Instant Reaction: Intel and Amazon Earnings

Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg BusinessWeek 0:00:11.440 --> 0:00:14.680 inside from the reporters and editors who bring you America's 0:00:14.680 --> 0:00:18.759 most trusted business magazine, plus global business, finance and tech 0:00:18.800 --> 0:00:22.759 news as it happens. Bloomberg Business Week with Carol Messer 0:00:23.120 --> 0:00:25.960 and Tim Stenebek on Bloomberg Radio. 0:00:27.040 --> 0:00:30.360 It is Bloomberg Business Week. Let's get a check on Intel, Carol, 0:00:30.400 --> 0:00:32.720 because this is the stock to watch in the after 0:00:32.840 --> 0:00:36.640 hours right now. Shares just absolutely creatoring the companies Wow 0:00:36.720 --> 0:00:39.480 down eleven percent. A series of what we call red 0:00:39.520 --> 0:00:43.479 stickies here, this company suspending its dibben end. The revenue 0:00:43.479 --> 0:00:46.599 outlook missed. It's a third quarter revenue come in third 0:00:46.680 --> 0:00:49.919 quarter revenue. The outlook goes from to twelve point five 0:00:49.920 --> 0:00:52.560 billion to thirteen point five billion. Estimates were for fourteen 0:00:52.600 --> 0:00:55.240 point three eight billion. They're implementing a more than fifteen 0:00:55.240 --> 0:00:58.280 percent headcount reduction. They've announced a ten billion dollar cost 0:00:58.360 --> 0:01:00.880 reduction plan, and they've suspended that dividends starting in the 0:01:00.880 --> 0:01:02.600 fourth quarter of twenty twenty four. 0:01:02.720 --> 0:01:05.319 Looking at our Ian King, who follows the sevenconductor space 0:01:05.319 --> 0:01:07.760 out with his story on the Bloomberg about Intel. He 0:01:07.800 --> 0:01:10.399 talks to us. It reminds us at CEO Pat Gelsinger, 0:01:11.040 --> 0:01:14.720 despite a massive spending plan to restore Intel to industry prominence, 0:01:15.080 --> 0:01:17.800 is struggling to improve the company's products and technology fast 0:01:17.880 --> 0:01:21.960 enough to retain customers. And so this is part of 0:01:21.959 --> 0:01:25.080 the problem. Right. They've been trying to do this turnaround, 0:01:25.480 --> 0:01:29.560 and it's been imperative for Pat Gelsinger and the company 0:01:29.560 --> 0:01:33.040 to show that they are having some progress on this. 0:01:33.040 --> 0:01:35.800 This is not necessarily a quarter that shows any kind 0:01:35.800 --> 0:01:38.160 of progress. If anything, that shows that they've got to 0:01:38.160 --> 0:01:40.920 continue to kind of rein in costs and try and 0:01:40.959 --> 0:01:41.600 figure this out. 0:01:41.720 --> 0:01:43.880 Okay, well, let's see what James Chalkmok has to say 0:01:43.880 --> 0:01:47.480 about this. He's a technology analyst over at Clockwise Capital. James, 0:01:47.560 --> 0:01:49.440 good to have you with us. We love talking to 0:01:49.480 --> 0:01:55.520 you around earnings. You guys have the ticker time is 0:01:55.600 --> 0:01:58.440 your ETF. I don't see Intel in there. This is 0:01:58.440 --> 0:02:01.000 a company though I know you followed in the past. 0:02:01.520 --> 0:02:03.600 Tell us your reaction to this huge news out of 0:02:03.600 --> 0:02:06.920 Intel with this cost reduction plan, suspend the dividend in 0:02:06.960 --> 0:02:09.600 the fourth quarter of twenty twenty four and then also 0:02:09.800 --> 0:02:11.240 these thousands of layoffs. 0:02:12.840 --> 0:02:14.519 Yeah, I mean they have to do something right. 