Commercial real estate, Good Buy or Goodbye: Market Domination
The markets are rushing to the close with just one hour to go, but Market Domination’s Julie Hyman and Josh Lipton are still here to walk investors through the day’s biggest stories and stock moves.
BD8 Capital Partners CEO and chief investment officer Barbara Doran lays out the key differences between President Biden and former President Trump’s fiscal policies, and what they both mean for US equity markets (^DJI, ^IXIC, ^GSPC) at large. Doran sticks around for today’s episode of Good Buy or Goodbye and argues which music label stock investors should be watching.
Moody’s Analytics head of commercial real estate economics Tom LaSalvia joins the program to discuss the biggest detractors to getting the CRE sector back on track as office vacancy rates climb to record highs.
Other top trending tickers on the Yahoo Finance platform include Nvidia (NVDA), ServiceNow (NOW), and ExxonMobil (XOM).
For more expert insight and the latest market action, click here.
This post was written by Luke Carberry Mogan.
Video Transcript
Hello and welcome to market domination.
I’m Julie Hyman.
That’s Josh Lipton live from our New York City headquarters.
We are giving you the ultimate investing playbook to help tune out the noise and make the right moves for your money.
And here’s your headline blitz getting you up to speed one hour for closing.
Bell rings on Wall Street.
It’s one of the most difficult calls in my career.
But I, I think there’s the chances are better than 5050 that he will not be on the ticket that Kamala Harris at some point in the fall will wind up on the ticket.
The fed is likely to cut rates in September.
We see an economy that is cooling, we wouldn’t call it weak, but it is cooling and we’re seeing those inflationary trends also close somewhat.
So we think it’s, it’s going to be, you know, time for the fed to start moving and we expect, you know, 1 to 2 fed cuts this year.
It’s a good sign from the aspect that they’re starting to clear some of these problems, some of these, these legal overhangs and that’s gonna help them focus on the most important thing to do with the company which is to build more airplanes, generate more cash flow, uh and generate profits.
We’ve got one hour to go until the market close.
So let’s take a look at the major averages right now.
We have some sideways movement today.
A little bit of treading water because there are more events to focus on later in the week.
Namely the Federal Reserve Chair, Jay Powell will be testifying before Congress on Tuesday and Wednesday.
We’ve got the consumer price index coming up on Thursday and then bank earnings begin on Friday.
So investors kind of looking ahead and as they do not see a lot of activity today, we see the dow off by about 38 points or so, about 1/10 of 1%.
The S and P 500 very slightly higher.
It’s been bouncing around a little bit today.
Important note on both the S and P and the NASDAQ.
If either one of them or both of them closes higher, that will mean record for both averages.
In the case of the S and P, it will be the 35th straight record that we have seen thus far this year.
You see the NASDAQ up about 2/10 to 1%.
So it’s a little bit more solidly in the green.
And as we look at the NASDAQ, it helps to look at the NASDAQ 100 as well because guess what the concentration, the market concentration uh debate discussion is still very much alive and well as we look at the mega caps to see what they’re doing today.
It’s really a mixed picture as well.
Meta is off by 2%.
But NVIDIA on the flip side is up by 2%.
We had a couple of price target increases on NVIDIA that we are gonna get into a little bit later.
And then the other sort of muddling along here.
If you look at the sector action here for the major A or for the S and P 500 I should say communication services in the red drag by meta there, but we’ve energy also lower.
And then on the plus side, we’ve got tech.
So a split between tech which includes software and hardware and communication services, which includes things like meta real estate.
Also showing a little bit of strength today, Josh.
All right, Julie investors looking ahead to several key events this week, a semi annual testimony from Fed Chair Powell followed by key inflation readings to provide key signals for the path of interest rates ahead on the corporate side, big banks, JP Morgan and Wells Fargo to kick off the second quarter earnings season on Friday.
For more on the market expectations ahead.
We have BD A capital partners, CEO and Chief investment officer Barbara Durand joining us here now, Barbara, good to see you.
Yeah, nice to see you both.
So why there was an interesting note from uh Ed Yardeni this morning.
And at being economist and strategist, he was telling his clients he was kind of trying to make sense of this market.
And doctor Ed said, you know, it feels like he said, kind of a slow motion melt up and he said, investors seem like they look at this weaker than expected economic data we get and they seem to kind of think, you know what?
That’s ok, that just increases the odds that Jay Powell is gonna cut.
Is that kinda how you’re seeing things?
Yes, it is.
And I think that’s why the market’s been making new highs.
I mean, there’s two things that have been going on and at different points, they’re, they’re in a different ascendancy like the beginning of the year, the fed already started last year to discount the prospect of fed rate cuts.
Now when we came into this year, people thought 67 rate cuts.
Well, that happened and happiness been pushed out now lately been coming back in.
But what happened in the meantime, earnings last third quarter last year was when they dropped and they just going up and up since then.
And this quarter is expected to be no exception.
It could be anywhere from 8.5 9% or more.
And that’s what the econ what the investors are focusing on our earnings.
And so whether the fed cuts in September, which I think is increasingly likely given the economic data we’ve had.
Um but I think that’s really what’s going on.
It’s really about earnings now and the fact that inflation is steadily coming down and I think investors really believe the next few infl inflation prints, which you mentioned CP I and PP I this week, you know, should be positive.
