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Instant Reaction: Intel and Amazon Earnings · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg BusinessWeek
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  Speaker 1: inside from the reporters and editors who bring you America's
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  Speaker 1: most trusted business magazine, plus global business, finance and tech
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  Speaker 1: news as it happens. Bloomberg Business Week with Carol Messer
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  Speaker 1: and Tim Stenebek on Bloomberg Radio.
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  Speaker 2: It is Bloomberg Business Week. Let's get a check on Intel, Carol,
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  Speaker 2: because this is the stock to watch in the after
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  Speaker 2: hours right now. Shares just absolutely creatoring the companies Wow
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  Speaker 2: down eleven percent. A series of what we call red
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  Speaker 2: stickies here, this company suspending its dibben end. The revenue
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  Speaker 2: outlook missed. It's a third quarter revenue come in third
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  Speaker 2: quarter revenue. The outlook goes from to twelve point five
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  Speaker 2: billion to thirteen point five billion. Estimates were for fourteen
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  Speaker 2: point three eight billion. They're implementing a more than fifteen
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  Speaker 2: percent headcount reduction. They've announced a ten billion dollar cost
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  Speaker 2: reduction plan, and they've suspended that dividends starting in the
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  Speaker 2: fourth quarter of twenty twenty four.
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  Speaker 3: Looking at our Ian King, who follows the sevenconductor space
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  Speaker 3: out with his story on the Bloomberg about Intel. He
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  Speaker 3: talks to us. It reminds us at CEO Pat Gelsinger,
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  Speaker 3: despite a massive spending plan to restore Intel to industry prominence,
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  Speaker 3: is struggling to improve the company's products and technology fast
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  Speaker 3: enough to retain customers. And so this is part of
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  Speaker 3: the problem. Right. They've been trying to do this turnaround,
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  Speaker 3: and it's been imperative for Pat Gelsinger and the company
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  Speaker 3: to show that they are having some progress on this.
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  Speaker 3: This is not necessarily a quarter that shows any kind
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  Speaker 3: of progress. If anything, that shows that they've got to
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  Speaker 3: continue to kind of rein in costs and try and
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  Speaker 3: figure this out.
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  Speaker 2: Okay, well, let's see what James Chalkmok has to say
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  Speaker 2: about this. He's a technology analyst over at Clockwise Capital. James,
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  Speaker 2: good to have you with us. We love talking to
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  Speaker 2: you around earnings. You guys have the ticker time is
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  Speaker 2: your ETF. I don't see Intel in there. This is
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  Speaker 2: a company though I know you followed in the past.
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  Speaker 2: Tell us your reaction to this huge news out of
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  Speaker 2: Intel with this cost reduction plan, suspend the dividend in
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  Speaker 2: the fourth quarter of twenty twenty four and then also
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  Speaker 2: these thousands of layoffs.
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  Speaker 4: Yeah, I mean they have to do something right.
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  Speaker 5: You know, they have to write the ship somehow because
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  Speaker 5: the growth is just anemic. And one way to do
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  Speaker 5: that is to find a way to grow, grow again,
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  Speaker 5: or you can.
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  Speaker 4: Fix things on the expense side.
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  Speaker 5: And it looks like they're giving up on the former
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  Speaker 5: and going toward the ladder, and you know, we're turning
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  Speaker 5: slightly more cautious on standings. More broadly, we've been cutting
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  Speaker 5: our exposure there across the board. We're basically just now
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  Speaker 5: left with Navidia, a little bit of SMCI on the
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  Speaker 5: data center side, and GeV on the utility side.
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  Speaker 4: So you know, we're rotating the portfolio.
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  Speaker 5: When we think that this rotation out of tech is
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  Speaker 5: going to be more prolonged and not just kind of
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  Speaker 5: the last two weeks that we.
