Big buy call on a burger joint you know there it is. Its yours mystery chart we start with a developing story on uber and lyft both stocks shooting higher after a Big Court Win in california deirdre bosa has more. Reporter until just a few hours ago it looked as those california riders and drivers would wake up tomorrow to a ride sharing blackout the court blinked, granting youtuber and ly e er uber and ln extension to continue to operate with drivers as independent contractors despite new regulation it is a win for uber and lyft in the shortterm it suggests that their threats to shut down service in california over the last week worked just hours before the extension, lyft told its drivers and riders it would be suspending services at midnight because the change would necessitate an overhaul of their entire Business Model and wasnt a switch they could flip overnight. In reality the writing has been on the wall for years. Uber and lyft used a tactic theyve used in other markets to avoid new legislation. It came at a time when california is facing enormous pressures, wildfires, Power Outages and a recession. The court decided now wasnt a good time to limit Transportation Options the Ride Sharing Companies also had less to lose by shutting down with bookings already under pressure amid the pandemic the fight, though, is far from over to get the extension, uber and lyfts ceos must submit sworn testimony that they will comply with the law and make drivers employees if they lose the appeal and the November Ballot issue. That brings the decision right to voters. If that happens and they are forced to comply with 85, they may have lost the war, so to speak. This latest win will not matter. Okay. A lot of questions here, deirdre. Uber says and lyft says, we cant exist with that model as employees. The cost structure just doesnt work a lot of the public online says its cruel and unusual you want to use these guys for their cars and discard them. What do the drivers think . Has anybody asked them reporter thats a very good question, but theres no easy answer to that a lot of drivers will tell you that they dont want to become employees because they use the income as secondary income they have other jobs there is a large group of drivers that says that, but when you consider the group of drivers that do do this fulltime, they work their evenings and weekends, they take risks amid the pandemic, those are the ones that really uber and lyft have built their platforms on the back of and they do not enjoy any of the benefits like protections and Unemployment Insurance and all of those things that other employees do get this is a very, very tricky issue, brian the drivers will get a chance to vote on this in number, the drivers along with the riders. Well see what happens far from certain ive seen a lot of drivers, they go back and forth between the two, lyft or uber depending on whats more busy. I guess if youre an employee, youre not going to be able to do that. Guy adami, you and i and most of us are old enough to remember the old town car system in new york city. You call and schedule an alpine or carmel or whatever it is and the guy comes up and you get in your car if these are employees, without this model uber basically becomes a taxi or a town car company. Is that an investable concept . Probably not. They would say exactly that as well i think you asked the right question, what do the drivers think . If forced to do this, both uber and lyft have to hire 50,000 employees each to sort of fall under the guidelines which is probably the existential troix t risk to the company. They played a high stakes game of chicken that right now theyre winning. But this could flip in their face in november that said, it seems to me given the question you asked, maybe theres some hybrid model that can work where you dont have to hire everybody maybe just hire the people that want to be fulltime employees in this case, i would rather lyft i think it trades back to the 39 level we saw in early june if you look at a lot of the analysts, price targets range anywhere from 31 to 49 i think the stock with a little bit of a tailwind now can get back to those levels you know, karen, i guess for many of our audience that doesnt live in new york or around new york, they maybe dont understand the town car model. Yeah, theres taxis but a lot of us sort of shuttle around if you dont have a car with these town cars, used to be the lincoln continental. That model was tough, price competition, the drivers with 1415 hour days, really difficult model to make money in that model seems like it wouldnt justify a stock or a stock price where both uber or lyft are right now, or is that just crazy no. I agree with you plus, uber has been very price competitive versus say taxis in new york city. If this were to pass in new york, if this were to become an issue everywhere, how much more expensive would those rides get and would that have a diminishing affect on demand i agree with you this is a very big deal, obviously. To me, it makes them both somewhat uninvestable. I cant really gauge what the court would do and i i dont know if that matters necessarily. Just a few weeks later whatever the state chooses to vote on it, that outcome will be the semipermanent outcome. I dont know how to gauge that and to have it out there that theres going to be potentially a Material Change to their Business Model and theyre not cheap to begin with makes me afraid you can say you can diversify. They have uber eats, but i dont know if that will face the same issues that the transportation part faces i own neither of them right now. I feel bad for the drivers, the ones who want to be not employees. I dont know how you do the h h hybr hybrid does the same man or woman who is an employee charge the same price for a drive that an independent contractor does . I dont know how it would work. Its not one size fits all for the state labor laws in california its probably the most onerous employer state to do business. This is the ultimate battleground i dont think a target necessarily on uber and lyft this is about bringing the gig economy understate l state labo. Its a big deal