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Is Apple's weakness in China being understated? · The Financial Exchange Show

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Speaker 1: and Mike Armstrong.
1:10
Speaker 2: Chuck, Mike and Tucker with you wrapping up the last
1:13
Speaker 2: week of jan Huary.
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Speaker 3: This has been a wild week, Chuck, it hasn't, Mike,
1:21
Speaker 3: it hasn't. Not for markets, no, for news. It's been
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Speaker 3: a wild week.
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Speaker 2: Here's the thing, Like, let's for all of the stuff
1:27
Speaker 2: that's happened this week in markets, Like, here's the wildest
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Speaker 2: part of it. So last Friday, Friday, January twenty fourth.
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Speaker 3: Or January as I'm yeah, you're pushing this one pretty hard.
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Speaker 2: I am, I I I I want to I want
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Speaker 2: to push this. The S and P five hundred closed.
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Speaker 2: It's sixty one oh one last Friday. Yeah, we're sitting
1:49
Speaker 2: here right now at sixty one oh seven. So for
1:51
Speaker 2: everything that happened this week, right back to where we
1:53
Speaker 2: see the market has moved a tenth of a percent. Yeah,
1:56
Speaker 2: a tenth of a percent. Yeah. Still been a lot
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Speaker 2: to talk about. What's going on? Like what a week?
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Speaker 2: This is wild? And here's the thing. There is a
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Speaker 2: bizarre world where if things don't hold together Monday, like basically,
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Speaker 2: if everything else doesn't somehow float up Monday, as in
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Speaker 2: videos blowing up, there's a world today where the s
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Speaker 2: and P five hundred is at fifty seven hundred, the
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Speaker 2: VIX is at like forty five, and we're sitting here
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Speaker 2: just completely shell shocked that didn't happen. Yeah, And I think,
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Speaker 2: can we actually unpack what happened this week? Because I
2:31
Speaker 2: do think this is fascinating to see just how this
2:34
Speaker 2: market did hold together because again, there's an alternate universe
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Speaker 2: where this doesn't happen. So know this because Google's quantum
2:43
Speaker 2: computer told us that alternate universes exist.
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Speaker 3: So what when you talk about what happened, what do
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Speaker 3: you want to recap? I mean, like all the news
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Speaker 3: or just the market react.
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Speaker 2: Why did this market actually hold together? Because here's what
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Speaker 2: happened on Monday and videos falling. It falls seventeen percent
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Speaker 2: in a day. It's the single biggest market cap loss
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Speaker 2: by a stock in US history, and it's not even close.
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Speaker 2: They lost six hundred billion dollars in a day. The
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Speaker 2: next closest was in Nvidia sometime last year when they
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Speaker 2: lost like three hundred and fifty billion dollars in a day.
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Speaker 2: So this was big, huge, as the kids say. And
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Speaker 2: normally when you see a market leader take that kind
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Speaker 2: of pounding and and the volatility that results from it.
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Speaker 2: It's like everyone kind of heads to the exits and
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Speaker 2: is like, okay, we got to sell everything. They sell
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Speaker 2: everything out of here. My tech.
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Speaker 3: You know, in Vidia, the largest tech stock in the world,
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Speaker 3: is down, So I'm selling all of my tech, which
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Speaker 3: leads messell everything else.
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Speaker 2: And you see this cumulative instead what you saw was.
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Speaker 2: And granted there are a few other things going on,
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Speaker 2: but maybe everyone just gets spooked as well. So bond
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Speaker 2: yields come in about a tenth of a percent, and
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Speaker 2: maybe somehow that floats up some other areas of the market.
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Speaker 2: There's this is intra tech rotation that happens on Monday,
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Speaker 2: where investors are maybe kind of like, hey, we're pulling
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Speaker 2: all this money from in Vidia. Where else is big
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Speaker 2: enough that we can Oh, okay, Apple's over there, We're
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Speaker 2: gonna stick it in Apple. And so Apple ends up
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Speaker 2: up a couple percent on Monday, not because Apple did anything,
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Speaker 2: but I think just because there was all this money
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Speaker 2: coming out of in Video and Apple's sitting there and
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Speaker 2: people are like, well, there's a three trillion dollar company.
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Speaker 2: Put it in that do something there.
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Speaker 3: Yeah, remember that day where in video is off by
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Speaker 3: seventeen percent. The NASDAK finished down by more than three the.
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Speaker 2: Dow was up, the Dow was up, in the S
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Speaker 2: and P was down one and a half, and the
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Speaker 2: S and P pre market was down like almost three
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Speaker 2: percent at one point. So again, there's an alternate world
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Speaker 2: that's not that hard to believe where we're having a
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Speaker 2: very different conversation right now, because the fact that things
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Speaker 2: didn't fall apart completely on Monday is remarkable. Monday was
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Speaker 2: the city. Monday was I'm trying to think of the
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Speaker 2: best way to phrase this. It was the single worst
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Speaker 2: day for the S and P five hundred on a
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Speaker 2: day where one hundred more stocks were up than down
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Speaker 2: for the day. I mean, like again, like you don't
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Speaker 2: see stuff like this often. So this is a it's
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Speaker 2: a wild market. But it also speaks to I think
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Speaker 2: the challenges that this market may have this year, which is, hey,
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Speaker 2: if tech leadership falters, which is make no mistake, it's
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Speaker 2: what happened this week, and Video and Microsoft faltered. The
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Speaker 2: other guys are hanging in there. Tesla is up one
5:35
Speaker 2: and a half percent this week, uh Met is up nine,
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Speaker 2: Apples up nine, right, but tech leadership started to falter
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Speaker 2: this week. The index has done nothing, but you got
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Speaker 2: all these other stocks that have rallied this week that
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Speaker 2: if you look at the majority of stocks in the
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Speaker 2: S and P five hundred, they're up this week even
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Speaker 2: though the index has done zip nunka niltsch.
