The Momentum Trade Stalls 2/20/25
44:01 Share

What counts most to you? Maybe it's spending more time with the ones you love, or maybe doing more of what you love to do. The key to being rich is knowing what counts. At Edward Jones, our dedicated financial advisors are people you can count on for financial strategies to help support what truly matters to you. Let's find your rich. Edward Jones, member SIPC.

What if your business could see beyond the what is and into what can be?

What if you could create more impact in every decision? What if you had a partner as visionary as you are? With Bank of America, you get access to our trusted experts, real-time insights, and digital tools. So whether you run a local shop or a global enterprise, you're backed by business solutions to make every move matter. What would you like the power to do? Visit bankofamerica.com slash banking for business to learn more. Bank of America is proud to be the official bank sponsor of FIFA World Cup 2026.

I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast, the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in.

Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wobner here in New York Stock Exchange. Front and center this hour, the Palantir plunge and what other high-flying stocks might be in danger of a deep drop as well. Momentum doing a big unwind today. We will discuss and debate with the investment committee. Joining me for the hour, Joe Terranova, Kerry Firestone, Bill Baruch. Josh Brown is with us as well. We are down sharply at the moment as those guys were just talking about. You see the Dow down 1.5%.

The S&P off about one. NASDAQ's under some serious pressure today. We're going to get to Walmart and all of the issues of the day, and there are many. I want to start with Palantir, though, because it is one of the most closely followed stocks in the market. There's a big retail presence there.

The stock has been up a lot. Joe, it's the worst two day performance since 2022. You got CARP changing the share sales plan. You've got the proposed cuts in defense and all of it is coming together today to just hit that stock.

really hard over the last 24 hours. What do we do now? I think what you do from here is, look, the next several days you have to sit. You have to kind of wait, be patient and understand that the stock can fall further, probably can fall into the 84 to 85 dollar level. That's where it broke out. You have a technical price gap from the February 3rd earnings. In fact, at 84, 85, the

If you have not bought Palantir, that's the spot that potentially you want to buy it. If it doesn't hold that level and it sneaks through there, you've got a bigger problem. That's probably a call to action more than anything else. But a lot of people are riding really strong gains in this stock. And I think you have to be a little bit patient here and see if this is something that plays out over the next several days. You know, I'm thinking about the stock Kramer this morning.

said the thing is talking about Palantir. Josh, the thing is so expensive, you can't have anything go wrong. So we're looking and we've talked a lot about momentum names that have gone pretty much straight up. And I'm wondering if there are other stocks that we need to pay attention to. I'm thinking the likes of CrowdStrike, for example, which is up 25 percent year to date. The forward P.E. is one ten. The cyber ETF is having its worst week since November.

These are all momentum names that we have highlighted of late. How are you thinking about Palantir and what it might mean for other names that have been really going almost straight up and now may be on their way down?

Right. So Palantir is a highly specific situation, but it's emblematic of the state of the markets. And I think it's really interesting for people, whether they own the stock or not, to just watch what's unfolding here. This is one of fundamentally this is one of the best position companies in the world for this confluence of increased geopolitical tensions, increased inflation.

budgets, not just the United States, but everywhere as it relates to national security and the AI trend, which clearly they are ahead of the curve technologically. And they've really become synonymous with what people think is going to be the next generation of warfare. So they've got all those things in their favor, but it's a 528 times trailing P.E.,

It's 150 times forward PE. What?

What did you think you were buying? It was a $258 billion market cap at its peak. And I get it. I love watching Alex Karp be interviewed on Squawk Box. I love hearing about the innovation and et cetera, et cetera. But this is a live by the gun, die by the gun type of stock, just purely based on the valuation. So when a 520 times earnings name starts selling off, it's not like, uh,

the value guys are waiting and saying, okay, here is where we pounce. So it's kind of in a no man's land. It's either momentum or it's value. And right now it's in the middle. It's neither. If the momentum is gone and the value people aren't coming in at these levels. So it's tough. But if you're a long-term investor and you understand why it has the valuation it has, you grit your teeth and live through it. And if you're a trader, you're already out.

You already got stopped out. If you're using any kind of risk management, you don't own it. So that's kind of the situation here. And yes, Scott, to your point, there are many names in this situation, really exciting companies, great growth rates, valuation out of control. And when they stumble, there are no buyers for a couple of days. It's difficult. Bill, crowd, as I said, 110 times forward, stocks up 25%.

