Transcripts For CNBC Squawk Alley 20240712

Steve smith. Good tuesday morning, everybody. It is 11 00 a. M. On wall street and squawk alley is live good tuesday morning, everybody. Deirdre bosa with us we are kicking off one of the toughest months for stocks getting a nice start here as the s p hit an alltime high we continue to watch the large cap tech names that include stocks like zoom and percentage gains that make your jaw drop. Absolutely, carl. Speaking of zoom, i have been calling it the consult of zoom, we have been talking about those incredible numbers, climbing market cap, remember they went public at a 9. 2 valuation. Take a look at these results, this chart says it all the increase, the step up, year over year, the earnings was something to behold. And at the same time, guys, it is our job to throw a little cold water on a quality like following. If you think it can become the next blue chip tech stock we saw in the results last night that it is growing a base of small users and it is making up a larger portion of revenue. Do they stay after the lock downs when they no longer have to to valuation. It is a forward sales ratio. Nearly three times that of slacks what is next i know that investors are watching these huge gains, but what will be the next era of growth for zoom especially when we talk about how the comps could be a little difficult. They are working on a cloud service. So it is trying to diver divers ways before this is all over, how sustainable is it . I remember a year and a half ago when zoom went public. I was there and he was getting nervous as the indications were moving higher and higher it would open up a lot higher than where it priced and he didnt want the hype to get too far ahead of things. It was in thele l80s that first day. Now it is 443 per share at this moment market cap around 125 billion cisco, which has webx as one product is at 175 billion. Shopify just a little higher than zoom, so a lot of questions about their next play, lets bring in chris, a portfolio manager. Guys, good morning morning so chris. I look at what is looking at the s p alltime highs what is it that youre going to do with your money, right . How do you look at valuations overall . We spent a lot of time in the small cap area and we think they still offer a great opportunity for longterm investors. They have not seen the money flows in like the nasdaq comp names have the breadth has not been wide in this company we think some of the small ones supply the long companies, and it is a derivative investment off of those plays that is where we see that, and they get through september, and we start to get more excited for october and november and into next year. We think growth rates look good. Zoom used to be smaller and falling to the zero sum group, but i look at zoom and ask is its vision big enough to fit its new market cap. Is it ready to expand beyond conferencing into devices, services, and becoming a platform is that necessary for Companies Like that . That is exactly the right question company thats create more value for all of their constituents than they take for themselves. Zoom does fit that category in terms of the pain points and friction points. But you get to the heart of the matter and you have three things in the tech sector some companies are huge platforms like amazon, microsoft, facebook, apple some are products that are built on those platforms, and some companies are feature thats are just one thing that a good thing. I think it is beyond if can be a platform of many years from now. That is a nar orow guess where t can happen hey, brad, i know we talked about zoom but looking at some of the other cloud names, we looked the shopify and data dog that have run up incredibly this year and then you have on the other send a slack that lets say are relatively how do you look at these winners. Can they live up to these valuations i think what is interesting about why some of these companies have grown so large, and i use shopify as an example. They are really truly an enabling platform. Theyre creating the next generation, enabling the reuatir creation of the next generation. When you look at the total adjustable market of that, it is trillions of dollars it has room to grow into Something Like that. Some of the others, theyre more products, more limited, i think it is a great example. Other platforms in the Cloud Software space they are enabling a lot of productivity and solutions and creating that win win for customers. You talk about seasonal strength for the small caps. Im looking at a blog this morning looking at Small Businesses running low on their ppp funds. Certainly more on the razors edge, how much for small caps is on the line when it comes to another package of aide for the government they do better when we see acceleration there is a great amount of stimulus that comes. Probably a few more weeks off from where we think congress and the they are able to navigate quite well i think what youre referring to are Smaller Companies that may not be public like the mom and Pop Restaurants on main street that need help to get through this but you know Small Cap Companies and semi conductors and semi cap equipment, i think theyre doing quite well and theyre supplying the supply chain that is feeding into Large Cap Company thats are doing really well. Hold