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Speaker 3: So as investor somebody who owns stocks, I'm happy about this.
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Speaker 3: But are we looking at just blind optimism. Yes, that's dangerous.
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Speaker 2: Yes, and specifically with a few of these names. I mean, again, Meta,
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Speaker 2: I don't understand to a certain extent. I mean, I
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Speaker 2: get that they're making a lot of money, but their
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Speaker 2: earnings call, they were like, yeah, we're gonna spend more
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Speaker 2: than you thought we were, and our revenue is gonna
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Speaker 2: be lighter, and the stocks going up on that. That's
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Speaker 2: kind of a tough put in. Then you have Tesla
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Speaker 2: who's like, hey, our auto sale, our auto revenue is
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Speaker 2: down eight percent, our margins are getting compressed a couple
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Speaker 2: percentage points a quarter, our free cash flow is down,
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Speaker 2: but it's gonna be the best year ever.
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Speaker 4: Guys.
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Speaker 2: I just I'm getting the sense that we are in
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Speaker 2: a dangerous spot, and maybe we escaped it this quarter,
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Speaker 2: but if this continues, if we continue, you see this
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Speaker 2: kind of degradation in the underlying fundamentals of these companies.
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Speaker 2: It can't continue forever to just be well, let's follow
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Speaker 2: good news all the time.
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Speaker 3: Yeah, now, earnings overall, look, this week had what one
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Speaker 3: hundred plus s and P five hundred companies reporting this
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Speaker 3: week alone, don't have updated data yet all I don't either,
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Speaker 3: But looking at the actual data from those large companies,
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Speaker 3: forecasts weren't great. But if we just take a look
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Speaker 3: at the big four that reported this week, the big
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Speaker 3: four tech ish companies, Microsoft, Meta, Tesla, and Apple, fundamentally
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Speaker 3: reasonable quarters for three out of the four. Yes, Tesla
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Speaker 3: wasn't very good, but Microsoft, Meta, Apple all had pretty
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Speaker 3: reasonably good quarters. But to your point, usually what investors
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Speaker 3: care about is much more about the forward looking statements,
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Speaker 3: and the forward looking statements were very.
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Speaker 2: Much good all three of those. The forward still looking
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Speaker 2: statements were objectively bad. Microsoft, Hey, we're slowing down our
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Speaker 2: growth and it's not going to be what we thought
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Speaker 2: it was going to be. Margins are being pressured. Meta,
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Speaker 2: we're spending more than you thought, and we're bringing in
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Speaker 2: less revenue than we guided previously. How can that be
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Speaker 2: good in any way, shape or form. And Tesla which
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Speaker 2: the most shocking part of this, by the way, I
8:23
Speaker 2: haven't even mentioned this week the CFO said, Hey, we
8:27
Speaker 2: were previously looking to see automotive sales grow twenty to
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Speaker 2: thirty percent this year. Now they're like, we're maybe hoping
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Speaker 2: that they'll be flat. We're maybe hoping they'll be flat. Yeah,
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Speaker 2: and the stocks up on that. What are we doing here?
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Speaker 2: But let's talk a little bit about inflation, because we
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Speaker 2: did get PCEE personal consumption expenditure this morning, also known
8:54
Speaker 2: as the FEDS preferred inflation measure. If it's not PCE
8:59
Speaker 2: then just a sparkling inflation measure from a region other
9:02
Speaker 2: than the FED. And so ultimately pc came in right
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Speaker 2: where everyone was expecting because people have gotten really good
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Speaker 2: at predicting it because it's largely derived from the other
9:13
Speaker 2: ones that come out before. You can take the stuff
9:16
Speaker 2: that flows through to PCE, plug it into a formula
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Speaker 2: and say, yeah, this is where we think it's gonna be.
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Speaker 2: And investors are pretty good at doing this now. So
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Speaker 2: core came in at point two was actually point one
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Speaker 2: six unrounded. Uh. Headline came in at point three, right
9:30
Speaker 2: in line with expectations, and so you've got core for
9:33
Speaker 2: the last twelve months running at two six. You've got
9:36
Speaker 2: i'm sorry, core at for the last twelve months running
9:38
Speaker 2: at two eight and headline at two six. That core
9:41
Speaker 2: number likely to improve in the next few months, simply
9:44
Speaker 2: because the elevated UH numbers from Q one of last
9:47
Speaker 2: year were largely housing related and we've seen improvement there,
9:51
Speaker 2: and so you're probably getting core PCE down to somewhere
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Speaker 2: in the two four to two five range over Q one,
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Speaker 2: barring something weird happening.
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Speaker 3: Yeah, and which is good. All of those things are good.
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Speaker 3: I think the point that was brought up by J.
