Transcripts For CNBC Fast Money 20240712 : vimarsana.com

CNBC Fast Money July 12, 2024

Skyrocketing a heart thumping 50 its not all rainbows and butterflies. Ibm was caught in a bad romance. The separation sending shares up 6 today more on the big blue breakout. Ibm has seen a little love from investors over the past decade so it is splitting itself in two and saying it will list its it services as a separate company next year. Investors initially cheering that move sending shares up about 6 but the ceo reminded inversers that it i ddivested in the 90s they didnt play into the value. Shares have under performed through the broader if he can sectors to broader names like or cal. But two years ago ibm was about watson and tech. It is said watson is barely mentioned on earning calls ibm was late to the game and still far behind amazon and google back to you. Lets trade this. Question, guy. I will start with you. When you start with a question, it always confuses me. Does this spinoff actually further ibms turn around plan or is this just Financial Engineering . The latter. Hello, melissa i think its the latter. If ibm was clever, they would rename the company red hat 2 because thats what it is if you want to boil it down i think it puts a fine point on what it is trying to accomplish. There was a time on valuation. They had visibility and a recurring revenue stream that gave them a multiple better than the market they are trying to get back to that in terms of the stock, in my opinion, i think you have been handed a gift. You have been traded up to and closed at a level we topped at on june 5th. To quote the steve miller band, i would take the money and run on ibm karen, what is is your thoughts this is a company known for financial engineer guy outlined the number of businesses they have divested over the year much is this part of a true evolution of its business or just making the business look better [ no audio i think we are having problems with karens mike we will work on that i will pose the same question to you. On face value it is Financial Engineering. That fits the bill of the definition of what it is with that said, it is a matter of whether they can deliver. I can see value in focusing down on Cloud Computing if we look at some of the other companies, crowd strike, we could go ad nauseam about these other countries, focusing on that and ai, it is a testament to a strategic shift i am hesitant from bashing a company for taking on a pivot and taking on a bold move. To me its an attempt to form a more creative company. So the question is, do you buy into this evolution . I guess we are going with steve miller tonight i dont think this stock will be flowing li flying like an eagle. I think the guys have framed the debate pretty well it will be spinning after Global Technology services. It has been a core business for them it hasnt grown but there has been residual core value you have to be careful i do think the focus on the cloud, you heard from the management, they announced guidance if you are talking about single, mid digits is roughly the growth that would really be a level where this stock has broken out of this range. We have traded in this range and if you look at the fiveyear downward slope, i think ultimately we need to break decidedly out of that range. I dont think this news alone does that. Cloud computing is all of the rage so ibm, should you afford it, the benefit of the doubt and think it should be rerated or that we might be entering a chapter where ibm shares are rerated because of the new focus it has got there is limited upside we are not talking about a new Growth Company seeing 50, 60, 100 a year Revenue Growth but this company has struggled to grow even marginally over the last four or five years. I think they have been slhrinkig a percent or two but if there were more robust margins, i could see upside in this stock here is another question for you. Two questions in the first six minutes of the show. Thats my questions ibm, is it more like h hewlettpackard or microsoft thats a fantastic question thats the framework we have talked about ibm over the last four or five years both microsoft and ib wrrch wm e doing the same thing microsoft pivoted, ibm is late to the dance i think ibm is more hewlettpackard. It pains me to say that. I think i was born the year they were borne its a 109yearold Company Great to have you with us. Is ibm more like hewlettpackard or microsoft with its announcement today i would probably agree with guy on this. When you think about what ibm is doing, they are playing significant catchup they are honing in on the cloud market to do so, they need to divest a legacy business that has been declining 5 or 6 a year with that die vest tour, they are keeping some of the cloud assets it will probably decline faster than that. I think there are questions in terms of what it looks like. There werent a lot of answers on the phone call this morning a lot of questions on structure. It seems clear the focus is to play catchup to circuit providers like amazon and google when you think about the 36 billion acquisition of red hat, how to combined that with this all of those who have been in this game so long who have market share it will take a long time. Look at google it has taken a long time to catch up to microsoft and amazon i think it will take time and patience the Growth Strategy they outlined today they talked about mid single digit growth this company has been growing 0 to 5 over the last several years. It will take a lot to accelerate that growth. Karen, thanks for being on. Even if one is skeptical about these two companies and how they trade, shouldnt one have done this anyway even if there is a risk of it not working i agree with that from a perspective of ibm, its a relatively new ceo even though he has been with the company a long period of time. This is looking how to attack the cloud Going Forward. Strategically it makes sense when