Year to date, there's Carvana.

96 times, up 359% over 12 months. There's Applovin, which is at 73 times forward earnings, up 672% over 12 months. Palo Alto, Robinhood, even names like Broadcom, which are trading above a market multiple. Nice premium, stocks up 83%. You want to touch on what's happening with names like Crowd, things that have recovered so dramatically, which became a marvel in and of itself, the ability of a stock like that to recover from the

the depths of where it fell on the issue mid-year 24 and here we are with a stock that's just surged again

Yeah, what we're seeing is really indicative of the environment. High expectations become higher. High multiples become higher. And you get a day like this, there's a little bit of a washout. We want to be able to pick your spots on days like this. CrowdStrike, they report earnings in two weeks. It's not our favorite on the valuation front. But I mean, I really do think that what you're looking at expectation wise, the narrative is in place and the need for cyber is extraordinary.

revenues are expected to decline or be flat. Earnings are expected year over year to decline in CrowdStrike. I think the bar is a little lower when it comes to CrowdStrike's earnings. Does that mean a beat's going to take it up 10 or 20 percent? Probably not. But that means it could grow into its multiple upon beating. And I think it can consolidate really here. And we have a lot of high hopes. But this overall is where you want to have your spots picked. I'm sitting back with alerts.

On Palantir, if it breaks 90. Alerts on Palantir, if it breaks 80. You want to be able to kind of maneuver and be flexible in this type of environment. So you'd buy it if it drops to those levels? I'm looking at 75 to 80 if we get there. That's a big move. I mean, 90 felt like a big move yesterday. I mean, so you just got to be able to pick your spots and be ready for it. You want to touch on Carvana, which we talked about yesterday, didn't we?

CARMAX, we talked about. Oh, we talked about CARMAX. That's right. But I mean, CARVANA, just a stock like that, almost 100 times forward, up a ton. And, you know, escalator up, elevator down. That's what people are learning about these momentum names. Why we highlighted them almost every day for a week, saying, look at the momentum behind these stocks. Why are these momentum names going up? Well, we all had the reasons why. But all it takes is one stumble to have you reassess

where they should be. So it's interesting. There are two factors that seem very important in this market. And one is the valuation on names that have been stretched. And you have a stock up 400 percent like Carvana. And they are susceptible, any misstep at all. And the stock is going to crash because sellers just run to the door. The other aspect we talked about

is whether we identify correctly the winners and the losers because there are so many policies and so many directives that are being thrown around right now and we don't know as investors who wins and who loses in sectors and in companies. As an example, Walmart, which is the other big name that's driving the market lower, the Dow particularly,

had to stumble. The guidance doesn't look good for this year. It's similar to what happened, we think, with McDonald's, where those firms that are catering to demographics that are lower, lower middle class are seeing a hit because per

perhaps their customers are concerned about being in a location where there's an ice raid. The workers may be concerned about that. It is affecting their business. They haven't talked about that yet because I think that's a difficult subject. You look at Shake Shack.

did not see any decline. Actually, better numbers than expected. That's a higher demographic. We might see this split between the lower demographic and higher demographic retailers, service companies, and providers of goods and services based on concern about ICE. All right. We'll get to those stocks in a bit. Applovin, do you want to touch on that? Yeah. Look, first of all, I think before we...

call the end of the momentum trade, which is the leading factor so far year to date. Momentum's up 10 percent, quality's up 4 percent. Let's kind of place it into context. We're seeing some of these names have some mean reversion relative to quality. It's not so much

that these names have an extreme valuation. Look across the board at the momentum names, the momentum funds, the popular names that they own. JP Morgan's down significantly today. Royal Caribbean's down 9%. Walmart's down 6%. Axon's down 10%. Interactive brokers are down 5%. So it's really these group of stocks

that have been identified as technically strong. They've been rewarded for that over the last year. Over the last six months, the momentum factor is up 15%. The quality factor is up six months, 6%. So I really think what's going on here more than anything else is a little bit of a mean reversion, a little bit of an internal rotation within the market where some of the capital that's allocated towards momentum is now pivoting towards quality, healthcare, energy, Apple, Microsoft. They're higher today. So

I don't see anything wrong with that. I think it's somewhat justified. In the case of Applovin, I'm actually a little bit more concerned about Applovin than I am Palantir because Palantir is falling back on bad news.