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Speaker 3: Powell and the Federal Reserve on Wednesday was not that
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Speaker 3: they are discouraged by inflation data. I don't think there
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Speaker 3: is really any mention of that. They are still happy
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Speaker 3: with the progress that's been made there. They are very
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Speaker 3: simply uncertain about the path for inflation over the next
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Speaker 3: six months. Is that Is that fair to say in
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Speaker 3: terms of your assessment of what they what they voiced
10:29
Speaker 3: on Wednesday, Because in the absence of that unknown I
10:33
Speaker 3: think they would again be more inclined to lower interest rates,
10:36
Speaker 3: because that's the path that they have wanted to be on,
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Speaker 3: and I don't think it's because of the data necessarily
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Speaker 3: that they're seeing, although these numbers are slightly elevated compared
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Speaker 3: to the previous three months, and I think has a
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Speaker 3: lot to do with the combination of slightly elevated inflation
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Speaker 3: compared to the fall of twenty twenty four combined with
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Speaker 3: uncertainty around trade tariffs and taxes.
10:57
Speaker 2: Yeah, I think that's that's kind of where we are
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Speaker 2: right now. Let's take a quick break, and when we
11:02
Speaker 2: come back, we'll talk a little bit about the potential
11:05
Speaker 2: tariffs that could go into effect this weekend and how
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Speaker 2: they may impact the auto industry in particular.
11:12
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12:10
Speaker 2: And CNBC today. It's titled Implemented or Not. Trump's twenty
12:13
Speaker 2: five percent tariff threat is challenging the auto industry. For
12:16
Speaker 2: those of you who have been living under a rock,
12:18
Speaker 2: the President has said that he plans on implementing a
12:21
Speaker 2: twenty five percent tariff on goods imported from Mexico and
12:26
Speaker 2: Canada tomorrow. Now, this is not yet been finalized, so
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Speaker 2: markets are kind of shrugging this off. You saw kind
12:34
Speaker 2: of a weird thing yesterday where around three thirty five,
12:37
Speaker 2: during a conversation from the Oval office, he mentioned this again,
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Speaker 2: and the S and P five hundred in the next
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Speaker 2: five minutes sold off about three quarters of a percent
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Speaker 2: and then rallied back that three quarters of a percent
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Speaker 2: by the end of the day. I was kind of
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Speaker 2: sitting there, going what happened? And then I looked and
12:51
Speaker 2: I said, oh, like this, this must be what it was.
12:54
Speaker 2: But in any case, automakers are amongst the companies that
12:57
Speaker 2: would be hit most directly by this, And the reason
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Speaker 2: why is that major US automakers both import and export
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Speaker 2: a ton of parts in vehicles from these three countries.
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Speaker 2: So as an example, Mexico imports forty nine point four
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Speaker 2: percent of all auto parts from the US but exports
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Speaker 2: eighty six point nine percent of its autoparts production to
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Speaker 2: the US, so really highly tied. So if you slap
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Speaker 2: twenty five percent tariffs on each side, because you better
13:24
Speaker 2: believe Mexico is not just gonna sit there and be like, well,
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Speaker 2: you can do this to us and we'll just you know,
13:28
Speaker 2: twiddle our thumbs, you end up in a situation where
13:32
Speaker 2: the cost go up dramatically. Wells Fargo estimates that if
13:35
Speaker 2: twenty five percent tariffs were imposed on Mexico and Canada,
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Speaker 2: the dollar impact on just GM, Ford and Stillantis would
13:46
Speaker 2: be fifty six billion dollars on an annual basis. Now
13:52
Speaker 2: do we think that for GM and Stillantis would simply say, hey,
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Speaker 2: you know what, that's okay, We're just gonna take that
14:00
Speaker 2: fifty six billion dollars hit to our bottom line. Probably not.
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Speaker 2: They figure out ways to either A how do we
14:07
Speaker 2: pass that cost on too, you know, our end buyers
14:10
Speaker 2: B resource where they're buying parts from, which, again, if
14:14
Speaker 2: you think about the decisions car companies make, they don't
14:18
Speaker 2: decide to source parts from Mexico or Canada because they
14:23
Speaker 2: are more expensive, you know, they don't decide to do that.
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Speaker 2: It's generally, hey, we're trying to look for cheaper production
14:32
Speaker 2: at quantity. Can you do this? And that's why they
14:35
Speaker 2: decide to do it. So the estimate then is that
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Speaker 2: the cost of vehicles has the potential to increase by
14:46
Speaker 2: thousands of dollars as a result. And so this has
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Speaker 2: also been impacting companies even before tariffs have been implemented, because,
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Speaker 2: as we covered earlier this month, we've seen a rather
14:58
Speaker 2: large spike in auto sales and the US, and it's
15:01
Speaker 2: not because people suddenly decided, hey, you know what, like
15:05
Speaker 2: this is a great time to buy a car. It's
15:07
Speaker 2: more likely that you're probably going to see a drop
15:09
Speaker 2: off and auto sales in the next couple months because
15:11
Speaker 2: people were trying to front run these tariffs, and so
15:15
Speaker 2: you've got impacts that have been happening even before any
15:19
Speaker 2: tariffs have actually been implemented here.
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Speaker 3: Yeah, so look, as we've talked about at length, we
15:25
Speaker 3: should pay attention to these tariffs. We should talk about
15:27
Speaker 3: them seriously, at least for now. February first is the
15:30
Speaker 3: deadline that we all have in the back of our minds.
15:33
Speaker 3: I have some serious doubts as to whether or not
15:35
Speaker 3: tomorrow we're going to go into place.