for the adoption curves that is great. Work from anywhere is here to stay for quite a while again i think those plagues are good growth areas for some time to come. Chris, finally, i wonder about the small caps because i think i saw a stat, kayla might have tweeted out, that apples market cap is equal to the entire russell 2000. You can at least have a vision, agree or disagree, for what apple says theyre going to do can you give it all of the uncertainties in the country right now. Invest in small caps as a basket, or do you have to get into the nitty gritty and research it stock by stock there are two things, there is a rebalancing so where do those dollars rotate to theyre probably not going into the fixed income area. I think they will close the gab with the under performance of small caps out there secondarily they have to look to buy high growth areas. Many of them are smal Growth Companies into we get to a point later this year. We would start to see them pick up as Companies Integrate and close on those deals i gres investors have to go through it with a fine tooth comb getting news this morning on the reopening front, new york city city is reopening their plan, and under a new School Safety agreement they will reopen on september 21 that is a delay of about ten days teacher wills still be returning next week to prep and then we will begin a transitional period for Remote Learning on the 16th, dee, but no inperson classes until september 21st in california we were in california we were watchingnt free access to resea. Yep, td ameritrades got that. We will explain next i dont want any trade minimums. Yeah, i totally agree, they dont have any of those. I want to know what im paying upfront. Yes, absolutely. Do you just say yes to everything . Hm. Well i say no to kale. Mm. Yeah, they say if you blanch it its better, but that seems like a lot of work. Now offering zero commissions on online trades. We charge you less so you have more to invest. Tools, cattle, grain, traded goods. Even shells represented value. Then currency came along. They made it out of copper, gold, silver, wampum. Soon people decided to put all that value into a piece of paper, then proceeded to wave goodbye to value, printing unlimited amounts of money as they passed the buck to the future. Thats why its time for Digital Currency and your investment in the grayscale funds. Go digital. Go grayscale. Walmart awaiting details in its long awaited program. Subscription 98 a year. Members with a minimum online order of 35 will receive Free Shipping joining us this morning, Stephanie Meta good to see you again. They are the spectrum of offerings, what is your stake . I think youre right, it is still early days, but this is a significant announcement from walmart. They are really trying to enter, i think, into a direct competitive situation with amazon and one of the thing thats we have been writing about at fast company is one of the senior writers that has been writing about the way taking on amazon in a big way it is about ease of use for a consumer not about making it affordable increasingly making it something it doesnt frustrate their us s users. To the degree that it lacks a media component, its hard not to talk about walmart and tiktok especially this month. Is there a growing since that that would be an early entree into offering things like content aside from the normal delivery and savings packages . I think there is a sense that walmart will be looking at them. They are looking at the content and package of content that amazon has amassed over the last several years. So tiktok is an important component of that conversation that is the way they acknowledged they would be part of that bid. Walmart is not thinking about video content as a pure play for entertainment or a loss leader they talk about selling video as a way to sell more rolls of toi toilet paper or more paper towel rolls. They think about how can walmart do what a lot of App Developers in asia have done. Which is to use content as a commerce play. It is interesting to see walmart as a way to take on amazon prime. They can enter the transactional super app of the technology atmosphere you see companies trying to play three dimensional press when i look at walmart doing this, two things come to mind. They want today do this walmart plus thing earlier this summer i wonder if this is a sign of confidence in the Logistics Confidence and supply chain now. Also how many people voted out these big box retailers. They have done well, and is there a lesson here for anyone about that i dont think that we can necessarily put department stores, for example, in the same category asball mart, target, oklahoma depot, lowes. Those brands have survived for a couple reasons in spite of being late, they have really not only have they been working on the back end, but really working on the front end. They have been trying to create a experience for their consumers but they are really user friendly i put target in the they are very quick to come up with same day pick up. Being able to place an order online i think we should provide these staples, utilities, items that people need every day. The jc penneys or the knneiman marcus of the world. They are up 7 almost to 15 on the news of walmart plus. Stephanie meta of fast company, thanks were keeping our eyes on shares of theater operators. A strong opening for tenet over the weekend amc adding to a 50 gain in the last four weeks. You see it up there ouabt 2. 