Applovin reached its peak on really good news. It had a blowout quarter on earnings on February 12th. The next day it put in the high, and that's a classic example of exhaustion, and it reverses from there, and it's giving back, obviously, a lot of very substantial triple-digit gains over the last year. You know, Josh, so Applovin is obviously one of these stocks that we've talked about. Goldman and JPM and Amex and Oracle and Costco and Garmin and some

Samsara are all in the MTUM, the Momentum ETF. You take a look at all of them today and you're not going to be happy with what you're seeing. I mean, you have Samsara, I think, so it's caught up in that as well. The unwind of Momentum feels like it's underway.

Yeah, but Joe's right. You don't take a bad day and extrapolate that out to say, OK, this strategy doesn't work anymore, period. It just may not work for a little while. But if you have risk management in place and for some people, risk management is just position size like I can. So I'm in Samsara.

I don't own so much that if it gets cut in half from here, my life has to change. And I've ridden it from, I don't know, 30? It goes to 60, so it pulls back to 52. Like, it's okay. It's part of the deal that you make when you're going to be in these types of stocks. That's one form of risk management is position size. Another form is, well, where's your stock?

So you guys hear me talk about the best stocks in the market. I was stopped out of Home Depot 12 points ago. I like Home Depot. It's not fundamental. This is an area where if it breaks down, it is technically no longer in an uptrend. I'm gone. I don't know how much lower it goes. I don't have to worry about it. That's another form of risk management. To just be in momentum names like Carvana and Applovin and think they're going to go up 20 points a week with no downside whatsoever along the way is

is to be like super naive about the game that you're trying to play. If you look at the momentum ETF right now, MTUM, and I know Joe doesn't want me talking a lot about, uh, all day because it's not doing well. Okay. It's down two and a half percent today. Look at its top 10 holdings. Eight of them are down on the day. The top three holdings. These are amazing companies, Avaga, uh, Broadcom, Walmart, JP Morgan, uh,

all down big, it knocks down the style. So then people sell the ETF, which knocks down the style even further. And it's like bowling. You hit one pin, which knocks another pin. So if you're investing through this, understand the mechanics at play and don't let that panic you out of good investments. And if you're a trader, you shouldn't have full exposure to these names right now because they've been falling.

The other thing to consider, and I think it's probably a good time to take stock of where we are exactly a month since the inauguration. We came into this, the collective investor out there as the we, I think came into this year pretty bullish.

Pretty bullish on what a new Trump administration was going to mean for a variety of reasons that are obvious to everybody. Tax cuts, better climate for business, more deals, animal spirits, deregulation, etc. Major averages have done not much. They're up about 1% in a month since the inauguration. Why? Well, tax cuts, they're not imminent.

Tariffs have muddied the outlook, certainly for business. Inflation's sticky. The path is somewhat uncertain, in part because of tariffs. You've got the tough Biden administration M&A rules staying in place for now. You have big spending and job cuts from government. That could be a hit to growth. And on the notion of the Fed, I mean, the Fed speak of late, including today, from Goolsbee and Bostick was pretty hawkish.

Then there's the St. Louis Fed president who's been speaking within the last 30 minutes or so. And Steve Leisman joins us now to talk about that because they're on hold and like nailed into hold at the

at minimum yeah for the foreseeable future Scott this is a perfect segue what you just introduced there because this trend we've been talking about this idea that the Fed is more willing to talk about the uncertainty from these policy changes and now also to muse about negative scenarios negative economic scenarios from the policy changes continues and it continues with alberta muslim speaking to the new york economic club at this hour he says

All right. His baseline is inflation declines. That allows the Fed to cut rates towards neutral, says the economy and monetary policy are in a good place. But his speech also talks about what he calls a plausible scenario where inflation does not decline to target. He sees the risks there higher. He says there's concern higher tariffs, immigration policies could increase prices and reduce demand. Two different ways the Fed could respond to that. It could look through these tariffs of inflation if the impact is brief.

