Here in new york but the markets are a little soggy right now United Health, the biggest of the dow downers. Morgan stanley lowering its price target but keeping an overweight rating for United Health peleton shares are trading lower marking another disappointing ipo. Bob is looking at some of how the biggest names are performing the buying public is saying prices for ipo is too high even if its centered around sound concep concepts this process has begun several months earlier of 120 ipos that have gone public, 22 have broken their ipo price on the first day of trading. About half are still trading below their initial price. Many ipos started really strong but they have been slipping recently as the investors question the valuation had a great week it was up 26 . Its now 6 this week. Crowd strike was huge back inror months but its down 16 this week mpl peleton off the lows of the day and disappointing debut for the company that makes those bikes and treadmills and offers classes. In way it was a bit of a glass half full. It didnt open as low as it indicated earlier on there were bids as low as 24. Thats a pricing at 29 the company did manage to raise about a billion dollars making it the 7th largest ipo deal of the year going public. They have about a billion dollars in revenues but are still losing money still as far as the pricing was concerned, ironically this morning on squawk box they said they thought they priced it fairly conservatively. We want some momentum we think we left something on the table in pricing my cfo said we dont want to be a dollar smart well, looks like they will be disappointed peleton on pace for the third or second worst performing ipo on its second day for more on peleton and the ipo market, were joined by a professor at the nyu school of business and author of the da darkside of valuation. How far off was the valuation of peleton in your estimation i think its still too high my estimate is 18 to 19 thats giving them the benefit of the doubt you have fundamentally a Good Business model i dont think it can scale up enough to justify the market cap. One thing i want to add that weve got to get the math right. At 26 or 27, the market cap is not 7. 5 billion. Its close to 9. 5 billion. They are waiting to become shares those ought to be reflected in the overall value as you look across the water front of ipos that are come out so far this year, many of which have noterer formed aperformed t well what has the market gotten about them that they all seem to have in common . I think its what the d. C. s got wrong. First its the translate market. Its been over estimating the market of value and underestimating the importance of the Business Model. Youre seeing it with all these companies. The Business Models are clearly not formed but they are scaling up i think the market is getting more skeptical there seems to be no pathway to profitability thats laid out. Its that critical point that worries you the most youre less worried about the idea that these companies arent making money right now or their cash flow megative you are worried that they cannot point to a Business Model that shows how they will become profitable exactly i think thats a problem that goes to the core of their existence. They have been rewarded all their life nobody seems to ask them fundamental questions like how do you plan to make money off this Business Model. Thats fundamental. Yeah, its fundamental. To give peleton credit their Business Model was a little more fonds than ubers. How so . Point to the distinction there i think its a subscription model that will make them profitable ultimately its not the Fitness Equipment business that will make them a valuable business its a subscription model because its the gift that keeps on giving. We know people are likely to keep subscribing. I think theres room for them to grow with the subscription business i dont think they can grow enough i understand founders wanting to protect a company they created. Do you think well see a change towards shareholder democracy . I hope so but im not confident they will hold these companys feet to the fire because theres greed. As long as you are making money, they seem to look the other way. I hope the recent state of ipos will make people wake up to the fact these companies cant just come with capital. I like the way youre point, we can have and theres plenty of class share structures for very successful companies. For start ups what do you think that point is which there should be pressure or the company it should think about changing that model. As were seeing, as wework put it, we played the private market game public. They did not play the market well at all. Government changes help them pull off that move id like to believe the wework fiasco will bring on the fact you cannot trust a founder to be a good manager founders can be visionaries. They can build up the businesses but they might not be the right people to run the company and build it up as a business. We can still give credit to founders for coming up withthe idea of building the company but we need the capacity to replace those founders if they are incapable of building the business they often control the boards or they control the voting share. Thats exactly right. The system as its structure standards makes it impossible. By setting up a voting share structure and a board of directors thats a rubber stamp, we have given up our rights as shareholders we have gone willingly to the slaughter. In a sense we get the share structures we deserve. For the last 