But we’ll see, let’s talk a little bit about earnings then, right?
Because uh the market is always an expectations game and the past few quarters, expectations for earnings have been pretty low and then companies have beat them.
I mean, companies usually beat expectations, but they’ve now been creeping up.
And in fact, if you look at the S and P 500 which I just pointed out is at a record again, but profit expectations have been going up as well.
So our stocks sort of in a more delicate position now, so to speak because of that.
Well, you know, it’s a good question because I think any time you’ve had a big run up and you’re making, as you said, today, could be the 35th high in the S and P. Not to mention the NASDAQ and, and composite and the NASDAQ 100 you’ve got at some point, there’s gonna be a pull back.
We know that and what we’ve seen so far a year to date though, it’s been shallow and I think that’s what’s going to happen here because the underlying fundamentals are positive, the economy is slowing down.
People are glad to see that.
It means the fed, you know, is restrictive and they will admit that and that’s working.
But now we’re getting to the point where we’re more concerned that we could, you know, start to slow it down too much.
And the fed is cognizant, you know, they keep saying things are in better balance, that means balance between the one mandate to keep jobs and full employment and the other to get inflation down.
And we see right now that this soft landing or no landing scenario is very much intact.
So I think we’re in good shape, but it’s a question of, you know, where here that’s always been the question, all the big tech names, they’ve been, you know, the majority of the gains so far.
And I think it’s been difficult to see the market broadening out like say into a cyclicals or small cap.
You know, a lot of talk about that how that has lagged.
But without knowing the timing of the rate cuts, you can’t say this is now we’re ready for the next economic cycle.
So I think we’re actually pretty close to be pretty certain the fed is gonna cut rates, then we’ll see a broader rotation into that.
But for now, even though names like, you know, meta apple, you know, all the great names are above their, you know, historical pe there’s good reason for that.
But how about Barbara after the run we’ve had when clients ask you how valuation looks for the market, do you say it looks reasonable?
Do you say we’re stretched lofty?
What, how are you describing it?
Yeah.
You know, it’s, it’s also a good question and, you know, one, it’s always in the context of interest rates, you know, as interest rates come down, pe s will expand.
And I think we’ve been seeing that, you know, not as much as we did last year when things like the tech names are really, really sunk.
But I think you’ve also, you got this bifurcation, you know, we’ve all talked about a lot in terms of um the S and P weighted S and P versus the equal weighted and large part of the, of the S and P is actually, you know, maybe a 1718 pe right now, not that expensive historically.
So if the market starts to broaden out, you’ll see, you know, perhaps other leadership coming up when the tech names, which I would not sell.
So these are great names with great long runways of, of growth ahead, particularly with the A I. Um you may take a pause there and see other names, you know, come into the ascendancy in new capital, being put into work in that.
And, and I, I was gonna say new capital, speaking of which you kind of you called um a list of names, the Down and Dirty Brown name, brand names might have turnaround prospects and, and these, these, I mean, speaking of down and dirty, some of these are pretty beaten down, Nike, which is at its lowest since 2020 Starbucks mcdonald’s Lulu, I mean, Boeing is on your list also.
I mean, does that mean those are names that you’re looking to, that you are getting, getting into or considering getting into and what your, well, two of the names I have to admit I own, you know, and have owned for a while.
Lululemon and Starbucks and there’s names like Lululemon Starbucks, um mcdonald’s, um, Nike, these are all great names that in the past, they have a, a brand and a reputation and a great management approach and they have all in the past missed at different times.
Lulu, not until recently, you know, but they’ve always meant whether it was an execution issue or a macro issue or compete additive inroads.
I mean, Nike’s gone through this over the many years.
They somehow managed to right the ship and that’s why I’m looking at them to see where’s, you know, what’s the, the risk reward here?
You know, because a lot of these names are discounting the worst possible case, Lulu, I still don’t know yet because that could be real competitive inroads.
Um But it could also be, they just really miss the product cycle unusually for them in terms of not having enough color, et cetera, et cetera in small sizes.
So, yeah, I’m looking at them because potentially, if these managements are able to turn things around and they have announced whether it’s mcdonal value, you know, menu, um, Nike really trying to get back on the innovation track, all that stuff, you know, if it’s fully discounted, then there’s potentially decent upside 25 30% from here.
So I’m not doing anything.
I’m still looking at them.
Boeing is an obvious one, you know, I mean, how long does that take?
You know, it’s just every month, some sort of bad news, you know, whether something flies off the bolts aren’t there, but it is, it is part of a, you know, an oligopoly.
And so at some point and they’ve got 78 years of, of uh backlog.
So that’s when you have to keep an eye on as to when, you know, and when to get into a stock like that, Barbara, you know, election years introduce uncertainty.
I think this year we can agree more than most.
I mean, serious questions about who’s even on the ticket right now.
What are you telling your clients, Barbara?
Uh Well, I get, do you get that client, uh that call, that question from clients?
And what I see is basically, you know, um Trump is more, um, more pro business than Biden, but Biden is also, you know, pro business and we know who, if Biden it remains on the ticket, we do know who Biden is.
We know what to expect I mean, there’s not gonna be no surprises.
And in fact, you know, here we are almost, you know, how many highs in the market and what’s happening with unemployment.