15:37
Speaker 2: But we're good here. We are in the next thirty
15:39
Speaker 2: eight hours. We're gonna know it's actually thirty seven and
15:44
Speaker 2: a half hours now, Well, probably be tonight.
15:46
Speaker 4: You'd hear something, right.
15:47
Speaker 2: I'm leaving open the possibility to not implemented until eleven
15:50
Speaker 2: fifty nine tomorrow.
15:53
Speaker 3: So yeah, I mean that's where things are. And my
15:56
Speaker 3: perspective on this has been let's continue to take it seriously.
15:59
Speaker 3: But if we don't get any action by tomorrow, then
16:01
Speaker 3: we need to take a step back, calm down, and
16:04
Speaker 3: talk about something else. But yeah, for these automakers, look,
16:10
Speaker 3: I can I respect whatever your position is on tariffs,
16:13
Speaker 3: so I'll take a step back from all of this.
16:15
Speaker 3: But they don't do this because they're un American. They
16:18
Speaker 3: don't do this because they're not patriotic. They do it
16:20
Speaker 3: because it is the most efficient way for them to
16:24
Speaker 3: produce vehicles at a low cost and sell them not
16:27
Speaker 3: only in the United States but across the globe. And
16:32
Speaker 3: you know, maybe you can still be a competitive automaker
16:34
Speaker 3: with massive tariffs in place on your neighbors by selling
16:38
Speaker 3: just cars in the United States, But if you want
16:40
Speaker 3: to do it globally, you're gonna have some problem.
16:42
Speaker 2: Well, to be fair, if if the end result of this,
16:45
Speaker 2: let's say the tariffs are implemented, everyone just starts implementing tariffs,
16:48
Speaker 2: Everyone's still gonna be competitive. It's just gonna be at
16:50
Speaker 2: a higher price. Sure, Yeah, you know, it's like, okay,
16:55
Speaker 2: glad we did this. Look, we're gonna have to see
16:59
Speaker 2: how it plays out. What I will say, if there
17:01
Speaker 2: are no tariffs implemented tomorrow, then the market is not
17:06
Speaker 2: going to take a tariff threat credibly. Again, it's not
17:11
Speaker 2: you're you're not gonna what. We just have to like
17:15
Speaker 2: wait for each Yeah, we have to wait for each
17:19
Speaker 2: day to like go by to see if it's gonna happen. No,
17:22
Speaker 2: if if they're not imposed tomorrow, And I'm make no mistake,
17:25
Speaker 2: I'm not like rooting for it or rooting against it.
17:28
Speaker 2: What I'm saying is, if you don't have tariffs in
17:31
Speaker 2: post tomorrow, regardless of the reason, even if it's hey
17:34
Speaker 2: like Mexico and Canada said they were gonna do X
17:36
Speaker 2: y Z at the border, then markets aren't gonna take
17:39
Speaker 2: tariffs as a serious threat. Again, Yeah, and quite honestly
17:43
Speaker 2: they shouldn't. Yeah.
17:45
Speaker 3: And the question is, how could you do any countries
17:48
Speaker 3: that are being threatened with tariffs take them seriously?
17:50
Speaker 2: How could you? Right?
17:51
Speaker 3: Like, you probably can't if it doesn't go into place.
17:54
Speaker 3: And again I'm I firmly believe the tariffs are a
17:56
Speaker 3: bad idea. Just to get my personal view in here, like,
17:59
Speaker 3: I don't think this is a good idea, except in
18:02
Speaker 3: cases where we have grave concerns about other countries subsidizing
18:07
Speaker 3: their industries. Like all in favor of tariffs on China,
18:10
Speaker 3: all on board there with you know, tariffs on Russia
18:13
Speaker 3: and sanctions on those countries where we're trying to exact change.
18:17
Speaker 2: But I don't think there's much important from Russia these days.
18:19
Speaker 3: No, there's not a whole lot of caviar coming over
18:22
Speaker 3: the border anymore. But again, if you're going to have
18:26
Speaker 3: them to be taken. Seriously, you do have to follow
18:28
Speaker 3: through here, which is why I'm really torn as to
18:31
Speaker 3: whether or not we're actually going to see anything and
18:33
Speaker 3: what the results are going to be.
18:35
Speaker 2: Here's the deal.
18:36
Speaker 3: We're right on the deadline. We're knocking on the door Monday.
18:39
Speaker 3: We're gonna have something to talk about either way.
18:41
Speaker 2: Yeah, I have no idea what's going to happen. I'll
18:46
Speaker 2: be honest, I have no idea whether this is going
18:50
Speaker 2: to actually happen or not. Don't know. It's just it's
18:55
Speaker 2: a complete toss up at this point in my mind.
18:58
Speaker 2: And that is very different from how I felt twelve
19:03
Speaker 2: days ago, when I was like, Okay, like day one,
19:05
Speaker 2: we're getting something, and then we didn't. Yeah, and so look,
19:12
Speaker 2: maybe this is just my ego trying to protect itself
19:14
Speaker 2: after being wrong twelve days ago, but I truly feel like, look,
19:19
Speaker 2: if if you don't get something tomorrow, then why should
19:22
Speaker 2: I take a tear of threat? Seriously, Yeah, let's take
19:25
Speaker 2: a quick break when we come back, talk a little
19:28
Speaker 2: bit about Apple. And we've also got Wall Street Watch.