15 years i think we have looked the other way and were now paying the price a vivid metaphor on which to leave it thank you. We should mention, as we have been all morning, cnbc Parent Company comcast is an investor in peleton more disappointing news on the ipo front. Endevour has lowered its expected price change. Whats going on out there . Its hard to be an investor looking for these road show and not be weary of whats happening. It could have an influence which is slated to price later on today. Some will argue that move has been influential known at one point in its existence as the William Morris agency the sell of over 19 million shares and earlier today en endeavor cut it from 26 a share and cut the offering size to 15 million shares for sell. It follows a new york postreport they said demand is very strong for the company with lots of investor interest in the shares just at price levels below the previous estimated range perhaps why you see the lower pricing. Theres also a feeling like endeavor getting caught up in wework that notion is not relevant to the story adding the feeling is the deal gets done and performs well with the only real variable being what price it goes public at sfw at. Thats the main variable. Thats the main variable. Heres a hypothetical question if peleton priced its ipo at 22 a share, would it be at 27 right now. It begs the question as the banks get together to talk about this, there is demand out there, always its just about what price will happen what is the endeavor Business Model. Now they had ufc theyve add the Miss Universe pageant. You have multiple Business Models it could be a problem but for the fact that the professor proe promoted out, theres a point they value the growth. Their losses are starting to get smaller. They are moving toward the path of profitability they might like the fact theres a tangible brand associated with it they recommend one name full stop lebron, they represent oprah. Im not represented by endeavor which is why im covering the story. Oprah, lebron, adele. These guys represent some of the biggest names in media and sports its complex. Well see. One name, dom from media streaming to meal kits the options are endless. Every one wants this Business Model. Well ask whether people are over subscribed. The Home Builders decline more than 34 this year. One firm is saying they have even more up side. Well g diinto that. Power lunch will be right back hmm. Exactly. Liberty mutual customizes your Car Insurance, so you only pay for what you need. Nice. But, uh. Whats up with your. Partner . Not again. Limu thats your reflection. Only pay for what you need. Liberty, liberty, liberty, liberty stocks trading lower today peleton opened lower than price as the ipo market is turning out to be not as robust as expected this year. We have signs of confidences fading, impeachment worries now. Sounds like quite wall of worry here now kevin is senior portfolio manager. Welcome to you kevin, walls of worry can be a good thing you got to climb something, right in. Sure it is. It adds discipline fundamentals are going to drive what happens in the markets. What we have seen despite trade wars and concerns of a brexit and despite talking impeachment, we have seen earnings hold up well markets have still been funding very nicely. Ultimately the data on the economy here in the yiet is coming in strong and much better than what we have seen overseas. I like his point theres some pricing discipline that may need to happen in certain parts of the market where do you think the valuations are compelling and too stretched. Right now were in control on u. S. Equities and we dont see a ton of upside from here until we get more certainty around the trade situation. Could be years. Lets hope not. Right now within the u. S. Equity market because of this uncertainty were more focussed on those domestic consumer focussed sectors over the more cyclic cyclical the trouble is the domestic consumer it depends on what they are small caps have been struggling more than you would think given this environment is there a tug of war happening . Its very difficult environment to make sense of i think we have this over hang from trade that could go either way. Right now the tariffs will go through as announced we are trying to take some risk off the table in those areas most exposed to the trade situation. That being the cyclical sectors that i mentioned and some of the emerging Market Equities have high exposure as well. We also have as mentioned earlier the impeachment scenario on the table which is adding to the uncertainty. Let me tie those two things together trade and impeachment. Does the president have a higher incentive to make a trade daily now that he has the target of impeachment on his back . No. I dont think so i think ultimately the trade is going to work out regardless of whose in the white house because whats happening with trade is the playing out of decades worth of imbalances that have finally come to the core the Slower Growth weve had in the yiUnited States, the cumulation of debt in the United States all of those things create pressures that have led up to this this is a much bigger story unless the impeachment process gouz in goes in a way we dont expect. We think the process continues to unwind. We expect for the next ten years or so we would be looking for the imbalances that were cumulated here to reverse themselves regardless of who is in the white house does the president need a trade deal more now today than he did yesterday did i understand you