5 squawk alley is back in just a moment motorcycle riders love the open road. And geico loves helping riders get to where theyre going, so to help even more, geico is giving new and current customers a fifteen percent credit on their motorcycle policies with the geico giveback. And because were committed for the long haul, the credit lasts your full policy term. The geico giveback. Helping riders focus on the road ahead. As the economy tries to recover from the pandemic, global it services and consulting giant emphasis announcing plans to hire 12,000 u. S. Workers in the next ten years. Joining us now is the ceo. Good to have you with us this morning. Good morning, thank you for having me. So tell us, what about this current climate that we find ourselves in leads you to make this move and what are the commitments that you can make to it over the next several months . Ye yeah, what were trying to do is launch a u. S. Recruitment hiring of u. S. Employees program, two years ago it has been extremely successful we made an initial commitment of 10,000 u. S. Workers. We have now hired over 13,000. Given what we see in the digital transportation journeys of our clients, we feel more and more confident that the u. S. Client base that we have will do more work with us with that in mind, we renewed our commitment with hiring 12,000 additional u. S. Workers over the next two years bringing the total to 25,000. We feel now with the medical crisis, in the midst of it, starting to be more behind us. The future as it unfolds will have more digital work and the emphasis can help our clients. Hey, help us to put this announcement in context now. Last year infosys was one of the Top Employers in the United States with h 1b i have is as. Are these employees ones you would have oregon brought in with those vie sas . We want to build more and more local employees worldwide were doing that in europe in other parts of asia pacific, and here in the u. S. We want to hire graduates which are from different backgrounds, community colleges, and then also individuals with some Work Experience so all of these bros will be employees that are essentially u. S. Workers going ahead into the next two years so does that have to do with the trump administrations restrictions on the h1b visas . This is based on a six new Digital Centers that we launched in the u. S we launched Similar Centers in europe, and some of the centers in australia and singapore the thinking for us is the more that our clients are driving digital transportation the more we feel that these Digital Centers are going to be critical and then to stop the centers, Building Local capabilities, as we go into the future. I wonder how far youre going to pursue this strategy. I remember five years ago the story came out about disney bringing in hcl workers, laying off their own employees, and having the employees train h1b workers and that was shocking to a lot of people and it made people look at outfits in a different way. Is there a way that you can recast the value that you add, not just to your congressmeusto in the countries in which you operate . That is exactly the focus that we have is driving increased localization and different countries, we have to make sure that more and more workforce is more localized today a majority is localized. What were now trying to put into place is through these Digital Centers, in addition to that we have Digital Studios we are doing work that is actually not i. T. Related but more design related. Combining with technology. Our plans have become more and more localized in the countrys in which we operate. So finally i want today get your thoughts broadly on what were seeing in terms of geo politics and technology. India banned tiktok and a few other chinese apps a few months ago. How do you view what happened when america is looking to similarly ban tiktok last year your cofounder and chairman said it was a phenomenal app any Lessons Learned that you can share with us . What have you been seeing . Most of our focus, really, is on large Global Enterprise clients. So we are not truly in the consumer space where some of these apps are operating our focus is being what do we do by enabling these large enterprise clients on to cloud, on to digital. Here we see tremendous innovation in the u. S. A lot of excitement through all of the changes that we see in these digital journeys and our objective participating vis visas. Fair enough, thank you for coming on and chatting with us today. We hope you will come back again soon thank you, thank you for having me here getting to news in washington dc as the ppe Program Continues to get scrutiny, lets go to ylan on that reporter they just released their investigation into the Paycheck Protection Program showing a potential of billions of dollars of fraud, waste, and abuse. According to the report more than a billion dollars went to companies that got multiple loans. Something the program prohibited more than 600 loans totallying 96 million were awarded to companies barred from doing business with the federal government another 350 loans worth 195 million went to contractors with performance and integrity issues more than 3 billion to