0:02:15.320 --> 0:02:18.720 You know, they have to write the ship somehow because 0:02:18.760 --> 0:02:22.840 the growth is just anemic. And one way to do 0:02:22.880 --> 0:02:25.760 that is to find a way to grow, grow again, 0:02:26.000 --> 0:02:27.440 or you can. 0:02:27.360 --> 0:02:28.760 Fix things on the expense side. 0:02:28.800 --> 0:02:31.239 And it looks like they're giving up on the former 0:02:31.320 --> 0:02:36.639 and going toward the ladder, and you know, we're turning 0:02:36.760 --> 0:02:42.920 slightly more cautious on standings. More broadly, we've been cutting 0:02:42.919 --> 0:02:45.600 our exposure there across the board. We're basically just now 0:02:45.720 --> 0:02:49.639 left with Navidia, a little bit of SMCI on the 0:02:49.720 --> 0:02:53.600 data center side, and GeV on the utility side. 0:02:53.639 --> 0:02:57.080 So you know, we're rotating the portfolio. 0:02:57.520 --> 0:02:59.480 When we think that this rotation out of tech is 0:02:59.480 --> 0:03:01.760 going to be more prolonged and not just kind of 0:03:01.760 --> 0:03:02.799 the last two weeks that we. 0:03:02.760 --> 0:03:04.919 Saw, why are you rotating out of Socks? We talked 0:03:04.960 --> 0:03:07.120 about this with our Gina Martin Adams, who follows the 0:03:07.120 --> 0:03:10.920 equity universe for US are you know, chief equity strategist 0:03:11.000 --> 0:03:12.600 here in the US. I mean, the Socks is up 0:03:12.600 --> 0:03:16.280 about sixteen percent this year, but we've had two volatile 0:03:16.360 --> 0:03:20.840 days this week of a big sell off and then 0:03:21.520 --> 0:03:23.320 a big rally or big rally and then a big 0:03:23.360 --> 0:03:25.519 sell off if you will, it's seen that as a 0:03:25.600 --> 0:03:28.239 leading indicator. You're saying that in terms of the semi cycle, 0:03:28.360 --> 0:03:31.399 that you're seeing retrenchment, that there's we're going to see 0:03:31.400 --> 0:03:31.959 a pullback. 0:03:34.000 --> 0:03:39.080 Well, i'd say across large tech more broadly, we've been 0:03:39.320 --> 0:03:43.080 really borrowing from twenty twenty five returns. You know, you am, 0:03:43.160 --> 0:03:47.200 Apple and Microsoft are probably the poster childs of pulling 0:03:47.200 --> 0:03:50.560 from twenty twenty five forward. A lot of hype obviously 0:03:50.600 --> 0:03:53.960 around AI and chips and what that means for the industry, 0:03:55.160 --> 0:03:57.880 but a lot of that is increasingly priced in. So 0:03:58.400 --> 0:04:02.000 and on the backdrop, you have a weakening economy, you 0:04:02.040 --> 0:04:04.960 have uncertainty as it related to the presidential election. You 0:04:05.080 --> 0:04:08.880 have now fed swaps pricing in three rate cuts by 0:04:08.920 --> 0:04:13.040 the end of the year, which to us is somewhat absurd. 0:04:14.000 --> 0:04:16.960 You know, so the likelihood of the probability. 0:04:16.320 --> 0:04:20.840 Of negative surprise is outpace the ones of positive surprise. 0:04:20.960 --> 0:04:23.640 So I think you got to be more balanced, you know, 0:04:23.720 --> 0:04:27.159 look more value names, small cap names. 0:04:27.200 --> 0:04:29.440 So we've been diversifying out of large. 0:04:29.200 --> 0:04:32.320 Cap tech and broadening out the portfolio to the sectors 0:04:32.400 --> 0:04:36.760 quite frankly, really aren't part of the innovation tilt that 0:04:36.800 --> 0:04:37.560 we have all. 0:04:37.560 --> 0:04:40.000 Right, always You're always come on on days where Snap 0:04:40.000 --> 0:04:42.880 reports earnings, and I know you don't own Snap. I 0:04:42.920 --> 0:04:46.039 know you covered Snap from the beginning when at ICI 0:04:46.120 --> 0:04:50.760 owed you and I spoke years ago, James, you changed 0:04:50.760 --> 0:04:54.160 your tune on this company. Shares are down twenty two 0:04:54.279 --> 0:04:57.240 percent right now. The company forecast to justin Ibada for 0:04:57.279 --> 0:04:59.800 the third quarter of the guidance missed the average analyst estimate. 