correctly that your base scenario is that the tariffs that have been announced to go into effect on the 15th of october and later will go into effect . Yeah. On the first part of your question, i would not tie those two things together. I dont think the impeachment inquiry changes the situation for trade at this point. I would agree a trade does tend to be more of a bipartisan issue. Then in terms of our base case scenario, yes, we do think it will go through. Theres a lot of risk. We acknowledge the potential for tensions do you think it will be passed during this president s term do either you have think that . Its hard to speculate on that that tells you all you need to know. Not even going down the route. Thank you, really appreciate it. Uber launching new products ascriticism the Company Doesn do enough to ensure rider safety those details are coming up. Esports are getting a boost not just from big name investors but big name conventional sports teams. Well break down the latest rit ckchomen power lun ces ghba markets. The business of trading goods and services. Nasdaq operates among the largest markets in the world. And our Technology Powers markets from indonesia to chile. Great markets are built on a foundation of trust and integrity, forged through leading Edge Technology and a smart regulatory framework. As technology advances, regulation must keep pace to allow the markets to evolve. Today we see an opportunity to modernize regulation, to make markets more accessible to investors and entrepreneurs of all sizes. From the graduate buying her first stock, to an institution investing in thousands. The markets belong to everyone and stand as a symbol of economic advancement, social progress and limitless opportunity. Thats the tomorrow that we envision and to get there, well have to rewrite it today. Woman what gives me confidence about Investment Decisions . Rigorous fundamental research. With Portfolio Managers focused on the long term. Who look beyond the spreadsheets to understand companies, from breakroom to boardroom. Who know the only way to get a 360 view is to go around the world to get it. Can i rely on deep research to help make quality Investment Decisions . With capital group, i can. Talk to your advisor or consultant for investment risks and information. Talk to your advisor or consultant Liberty Mutual customizes your Car Insurance, so you only pay for what you need. I wish i could shake your hand. Granted. Only pay for what you need. Liberty. Liberty. Liberty. Liberty. Welcome back to power lunch. Square getting a check mark from wells fargo today. Analysts upgrading the stock to out perform. Those gains a relief after a square beat down the stock falling nearly 30 since august shut out of a rally in payment stocks mastercard and visa. Lets bring in your trading team matt, size up this call today on square do you think its still going to be one of these growth stock leaders . Well, it looks like its going to be if you look at its chart. The stock had gotten beaten up pretty bad when it dropped below its summer lows and started bouncing back, it got very over sold. It started to bounce back and has regained that old support level. Its above that level. Its kind of funny we also have seen a death cross of the stock however, we notice that the previous two times we had a death cross in the last year or so, it was a horrible signal it was a great time to buy the stock. The first time was when the cross took place, it was the exact time to buy it the next time was about a week later. This time its about a week after it took place. It looks like it will be another situation where it will be c contrarian i understandicator could this enter the zone of what you see yeah, mike, thank you i think this was a smart upgrade. I like it better when analysts upgrade stocks when the prize goes down rather than at all time highs we were circling and hoping to get in its bounced very nicely on this upgrades there are fundamental changes to be sure. Jpmorgan is entering the space that square is trying to go after. The sell of caviar will be good for margins. I do think that for value oriented investors this is a potential opportunity if you arent as limited by your discipline as i am i like the story i like the payment space its very expensive. We have been selling it. I was hoping to get in on square and it may just not happen having a discipline that doesnt let you buy 70 times earning stocks isnt that limiting, but i guess in some cases you need to make an exception. Thanks to your both. Head to our website and follow us on twitter. Kelly, back over to you. Ahead, ubers ceo announcing major change toyotas a its apps. Well speak to an analyst who says now the the time to buy ho home builder stocks. Theres a subscription for nearly everything. Are we getting over subscribed all this when power lunch returns. Keeping the night interesting, is all about setting the right tone. Lower carbs. Lower calories. Higher expectations. The light beer youve been waiting for has arrived. Corona premier. Has arrived. Liberty mutual customizes your Car Insurance, hmm. Exactly. So you only pay for what you need. Nice. But, uh. Whats up with your. Partner . Not again. Limu thats your reflection. Only pay for what you need. Liberty, liberty, liberty, liberty welcome back here is your cnn news update at this hour. House Speaker Nancy Pelosi once again stressing that no one is above the law, including the president of the United States at her Weekly Briefing she focussed her remark os on the trump impeachment