We’ve got a pretty good economy, you know, under the Biden administration and looks like, you know, there’s nothing that’s gonna der that, you know, in terms of his plans and what he says, Trump on the other hand, um, it’s more for Trump, there’s, there’s two questions.
One is the macro, what happens?
Um, if he implements the things that he says are his priorities and there’s three things that stand out to me.
Um, one is the 10% he’s saying across the board, 10% import um, tax increase in China much more.
Ok. What does that do that raises prices and what, who doesn’t raise the prices that hurts the most?
That’s the lower income consumer who we are already seeing through many company reports, uh, reports, uh retail, et cetera.
That, that’s who is hurting it the most because they’re spending on necessities.
And then you have the immigration issue.
If he really um, gets elected and deports millions of immigrants, those are the ones who have been providing, you know, have been taking the jobs that have been and that also helps, you know, keep wage pressures down.
And then we, he’s also talking about not re um about keeping the tax, um, cuts in place and that’s for the wealthy.
Well, we’ve already seen in, in that administration, it really the the deficits and loss of income for that were not made up in other ways.
So to me, what you’re seeing is that it probably means higher rates for longer, you know, that’s inflationary.
And so, you know, what happens then, I don’t think it has immediate impact on the market.
It’s more what we’re gonna see is sector rotation which is trying to gain that at.
And we know one that um you know, Trump will not be pro regulation.
You know, we’ve already, you know, heard reports of him talking with the oil executives.
You know, if you support me, I will, you know, um give you certain benefits, clean energy will be hurt, no subsidies, you know, anything that supports them.
Um Health care is interesting because health care would kind of would be bifurcated.
You know, those with Medicare advantage like um United Health Care or um or CBS would do well, right.
Um those who have more of an Obamacare or Medicaid orientation like a cent team, they’re not probably gonna get much support, you know, from the government tech, both parties seem not to like, so they, you know, in either case they’ll be after them.
And of course, banks, you know, anything that requires regulation but banks, there’s not, I think big changes that would happen just less maybe attention to enforcing certain regulations.
All right, that’s interesting how you’re thinking about all of this Well, um Barbara, thank you very much.
You’re gonna stick around though and join us in a little bit for goodbye or goodbye.
So just don’t go anywhere and we’re just getting started here on market domination.
Coming up.
Boeing has agreed to plead guilty to a criminal fraud charge surrounding two fatal 737 max crashes from 2018 and 2019.
We’ll check in on the stock later in the hour plus at 330 it is indeed the latest edition of our series.
Goodbye or goodbye.
You know, already who’s going to join us?
It’s going to be Barbara Duran.
We’ll break down two stocks to help you decide what to do with your portfolio.
And at 430 it’s asking for a trend.
I’ll be diving into the latest stories impacting your wallet, including the recent moves in crypto.
Stick around all that and more when market domination returns.
Let’s check in on some trendy tickers here on Yahoo Finance.
First up, we got Boeing, which is little changed right now.
But if you look at the intraday chart, it’s really been bouncing around today.
The company agreeing to plead guilty to criminal fraud charges in connection with two fatal crashes of its 737 max jet.
Prosecutors accused the aerospace giant of deceiving regulators who approved the plane and pilot requirements for it.
It’s still unclear if this um settlement is gonna go through because the the the families of, of uh who were involved in these various incidents are weighing in and don’t say happy criticizing it.
You know, I, I look at you, I mean, it’s another black eye for Boeing.
It does mean they avoid a trial which would have been, obviously been a distraction and, I mean, you never know what’s gonna happen in a trial.
So you do put that behind you.
But as you know, listen, Boeing faces are fine, there’s a corporate monitor.
Um Not something a company ever enjoys.
Reports are in the government and Boeing are still as you know, it’s kind of finalizing this.
Um I read reports expect to file the final plea agreement by July 19th.
Um Moving forward.
Now you do have some dates on the calendar.
We’ve got Q results on July 31st.
We have Farnborough the Air show that’s coming up soon.
And really the big question, which is interesting too, by the way, I mean, the stocks up a half percent, maybe on some clarity.
That’s what investors to who knows.
I mean, the big question is still there also who’s leading this company?
Who’s actually gonna be CEO um We hear about potential candidates, maybe it’s Pat Shanahan over Spirit Aeros and he’s certainly being talked about but still who, who is gonna be that in that C suite when Calhoun steps aside the, the clouds over the stock are not removed with this settlement, even if we see a little bit of a boost for the stock today.
By the way, as part of all of this settlement, $455 million is what Boeing is gonna be required to spend on compliance and safety measures in the coming three years.
So that’s part of all of this as well if it does end up sticking.
All right, our next trending ticker Exxon, that company really expects refining profits to drop due to lower margins across the industry, reducing earnings estimates for the second quarter.
This will be the oil giants first earnings report since closing on that $60 billion deal for pioneer natural resources.
And, and so that was the the headline here, Julie, we did have some new numbers from Exxon.
Um I guess what the investors trying to figure out is what, what that means for the bottom line Exxon earnings from refining will decline between 1.1 and 1.5 billion in the second quarter uh compared with the previous three months.
Um I did see some analysts, I think it was R BC quoted as saying, this means when they did the math earnings per share over maybe look light versus consensus.
Yeah.