you think about how the vision looks Going Forward and how to attack the market microsoft realize they have this massive base from an enterprise perspective and they lnch that leverage that it will take a long time obviously ibm is intense in kpaeting wi kpa competing with this business do you expect prices to be across the board pricing is part of the equation, but if you are the ceo of a fortune 500 company and you are talking about shifting your infrastructure to the crowd, thats just part of it you want to make sure that those assets are never going down. I dont anticipate that being part of the equation good to see you tim, top cloud play probably google for me. I like the valuation and other parts of their business. I realize people have been talking more about microsoft and amazon, but frankly, i like googles business. I think their core business in search is proven and their cloud is good. Lets go to the manager marriage Morgan Stanley earlier saying this move has been in the works for years. They have an incredible custom product in parametrics. Large sustainability funds its an unusual deal and highly complementary. It is something we looked at for several years and took advantage of it. What do you make of it, karen . Do you think Morgan Stanley is more attractive as a Business Today versus yesterday i think its interesting. I was surprised. I know the stock was up a lot. It didnt seem like they were paying that much for assets. It seemed like there was a lot of synergy here. Now it sets up a land grab remember when schwab bought ameritrade good timing for nelson are they going deeper into a business slowly being eaten away by a business with robo advisers guy . I think that is true. But if you listen to what james gorman has said over the years quite frankly, he can tell the board, you need me to integrate this deal. I think karen is right, there will be a land grab. Morgan stanley was first to the dance. I dont know you buy Morgan Stanley, but you look at some of these Asset Managers and you look at who is next. And they play it as which one is next. At this point in time would you buy a Morgan Stanley kind of business or morgGoldman Sachs kd of business . I would go with Goldman Sachs because of their Investment Strategy Morgan Stanley, you have seen a limited assault on some of the fee generation businesses there. So when you look back at Bank Earnings in the last two quarters and talk about training profitability, i think Goldman Sachs is better and that would be my preference for a business transitions into retail focus. Tim i think this is a good move you want to own morgan over goldman. It has outperformed Goldman Sachs 15 on a twoyear chart. It takes away regulatory pressure, takes away the Balance Sheet requirements this is around 4 1 2 trillion dollars of assets. Its massive i think they deserve a premium over others. Karen, do you think there is another deal in the works when it comes to as set managers . Yes i think we will see one. Invesco, you are already under scrutiny there this adds to it. I dont know who it will be, but i do not think this will be the first and only one we see. Come on, lets play matchmaker guys, play this game with me do you want me to sing . Not really. You cant unhear things. You brought it up i dont think citi will do anything they have their own problems Goldman Sachs is trying to get away from the way they were 15 or 20 years ago when i was there. I think wells fargo has too many issues so you have to ask yourself who is the next bank to step up. It comes down to Goldman Sachs or bank of america i have no idea who they pick i think maybe they are looking at etf companies i think thats a major investment trend think of some of the big etf companies that are still independent. We are not done two big names called for in oil mega mergers and disney in california is throwing down the gauntlet when we return. My father always reminded me, a good education takes you many different horizons and that sticked to my mind. So, when 1 a day came out, i said, why not . Why not just utilize that resource. And walmart made that path open for me. Without the 1 a day program, i definitely dont think id be in school right now. Each week for me in school is just an accomplishment. I feel proud every step of the way. You can go your own way is just go your own way. Your wireless. Your rules. Only Xfinity Mobile lets you choose shared data, unlimited or a mix of each. And switch anytime so you only pay for the data you need. Switch and save up to 400 a year on your wireless bill. With the carrier rated 1 in customer satisfaction. Call, click, or visit your local xfinity store today. Welcome back disney slamming california again over the states refusal to allow it to reopen its theme parks. Melissa . Disney is criticizing californias refusal to allow it to reopen. Disneyland issued a Statement Today saying now this follows governor gavin newsom saying that disneys parks wont open until covid cases stabilize and improve. While the county adjacent to the disneyland reports its biggest spike in cases in six weeks. The task force had its head row sign no comment from disney on that i want to note here, that disney world in florida has been open with limited capacity for a couple of months julia, this drag is hurting shares of disney what do you make of disneys fight with the state i think disney has to play this game on some level. We have the numbers in florida to compare what they may be missing out on thats reality we have dealt with are they open or not since the beginning of covid. At times it has been seen as the turnaround or reopening phase was going to be somewhere out there. But more importantly, what we have been arguing in the last couple days is should they be a content machine or the fly wheel of Consumer Products and streaming. I dont think they should be a streaming machine. Netflix isnt profitable disneys numbers spiked on the quarter because