19:41
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20:01
Speaker 4: Market term positive territory to wrap up the week, as
20:04
Speaker 4: Walstreet reacts to the Fed's preferred measure of inflation, the
20:08
Speaker 4: core PCE index coming in line with estimates. Investors will
20:12
Speaker 4: also be monitoring Washington this weekend for any terroriffs from
20:15
Speaker 4: President Trump to be potentially implemented. Right now, the Dow
20:20
Speaker 4: up by sixty seven points, SMP five hundred is up
20:23
Speaker 4: by above three quarters of a percent, and the Nasdaq
20:26
Speaker 4: up one in a third percent are two hundred and
20:29
Speaker 4: sixty points. Russell two thousand is flat, edging two points higher.
20:34
Speaker 4: Ten year treasure reeled is flat at four point five
20:37
Speaker 4: to one percent, and crude oil off about a half
20:39
Speaker 4: a percent, trading just above seventy two dollars a barrel.
20:43
Speaker 4: Apple up by one percent after the iPhone makers quarterly
20:46
Speaker 4: results beat analysts expectations on the top and bottom lines,
20:49
Speaker 4: as the tech giants strong services revenue helped offset weaker
20:53
Speaker 4: than expected iPhone sales, more than that from Chuck and
20:56
Speaker 4: Mike coming up. Meanwhile, Walgreens announced it would suspend its
20:59
Speaker 4: quarterly dividend after ninety two years of paying one where
21:02
Speaker 4: the struggling drug store chain said it was aiming to
21:05
Speaker 4: strengthen its balance sheet by reducing debt and improving cash
21:09
Speaker 4: flow that stocked down by fifteen percent. Elsewhere, Chevron missed
21:14
Speaker 4: fourth quarter earnings estimates, attributing weakness to its refining business
21:18
Speaker 4: that stocked down by four percent. However, rival oil giant
21:21
Speaker 4: Exon Mobile beat earnings expectations, while its revenue fell just
21:26
Speaker 4: short of forecasts that stocked down by one percent. Visa
21:30
Speaker 4: up by one percent after the credit card company beat
21:32
Speaker 4: earnings and revenue expectations, citing a strong holiday shopping season.
21:36
Speaker 4: At Lastian shares jumping by over seventeen percent after the
21:40
Speaker 4: software maker posted stronger than expected earnings and revenue as
21:44
Speaker 4: it benefited from robust cloud and data center growth as
21:49
Speaker 4: more customers turned to AI solutions, and Intel down by
21:52
Speaker 4: over one percent after the struggling chip maker reported a
21:56
Speaker 4: smaller than expected decline in quarterly sales alongside it disappointing
21:59
Speaker 4: out look. I'm Tucker Silvan, That's Wallstreet.
22:02
Speaker 2: Watch Mike. Before we get to Apple earnings, I did
22:07
Speaker 2: come across this morning. I just want to circle back
22:11
Speaker 2: to Tesla. Yeah please. I came across JP Morgan's analyst
22:16
Speaker 2: report on Tesla earnings and I just wanted to read
22:19
Speaker 2: it into the record because I think it's strong to
22:23
Speaker 2: quite strong.
22:25
Speaker 3: Like genuinely, rather than the one that I read yesterday
22:28
Speaker 3: that I thought was belooney to quite boloney.
22:32
Speaker 2: This is This is the analyst report from JP Morgan.
22:36
Speaker 2: Tesla shares somehow plus five percent after thirty eight percent
22:39
Speaker 2: ebit miss on lowest margin in years as twenty to
22:41
Speaker 2: thirty five deliveries outlook revised to return to growth, but
22:45
Speaker 2: expect fundamentals to eventually matter. It's not clear to us
22:49
Speaker 2: why Tesla shares traded as much as five percent higher
22:51
Speaker 2: in the aftermarket Wednesday, that we do have some leading theories.
22:55
Speaker 2: Perhaps it was management statement that it had identified an
22:57
Speaker 2: achievable path to become to be coming worth more than
23:00
Speaker 2: the world's five most valuable companies taken together, i e.
23:04
Speaker 2: More than the fourteen point eight trillion combined market cap
23:06
Speaker 2: of Apple, Microsoft, Nvidia, Amazon, and Alphabet. Maybe it was
23:11
Speaker 2: management's belief that just one of its products by itself
23:14
Speaker 2: had the potential to degenerate north of ten trillion dollars
23:16
Speaker 2: in revenue. It may have even related to management guidance
23:20
Speaker 2: for twenty twenty six. No financial targets were provided, but
23:23
Speaker 2: it was said to be quote epic and for twenty
23:26
Speaker 2: twenty seven to twenty eight quote ridiculously good. What does
23:30
Speaker 2: seem clear is that the move hire and Tesla shares
23:32
Speaker 2: bore no relation whatsoever to the company's financial performance in
23:35
Speaker 2: the quarter just completed or its outlook for growth in
23:37
Speaker 2: the coming year.
23:40
Speaker 3: That sums it up in a lot better than I could,
23:42
Speaker 3: so about as aggressive as you.
23:43
Speaker 2: Will get from an investment bank analyst. Yeah.