And also um we should mention that the company is dealing with hurricane barrel and the effects of that right now.
Um Houston, a lot of that city is out of that.
It’s affecting Gulf operations as well.
So that’s just something on the side that it’s dealing with as it’s also come out with this update.
Full results from the um oil giant are gonna be coming on August 2nd.
So we’ll get more color around pioneer.
Some analysts said the contribution from the pioneer acquisition were not as good as had been expected.
So we, we should get more fleshed out information when we get that full earnings report.
That’s uh coming up.
All right, let’s broaden it out and talk about what’s going on in the macro level because it is a big week for investors.
We will be getting a fresh reading on inflation this Thursday that could help build the case that the fed should begin to cut interest rates in September for more on the week ahead and what it means for the economy.
We want to welcome in Veronica Clark economist at City Veronica.
It’s good to see you.
And what I find really interesting about the city call on what’s gonna happen with interest rates is, it’s a good reminder.
It’s not just about when they start, it’s about what happens after that and how frequently, um, they, they keep cutting rates and you guys think we’re gonna have a streak here once they start going talk us through that.
Yeah.
Yeah, exactly.
We, we have the fed cutting rates for the first time in September, which is, is not so much out of consensus anymore where we’re pricing about 20 basis points or so for, for September.
Um, but yeah, we we’re more out of consensus is what happens after that.
We do think the FED is cutting every meeting after that.
So that includes November, December and, and into the first half of next year.
Um And that consecutive cut call is increasingly premised on this idea that the labor market is softening.
Um, you know, we had very strong 200 K plus payrolls on, on Friday.
Um But that unemployment rate ticking up, I think will be increasingly concerning for, for fed officials.
We’re now at 4.1% on the unemployment rate that’s above the fed’s year end forecast.
Um So I think that will really, you know, what gets us to those consecutive cuts and Veronica when you’re talking to clients.
So they ask you what, what are the risks to this call?
What, what do you tell them?
Veronica?
Yeah, I mean, we, we are still, I think in a, you know, we’re, we’re kind of on this trade off or are we going to have a soft landing?
Are we going to weaken further?
Um I think we have a, a much easier time now than maybe a couple months ago of convincing people that things are slowing down.
Um, a couple of months ago, you know, the story was re acceleration and, and growth picking up again, maybe the fed would have to hike again.
Um That looks much less likely.
Um But I think for us, it really just comes down to the the normal macro dynamics.
You know, most recessions, most downturns do start very gradually.
They start very slowly.
And then at some point you encounter this non linearity, you get the, you know, bigger increase in layoffs.
We have seen this rise in initial jobless claims lately.
It kind of feels like we’re on the brink of that now.
Um Maybe the the biggest pushback is, yeah, the, the overall numbers still look pretty good.
It’s just the, you know, extrapolating that trend does not look so good Veronica, what are the other warning signs that you’re seeing in the data?
Yeah, I mean, I think it really does, you know, mostly come down to, to the labor market.
We’ve seen, you know, for a number of months now, you know, nine months or so, you know, hiring really pulling back hours worked that are coming down.
It looked to us like all of those early steps that employers would be trying to, you know, cut labor costs.
They’re not laying anyone off yet, but that would really be the last step.
Um But as that, you know, dynamic has happened and it’s been getting harder and harder to find work if you do happen to get laid off.
We have, I’ve seen this pullback in spending, you know, we’ve had retail sales and moving sideways to slightly lower for, for a number of months now.
And that pullback in spending that’s less business revenue.
Maybe that’s what gets you to that final step of, of layoffs.
Um So it is really just this gradual deterioration that we see.
Veronica.
I’m curious too.
Our, our central bankers are on Capitol Hill this week, Jay Powell uh with his semi annual testimony.
I’m curious, Veronica.
Um You’ll be listening.
What, what, what do you think Jay Powell has to say?
Yeah, I think the, the risk tomorrow we’ll hear from him first tomorrow and then on Wednesday are that?
He sounds relatively dav.
Um, it’s interesting that we’re hearing from Powell first, you know, among Fed officials after that unemployment rate number on Friday.
Um, but he did sound like a, you know, a central banker who’s getting more, we’re worried on the labor market, you know, employment side of the Fed’s mandate.
We’ve heard that from some of the other Fed doves also.
Um, I don’t think he’s gonna, you know, you know, really flag, you know, alarm bells just yet.
Um, but I think he’ll be increasingly worried with that unemployment rate rising at the same time.
It feels like inflation is going in the Fed’s direction, right?
Um Are you, are you pretty confident that we’re going to see a benign reading in CP I on Thursday?
Yeah.
Yeah, I mean, as confident as a forecaster can be, maybe there’s always things that can happen, you never know.
Um, but yeah, we’re expecting another pretty favorable reading for, for the Fed a 0.2% month on month for core CP I, that’s a very normal reading.
Um Even in the d details of that, I think we might see, you know, finally some slowing in shelter inflation, that’s been a very sticky, strong component of inflation that might look more normal on, on we on Thursday’s data.
Um So that would be, you know, the fed, getting more confidence that inflation is easing Veronica.
Great to have you on the show today.
Thanks so much for joining us.
Thank you and coming up, it’s the latest edition of our series.
Goodbye.
Goodbye.
We’re breaking down two stops to help you make the best moves for your portfolio.