inquiry. The facts are these that the president of the United States and his actions in a telephone call with a head of state betrayed his oath of office and our National Security and the integrity of our election. Mcdonalds is entering into the meatless burger wars it will be available for 12 weeks in ontario the ceo was on squawk on the street back in may when you look at the whole meat substitute, i think it will be interesting for us to see who is particularly interested is it an existing customer or bra brand new customer well explore that they do offer it in germany already. Youre up to date. Back to you. If i wanted to try it, but no youre going to stick with the real thing i will. Thank you very much. We have come well off the lows the nasdaq still down by half of 1 take another look at peleton thats the ipo of the day falling to session lows a few moments ago below 26. Its slightly above that level but priced at 29 still down about 10 . The oil market closing for the day. You can see its relatively flat both prices were lower on the day and closing the session highs with market moved higher in the last half hour or so. Its a report that the pentagon will deploy u. S. Military assets in saudi arabia including Radar Systems as well as support personnel. Energy traders considering a number of other potential Market Movers we got that bigger than expected weekly supply build by the Energy Department just yesterday. Next up we got the baker hughes count due out tomorrow afternoon. Keep it right here well see you for that. Thanks uber saying it wants to be the operating system for your every day Life Reporter today is all about uber trying to show you it can do everything. Thing is, theyre not profitable bringing them into one fancy app doesnt change the Business Model. Does he ultimately have to raise prices for the riders . I dont think that we have to raise prices in other words to be a profitable company. I think the company is scale were looking at costs in every single part of the business. I do think we have Pricing Power. We had to increase prices substantiately its not something we wanted to do we have to do because of new regulations and our business continues to grow. Its interesting he was confident enough to say we did edge a little by saying i think we can do this especially because theres plenty of events regulation on the horizon that could force uber to raise costs or lower the prices it pays or the amounts it gives to drivers. Theres california legislation the so called big economy bill that could raise costs very much for ubers consumers theres the issue of london where ubers future is very uncertain. Remember, san francisco, london, new york where they are seeing increasing regulation, these are some of ubers biggest markets back to you. Thank you very much lets get an analyst take on uber and what is next for that Ride Sharing Company you just heard dara say we dont feel were compelled to raise prices Pricing Power. I think its the rare ceo who doesnt eventually use it. Yeah, thanks for having me. They do have Pricing Power prices went up about 15 since the regulation came in in february we only think that trips per day were reduced by about 3 this is a big that really needs to continue to grow sequentially this market goes to about zero growth thats a very significant part of the u. S. Market, thats not going be good for the overall top line of uber they have to keep growing their trips. They have to keep growing their revenues what is their path to prof profitability. Thats cash flow hold has been narrowing. Cash flow is not as bad as earnings theres a lot of noncash concerns that are happening that makes the cash flow better i think it will be tough we think they need to continue to grow about 25 per year revenue for the next four years and reduce costs on a unit basis by about 5 per year that would get them to break even on the growth side what we discovered about this business is its extremely concentrated so almost 60 of the revenue is happening in eight cities. This is the u. S. Business im talking about. Were just concerned that if they cant find a way to build a business outside of the cities it will be tough to generate another three or four years of that type of growth rate thats a great stat one of the things people focus on a lot is how uber and lift compete to the detriment of both would uber look at buying lyft, would they be allowed to thats pretty speculativspec. I think it would create too big of market share. Im not sure they would be able to do that i think the two can coexist they understand these markets. Like i said before in certain markets we dont see a lot of price sensitivity. Margins improve for both companies because competition got more rational. It seems like they are doing the right thing. Let me two back to something you just said, you said the path to profitability could depend over a multiyear period of being able to reduce costs on a per unit basis by 5 a year. When you say per unit does that mean for ride. Number two, how do they do that . How do they squeeze that 5 per unit, whatever a unit is out i think im talking about per ride where most of the growth is coming from today is from adding users. When you add users they is a cost associated with doing that. I think the more efficient way to drive margins down and continue to grow revenue, margins improved is to drive more revenue through the existing users that is one reason why we think the food Delivery Business is an advantage that uber has over lyft i think todays announcements are intended to do that. Another statistic is that for uber users that use the food delivery and the ride service, trips or their frequency of usage per month is almost 12 12 times per month they are using one or the other services for users that only use one or the other its five. If you can get more people to use bothbining the apps should thats the way to drive more revenues and more of that new revenue drop to the bottom line. Interesting thank you for spelling it out. Lets check on the bond market now rick we had a seven year not auction. 