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  Speaker 3: Saw, why are you rotating out of Socks? We talked
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  Speaker 3: about this with our Gina Martin Adams, who follows the
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  Speaker 3: equity universe for US are you know, chief equity strategist
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  Speaker 3: here in the US. I mean, the Socks is up
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  Speaker 3: about sixteen percent this year, but we've had two volatile
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  Speaker 3: days this week of a big sell off and then
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  Speaker 3: a big rally or big rally and then a big
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  Speaker 3: sell off if you will, it's seen that as a
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  Speaker 3: leading indicator. You're saying that in terms of the semi cycle,
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  Speaker 3: that you're seeing retrenchment, that there's we're going to see
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  Speaker 3: a pullback.
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  Speaker 5: Well, i'd say across large tech more broadly, we've been
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  Speaker 5: really borrowing from twenty twenty five returns. You know, you am,
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  Speaker 5: Apple and Microsoft are probably the poster childs of pulling
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  Speaker 5: from twenty twenty five forward. A lot of hype obviously
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  Speaker 5: around AI and chips and what that means for the industry,
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  Speaker 5: but a lot of that is increasingly priced in. So
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  Speaker 5: and on the backdrop, you have a weakening economy, you
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  Speaker 5: have uncertainty as it related to the presidential election. You
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  Speaker 5: have now fed swaps pricing in three rate cuts by
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  Speaker 5: the end of the year, which to us is somewhat absurd.
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  Speaker 4: You know, so the likelihood of the probability.
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  Speaker 5: Of negative surprise is outpace the ones of positive surprise.
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  Speaker 5: So I think you got to be more balanced, you know,
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  Speaker 5: look more value names, small cap names.
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  Speaker 4: So we've been diversifying out of large.
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  Speaker 5: Cap tech and broadening out the portfolio to the sectors
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  Speaker 5: quite frankly, really aren't part of the innovation tilt that
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  Speaker 5: we have all.
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  Speaker 2: Right, always You're always come on on days where Snap
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  Speaker 2: reports earnings, and I know you don't own Snap. I
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  Speaker 2: know you covered Snap from the beginning when at ICI
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  Speaker 2: owed you and I spoke years ago, James, you changed
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  Speaker 2: your tune on this company. Shares are down twenty two
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  Speaker 2: percent right now. The company forecast to justin Ibada for
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  Speaker 2: the third quarter of the guidance missed the average analyst estimate.
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  Speaker 2: What is going on with Snap?
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  Speaker 5: I mean, I'll say the same thing I tell you
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  Speaker 5: every time. I mean, it's when I when I first started.
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  Speaker 5: You know, they had Van Stiegel laid out the vision.
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  Speaker 5: You know, it was a sound one, but they had
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  Speaker 5: an identity crisis where they don't really know what they
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  Speaker 5: need to be. You know, you can either be an
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  Speaker 5: ad platform that serves everybody and go large, or you
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  Speaker 5: can be super niche and drive engagement.
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  Speaker 4: And monetization on a per user basis. They're doing neither
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  Speaker 4: of those.
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  Speaker 5: And I just think that there's just kind of lost
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  Speaker 5: and uh, you know, we're you know, in this market
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  Speaker 5: is one that's rewarding companies that have failed in recent
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  Speaker 5: quarters because they've been beaten down too much.
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  Speaker 4: Snap I definitely wouldn't put into that bucket.
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  Speaker 3: Let's go to Amazon. Obviously, we've talked a lot about,
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  Speaker 3: you know, the companies that are reporting today, Amazon and
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  Speaker 3: Apple in particular, and how they can shape sentiment when
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  Speaker 3: it comes to the Nasdaq one hundred. Amazon's down more
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  Speaker 3: than four percent as we speak. A lot of it
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  Speaker 3: has to do with the outlook. See three quarter operating
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  Speaker 3: income of eleven and a half to fifteen billion. That
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  Speaker 3: is shy the street estimate of fifteen point sixty six billion,
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  Speaker 3: So the outlook not very upbeat. Second quarter or AWS
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  Speaker 3: net sales always important in terms of profitability at this
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  Speaker 3: company twenty six point twenty eight billion, So that was
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  Speaker 3: actually better than the street estimate of twenty five point
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  Speaker 3: ninety eight billion. Yeah.