Stay tuned, more market domination after this.
It’s a big noise.
The universe of stocks out there.
Welcome to.
Goodbye or goodbye.
Our goal to help cut through that noise to navigate the best moves for your portfolio today, we’re hitting on the low and high notes of music companies.
I’m here with Barber Duran, 88 capital partner, Ceo and Cio.
Thanks for being here.
Let’s talk about some music companies.
One of my favorite topics actually is talk about music.
I’m happy to do so.
Universal Music Group is the stock that would be looking at at a potential by the stock and pretty well over the past year in Europe, it’s up about 33% or so over the past year.
So let’s talk about why you like it uh streaming, growing and pricing for streaming is getting better for the, the artists that, that this company manages.
Yeah, it’s been, it’s been a big sea change in the last 18 months or so, really driven by names like Spotify a stock that’s up 100%.
And it takes in just a little bit of history about the music business.
You know, when I guess in about the last, the 1st 15 years of 2001 to 14, the pro the uh sales dropped dramatically.
And that’s because digital media, you know, came into being and people did not want to buy the physical records.
So it went from 23 billion to 14 billion.
Then streaming started to catch on.
And so it’s now back up to 27 billion.
So you’ve had a very big sea change and the sea change is really is paying, it’s become much more what they’re calling artist centric that you are now paying every time I download a song, I am paying that artist.
And that is through the big music, you know, studios and that is the three big three are Universal Sony and um and Warner.
And so it’s a very interesting time because they’re really seeing their revenues come up with a decent amount of their revenues from the streaming services.
And it’s also interesting because universal had an agreement with Tik Tok lost the agreement with tiktok.
But the last earnings report actually looked pretty decent, as you say.
Um this is one of the big three and it’s actually the biggest of the big three I believe with it, with its market share.
Right.
It is.
They, they’ve got about almost 30% of share.
Sony is number two with about 19% and they have Warner bringing up somewhere between 14 and 15%.
And in this business that makes, that’s a big difference because usually when they’re talking market market shows they’re talking about the catalog, right, the catalog is the millions and millions of songs that they have.
And that’s, it’s an advantage to have that kind of scale because an interesting that’s happening with streaming is all the sort of the iconic names of the past, you know, are, are becoming even more popular and you’re seeing more downloads.
In fact, there’s an interesting stat on the UK market, you know, eight years ago, 53% of downloads were this iconic golden oldies type of thing.
Now it’s up to 70 7%.
So, yeah, and it’s the, the thinking is that it’s probably not only the older generation figuring out how to stream, you know, um but it’s also younger generation who never heard these songs and a lot of it’s great music.
So you’re seeing the streaming is and you’re seeing something like Spotify, who’s being very aggressive in building their business and they’re seeing something like 19 20% more active uh monthly users every month.
That’s big.
They’ve got about almost three quarters of a billion listeners, about quarter billion that are subscribers and that money flows directly to all of them.
Yeah.
And as you say also, it’s not just how many artists they have, it’s, it’s who they have, right?
And we actually have a graphic, I believe, but some of the universal music group art, I mean, Taylor Swift won with a bullet there, right?
Like that’s the one that’s obviously she’s been dominant.
And they also have legacy artists like staying bad.
Bunny Sabrina Carpenter, who’s been hot this summer, Kendrick Lamar Warner, on the other hand, which we’re gonna talk about in a minute, it has, it has some big artists, but in terms of the depth and breadth.
Well, that’s it, you know, because what happens when you have all the big names, it, you know, it makes it much easier to recruit new names, right?
When you’re a Warner and you’re sort of in third place, you’ve got to offer more.
You usually can’t give us good royalty deals, you know, to this phase, you don’t have as much capital.
And so when you’ve got the scale and you’ve got the global infrastructure offices everywhere, it really makes a difference.
And you’re seeing that universal is gaining share in just about every category.
Well, as you know, we, we have to talk about what are presidential risks here.
And I guess the central risk here is that a subscription service like a Spotify will be able to continue that moment.
Exactly because I I thinking right now when analysts are really doing their projections, there’s only about 15% penetration in smartphones worldwide in terms of streaming music.
So the thought is, you know, that will grow.
So you’ve got not only the growing subscriber base, but you know, the the players like uh universal who have deep, you know, benches both in the iconic sort of uh music, but also these big stars because apparently 2% you know, um you know, of the stars, um you know, is what’s played as for 95% of the time.
So it’s, that makes sense.
So we already teased it, but let’s talk about the company that you think is not as good a buy and that is Warner, the shares are up over the past year, about 9%.
So they’ve really lagged.
Um So let’s talk about it smaller.
First of all, you talk about scale important, they don’t have the same quantity, they don’t and I’ll tell you where that starts with not only in your recruiting and finding the top artist because they’ll say, oh my God, who Taylor Swift, I wanna have the, you know, the people who have the, the ability to promote me and get me out there so that hurts.
Plus that it’s also technology and a I, you know, you’ve got to spend a lot, there’s lots of things going on.
They won’t have that those kinds of resources.
And so, and also when they negotiate their royalties with artists, it’s usually they have to give more, you know, to say, well, look, don’t go with this player, we’ll give you better pricing.
And also there’s the, you know, as you said before, it sort of begets talent and I guess the, the opposite can be, that’s really it.