32 billion worth it was steady eddie today. The yield 1. 633. Priced about right we had very solid indirects and a little over 20 with primary dealers. Slightly above ov raverage. If you look at the chart since the 22nd of july, we are correcting a correction. Maybe the Biggest Issue is all the fed operation trying to put more liquidity in the system you taxes and settlement get what, september 30th is the last day of this quarter its also settlement for the supply im describing. 113 billion. If theres something important about this auction and tieing it with the funding market, everybody should pay very close attention of how the markets act on monday. Back to you. Shares of peleton lore in their public debut today are we all over subscribed ennee going to tackle that o wh power lunch returns doprevagen is the number oneild mempharmacistrecommendeding . Memory support brand. You can find it in the vitamin aisle in stores everywhere. Prevagen. Healthier brain. Better life. Welcome back seems now there are subscriptions for everything, fitness, streaming tv, meal delivery, you name it. The list keeps growing why is this a great Business Model . More companies are looking to cut out the middleman. Are we getting oversubscribed . Kelly, it does seem like theres a subscription for everything nearly half of u. S. Consumers pay for streaming Services Many more entertainment streaming subscriptions are coming with apple tv launching in november and then Nbc Universal peacock next year. More focussed Entertainment Services such as espn plus Discovery FoodNetwork Kitchen has a live cooking show service. There are the Meal Kit Delivery systems. Amazon has its own Martha Stewart marly spoon. Retailers can subscribe to monthly razors boxes of clothes like stitch fix and nike has a shoe Subscription Service for kids over a third have three or more services the ecommerce market is as much as a 15 billion a year market in the u. S. Alone kelly. Stick around. Lets add john to this conversation as well as we tally up how many Subscription Services we have and how much more the consumer can stand to bear i have a ridiculous number of Subscription Services. I gave the producers a few i dont remember which ones. What . Netflix, amazon prime, sirius xm ancestry. Com i just quit that a few minutes ago. What we might be missing is the subscription thing isnt that new. We had columbia house clogrowin up you can have apple news now its not entirely new concept. I just cancelled news plus last night too thats what im confused with. Shows me what im paying for and i lett alerts me when im paying for something i havent used or they say for a better deal i think were seeing them trying to let consumers know based on what youre paying for. I think amazon has become the base of my subscription bundle i pay to get access to amazon fresh which is the Delivery Service for groceries. I also turn on my magazine subscriptions on and off through amazon because they let you do it on demand you go through the company and it takes forever what about somebody who can bundle this for your life stage. If youre a 25yearold living in the city, here is the whole realm of services you need if youre a 35 new mom in the suburbs, here is everything youre going to need based on my age i can see the depends subscription coming or something. All of these things, i have i count 14 subscriptions in my life that include four print products i forgot about that to your point, its much harder to shed a subscription once you have it than to just say yes there are different kinds of subscriptio subscriptions. You know you want these news products and want to read them you might want a paper product then i think theres some of these other ones that are more about curation you may or may not like. Here is the heart of this when adobe and sales force came up with software service, it revolutionized the price and changed the world as we know it. Are rereaching a point of push back where we say not everybody with use the subscription model as their Business Model going forward. I think we are. If you have subscriptions that youre offering to people, you have to provide an amount of value. The Legacy Companies have known this for a long time i think were about to come up with new Business Models for taking advantage of the fact were over subscribed. Thats the next way when old is new again. Bundling is coming back. All of it. I think that is coming. They put companies together. They take them apart. Every company will want to be the base of your bundle. The items i get like toilet paper and toothbrushes thank you fun discussion really appreciate it reported mixed earnings after the bell yesterday shares have climbed more than 68 this year. Were going to talk to an analyst who says the builders still have room to run after this he rx, the new. The lexus rx has met its match. If theyre talking about you. You must be doing something right. Experience the style, craftsmanship, and technology that have made the rx the leading luxury