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  Speaker 2: I was just going to add in for James that
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  Speaker 2: it's the sixth biggest holding in your clockwise Core Equity
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  Speaker 2: and Innovation ETF. So it does make up about four
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  Speaker 2: percent of your portfolio. What's your reaction to the numbers
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  Speaker 2: that we just got.
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  Speaker 5: Yeah, it's four percent now six percent a week ago.
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  Speaker 5: So you know, we cut exposure into the print. Worried
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  Speaker 5: about really the softening consumer and the implications for retail
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  Speaker 5: revenue as we look forward into the second half of
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  Speaker 5: the year. Obviously CAPEX was a big question, but I
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  Speaker 5: think Microsoft kind of muted those fears. But you know,
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  Speaker 5: a lot of the hype around the operating income leverage,
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  Speaker 5: you know, there was a lot of hype around it,
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  Speaker 5: quite frankly, and it's happening, which is good, but you know,
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  Speaker 5: they need the revenue to keep up with it. On
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  Speaker 5: a positive note, AWS is doing quite well.
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  Speaker 4: That was slightly better than expected.
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  Speaker 5: So all in all, I'd say it's a it's a
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  Speaker 5: pretty good quarter, but you know it's it's one that
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  Speaker 5: was certainly we'll see what they say on the call.
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  Speaker 4: But I think this falls into my.
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  Speaker 5: Comments earlier about big calf Tech just can't be overweight
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  Speaker 5: these names to the same degree as you look into
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  Speaker 5: the second half as we were in the first half.
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  Speaker 3: So James, So the selling that we're seeing in the aftermarket,
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  Speaker 3: I mean, this is Amazon is up twenty one percent
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  Speaker 3: so far here in twenty twenty four, and you know,
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  Speaker 3: I know there's a lot of metrics in how we
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  Speaker 3: do it. I'm just going to go basic. You know,
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  Speaker 3: your forward pe of about forty But is this just
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  Speaker 3: a case of the fundamental story we're at Amazon, you
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  Speaker 3: still like, but maybe valuation wise, maybe that is some
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  Speaker 3: of what we're seeing in terms of the selling.
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  Speaker 5: I think, I mean, they ultimately missed numbers, right, so
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  Speaker 5: you Ago is coming yeah, and the ALOGO is coming
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  Speaker 5: in exacerbating.
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  Speaker 4: The pressure.
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  Speaker 5: But you know, they could walk it back on the call,
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  Speaker 5: provide more colored commentary.
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  Speaker 4: I got to look at you see exactly where the
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  Speaker 4: weaknesses were.
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  Speaker 5: But that being said, you know, I think it's just
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  Speaker 5: I think you got to take this into the context
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  Speaker 5: of what happens the big tech from here, and.
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  Speaker 4: You know, a lot of these have had remarkable runs.
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  Speaker 5: Will they be able to perform in the second half
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  Speaker 5: the same degree that they were in the first half?
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  Speaker 4: We just don't think so.
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  Speaker 2: Okay, So what does happen to big tech here? I mean,
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  Speaker 2: in videos, you're top holding it's a five percent of
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  Speaker 2: your portfolio.
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  Speaker 5: Yeah, well it was four yesterday and then uh then
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  Speaker 5: it went on it was like four point three and
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  Speaker 5: then went up for five.
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  Speaker 4: Yes today's movement. Yeah, we got to evaluate Navidia.
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  Speaker 5: But that's the only one really that we have no
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  Speaker 5: problem kind of.
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  Speaker 4: Maintaining that more sizable weight.
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  Speaker 5: It's really the other companies within the semi space that
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  Speaker 5: we're we've shed from the portfolio and really we're just.
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  Speaker 4: Limiting it to.
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  Speaker 5: Navidia, SMCI and GeV as we think about the data center.
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  Speaker 3: All right, well, there's a lot going on, and the
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  Speaker 3: earnings continue to cross the Bloomberg termin looking at DraftKings
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  Speaker 3: down about eight percent, us coming out with a little
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  Speaker 3: bit of a forecast. We'll break down some more of
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  Speaker 3: those numbers. James chock Mak, thank you so much. Busy
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  Speaker 3: earnings day and you walked us through at he's tech
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  Speaker 3: analyst ever at Clockwise Capital