0:05:00.000 --> 0:05:01.080 What is going on with Snap? 0:05:03.040 --> 0:05:05.039 I mean, I'll say the same thing I tell you 0:05:05.120 --> 0:05:08.239 every time. I mean, it's when I when I first started. 0:05:08.279 --> 0:05:11.279 You know, they had Van Stiegel laid out the vision. 0:05:12.440 --> 0:05:16.160 You know, it was a sound one, but they had 0:05:16.200 --> 0:05:18.920 an identity crisis where they don't really know what they 0:05:19.000 --> 0:05:22.000 need to be. You know, you can either be an 0:05:22.040 --> 0:05:26.159 ad platform that serves everybody and go large, or you 0:05:26.200 --> 0:05:30.160 can be super niche and drive engagement. 0:05:29.640 --> 0:05:33.560 And monetization on a per user basis. They're doing neither 0:05:33.640 --> 0:05:34.080 of those. 0:05:34.640 --> 0:05:37.400 And I just think that there's just kind of lost 0:05:38.440 --> 0:05:41.760 and uh, you know, we're you know, in this market 0:05:41.920 --> 0:05:45.599 is one that's rewarding companies that have failed in recent 0:05:45.680 --> 0:05:48.400 quarters because they've been beaten down too much. 0:05:48.880 --> 0:05:51.440 Snap I definitely wouldn't put into that bucket. 0:05:51.600 --> 0:05:54.880 Let's go to Amazon. Obviously, we've talked a lot about, 0:05:55.200 --> 0:05:57.520 you know, the companies that are reporting today, Amazon and 0:05:57.560 --> 0:05:59.720 Apple in particular, and how they can shape sentiment when 0:05:59.760 --> 0:06:02.360 it comes to the Nasdaq one hundred. Amazon's down more 0:06:02.360 --> 0:06:05.240 than four percent as we speak. A lot of it 0:06:05.279 --> 0:06:07.600 has to do with the outlook. See three quarter operating 0:06:07.680 --> 0:06:10.160 income of eleven and a half to fifteen billion. That 0:06:10.279 --> 0:06:14.320 is shy the street estimate of fifteen point sixty six billion, 0:06:14.400 --> 0:06:17.440 So the outlook not very upbeat. Second quarter or AWS 0:06:17.440 --> 0:06:20.120 net sales always important in terms of profitability at this 0:06:20.200 --> 0:06:22.800 company twenty six point twenty eight billion, So that was 0:06:22.839 --> 0:06:25.360 actually better than the street estimate of twenty five point 0:06:25.400 --> 0:06:26.320 ninety eight billion. Yeah. 0:06:26.320 --> 0:06:28.159 I was just going to add in for James that 0:06:28.200 --> 0:06:31.880 it's the sixth biggest holding in your clockwise Core Equity 0:06:31.880 --> 0:06:35.240 and Innovation ETF. So it does make up about four 0:06:35.279 --> 0:06:38.640 percent of your portfolio. What's your reaction to the numbers 0:06:38.680 --> 0:06:39.360 that we just got. 0:06:40.680 --> 0:06:43.320 Yeah, it's four percent now six percent a week ago. 0:06:43.520 --> 0:06:47.320 So you know, we cut exposure into the print. Worried 0:06:47.360 --> 0:06:51.760 about really the softening consumer and the implications for retail 0:06:51.800 --> 0:06:53.839 revenue as we look forward into the second half of 0:06:53.839 --> 0:06:56.680 the year. Obviously CAPEX was a big question, but I 0:06:56.720 --> 0:07:01.520 think Microsoft kind of muted those fears. But you know, 0:07:01.640 --> 0:07:04.839 a lot of the hype around the operating income leverage, 0:07:06.120 --> 0:07:08.200 you know, there was a lot of hype around it, 0:07:08.320 --> 0:07:13.240 quite frankly, and it's happening, which is good, but you know, 0:07:13.360 --> 0:07:16.640 they need the revenue to keep up with it. On 0:07:16.680 --> 0:07:19.320 a positive note, AWS is doing quite well. 0:07:19.440 --> 0:07:22.720 That was slightly better than expected. 