23:48
Speaker 3: I also like that one a little bit better than
23:51
Speaker 3: the one that I was reading yesterday from Piper Sandler,
23:55
Speaker 3: which seemed to unless it was tongue in cheek, which
23:58
Speaker 3: it could have been. But the quote from the Piper
24:04
Speaker 3: Sandler analyst right now, which I'm pulling up right now,
24:07
Speaker 3: give me just one moment, you can play the TikTok
24:11
Speaker 3: if you want.
24:17
Speaker 2: Darn it, it's here.
24:18
Speaker 3: They removed it, okay, or I can't find it, But
24:20
Speaker 3: it was effectively the earnings were bad, But who cares
24:25
Speaker 3: Stock's gonna move up because he's so enthusiastic.
24:27
Speaker 2: Yeah, and it's basically where we are. Yeah, I guess.
24:36
Speaker 3: Look, it's pretty much how he's driven the stock price
24:38
Speaker 3: higher for the last decade. So it's nothing new at least.
24:41
Speaker 2: So there's that Apple. Apple had a kind of me quarter, Yeah,
24:49
Speaker 2: quite honest, Like, I don't think it was terrible. I
24:51
Speaker 2: don't think it was great. It was just kind of fine.
24:54
Speaker 2: Revenue was up four percent for the quarter. They did
24:58
Speaker 2: have declines in iPhone, missed on iPhone revenue, but they
25:02
Speaker 2: made it up with services revenue growing faster than expected,
25:05
Speaker 2: and because services are basically all profit at this point
25:09
Speaker 2: for Apple, their profit margin actually expanded by a little bit.
25:13
Speaker 2: And so I think analysts look at that and say, hey, yeah,
25:16
Speaker 2: they're not selling as many iPhones. They're seeing, you know,
25:19
Speaker 2: some struggles in China in particular, where I think they
25:22
Speaker 2: said they're China iPhone sales were off eleven percent, I believe,
25:26
Speaker 2: But ultimately they sold one hundred and twenty four billion
25:31
Speaker 2: dollars worth of stuff in a quarter. Now my math
25:35
Speaker 2: is a little bit shoddy these days, but there's ninety
25:39
Speaker 2: days in a quarter, and if you're doing one hundred
25:41
Speaker 2: and twenty four billion in a quarter, that means you're
25:43
Speaker 2: selling one point three billion dollars a day in stuff.
25:46
Speaker 2: One point three billion dollars a day. Yeah, it's impressive
25:49
Speaker 2: a day.
25:50
Speaker 3: Yeah, but that's why this is a three trillion dollar
25:53
Speaker 3: company or whatever it is.
25:54
Speaker 2: This is the thing that I struggle with with with
25:57
Speaker 2: Apple in particular, is even if you think that Apple's
26:01
Speaker 2: just go, let's say they flatline from here, they don't
26:04
Speaker 2: grow anymore, what's the value of that company? How do
26:10
Speaker 2: you The whole idea of the value of a company is, Hey,
26:15
Speaker 2: there's some price at which you know, ultimately all of
26:19
Speaker 2: the shareholders decide, okay, we're willing to be taken out,
26:22
Speaker 2: and it's not the price that the stock trades at.
26:24
Speaker 2: Usually it's like ten to twenty percent higher. But you
26:27
Speaker 2: look at this and you say, okay, if they're just
26:30
Speaker 2: gonna do like five hundred billion dollars in revenue a year,
26:35
Speaker 2: and they're gonna end up making one hundred and twenty
26:38
Speaker 2: billion dollars a year on that five hundred, what do
26:43
Speaker 2: you actually value that company at?
26:45
Speaker 1: Like?
26:45
Speaker 2: Does value actually matter to a company like that? And
26:48
Speaker 2: I'm not saying it in terms of, hey, it should
26:51
Speaker 2: go up forever, but what do you do with it
26:55
Speaker 2: if it seems kind of hard that it can like
26:59
Speaker 2: go out of business, So that's not really a short
27:03
Speaker 2: term threat to Apple. Yep. On the other side of
27:07
Speaker 2: the equation, it's probably not gonna all of a sudden,
27:11
Speaker 2: you know, return to fifteen percent growth just because there's
27:15
Speaker 2: only so much money in the world to buy Apple stuff.
27:18
Speaker 2: So you kind of look at and you're like, what
27:21
Speaker 2: do I do with this in terms of where the
27:24
Speaker 2: stock should be, Like, how do you say it's either
27:27
Speaker 2: over or underpriced if it has a really really challenging
27:32
Speaker 2: path to like either shrinking or going out of business,
27:35
Speaker 2: but also a really really challenging path to growing. But
27:40
Speaker 2: it might just trade like as kind of a meme.
27:42
Speaker 2: What do you do with this?
27:43
Speaker 3: Yeah, I mean, look, it's an incredibly profitable company with
27:48
Speaker 3: massive business segments. You're right, it's gonna be tough to
27:51
Speaker 3: make it grow like it did a decade ago or
27:54
Speaker 3: even five years ago. To me, I don't know about
27:57
Speaker 3: that upside piece. To me, though, there is still a
28:00
Speaker 3: lot of China risk with this company that I don't
28:02
Speaker 3: feel like gets fully acknowledged here. You know, they're saying,
28:05
Speaker 3: you know, their struggles in China are stemming from not
28:07
Speaker 3: being able to offer Apple intelligence in the country.
28:10
Speaker 2: Disagree, No, you're you're.
28:13
Speaker 3: Your struggles in China have to do with a massive
28:15
Speaker 3: nationalistic backlash against the company and the government itself.