But here's the money quote here. It could also be appropriate for the Fed to become more restrictive if inflation is sustained and expectations become unanchored. He says the stakes are higher now. In other words, it's a difference between now and 2018, which we've talked about, because inflation is not at target.

and the inflation risk ultimately is greater now than the risk that the labor market could weaken. So, Scott, we talked about this yesterday after the minutes. The Fed has become not shy about talking about uncertainty. And now in three speeches we've heard today from three different Fed officials, they're also not shy about musing about potential negative scenarios for the economy, both from the uncertainty and from the policies.

elevated risks. That's the bottom line. And they see it as such. And that could very well impact their policy path going forward. Steve, thank you for the headline, because it plays right into the conversation that we have been having. That's Steve Leisman, our senior economics reporter. The defense cuts, right? I mean, investors and CEOs are recalibrating, has sort of been the word of the last six months, whether it relates to the Fed or anything else. The way that they view the

What might happen in the in the months ahead the defense cuts that are proposed were absolutely responsible for Palantir's rollover Booz Allen new 52 week low you own the stock. Why are you still in the stock? Well, we trim the stock back It had a really strong run and we did it would have been wise to sell more than than we did at the time and it's suffering because of it I would say that

Things do not always play out as we've seen the way it appears at first. And there's been an overreaction. We think the stock is attractive at this price. And we've started to hear from European countries how they're going to increase their spending on defense. That could turn into

orders for Bruce Allen and for other defense contractors. So it may be that there's business that comes from other areas and not just the U.S. government. But clearly, this is not a good look when you have all sorts of discussions about how we're cutting here and cutting there. I'm just also thinking about, you know, so much for the idea of a overwhelmingly business friendly administration and environment. Look at the cruise lines.

Perfect example. You own Royal Caribbean. Yes. Why are they all down and down sharply today?

Because the Commerce Secretary, Howard Lutnick, called out foreign cruise lines for not paying taxes. Now, they're words, not action at this point. But stocks don't wait for action. They react on words. And here's all these stocks going down. For sure. And you now have Royal Caribbean testing the 100-day moving average. That's critical. If you're long the name and it breaks below there and you have a risk management strategy, you need to engage and do something about it. But I think

Overall, what has been the stabilizing factor against all the uncertainty that you have cited here that we have had over the last month and will continue to have? It has been earnings. Earnings has been the stabilizing force. What's interesting about the earnings, the guidance is not good.

The guidance is reflecting an environment where rates stay elevated. We're not sure what the effect is of tariffs. And just look at Walmart. And we talked about Walmart yesterday. We said that's going to be the problem when you hear this earnings report.

So the earnings estimates are coming down. So it's a very peculiar earnings reporting season because on the surface, Q4, everything looks good. You've got the double digit revenue growth. You have the double digit earnings growth and it's expanding into other sectors. But it's the guidance here that really matters. And if you think about that,

really the ultimate question is going to be, are the earnings estimates too low? Can corporations exceed them? Or are the earnings estimates warranted in continuing to move lower because of the uncertainty? What are you thinking about as it relates specifically to Walmart today, which is

having its worst day since November of 2023. I would not be surprised to see Walmart, Costco, a lot of the big box retailers kind of move in a little bit of a sideways pattern here. They're going down as if today. Target, Costco, Dollar Tree, Dollar General. Can we pull up a one year on Walmart for one second? The stock is up 65 percent. We're down today 6 percent. We're not even at the 50 day moving average yet. So

I think we've got to be careful ending, calling the end to a lot of these bullish trends. It doesn't mean I agree with you. It doesn't mean you quickly restart the bullish momentum in these names. I think more than anything else, consolidation patterns are going to become more popular and frequent in a lot of these names that have done well over the last six months.

And for the big box retailers like a Costco, like Walmart, I think that's what you're looking at. I mean, it's not all bad, obviously. You look at Shaq, Josh, earnings were good. Revenue's up 15% year on year. This stock's done quite well, which is why you've highlighted and we've talked about it because it's one of the stocks you've owned the longest and loved the most.

yeah this stock should be like 150 160 and if the market didn't look like this it would have them it would be having a much bigger day uh than it's having right now look at look at where that uh pre-open gap

was headed. Looks like 128-ish. So it's not a great day in the market for these types of growth stories. People aren't out there looking for the next one. They're licking their wounds from the last one. So it's fine, though, because I bought the stock 10 years ago on the day it came public. And I want to talk about these results because they really do stand apart from a lot of other companies in the space. Shack is beating its own path.

to a significantly larger market cap. They beat on the top line, 328 versus 327.