for a lot of people if you look at how both of these companies have traded over the last three months with an expectation of this battleground, i think this is largely where these stocks have to go from here. I thought uber had found some base around 33 i said that a week ago the stock was down 18 in ten days after those earnings. I think with the acquisition of postmates, i think uber eats is a big part of their business at this point they are close to dominating that business what do you do with the stocks you dont have to do anything. I will say you make the most money when things seem the darkest. The fact they were going to flick the light switch off, i dont think the 6 or 7 rally in todays market from 1 00 p. M. Is what youre playing for. I think youre playing for a lot more i dont think you have to chase these stocks today i dont really make that analogy to the alpine model. You have a bunch of technology you have a lot more of the app involved than we did back then when i first started on wall street almost 30 years ago its a lot different i think theyre investable into the vote i take the other side of it. In the would you rather, i go uber versus lyft are they investable . Yes. Into that vote i think you have a large headway or horizon into that vote where both of these names are buyable. And i dont think california cascades through the rest of the country. Maybe youre making a good bull case, which is if that law sticks, steve grasso, maybe they have to double or triple the rates but that enables them to pay Health Insurance for their drivers. The business shrinks but they actually make money. Lets not forget uber has lost 15 billion in the last two years, bigger than the market cap of many companies. H gene, we remind our viewers that ubers original name was ultra taxi is that a business worth 55 billion . No. Both of these companies are in a tight spot yes, there was a reprieve today. This topic is not over obviously with this vote coming november 3rd. California can have influence on other states if you put all this together and think about if these changes to employees across the country caught a 15 increase, which is effectively their profit margins, i do want to caution the voters of california and also some of the lawmakers i do not want to politicize any of this, but one aspect, what would the drivers want most of these drivers use both apps, both lyft and uber if they are employees, they will be most likely restricted from jumping from app to app. That would cut down on what they would be paid on an hourly basis perhaps. I dont think the right path here is as clear for the drivers as simply to become an employee. To karens point, she talked about a hybrid model the team are smart people. They have a lot of technology. To steves point, is there some kind of model that maybe we or the market has not thought of yet based on what they have that even if the California Law stuck, which is oneeighth of the American Economy, theres some idea of the business that we have not thought of yet which they could prosper off of. There is. Its called autonomy that could create some forced adoption if this model doesnt work, youre going to see these Companies Push even harder into autonomous systems, simply eliminating the drivers. The next few years there are going to be ups and downs related to the regulation. We know where this is going. Ultimately lyft and ubers business over the next decade are going to be fully selfdriving and this topic is going to be largely irrelevant. Gene, we played a little would you rather before. I hate to do a type thhypothetit assuming the vote goes the way of uber and lyft, theyre very Different Companies now for a lot of Different Reasons under that scenario, who stands to benefit more, uber or lyft. Im in the lyft camp in part because actually i like their focus on the u. S. , i like their focus on the ride sharing. I appreciate you putting that caveat assuming they get through this current intersection theyre navigating ultimately i think if i had my choice, i would put my money on lyft i think its more investor friendly culture and i think that influences my view. So you talk about the potential for ultimately not even needing my driv ining any. Does that make you bullish on the model for when that period comes, because thats a huge part of their cost so this has nuances to it one of the sides of the marketplace is under some pressure now, the driver side. If we eliminate the drivers side, we have the marketplace trying to get consumers to ride. That opens up new competitors. Theres about six of them trying to get there i think the option is a better option than what they currently have with humans driving ultimately it will attract other competition. I think google and tesla are going to vector into the ride hailing market gene, always a pleasure to get your take there. A lot of questions around these companies. They did rally today, though gene, thank you very much. Lets turn back to the Broader Market stocks ending higher across the board. The nasdaq 100 adding another 1. 4 to its coffers today. If you think the big names may be getting big time played out, this one is for you, because your next guest is still finding big opportunity in smaller caps. Chris harvey of Wells Fargo Securities good to have you back on earlier this summer, you called for a 10 rise in the overall market it happened. A lot of people thought you were nuts it worked out for you and your clients. Congratulations on that. Are you shifting that call from the Broader Markets to the smaller names . Thats right. Our price target is 33 were sitting right on top of that now its about rotation. Were looking for areas where we can grasp sicyclicality. The last thing we want, easy comps in the first half of next year you can find all of that in small caps were starting to rotate the portfolio away from the last year, two years. Its a walk not run situation but we want to rotate, we want to get more cyclicality in the portfolio. Ultimately we think at least in 12 months were going to be in a much better place with regard to the economy. I was going to say this is a pure economic call, is it