they could tighten their belt lets say there are those two choices, content machine or fly wheel machine. You have this auxiliary business that can become part of the streaming business pivoting away from that changes the underlying brand there and brand recognition. How does the Balance Sheet look like, karen they have a lot of debt, a lot of businesses virtually shut down because of the pandemic i think its concerning i think this rhetoric back and forth is setting them up to announce a terrible quarter. Maybe thats already priced in when we talked about this yesterday about should they be a content machine. I think they shouldnt with guys talking about espn, if it were spun off and able to be in the gambling business, that could create value for share olders maybe it wouldnt be part of disney shareholders should be paid a dividend they werent paid in the first quarter. They are leveraged, but they have cash, even if they need to borrow it. What would you tell him to do he is a huge fan. I would have told him. When the fox acquisition came around, i believe they had an 11 stake in draft kings i would have tried to match it with espn, a match made in heaven, spun that off, an incredible dole incredible deal in my opinion and off we go. I am not the ceo of disney so i cant tell him anything. But what i will say is go back to the spring of 2019. The stock couldnt get through 120 on the upside. Traded down to 120 thats the line in the sand. Here is what is coming up next. The Energy Sector may be bruised and batter, but our next guest has an idea that could really fuel the space. Will a blue wave in november mean more grfoeen r this sector . We will get answers to that and more when fast money returns my financial professional explained to me all the ways nationwide can help protect Financial Futures in peytonville. Nationwide can help the greens get Lifetime Income because their son kyle is moving back home and could help set up a Financial Plan for mrs. Garcia. And he explained how nationwide can help mr. Paisley and their new band. Exactly yeah. Dont forget the band. I havent. Were committed to making college more accessibley, by making it more affordable, thats why were keeping our tuition the same through the year 2021. I knew snhu was the place for me when i saw how affordable it was. I ran to my husband with my computer and i said, look, we can do this. [narrator] take advantage of some of the lowest online tuition rates in the nation. Find your degree at snhu. Edu. Welcome back to fast money. Oh, how the valuable has fallen. Chevron overtook its capitalization but it was short exxon regained its top spot. And it is said that these two oil titans should merge. Talk about a mega deal what would a combined Company Look Like . Well, they are about 130 billion each in market cap exxon formerly was about four times the size of chevron. When i say recently, as early as this year, january of this year. Exxon was double the size of chevron. It would be a very big u. S. Oil company, but it would also be one with a tremendous amount of Balance Sheet power. One thing weigh like about the idea, if chevron took control, you could get better on the esg and get rid of a Public Relations problem where it is perceived to be for better or worse, but rightly or wrongly. Exxon has a huge Public Relations challenge. One solution might be to end exxon. Would the ceo of chevron do this i doubt it. I think if this continues for another year or two or gets more in favor of chevron which is heavily praefrd eferred by the , then its a possibility. As of now going into the election, i think there is zero chance of this happening but the point this morning was this is where we have gotten to with the crisis. Chevron is bigger. The next era is bigger than both of them. The writing is on the wall for the next 50 years. These are 100year companies this is very big and this is a big idea paul, restructuring rumored around exxon, whether this is happening and in what way. Is there anything on stock that could make this good for investors . In the shortterm they are cutting costs as much as they can. Over 100 billion in administrative costs in exxon which is a huge company. We think they should cut caps further. A year ago they were at 40 billion a year they are talking about going down to 20 billion. We would like to see them go to 15 billion. Are they going to pay this enormous burden . The market doesnt believe them. At least the market doesnt believe it is sustainable. If you could sustain it, potentially it is super attractive if they can make it, but at the moment, the oil market is against them how does that change under a baden administration for oil its going to be very significant because you were going to be pumping money one way or another in the renewable sector where my clients are making money is in the renewable sector a lot of these renewables have small market caps. The amount of money proposed to going into the general theme of being more carbon friendly, this is beyond anything we have seen up to now. It should be positive there. If you are going to limit methane emissions and stop drilling on federal lands, that will reduce federal supply and people will still be driving gasoline powered cars and still taking planes around which will leave oil up in doing so, you should have a disconnect between highlow demand disconnect which we think will be bullish over the next five years chevron or exxon, you like it i think chevron is the better company. 120,000 employees. Obviously huge job loss. I dont think it gets through the proper legal channels, regulatory channels to approve the deal, but what do i know if terms of the stocks, chevron i think is the better company. Exxon might set up better. They just traded down. Levels we saw in march bounced off the 30 level. I think for the first time in a long time exxon might be interesting. I though

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