And I think that’s why you see for the, uh, the disparity in the stock performance between universal and them, because universal has much more, much higher growth, they have a great management team and they know how to do it.
And this, you know, they, it’s been erratic, you know, in their execution and I think it’s just, it’s really a function of their size, size and, and I think the third one, we kind of already alluded to the pricing pressure that is that they have to, yeah, it’s pricing pressure, not only right on that, but it’s also, um you know, in terms of streaming and all that sort of thing.
So we will see, you know, what happens now, what could go right for Warner, you know, the streaming business numbers could continue perhaps to improve.
Yeah.
And also what’s interesting is that gaining share in terms of their deep, you know, um music base from the past.
And so, I mean, you mentioned Sting, I mean names like that, those are, it’s like the uh the riches that keep giving it’s also higher margin business because they’ve already, it’s already sunk cost, they’ve already paid for those artists way back when to get them where they are.
So the more it goes to the uh deeper in their catalog, the more higher margin business and the more visibility because you can have years of Billy knowing what you have in your catalog, what we call the legacy artist.
Sadly.
OK.
So let, so you are telling folks by universal avoid Warner music, you don’t hold either of these.
I believe them.
And I wouldn’t say, I mean, I would, I wanna make clear Warner is not a short, you know, because a rising tide, you know, they will be helped by all these, you know, industry, um you know, uh forces that are happening.
But again, as you mentioned, they have really underperformed.
This stock has been up three times what Warner was in the last year and year to date, you know, Warner is down.
And so, and I think this has a deserves a premium valuation.
It will maintain that.
And the only reason I think people would buy Warner because think, ok, it’s down and dirty.
It’s discounted, but I think it will always be discounted to the universal.
All right, Barbara, thanks a lot.
Really appreciate it and thank you so much for watching.
Goodbye or goodbye.
We’ll be bringing you new episodes at 3:30 p.m. Eastern.
All right, let’s check in on a few of the top analyst calls from today, NVIDIA shares higher on the back of two price target.
Boost U BS raising its outlook from 120 to 150 selling demand momentum for the Blackwell chips.
While Wolf research also raising its price target to 150 calling it one of the best ideas in semi.
So U BS for its part talks to about demand momentum for Blackwell rack scale systems says it’s robust sentiment.
Yes, they say it’s recently faded on the stock in the last few weeks, creating what they say is more a wall of worry that should be ultimately healthy if our stock, if our outlook materializes.
And then separately, as we know, Wolf also raised their target to 150.
Talk about a SPS and improving mix driven by, by black wealth.
Now I’m sort of blown away like I’m, I don’t know why.
I’m continually surprised by estimates for NVIDIA, but I’m still have the capacity to be surprised apparently.
So the consensus calendar 2025 earnings per share estimate for NVIDIA is $3.69.
According to Bloomberg estimates, Uu Bs says no, it could be closer to $5 per share because of these channel checks that they’re doing.
Wolf puts the number around $4 but like 369 versus $5.
That’s a pretty big gap here.
And the NAYSAYERS with NVIDIA have talked about this slowing growth trajectory all around.
There’s no way they could keep up this pace of growth.
U Bs says, well, given what we’re seeing when we talk to people who are buying this stuff, there is still high demand.
Now, we’ll see if that does end up being the case, but it’s still, you know, it’s just, it’s incredible has its capacity to say, wow, $5 versus 360 isn’t, isn’t our friend, our friend Corey Johnson?
If you turned and we ask him and he said in his career, never seen anything like it.
You never seen anything like in video.
You know, we, we’ve the word unprecedented a lot under the after the past few years.
But, you know, you still, it still applies in, in some cases.
Uh Let’s get to another mover.
Now.
Um Melius research suggesting the second half of the year, could you see some major gains for the likes of Intel, A MD and Apple?
And what analyst Ben writes calls the catch up trade for stocks that underperform in the first half.
And he’s looking for a model uh at last year where he said we saw a similar phenomenon where these stocks do well in the first half and then they caught up in the second half of the year.
And those are just some of the names that he’s talking about.
He’s talking about the product cycle for Apple being helpful.
He’s talking about semiconductors like a MD and, and Intel coming back as well.
Yeah, to tie back to the video.
His note declines what he says in NVIDIA is Blackwell actually isn’t on the only product cycle to pay attention to in the second half.
Would you believe it or not?
Yes.
So to your point, Julie, it was, I, I like this note sort of, um, time to dust off the A I Laggards again was the, I don’t know.
And he talks about Apple and the iphone 16. um and has three estimates are, are low for the iphone franchise.
And then he also talked about some other things too that were interesting about the A I ready P CS, a big theme.
Listen, we’ve talked to a lot of smart analysts about that, some questions about how that will play out, but he talks about how that that benefits some names like Intel and A MD.
And it also mentions IBM by the way, Big Blue gets the shot out under underperformed in the first half.
He notes now he says he sees revenue upside from Red Hat and they also talk about help from some recent acquisitions over there as well.
Yeah, it doesn’t hurt that the Taiwan semi is also rallying today.
So we’re seeing a big uh chip rally overall, I think TSM above a trillion dollars in market cap today in the UN and its US valuation finally shares of service.
Now, now they were today, look at that down on about 5% on the back of a downgrade from Guggenheim to sell from neutral signing, second half concerns in the company’s gen I monetization.
