Transcripts For CNBC Squawk On The Street 20130809 : vimarsa

CNBC Squawk On The Street August 9, 2013

Docket. May be seven. Well find out more in a few minutes. Watch bonds today. Investors pulled 4 billion from treasury funds in the weekended wednesday. Youre going to hear more great rotation talk today. Road map begins with blackberry open to the idea of going private. Also, priceline beating expectations and the shares approaching new highs, not seen since the dotcom era. Its shark week on wall street as our our guest likes to say. Hedge funder bill ackman pushes jcpenney to push up its search for a ceo. Published reports say the smartphone maker is warming up to the possibility of going private. The companys board are said to be increasingly coming around to the idea. No deal is imminent and blackberry has apparently not launched any kind of sale process. Interesting though, guys, reuters is saying theyre having discussions about collaboration with silver lake. Nothing regarding m and a but just in a time when theyre involved in another highprofile deal. Mike . I think no growth or growth challenge tact with a lot of cash. It makes sense to ask the question. 3 billion or so in cash. I find when people say, if you go private you kind of get out of the glare of wall street. You dont have to worry about shortterm results. It also means if you can shrink a business, you can shrink. Yeah. Other options, of course still looking at licensing their software. But i was amazed at some of the market cap figures. 84 billion. I mean, its hard to get your head around how much the market cap has sh runk on this company. Its a really good example of how quickly the fortunes of a business can turn around. Especially in a volatile effese like tech. You look at microsoft. This is a business that i think can really turn on a dime. Well have to see if blackberry can pull out. Would it make sense, mike . Is there a buyer that would make sense . I dont know if theres a buy their makes sense. You have to position blackberry as a niche cult product. I dont know if theres room for four big mass market smartphone makers. In the licensing thing kicks off, who knows, that could be another avenue. We had this discussion yesterday. The guy we had on from idc said, you know what, theyre never going to unseed the number one player or number two players but carriers do like choice. Players do abhor a duopoly. And they do still see have residual loyalty on the i. T. Corporate end of things. You still see them in d. C. Many of the people i know, feek folks on the hill carry both. They cannot give up the keyboard. Theres a Big Government contracting angle to this as well. People talk about the operating system, the fact that apple is a closed system, blackberry as well, opposed to the androids of the world which are more open and more vulnerable to security threat. As you see companies, whether its the pentagon or otherwise, shifting and allowing more of their employees to use come of these open based devices its going to be an important hurdle and a problem. Again, for the traditional players in this space. Keep an idea on the Short Interest obviously to their ive talked to some Fund Managers from whom it is a top holding because theyre betting on something transformative happening in the not too distant future. Priceline shares rising sharply premarket. Theyre near dotcom era highs. Well explain a little bit more about that. The travel website posting Second Quarter results that beat wall street forecast. Profits up 24 in the period, the surge in Summer Travel booking. Guys, a couple of interesting things happening here. Youve got the readthrough with regard to strong period for them. Perhaps a little bit of mark share. Gains again. I want to go back and thanks to reuters for this. Priceline shares are 900, 93, 94 premarket. That is a nominal high. They did a six for one reverse stock split back when shares collapsed. The highest thing you probably saw them trading, mike, in 1999 was 160 or something in that range. That was equivalent to where we are today. On a price basis were basically matching the previous highs. Whats really interesting is if they go above 1,000, first s p 500 listed company to do so. Interesting. Yeah. Yeah. Used to be actually that would preclude s p 500 from putting in other words, if you start out at 1,000 they want it in there. That might be changing. Its funny vogue for high priced stocks right now. One explanation, one small piece of why share volume is so low. The average price of the stock has never been higher. The weird thing is there are some people who say maybe the fact, so why is this happening . Why are stock splits becoming less common . Think about it from the exchange or brokerage point of view, you get fatter commissions on higher priced fairs. Thats fine. Is the snake eating its tail . If its ruining volumes, that cant be a good thing. I think its corporate fashion. Its just fashionable to have a highpriced one right now. Theres no real downside to it. It used to be you wanted to have cheap enough for retail to buy 100 shares. It doesnt matter anymore. Only seven stocks on s p priced at 400 or more. Apple is the only one of them which is not higher on the year. As for the quarter itself, it wasnt bad. 8. 39. Revenue up 27 . Margins up to 82. 