borrowers that raised red flags and hundreds of loan applications were missing identifying information. This report was put together by the committees democrat whos are now arguing for more robust oversight of the program especially as they start to apply for loan forgiveness republicans fired back showing that ppe supported 51 million jobs it comes ahead of the committee this afternoon the chairman and the treasury secretary will be there in that person so the tone of the hearing already set. Especially given all of the Small Businesses that wanted the loans and didnt get them. That will sir raiseure raise a f eyebrows apple taking a closer look at the companies continued growth and ionphe production we look forward to that in the fall stay with us apps are used everywhere. Except work. Why is that . Is it because people love filling out forms . Maybe they like checking with their supervisor to see how much Vacation Time they have. Or sending corporate their expense reports. Ill let you in on a little secret. They dont. By empowering employees to manage their own tasks, paycom frees you to focus on the business of business. To learn more, visit paycom. Com another record high for apple shares a day after the splint went into effect. Wamsi, welcome back, good to see you again. Good to see you, too. We have been thinking about you because you put your flag in the ground and you expressed concerns about volume risk and margin risk, the whole thing, and yet momentum remains you are taking your price target up a touch are you getting shaky on your legs here . No, look, i mean i think there is a momentum call that is extremely strong right now you know the flow of funds into the stock have been at a very unprecedented level in a very short period of time and some, you know, it is momentum being the factor that is impacting it the most we speak to a lot that are not inclined to chase the stock over here they didnt like it 100 or 200 ago. When you think about alternatives there are Companies Growing at a faster pace that have good fash flow profile thats are trading at valuations so we stand with our valuation call that the risk will be more adjusted there are still a lot of risks out there that we worry about. Our conviction on the fact that the risks are getting higher is unchanged. We also acknowledge that the momentum can trump near term valuation concerns on any given day. You do say that you believe momentum can cut bothways. Given the risk in the september and december estimates, what is that earnings forecast curve going to start to come down in your view . When will that risk become more visible . I think as we get closer to the launch of the iphone as we get closer i think there will be a biggest unknown at this point is what the new device will be so you can play it out different ways if it is higher, i think that creates pressure on the stock. We have seen the price e lasty it is significant and a time like this with the pandemic, i think raising prices would be tough to do. I think youre youre flat with a higher building materials, that can be problematic as well. So the only net favorable outcome is that if there are lower prices now than apple would figure out that it will overcome the gross federal government margin. So either way you slice it i think as you go into the launch, you have to be cognizant that hear at this point, it is really the iphone apart from that i mean obviously there is bundling around services and other things that can come to fruition, but we think that the apple launch event will create the first catalyst and well see what they bought back in the stocks as well they are price sensitive to valuations and i think that buying stock at 300 versus 500, and a split adjusted basis, and 130 jersey 300 will be a lot difference. Hey, wamsi. You have talking about the risks associated with apple, but if you look at the fundamentals Going Forward what will drive that you mention the iphone 12, services, buy backs. What do you think is more important for investors that want to get into this play so i think that if you are looking for staying in the stock for a longer term basis you have to have conviction the estimate revisions will continue to move higher. Because so far what were really seeing is that estimates are being fairly stagnant and the multiple is expanding to the point that it is now trading about Consumer Staples that have, you know, different risk profile to them. Hardly i mean the investors are under writing the cash flows are so rock solid that no matter the cycle we go through we can override those cash flows, right . So to be able to drive valuations higher on a sort of earnings basis on a Free Cash Flow basis, you need to see them start to expand from here. And we think that in the near term there is more risk for the downside on that than on the upside to those. You can construct scenarios out into 2022 and 2023 and look at augmented reality. And you could get to higher estimate numbers, and from what we know today and what is expected, a successful product can take two or three years to really drive material improvement estimates. So what we know today, i think they are at some level of risk yeah, this is a neutral rating that you have that almost sounds to me like a sell, but i wonder, this stock is worth its valuation, you know, it is trading