So, all right, Guggenheim cuts to sell target 640.
Not many sells on this name by the way, only actually just two on the street.
Uh doesn’t mean he’s wrong by the way.
Uh Now he says he, the company seems to be expecting uptick in gen A I business in the second half Julie.
But our field work indicates this is not likely until 2025.
If ever that was the part I fed from the notice.
It was a dramatic caveat.
Yes.
Yeah.
So, I mean, and this is, you know, it’s interesting.
I wrote about this for the Yahoo Finance Morning Brief recently that there is all of this expectation around Ja I but particularly with the software companies, they’re not necessarily seeing it flow to the bottom line or even the top line as of yet.
The other thing that he said that stuck out to me.
He said, we believe there’s a material risk that now we have to lower top line subscription guidance for 2024.
Now, he says there’s a real sales culture at service now that has powered its numbers that, that might sort of if not mask any weakness, it might help them get a little bit more of a runway.
But, you know, with that sell rating, he doesn’t seem that he, he, he put for his clients, he said, listen, there’s some risk to my call.
You know, if there was significant increase in federal spend, he said that could result in upside compared to what I’m looking for.
Higher revenue contribution from Jen is solutions.
Then maybe he says I’m modeling or anticipating.
But as you point out Julie United Base case report, they report on July 24th.
So maybe another update then and we’ll see what happens.
All right, moving on office vacancies hitting an all time high record in the second quarter at 20.1%.
It is the first time the sector has ever eclipsed 20%.
It’s according to a new Moody’s report and with us now is the co author of that report, Tom La Salvia, Head of CRE Economics and Moody’s.
Tom, it is good to see you.
So look at this Q two preliminary trend report, Tom, you do say listen off the sector record vacancy rate 20.1%.
Where does that rate go from here, Tom in the next, let’s say 6, 12 months and, and what factors, what variables does that depend on?
Yeah, unfortunately, for office property owners, that vacancy rate continues to go up.
Some of our most recent research shows that with remote work really here to stay, we could see a 22 to 24% vacancy rate as at the peak of distress that’s likely to hit sometime in 2025 maybe even early 2026.
So there’s still a couple of years of accelerated distress as this plays out.
Uh One of the key variables here, it’s gonna be well, office employment, of course.
And we know that the labor market is beginning to soften.
And another key variable here is remote work and remote work.
As I said before, it is here to stay at least at some level.
Right.
I think there’s still a trial and error period that’s gonna last multiple years.
But we know that square footage per employee is gonna continue to drop.
And and tom when you talk about a peak vacancy rate in office of 22 to 23% I mean, just for so people know you said in the second quarter was about 20%.
So still an increase from there.
What then is the long term vacancy rate, right?
Like in other words, how long can it stay at 22 or 23%?
Is that the new normal?
It’s a great question the way we’re thinking about this as obsolescence that there is a good 10 to 20% of office buildings out there that really just will not be able to compete in this new era, this era of remote work, this era of new offices, this era of new, let’s say centers of power in terms of where office centric locations are, right?
I mean, you’re getting migration into the Sun Belt, you’re seeing even within metropolitan areas like new York, certain submarkets doing much better than others.
And so what you’re left with is 10 to 20% of obsolete offices.
They’re going to have to find some new life in this new era, right?
They’re gonna have to go the way of a lot of these class B and class C malls over the past 30 years.
And do you see that?
I mean, that was one big trend time that was often talked about that you would see office buildings, you know, repurposed as for example, residential buildings.
I mean, I is that when you do your research to, is that actually happening?
Because there seemed like it seemed like it would be such tremendous uh red tape and bureaucracy to make that happen or no.
Is that a, is that a trend we’re seeing that’s actually playing out well, a combination of both of those things, it is a trend that we’re seeing, right?
And we’ve seen it.
I, I think um the financial district in New York since 911 is a perfect example of how you can take at least older office buildings with smaller uh floor plates and you can renovate those into valuable residential real estate.
So there is a precedent for that.
I think the problem comes in is when you have some of these 19 seventies, 19 eighties office buildings where there’s not a lot of natural light hitting the center of those buildings, that’s where you’re gonna run into real cost pressures that make it prohibitive to actually go ahead with one of these renovations.
And so where does that leave us?
That leaves us with a lot of subsidization?
A lot of public private partnerships in order to convert some of these obsolete office buildings from that era, Tom Finally, I wanted to ask you about a report in the Wall Street Journal today that talked about potential fraud that has elevated the the valuations of some of these office properties that now that the market is pulling back, maybe those are being uncovered.
And I’m just curious how much of an issue you think that is in the market and then how that affects what we’re gonna see next.
Well, what I can say about this is there’s been a lot of extensions, there’s been a lot of modification, a lot of work with loans, a lot of non transaction activity going out there, whether it’s from the loan perspective or from the same perspective and that has not allowed really any price discovery.
So whether there’s fraud or not, or cooking of books or whatever, it might be.
A lot of that’s going to have to come out over the next year or two because again, especially if that building is considered obsolete in this new world, right?
Where do we go from there?
There’s going to have to be some liquidation of that asset and the truth has to come out about really what are the occupancy levels, the rent levels.
What’s the income?
What are the management expenses?
Right?
What’s going on with each and every of these properties?