It beat on the bottom line, 26 versus 24 cents. Year-over-year growth was 15%. System-wide sales, which includes the licensed stores that are overseas, up 13% to $500 million run rate for the quarter. This is only a $5 billion market cap, but they're now talking about getting to 1,500 stores

The day it came public 10 years ago this January, they had 31 stores. And they were saying they thought the top end of the target would be 450. Today they have 335 company-owned stores and then the additional licensed stores. And Rob Lynch is talking 15%.

1500 US corporate owned stores at the current run rate of $4 million per store. That would be $6 billion in US only revenue. They're at about a 22% profit margin restaurant level. So that would be like 1.3 billion in profit. Put a 15 multiple on that. That's a $20 billion market cap. It's 5 billion today. It's a four bagger if you can hang on to it the way that I plan to.

That's why I think the stock is significantly undervalued still. And the guy running this company knows what he's doing in terms of scale. Remember, he came from Papa John's, which was 5,000 stores. And this is 300 something stores. So I think it's early. I think people are rightly reacting positively to the news. I don't think they're positive enough.

You know, to kind of bring the conversation of how we started full circle 23 minutes in to the program with a lot of the uncertainty around policymaking and stocks that are reacting

In the way that they are whether it's the cruise lines or defense stocks or momentum names There's been a lot of talk lately and Josh you highlighted this too last week about Europe and other places outside the u.s. Being the place to be JP Morgan today wondering whether the unwind of the you at what they call the u.s. exceptionalism theme has gone too far and

where there's just too many people trying to get on the side of the boat that says Europe, China, better investments now than the U.S. They've bottomed. There's much greater upside with perhaps much less risk at this point elsewhere. J.P. Morgan says there's some aspects of the unwind of that theme that look extended, such as the longs by momentum-based investors in the Hang Seng and also the Eurostox 50. Do you believe that? We've gone a little too far?

towards that regard? - Broadly over the last couple of years, maybe it's gone a bit far, but I'm not saying right now is the time to call the top in this relationship. I do think that US stocks will finish probably better against European stocks on the year. There are some names that are on our radar. There's some really great companies that I think have some tremendous upside from a narrative standpoint, like a Siemens, as well as a Solzar that are on our radar right now. We don't feel the need to sort of chase into the narrative.

you know i think we take a step back there's look at the currencies here even even after some of the fed talking today you're seeing the dollar make new session lows if the dollar continues to kind of come off and we saw peak dollar that is going to be a tailwind uh two foreign stocks to european stocks as uh as the year evolves i mean obviously the the the the number one u.s exceptionalism trade i think you can make an argument has been large cap tech by the mega caps because ai

And the fact of the matter is we've got the best AI companies in the world. I don't think anybody would dispute that. Maybe Alibaba would say, well, you know, what about us? That's popping on earnings, by the way, a 52-week high today. Do you want to touch on that? It's been in the Tepper wheelhouse, as we highlighted earlier.

week ago Monday as the 13 F's started to come out. Yeah, the momentum is now accelerating in this name. And I think the next stop for it is 150. I mentioned that when I bought it, that it had the potential to do that after earnings. I think that's very clear. I think Bill brings up a good point on the dollar. You have to watch the dollar because it feels as though

the dollar is actually higher because you had that big move from the September Fed meeting into January. The dollar is actually lower on the year. That plays into international having

having a little bit of a comeback. And I think the most important thing when you think about going ex-U.S. is think about positioning, because at best, positioning outside the U.S. for non-U.S. assets can be defined as being underweight coming into this year. So there's a lot of rebuilding that actually could unfold just to get them back to market weight. All right. We covered a lot. We got to bounce for a couple of minutes, take a break. Josh, thank you. Josh has to run, but

We appreciate you joining us for the A Block today. We will see you obviously soon. Stephanie Link is going to join us after the break because she has some new moves today and she trimmed a momentum name, the big one too. We will discuss that next.

EY.

EY, shape the future with confidence.

Sly Lives, aka the burden of black genius. Now streaming on Hulu.

Are you still quoting 30-year-old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now. It pays to discover. Learn more at discover.com slash credit card based on the February 2024 Nelson report.

All right, we are back. You see the Dow's down 570. Financial stocks dragging that down. JPM, Goldman, you know about the Walmart news today. Stephanie Link joins us now to talk about some moves. So, Steph, it's good to have you. I want to start with the stock that you actually trimmed because it really goes to the heart of our conversation that we led the show with, the unwind of some momentum trades. I talked about cyber and you trimmed CrowdStrike. Tell me why. Yeah.