at twice what it was in november how can you justify that so look, i mean, we think valuation is pretty stretched. That is the whole reason that we downgraded the stock three weeks ago. So valuation metrics, i mean, you can it reminds me of the housing bubble in some ways, right . It comes down to comps and what people are willing to pay and what the rates are to construct a case around valuation upside and justify of valuation you can justify it many different ways. You can call it a Platform Company that is handling growth in a pandemic. So the cash flows are worth more than what they were worth previously the conviction in those is higher than possibly any other company on the planet. Why wouldnt you pay up for that, and what can you buy that has visibility into cash flows and Growth Profile that could surprise investors to the upside you can construct both cases the question is will the earnings support that case the trick is to understand where in the valuation argument can things turn and, you know, you need an event for things to turn in some ways that can be a macro related event, it could be a much more specific earnings related. There are lots of things that ultimately valuation will come to fruition, but between now and when valuation does come to fruition moe me tum can still play a very big role in the direction of the stock we are going to watch this closely. It was a provocative call. Thank you, talk to you soon. Thank you take a look at shares of Quest Diagnostics under pressure after the Florida Department of health said theyre severing ties with the company. They say they failed to comply with law and report covid results in a timely manner cnbc and acorns invest in you looking at how the pandemic changed how we spend our money yes, we surveyed 5400 peopl to see how the pandemic is affecting their relationship with money more people are saving, but most people are not saving for their kids 46 of people say theyre more of a saver now than they were before the pandemic. Of those that have children younger than 18, more than have, 53 , say they have nothing saved for their kids about 32 have a regular savings account. And as you might expect, rates of saving have varied quite a bit. The highest earnings are most likely to have something set up for their children only 20 saying they have nothing. But that number increases as earnings decrease. 70 of parents making less than 50,000 a year have no money saved for their kids and the pandemic is causing a lot of parents to put the brakes on the savings three in ten say they they are they are investors in acorns later this hour, they reopened for Indoor Dining in new jersey and florida we have a outlook for the stra iusy tethreauntndtrafr is im hector. Im a Operations Manager in san diego, california. We were one of the first stations to pilot a fleet of electric vehicles. Were striving to deliver a package with zero emissions into the air. I feel really proud of the impact that has on the environment. We have two daughters and i want to do everything i can to protect the environment so hopefully they can have a great future. A lot goes through your mind. With fidelity wealth management, your dedicated adviser can give you straightforward advice and tailored recommendations. Thats the clarity you get with fidelity wealth management. And tailored recommendations. If i could, baby id how can i, when you wont take it from me you can go your own way go your own way your wireless. Your rules. Only with xfinity mobile. Getting a pop in the Airline Stocks this morning as the president is on his way to kenosha, wisconsin says he will help airlines facing a downturn in traffic american is up a qck . Ui 3 were back in a moment [narrator] at Southern New Hampshire university, were committed to making college more accessible by making it more affordable, thats why were keeping our tuition the same through the year 2021. I knew snhu was the place for me when i saw how affordable it was. I ran to my husband with my computer and i said, look, we can do this. [narrator] take advantage of some of the lowest online tuition rates in the nation. Find your degree at snhu. Edu. Tools, cattle, grain, traded goods. Even shells represented value. Then currency came along. They made it out of copper, gold, silver, wampum. Soon people decided to put all that value into a piece of paper, then proceeded to wave goodbye to value, printing unlimited amounts of money as they passed the buck to the future. Thats why its time for Digital Currency and your investment in the grayscale funds. Go digital. Go grayscale. We mentioned before the break the president taking questions on his way to wisconsin. He talked about the airlines and also talked about tiktok. Reporter the president underscoring a point he made before he wants the u. S. Government to get a cut of transaction i said the United States has be compensated because he are the ones that are making it possible we should be compensated reporter the president there not defining what well compensate what had it means the question is, here precedent does that set. Does the United States put itself in a position where it wants to get a piece of any deal thats forced on National Security ground. A lot of questions back over the you. Its a very strange precedent, that is for sure. Restaurants in the head