0:07:22.800 --> 0:07:26.440 So all in all, I'd say it's a it's a 0:07:26.560 --> 0:07:30.560 pretty good quarter, but you know it's it's one that 0:07:31.080 --> 0:07:33.120 was certainly we'll see what they say on the call. 0:07:33.200 --> 0:07:35.920 But I think this falls into my. 0:07:35.960 --> 0:07:40.400 Comments earlier about big calf Tech just can't be overweight 0:07:40.520 --> 0:07:42.880 these names to the same degree as you look into 0:07:42.920 --> 0:07:44.679 the second half as we were in the first half. 0:07:44.760 --> 0:07:47.400 So James, So the selling that we're seeing in the aftermarket, 0:07:47.400 --> 0:07:50.360 I mean, this is Amazon is up twenty one percent 0:07:50.440 --> 0:07:53.520 so far here in twenty twenty four, and you know, 0:07:53.560 --> 0:07:54.800 I know there's a lot of metrics in how we 0:07:54.800 --> 0:07:56.080 do it. I'm just going to go basic. You know, 0:07:56.120 --> 0:07:58.240 your forward pe of about forty But is this just 0:07:58.280 --> 0:08:00.920 a case of the fundamental story we're at Amazon, you 0:08:00.960 --> 0:08:04.800 still like, but maybe valuation wise, maybe that is some 0:08:04.880 --> 0:08:06.800 of what we're seeing in terms of the selling. 0:08:09.200 --> 0:08:12.400 I think, I mean, they ultimately missed numbers, right, so 0:08:13.280 --> 0:08:16.880 you Ago is coming yeah, and the ALOGO is coming 0:08:16.880 --> 0:08:19.040 in exacerbating. 0:08:19.720 --> 0:08:20.320 The pressure. 0:08:20.400 --> 0:08:22.600 But you know, they could walk it back on the call, 0:08:22.800 --> 0:08:24.160 provide more colored commentary. 0:08:24.160 --> 0:08:26.840 I got to look at you see exactly where the 0:08:26.880 --> 0:08:27.640 weaknesses were. 0:08:28.760 --> 0:08:31.600 But that being said, you know, I think it's just 0:08:31.800 --> 0:08:33.520 I think you got to take this into the context 0:08:33.520 --> 0:08:37.560 of what happens the big tech from here, and. 0:08:37.840 --> 0:08:40.040 You know, a lot of these have had remarkable runs. 0:08:40.200 --> 0:08:42.360 Will they be able to perform in the second half 0:08:43.200 --> 0:08:45.000 the same degree that they were in the first half? 0:08:45.120 --> 0:08:45.960 We just don't think so. 0:08:46.200 --> 0:08:48.840 Okay, So what does happen to big tech here? I mean, 0:08:48.840 --> 0:08:51.079 in videos, you're top holding it's a five percent of 0:08:51.080 --> 0:08:51.760 your portfolio. 0:08:53.679 --> 0:08:57.240 Yeah, well it was four yesterday and then uh then 0:08:57.240 --> 0:08:58.680 it went on it was like four point three and 0:08:58.679 --> 0:08:59.480 then went up for five. 0:08:59.800 --> 0:09:03.520 Yes today's movement. Yeah, we got to evaluate Navidia. 0:09:03.920 --> 0:09:07.120 But that's the only one really that we have no 0:09:07.240 --> 0:09:08.280 problem kind of. 0:09:08.440 --> 0:09:11.160 Maintaining that more sizable weight. 0:09:11.440 --> 0:09:15.560 It's really the other companies within the semi space that 0:09:16.080 --> 0:09:20.280 we're we've shed from the portfolio and really we're just. 0:09:20.280 --> 0:09:21.040 Limiting it to. 0:09:22.480 --> 0:09:27.680 Navidia, SMCI and GeV as we think about the data center. 0:09:27.920 --> 0:09:29.559 All right, well, there's a lot going on, and the 0:09:29.679 --> 0:09:32.520 earnings continue to cross the Bloomberg termin looking at DraftKings 0:09:32.520 --> 0:09:35.560 down about eight percent, us coming out with a little 0:09:35.559 --> 0:09:36.880 bit of a forecast. We'll break down some more of 0:09:36.920 --> 0:09:39.440 those numbers. James chock Mak, thank you so much. Busy 0:09:39.480 --> 0:09:41.400 earnings day and you walked us through at he's tech 0:09:41.440 --> 0:09:42.920 analyst ever at Clockwise Capital