28:20
Speaker 2: And the company sucks.
28:21
Speaker 3: Yeah, and not so discreetly telling people to not buy
28:24
Speaker 3: Apple made phones. Uh, And so you have a big
28:29
Speaker 3: Apple problem. You have a big China problem in Apple.
28:32
Speaker 3: And that hasn't I don't think fully been realized with
28:36
Speaker 3: all of this. Not that it's the most important thing,
28:39
Speaker 3: but it is fairly important to Apple's success story.
28:44
Speaker 2: Maybe Yeah, I mean, like, so here's the thing though,
28:48
Speaker 2: this has all been going on for a while now,
28:50
Speaker 2: like this this is not new for Apple, that they
28:52
Speaker 2: might have a China problem, and they continue. They still
28:55
Speaker 2: printed this quarter. Yeah, they still print money. Like what
28:58
Speaker 2: this is? This is why I kind of get to like,
29:00
Speaker 2: what do I do with this? And I say that
29:03
Speaker 2: in like kind of the most amazed, nicest way possible,
29:08
Speaker 2: Like I don't know what to do with Apple because
29:12
Speaker 2: I don't really I struggle to see the thing that
29:17
Speaker 2: like really knocks them on their head other than China
29:21
Speaker 2: saying you can never build another iPhone here. Ever, Again,
29:24
Speaker 2: I struggle to see that.
29:25
Speaker 3: But I also will say that I failed to understand
29:29
Speaker 3: the innovative importance of things like the Apple Watch, the AirPods,
29:32
Speaker 3: and many new products that they have rolled out over
29:35
Speaker 3: the course of the last decade that maybe not percentage wise,
29:40
Speaker 3: but truly did drive sales that I didn't think were possible.
29:44
Speaker 3: When we were talking about the company that rolled out
29:46
Speaker 3: the first iPhone, right like, yeah, I didn't see that happening,
29:49
Speaker 3: And so far be it from me from doubting that
29:51
Speaker 3: they're not going to have more success than those are areas.
29:54
Speaker 2: The one thing, let's get back to the Apple Intelligence
29:56
Speaker 2: talk just for a second. Do do you guys know
29:59
Speaker 2: anyone who's using this? No, it's only on I think
30:03
Speaker 2: the two newest years of the phone, so it's a
30:04
Speaker 2: respect and if they only roll it out in like
30:07
Speaker 2: mid December. But here's the thing. The first iPhone rolled
30:12
Speaker 2: out in July of two thousand and seven and was
30:15
Speaker 2: a hit of the day it rolled out. It was
30:17
Speaker 2: a status symbol immediately. Do you guys know anyone who's like,
30:23
Speaker 2: Apple Intelligence is changing my life? No, I haven't heard,
30:27
Speaker 2: not even that. I haven't heard one person I know.
30:29
Speaker 3: Talk about it that said I like the way that
30:36
Speaker 3: they have approached AI of you know, we're gonna try
30:39
Speaker 3: and find some way to work it into our phones,
30:41
Speaker 3: but we don't really know. I think it's an acknowledgment
30:43
Speaker 3: on their part that they don't really know what to
30:45
Speaker 3: do with this yet, and they're gonna wait for the
30:49
Speaker 3: best thing to float to the top before they go
30:51
Speaker 3: and implement something. And I'm just really glad they didn't
30:54
Speaker 3: pour a whole giant investment into something like chat GPT
30:58
Speaker 3: just to be surprised by Monday's news at Deepseek and
31:01
Speaker 3: the piece that is kind of interesting. You know who
31:03
Speaker 3: Apple reminds me of on this. It's another company just
31:08
Speaker 3: they sell stuff. Oh good, BJ's wholesale club, No Tucker,
31:13
Speaker 3: any guesses, Nike, no Toyota.
31:17
Speaker 2: Everyone was, Hey, we're gonna produce all EV's. We're gonna
31:21
Speaker 2: have fifty eight models of EV's and Toyota's like hybrid, No,
31:26
Speaker 2: you got to do an EV hybrid to be fair.
31:29
Speaker 2: They were also all about hydrogen cars, which hasn't gone anywhere.
31:31
Speaker 2: But I take your point that they didn't jump on
31:33
Speaker 2: the EV bandwagon. And they're sitting in the driver's seat
31:36
Speaker 2: and say, Toyota's been all about it, like they have
31:38
Speaker 2: one model that they sell like fifty of a year
31:40
Speaker 2: in the US. This kind of has that vibe where
31:44
Speaker 2: everyone in tech is going, hey, spend one hundred billion
31:48
Speaker 2: dollars a year on AI and Apples just like put
31:51
Speaker 2: it on the phone and granted, like, I think part
31:55
Speaker 2: of it the issue with Apple Intelligence is I'm not
31:57
Speaker 2: sure there's really a big market for I don't know
32:03
Speaker 2: if the average person or cares about or wants it
32:06
Speaker 2: or even like understands what it will do for them.
32:10
Speaker 2: So I think like trying to sell it to people's harder,
32:13
Speaker 2: But I also think it might end up being the
32:16
Speaker 2: right approach if you end up with this commoditization of
32:20
Speaker 2: AI models, at least the large language models, right, Okay,
32:24
Speaker 2: Apple might end up having the right approach here. Then
32:27
Speaker 2: let's take a quick break. When we return, we'll talk
32:31
Speaker 2: about the UH, the new nickname for the Magnificent Seven.