4. International bookings up 44 . So the travel trend, we saw what trip adviser has done in the past couple of weeks. Best performers on the s p 500 this year. I find it interesting. People talk about 2000 bubble era highs, going back to it. Priceline is one of very small number of cult Growth Stocks that have a fat multiple but even at that, its 30 times this years earnings. Its not 200 times. Its not infinite. You get away from tesla and you cant find on insanely valued customer. You can look at a linkedin and say its far more over valued from that point of view but doesnt necessarily seem to matter. Look at what apple shares have done, they have collapsed in setting their highs. Meantime, as we mentioned at the top, the week is ending with the bang in the ipo market. Half Dozen Companies set to make their wall street debuts today. Among them another Company Going public. Cvent is under the Ticker Symbol cvt. Were going to talk with the ceo one it begins trading. Some have priced above the range, some below, some in the middle. My question, mike, in our Conference Call this morning i said is this the double click party. Are we going to look back at today and think that was it . I dont know. Obviously pent up demand for ipos following facebook, the window closed. Now the markets are new highs. Sellers like the valuations. Im focused on one component of the ipo market which is the private equity firms bringing their Portfolio Companies public. Thats been disproportionally account for a lot of the volume. Those stocks have not done that great. Seaworld has done okay. Great point. So basically theyre kind of hitting the markets bid. I think in general, though, its understandable to have this level of activitactivity. Speculative stats are rising but i dont think its crazy yet. The cvent name is huge in the washington area. I mean, big employer of a company that is used a lot when it comes to events, et cetera. They really fast track their ipo thanks to the jobs act signed last april. Weve seen more Companies Taking advantage of this. I think thats something that we will have to see if more companies will take advantage of. 93 companies that have filed for ipos under jobs act sort of new qualifications. But i think that also raises the note of caution for investors as well because youre not getting the full look at companies books that they would have had before. That can cause some you can see some potentially budding problems within a company when you get that closer look at what that accounting issues might be, thats something to watch for. There has been a lot of talk this week about strategists and how bullish they are. Usa today, 1700 club. One of those who was stubbornly bearish at 1600 went up to 1750. Again today says you look at trailing, forwards, shiller pe, you look at s p in gold terms and oil terms, still at least reasonably valued. Is there anything wrong with that argument . No. Although the schiller pe is high. If you look at the tenyear trailing you worry about the longterm forward returns. No, i think were in an valuation zone where its neither cheap or up. The duration of the recovery, not so much the strength of it. People say i find it interesting saying strategists are getting bullish because the targets are not that high. Right. High given where not that high. What about the notion that this the rotation front, these lipper figures from the weekended august 7th, 4 billion out of treasury bond funds. More into equity inflows. Then youve got bill gross saying, ride it out, ride the volatility. Right . I mean, obviously retail chases new highs. And its a recognition phase. Basically were now paying for the fundamentals that have been proven out for the past three years and paying relatively high price for it versus what we paid in the past three years. Interesting as well to take a look at the great rotation. The main question on everyones mind has been is this really happening . There are a lot of people who still dont think despite some of the record weeks weve seen with treasury funds, despite the weeks weve seen with equities, mike, that, you know, a drop in the bucket compared to the long term. Its not a big number relative to how much came out of equities. I feel like its a grudging rotation. I dont think anyone is excited about it. People dont like the idea of buying the new high. But basically with fresh money if youre luking at your options, i think more of it is being shoved in the equity direction. A lot going into for equity as well. Not a determinative of how the market does. Everybody rotating in, someone is selling to them. Okay . Its all a matter of who is more urgent, the buyer or seller. How about, do you think the retailer, the retailer investor, is tom liesman said theyre spectating at this point. Dont want to join in. Keep reading stories about the 1700 club and reminds them of the hot stove. Its true. My read on it is that very, very wealthy individuals are in. Theyre exposed to stocks. They feel it. They probably own some all along. You go down from there and i think again, its very grudging. Its only its a very uncomfortable feeling. Response to my articles are almost uniformly skeptical. You get hated on. Marianne bar tell is telling us the other day that only the ultrawealthy when he talked to Merrill Lynch clintsz invested in this market, the bar for ultrawealthy is, what, 3 million in assets . 30 million. Some ridiculous higher. Higher. 30. I cant believe it. Thanks. Still to come, the bill ackman effect on jcpenney. Well hear one analysts take on penneys surge. We might be right back there with implied open at 24. More live from the post pine at nyse when we return. [ male announcer ] these days, a Small Business can save by sharing. Like carpools. Polly wants to know if we can pick her up. Yeah, we can make room. Yeah. [ male announcer ]. Office space. Yes, were loving this communal seating. Its great. [ male announcer ] the best thing to share . A data plan. At t mobile share for business. One bucket of data for everyone on the plan, unlimited talk and text on smart phones. Now, everyones in the spirit of sharing. Hey, can i borrow your boat this weekend . No. [ male announcer ] share more. Save more. At t mobile share for business. The most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second trades. And at the center of it all is a surprisingly low price just 7. 