suv of all time. Lease the 2019 rx 350 for 399 a month for 36 months. Experience amazing at your lexus dealer. Classical Music playing throughout welcome back to power lunch im dominic chu. Shares of Td Ameritrade are hitting new lows as theres a strip down version called ib ibkr lite. It will offer commission trades with no minimums and no activity inactivity fees. What this is doing is accelerating that war, kelly, with regard to commission and spread compression down to nothing. Sw schwab and Td Ameritrade taking a hit on those news. Lets talk about the Home Builders kb home shares hit highs yesterday. Sank after hours on a mixed earnings report. They are up 1 today up 68 yeartodate. Lennard and Toll Brothers is up. Raymond james sees more upside ahead. Lets bring in our analyst behind those calls good to see you. This performance doesnt scare you off . Well, you know, were certainly looking at more elevated valuations and we admit were chasing the stocks a little bit we backed off earlier this summer, historically whats usually a top period for Home Builders we were more bullish in the springtime what we found is we published these upgrades in conjunction with an analysis we did with the top 20 Home Building markets what we found across the board and unusually so is inventory trends collapsing in terms of tightening in the market supply statistics all dropping as demand has picked up noticeably mortgage rates, buyers are responding to it prices started reaccelerating pretty much across the board and so with that we wanted to get out in front of these Earnings Results that were coming with kb and lennard. The stock action today is a little bit of profit taking on some of the results here, but certainly we do feel these names have valuations that are still below the Peer Group Average and still have some decent upside. Fundamentals significantly improved in august weve seen that across the housing data you like these names because you think they are cheaper than their rivals how much mommy Building Activity can they hands signal theres regulatory, space constraints. Theres a lot of reasons why we have these shortages youre right. There are head winds and we understand those very clearly. Theres labor shortages p. M. Challenges with mortgage underwriting challenges with Student Loan Debt we have seen an economy thats Still Producing good household formation both on the renter side and ownership side. So were still getting some momentum and clearly the buyers have respond to lower rates this summer so were still seeing plenty of momentum its slow growth i think whats improving here is with incremental demand, builders are not getting out in front of themselves on volume they are taking the price and improves the margin outlook for 2020 substantially and gives us more comfort with these upgrades we appreciate it. Thanks for joining us. The Boston Bruins are moving off the ice with their latest investment a new area of sport and the black and gold are getting into it next it begins by being privately owned. With more than 85 years of experience over multiple market cycles. With Portfolio Managers who are encouraged to do whats right over whats popular. Focused on helping me achieve my investors unique goals. Can i find an Investment Firm that gets long term the way i do . With capital group, i can. Talk to your advisor or consultant for investment risks and information. As a principal i can tell you this. When one student gets left behind, we all get left behind. This is a problem that affects each and every one of us. Together with ibm, we created a whole new kind of School Called ptech. Within six years, students can graduate with a high school diploma, a college degree, and a pathway to a competitive job. You know whats going up today . My poster. Today, there are more than a hundred thousand ptech students around the world. Its a game changer. Its an honor to tell you that ptech[ applause ] arouthank you. Ld. Liberty mutual customizes your Car Insurance so you only pay for what you need. I love you only pay for what you need. Liberty. Liberty. Liberty. Liberty. But were also a company that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. From the day youre born we never stop taking care of you. Esports is a billion dollar investment sports teams looking to get into it thats right. Esports Company Announced new funding raising 30 million but what makes it interesting who is investors are. They are the ownership groups of the nba houston rockets, phillies 76ers, l. A. New Jersey Devils and the Boston Bruins along with susquehanna private equity that new company will have three distinct visions one focusing on professional esports teams across a variety of games. Focus on content and marketing to create video. Separate division of digital sports and entertainment all of this shows you how traditional sports investors are putting large amount of capital to reach that younger audience as esports see struggling reaching younger viewers esports is not sports they are for kids they are video games. They love to plate. Thanks for watching power lunch close bell starts right now welcome to the closing bell. Im wilfred frost. Uber, that stock is flat despite peloton which listed today trading so e . Price range cut for endeavor broader market, though, recovered in the last hour now down only 50 points on the dow with 59 points left to trade lets look whats driving the action more impeachment headlines the whistleblower complaint is released yields have slipped on the Housing Market its the third