32:37
Speaker 2: After this.
32:39
Speaker 1: The Financial Exchange streams live on YouTube. Like our page
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32:45
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32:59
Speaker 1: This is the Financial Exchange Radio Network.
33:13
Speaker 2: So Bank of America has a analyst, a yeah, strategist
33:19
Speaker 2: the name of Michael Hartnett. And Hartnett was the one
33:23
Speaker 2: who coined the name Magnificent seven. Did he also create
33:27
Speaker 2: the movie in the nineteen sixties. He looks good for
33:32
Speaker 2: you know, being as old as he is. Yeah, but
33:36
Speaker 2: now he's saying that the Magnificent seven could actually turn
33:39
Speaker 2: into the Magnificent seven this year.
33:43
Speaker 3: That's some good wordplay, not as good as it could be. No,
33:46
Speaker 3: and what else you got, Well, here's the thing.
33:49
Speaker 2: And again, I don't know where these stocks are gonna
33:51
Speaker 2: go this year, like I've got no freaking clue. But
33:53
Speaker 2: if he does believe that they're gonna go, not down, Mike,
33:57
Speaker 2: is the word magnificent a word? No, No, it's not, Tucker.
34:02
Speaker 2: Can you pull it up in any of the dictionaries?
34:05
Speaker 2: Does magnificent exist? I will google it. I don't believe
34:08
Speaker 2: it's there. So, as someone who enjoys making up no,
34:12
Speaker 2: it's not, it's not okay, I think that he needs
34:15
Speaker 2: to work more with kind of a shortened version of it.
34:19
Speaker 2: In order to make it a little punchier, you know how,
34:22
Speaker 2: in the social network, justin Timberlake's character says, here's my suggestion,
34:26
Speaker 2: drop the the from the Facebook. Everyone kind of refers
34:31
Speaker 2: to it as the mag seven, right, not the Magnificent seven. Okay,
34:36
Speaker 2: the bag seven things that a bag could be a
34:41
Speaker 2: positive thing though in the stock market, if you're a
34:43
Speaker 2: bag holder, you're getting the Bag seven. H yeah, yeah,
34:50
Speaker 2: not doing it for me, Okay. I guess you guys aren't.
34:53
Speaker 2: That's fine. You guys aren't hip enough to appreciate it
34:55
Speaker 2: with no Tucker's Tucker's like kind of on board. So
34:58
Speaker 2: I appreciate the support, and I will be pursuing Bag
35:02
Speaker 2: seven over Magnificent seven.
35:04
Speaker 3: Michael goes on to say that it investors, well, he
35:07
Speaker 3: suggests that investors should buy cheap international stocks instead of
35:11
Speaker 3: chasing pricey US shares. Well, let me tell you this,
35:14
Speaker 3: and this is not to pupu international like just like
35:17
Speaker 3: on its face, but it is international stocks have been
35:20
Speaker 3: cheap relative to the US for about fifteen years or so.
35:24
Speaker 3: Important context is that every single January for the last
35:27
Speaker 3: fifteen years. I've heard some analysts, yes, some leader somewhere
35:32
Speaker 3: say that look, how cheap international stocks are, you should
35:35
Speaker 3: probably buy them.
35:36
Speaker 2: And so and that's just the point. And by the way,
35:38
Speaker 2: the reason why international stocks have been cheaper during that
35:41
Speaker 2: time is because their earnings growth has been lower. The
35:45
Speaker 2: companies have not grown their profits as much. And as
35:49
Speaker 2: Larich Cuddlo always likes to say, profits are the mother's
35:52
Speaker 2: milk of stock prices. Indeed, and so if your profits
35:54
Speaker 2: are growing more slowly, then when you expect stocks to
35:57
Speaker 2: be priced more cheaply, you certainly would. We talk about
36:00
Speaker 2: this in the US with regards to certain types of companies,
36:03
Speaker 2: and so obviously it can apply internationally as well.
36:07
Speaker 3: Folks, it's the last chance to get a copy of
36:10
Speaker 3: Armstrong Advisory Group's Guide this month. And I took the
36:12
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36:22
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36:24
Speaker 2: how to grow your net worth explosively or anything like that.
36:27
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36:32
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37:41
Speaker 2: New York Stock Exchange is looking to extend its trading
37:43
Speaker 2: hours to twenty two hours a day. Good, bad or ugly? Uh,
37:48
Speaker 2: I'll say bad. I don't think it's ugly. Yeah, I
37:51
Speaker 2: would agree, I don't.
37:52
Speaker 3: I don't really know who gets dramatically hurt by this,
37:55
Speaker 3: But I don't think it's necessary or a good idea.
37:57
Speaker 2: Yeah, it's uh no, one needs to be trading stock
38:00
Speaker 2: at eleven thirty pm. It's just like nothing good happens
38:02
Speaker 2: after like four. Yeah, they still are going to keep
38:06
Speaker 2: the four pm official close. It's just they'll extend the
38:09
Speaker 2: after hours window from like eight pm to I think
38:12
Speaker 2: ten thirty or something like that. But uh yeah, Like,
38:16
Speaker 2: why do we need twenty two hour day stock trading?
38:18
Speaker 2: More time for them to make money on the flow,
38:20
Speaker 2: not on the price. Gotta compete with crypto quick break here.
38:23
Speaker 2: We got hour two coming up in a bit