95. In fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. Im monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Lets get to the ceo shuffle. Jcpenney bill ackman calling for a new ceo to be put in place in the next 30 to 45 days. Rick schneider is a retail analyst with maxim group. Buy rating on jcpenney and a price target at 27 although that may change. Are you wavering at all on that target . No, longterm turn around story. I dont think the company goes out of business, but im not really thrilled with all of the drama going on in the last few weeks. Yeah. More essentially as a twofront war now. War with the consumer trying to get them back and a war with one of their own. Yeah. And i think the boards strongly worded statement is correct. This is a distraction they dont need right now. And i have to concur with that with their assessment. Your 27 price tart is predicated on the ceo coming back in and turning things around. This is from davids report. This is our most profitable short of 2012. Though the retailer is poorly positioned the shares rocketed in early 2012 based on over hyped prommises put forward by a highly pro mogaal ceo. The shares went on to ration rationalized when they realized the ceo was not going to do anything wonderful to turn things around. Why is this not going to happen again . They changed their business strategy. Let me point one thing out. At the time he was getting in his short i agreed with him. I also agree with him covering his short. So i was i had a sell rating on the stock most of the way down and since theyve changed their Business Model going back to trying to get the customers that they fired, essentially, under the previous ceo, and theyve got funding, im much more bullish on the stock. You get to this point with retailers and the typical, you know, vendor nervousness kind of rumors come out there. How does management at this point without a permanent ceo, you know, try to kibnd of calm those fears . I think thats one of the questions. But one of the reasons that i did turn bullish is it is fairly clear to me the vepders are working with jcpenney. They allowed them to extend their days bay paiable from about 30 to almost 60. So as long as the vendors are working with a retailer, its very difficult for that dealer to have to file. Do you think the reports about cit were true . And was if cash level, is it lower now than you thought it would be at this stage . It is its about where i thought it would be. There are some moving parts in there. There was an accrual that i think has to be reversed. I think theyre building a little more inventory. So it was about where i was. I think the cit rumors were taken out of context. I think they took a point in time. I believe that that was a normal negotiation that was going on between jcpenney and cit that really was not necessarily press wort worthy. The journal today tries to talk to some suppliers. They think coumps could be down another ten. Home category is running 50 below plan. Is that true . I have no information. I would say that i think the home category has been disappointing. I think there was some moving parts on the comps in the Second Quarter that the company had to overcome so that the Second Quarter is setting up for a better second half. There were some pricing changes that took place over time in the Second Quarter that are going to hurt gross margin. And i think the home category by the way, he didnt have anything to do with it. No doubt about that. I think the merchandise is inappropriate for their core customer and thats the customer they have to get back. I would not be surprised to see that liquidated throughout the next few months and home reset to the way it was under the old jcpenney. This brings up the point, how much is this turmoil at the top really impacting the store experience, impacting the Shopping Experience for customers as theyre about to launch into the middle of back to School Season which is one of the second biggest season of the year for a retailer like jcpenney. Its very distracting for everybody. Nobody wants to see it. I think this story is going to come down to three things, cash flow, cash flow, cash flow. And i think whoever is the ceo has to focus on that. And mike i thought was a good choice because he always focused on cash. He wanted to keep 3 billion on the Balance Sheet that have no net debt. So he was very conscious. I thought he was a good choice as the interim person. I think the new ceo, whoever that is, is going to really have to focus on that position. Should it be questerim or not . I think the street would love to see mr. Questrom but i dont think he wants the job. I think his name has been bantered about from the beginning just because of his history with the company and hes just hes a fantastic e reta retailer. I think any involvement with him would be a good thing. Rick, thank you for coming in. Thank you for having me. Now 24 hours ago art cashin told you how the bulls needed to seize control of the market again. Whats on his mind this morning. Art will visit us right here on post nine when we come back. And we got a ipo barrage on tap today. Well bring you the opening trades of several Companies Making their wall street debuts. Plenty more squawk on the street in two. 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