lieps this week as states ranging from new jersey to florida relax their coronavirus restrictions and begin to allow more Indoor Dining what comes next for the sector its great to have you good morning i want to start with something that you said that i think everybody should Pay Attention to from a business standpoint delivery is great but it wont take you to the promise land a lot of restaurants are hoping to get there through delivery. Why wont it why is Indoor Dining important i think tlidelivery is an important piece to the puzzle. Youll need multiple Revenue Streams. Indoor dining being a piece. If you have 100seat restaurant youll only be able to serve 30, 35, 40 people when Indoor Dining is open. If you take into consideration delivery and take out and other Revenue Streams that you can create, i think the key moving forward will have to be to chip away at your costs or expenses unfortunately, whats is going to happen is youll see menus suffer on a creative side. The cost of creativity is one of the things that restaurants, they move that forward because it keeps their client base interested i find the better the restaurant is, the bigger the gap in the experience between delivery and actually eating in. I want to talk to you about new york im worried about new york i live in new jersey but spend a good amount of time there. I know you used to live in new york but you moved to arizona. The mayors policies even before now were a part of that. Tell me what you see happening to new york with the reluctance to open up Indoor Dining and what the impact on new yorks reputation as a destination is going to be. I was 27 years in new york city i started as a young cook in 1990 and i worked up through the years and im proud of the experience that i had in new york and most importantly im proud that new york has always been the epicenter of dining in this country i think about what that is and where its falling to under the leadership of de blasio i feel like some of the decisions hes made have not been probusiness. One of the reasons i moved to new york here is because it is probusiness i miss new york and the diversity of cuisines. Were seeing in new york now between the taxes, between the cost of living there and now people dining on the streets and with the homeless issue that de blasio refuses to acknowledge, its a huge problem. Im not a politician im a Business Owner this comes from the frustration of the amount of employees that ive had over the years and to see them struggling also as well as the businesses that employee and that employ them as well as the other businesses being affected what do you think the new york city dining scene looks like a year or two years from now . Have you heard from other Business Owners a similar sentiment . I think you can never underscore or over exaggerate the resilience of new yorkers. Thats the most promising aspect to me. They have found a way. Im looking forward to see the adjustments that could be made moving forward theres great leadership from people like danny meyer and drew who are vocal. Its going to come down to the level of goodness thats coming from the political leadership. Give some other restaurant entrepreneurs some ideas here beyond delivery, which isnt going to get them to the Promised Land of what they can do youre working with hotels are there Technology Tools that are useful what should people be thinking about . Number one be careful the tli Delivery Systems that youre using. Really do a great cost analysis on those things. I feel like some of those Delivery Services end up costing the restaurant money youre losing money every time you get a delivery or you deliver something through some of those apps. Be really, really cautious and run your numbers prior you cant be hopeful right now you really have to put pen the paper and figure out who those numbers are. As i said before, looking at multiple Revenue Streams will be the key moving forward trying to break down your cost if you have a 25,000 a month rent, break it down into five different Revenue Streams. How do you create that you can do create packages for your Customer Base and do cooking demos for them at home through zoom or any video app. I think theres other opportunities that you can create things like gold belly where you have a signature dish. It can deliver it around country. Youre not limited to your neighborhood or your local client base. The key is going to be to think a bit bigger and broader talk to your friends and colleagues thats also super important. All right i asked for some ideas and you brought the heat scott, Award Winning chef, restauranteur. Thanks for being with us thank you fascinating market day with the list of all time high includes amazon, chipotle, walmart too with the 7 gain on the news about walmart plus is one to watch for the afternoon session. Speaking of which, lets get to the half and tyler mathison. Thank you very much. Welcome everybody to the halftime report. It was the best august in decades but august is over now its the first day of trading in september and the first day of september. Usually september has been the worst month of the year for investors. So should you keep riding this red hot summer rally or get ready for something a little less full fillfulfilling well debate that with our Investment Committee today lets get