not. The large cap stocks have a fed aspect to it we get it. Smaller cap stocks largely rely entirely on the American Economy. The American Economy goes in the tank again, i would imagine youve got to revisit this call. If the u. S. Economy goes in the tank again, i think we have to revisit almost everything its not as if growth is going to outperform in that environment. Everything is going to get beaten up. We think we have a handle on covid. Can it get worse absolutely but every day we get one day closer to a vaccination. We want to go to places where numbers were slashed at the beginning of this year and you dont need much of an economic improvement to see upward revision thats across your small caps, your cyclicals so i have a question for you. I think youre spot on because i agree with you so unfortunately i am biassed to this how much of this do you think the rotation has been put off when you look at the apple split and the tesla split . It seems like everyone is rushing back into growth again and it put off that value rotation and it truly is a walk, not a run. Right steve, i think youre right. Weve both been around for a while where weve seen these more excessive tops where whats working continues to work. But thats not a good value. Again, if were looking ahead 612 months we want to go where the market is going to go. The market eventually is going to start rotating to price up names that have really easy comps in the first half of next year for the meantime were seeing the uber caps work today thats great but if you look at small caps in the second half of this year, theyre more or less trading in line with the s p 500 and thats a positive sign. Chris harvey, Wells Fargo Securities congrats on being right on the big macro call at the beginning of the summer. Welcome you back on any time thank you very much, buddy tim, the small caps ended down today but theyre up 16 over the last 90 days and outperforming the s p 500. Do you agree with or like chriss call chriss call, he used the term covid beta. When ive been covid beta, i think ultimately the momentum and the move in stocks that goes along with an economy that is struggling under the weight of covid, i think if anything we have had this reopening craze, we have seen some industrials have a pretty good run i actually believe in part of the materials and resources trades we talk about housing all the time big cap tech to me is still going to outperform if we have covid beta weve had these rotations in the market for the last two months the triple qs has outperformed the s p by 3. 5 in the last 20 days i think you have to be careful to say its time to rotate out of tech, because right now it will continue to be defensive. These companies that we complain are the earnings of the s p are most of the earnings of the s p. Why would you run away if the current pace continued, the nasdaq 100 would end 2020 up 50 . Coming up, tesla part of that story on a tear today the stock went past another major milestone. Plus, maybe take your tesla to the drivethrough or a 5 milk shake one top wall street analyst making a big bet on the shack. [ engines revving ] its amazing to see them in the wild like th shhh. For those who were born to ride, theres progressive. Lookentertainmentour experience xfinity x1. Its the easiest way to watch live tv and all your favorite streaming apps. Plus, x1 also includes peacock premium at no extra cost. This baby is the total package. It streams exclusive originals, the full peacock movie library, complete collections of iconic tv shows, and more. Yup, the best really did get better. Magnificent. Xfinity x1 just got even better, with peacock premium included at no additional cost. No strings attached. Welcome back to fast money. Tesla is topping the tape today to the tune of 7 gains. And it busted out about 2,000 a share for the first time ever. Get this, certainly random but hopefully interesting, tesla is now bigger than walmart on a market cap basis walmart, by the way, a Company Whose sales are 2,000 times larger than tesla. Now, karen, i know its just a stat, market cap i get it but man, what a move by tesla. What do you make of it walmart makes money and has for a long time. What makes tesla, i guess, more exciting is that its exciting to know whether theyll make a lot of cash flow or not. I dont know this is crazy on the split its happening i guess next week obviously the split is not a creation of real value, but if enough people perceive that it is, then okay, great, it is. I mean, its in the stratosphere i cant. I cant possibly touch this one here cant touch it here guy adami . Listen, im not going to pretend ive been some raging bull ive said for a while that i dont necessarily understand it. But i will tell you back in may at the time the stock was trading 700 and elon musk tweeted the stock was too expensive, that lasted a day and now were three times higher that tells you all you need to know im not pretending that i understand it but i do see whats going on. Ive got another stat for you here teslas market cap is now bigger than vw, bmw, ford, volvo, rang rover and others combined. Wow. Now to ye olde call of the day. Thats shake shack steve grasso, youre long hack you love their food. Your take on the call . I think its good they have been forced to invest in digital from dominos experience with the app and digital, all of the quick serve restaurants should have been way ahead of this. I think corona, i akrgree the environment has made them focus on where the growth areas will be but this is a name that was only thought to thrive in city centers. Now you have them adding drivethroughs and shack tracks and the ability for them to thrive outside city areas. So in theory, you should be able to grow faster than the pace that they once were growing at brian, remember, everyone threw this stock out and the whole group out so they overestimated what the downside was going to be the call is simply based on average monthly volume that growth is what they are expecting and also the Digital Enhancements in a post covid world, thats why you want to buy shack. There you go. Buy shack. They like the call. Coming up, a slew of