So price discovery is gonna be a really big deal because of the distress we see coming over the next year.
Two years, I think we do see a lot more of that price discovery and we see a lot more of the specifics of some of these properties.
Tom La Salvia, quite a picture here of the office market.
Thanks so much.
Appreciate it.
Thank you.
Coming up.
Shares of Solar edge have had a rough first half of the year but one analyst sees opportunity in the pullback.
We’ll speak to her after the break.
Tesla shares fighting for gains trying to extend its win streak to nine straight sessions stock now at break even for the year and Es fray is here with a look at what is driving the stock higher and ez hey Josh, yeah, it’s a nail biter because Tesla right now is up about 6/10 of a percent.
It opened lower than went up about 2% earlier today.
So let’s see what happens.
But look over the last eight sections.
Tesla shares are up 37% over the last month.
About 40%.
Remember this stock hit a 52 week low on April 22nd when it hit around $138 per share right now.
It’s at 253 So it has been a huge run over the last month.
Of course, the production and delivery beat the stock popped last week because of that.
But also you saw the stock going higher even before that, there’s some positive Wall Street calls or analysis after those production and delivery beats.
Even though delivery was down year, over year, it still beat what the analysts had been expecting.
Dan Ives over at Wedbush has a $300 price target on the stock.
Adam Jonas and Morgan Stanley called out that this is more than a car company in his note and he pointed out what some other analysts have also been pointing to, which was the show steer, what was uh Jonas called it and that is its energy segment, which is the fastest growing segment for Tesla energy storage.
This includes products like mega packs.
These are these massive rechargeable batteries that are used for commercial and industrial use and what’s interesting about this segment?
Yes, it is a much smaller slice of the pie when you look at the Tesla’s overall business, but it is the fastest growing and its profit margin is also so large.
It’s at a record of just above 24%.
You compare that to Tesla’s automotive, which is around 18%.
So you can see why analysts are excited about this segment even though it is a smaller piece of the pie, but just taking a look at where we’re at with the stock.
It’s break even for the year.
It’s come off those April lows, a massive run for the stock over the last month.
Ines.
Thanks a lot.
So we’ll see the photo finish and where it turns out today where it ends up.
Thank you.
Well, shares of Solar edge have had a rough first half of the year down.
Roughly 70% Bank of America Securities now sees opportunity in the pullback, upgrading the stock to neutral, citing an appealing valuation as the stock is already priced in an unlikely worst case scenario.
Joining us now, Dimple go Clean Energy analyst at Bank of America Securities and Dimple.
So it’s not that you’re positive on the stock.
You are in a neutral, but you’re less negative on the stock here and given that 70% pull back.
What kind of scenario is the stock pricing in here?
Good question Julie and thanks for having me on.
So for those that aren’t familiar.
Uh Solar Edge is a power electronics company.
They do DC inverters, they sell optimizers and battery storage systems too.
So you’re right, the stock is down 70% under performing its closest pier, Nha by close to 50% and the broadest solar index by close to 50% as well year to date.
I think, you know, the stock is oversold.
Investors are largely concerned that we might see the likes of inventory write downs.
Um You know, you are seeing uh solar edge, struggling with things like customer um accounts, receivable extensions, monetizing the balance sheet weaker underlying demand.
And the question is really, when can these underlying trends really reverse?
And so that’s the fear in the market.
We are arguing that the stock here is, is largely overdone dimple.
So you move to the sidelines, what do you have to see to, to make a buy rating on this one?
Yeah, good question.
So one is I’d really like to see the balance sheet.
Um You know, I’d like to see underlying demand firstly improve because that would mean that you know, this this inventory congestion that we are seeing today, largely prevalent in Europe were to unwind um and similarly weaker end demand in us, but to then done, which would, which would really change uh what we see from the balance sheet.
That’s the first thing.
Secondly, I’d like to see um you know, solar edge execute on some of these ira tax credits, you know, expand us manufacturing kind of see margin growth here.
Um And, and, and with that the the increase in cash flows, so not yet bullish, but looking for signs of incremental growth.
And so that’s really where we’re looking for science in the second half of this, of this year.
Dimple, I wanted to to sort of zoom out a little bit and ask you about the solar industry more broadly because it’s been a lousy year for a lot of these companies, solar edge is not alone.
I was looking at the tan ETF, the invest solar ETF which is down more than 20% year to date at a time when solar adoption has been increasing.
As he said, there are tax credits in the US at least and in other places that are available, what has gone wrong and what would turn the cycle?
Good question.
And I think one is interest rates, you know, the cost of financing.
Um One, the second thing is just weaker consumer demand, especially in the residential solar segment.
Um and then three tax credits is something that, that we are seeing companies really take advantage of um utility scale and resi but we won’t likely see the benefits of this until next year.
Uh When you can really, you know, include them or or get the cash upfront.
So that is something that we yet to see the benefits of.
So those are probably the three main things that are that are hindering the sector I would I would say and then there’s also, you know, regulatory policies.
So for example, in California, which is, you know, north of 60% of the residential market today, we see policies like the net energy metering policy or ne three which similar to the Netherlands market, which is really uh decreasing or has happened, the growth or end demand growth amongst consumers dimple.
Thank you so much for joining us today.
Great chat Thank you for having me and while wrapping up today’s market domination.
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