Because, Scott, I was buying it in the summer and in the summer it had fallen about 41 percent from its highs as they had that glitch, the global glitch, if you will. And I thought it was an opportunity. I had never owned CrowdStrike before because I could never really get my hands around the valuation. But down 41 percent from its highs.

I thought it was an opportunity for best in class company. Still is best in class, by the way, but it's up 97% from August 2nd. And I got lucky. I timed it really well. I was adding it throughout August. And so I just think it's prudent to take money off the table. It's not to say I'm negative on the name at all.

all. In fact, I like the long term story. You know, I'm very much involved in cyber and I use that money to put it into a laggard, which is Palo Alto, because that stock was only up 8% in the past year when everyone else is up 40, 50, 60%. And so I thought that was an opportunity. So still a very large position for me. I still expect a very good quarter when they report 30 to 40% earnings and total revenue and subscriptions.

I just think that it was prudent to take some money off given the run. - Do you feel like it's prudent to do that for investors who are watching you now in a lot of the other names that we discussed at the top of our program? Ones that were in the momentum basket that had a huge run up? I mean, it's really not coincidental or to me in any way that you're doing this today as we're watching a rollover of one of these great trades.

Well, I actually did it earlier in the week before we start major rollover, but I would have no problem with people taking some profits in any of those names because they're up so much. And when the momentum turns, look, momentum is great on the way up, Scott.

But when the momentum turns and it's on the way down, the valuation support is very, very hard to use as a tool. So you either have to hold your nose and deal with the volatility or you take some profits along the way. Look for opportunities. Look, by the way, if CrowdStrike were to fall 20 percent from here, I probably would add it back.

Right. But I just see value elsewhere in the market. And I wanted to take some gains. I think that's the prudent thing to do in my strategy, the way I invest. Let's talk about taking that money and putting it elsewhere because you bought more United Health and you bought more Diamondback. Tell me more.

Yeah, I mean, every day UnitedHealth goes down. It acts horribly. I bet the chart looks terrible, but I would just say I'm going to continue to make this a very large position throughout this year. This is the number one managed care company in the world, and their long-term earnings growth rate is anywhere from 13 to 16 percent.

If you can get their medical loss ratio, if you could get that to come down to 2022 levels, then you look at something like 25 to 40 percent potential earnings growth. So it's all about the margins. And I think we've seen peak utilization. And therefore, I think you will see margins kind of recover for the company. And the stock is trading at 12 times EBITDA versus 17 times its long term average.

Yeah, and you don't have an issue. I mean, one of the things, obviously, is just the sentiment around the name has been so bad. Yeah. Fundamentals haven't really mattered. And I'm just wondering why you think they will. The stock hasn't done anything. No, I don't think...

No, I think fundamentals have been not great, Scott. That's why the stock hasn't done that well. Yes, sentiment is bad. Yes, you've got Washington policy risk. I think that's overdone. And I think at this valuation, it's priced in a lot of bad news and a lot of the bad fundamentals. And I'm making the bet that this company, being the number one player in the industry, will recover in fundamentals, mainly the margin side. I have no problem with their product growth.

Optum is their gem. It's 25% of total revenues. It has an operating profit growth of 12%. That's the driver of the growth in my mind. And if you can get the margin side fixed, then I think you see upside from here. Yeah. I just wonder if there's at some degree a buyer strike in that name for all the reasons that we've discussed since the CEO-

of united healthcare was was murdered um diamondback quickly yeah so they made another acquisition this week of double eagle and it's going to be free cash flow positive by five to six percent uh this year next year this is the sixth acquisition acquisition that this company has done since 2020 and and

Every deal that they have done, it's accretive to free cash flow. And they have the highest oil and gas production in the industry. And it's just the largest pure play on the Permian, which is the fastest growing piece within the U.S. that you want to be exposed to. Trades at 10 times EBITDA, 10 times earnings. So I think this is a really good move for them. And I like what they're doing overall. All right. Good stuff. Steph, thank you. We'll see you back on the desk. That's Stephanie Link.

Contessa Brewer has the headlines for us now. Hi, Contessa. Hi there, Scott. Senator Mitch McConnell has just announced today on his 83rd birthday he will not seek reelection next year. That decision ends a four-decade career where he became the longest-serving Senate leader in history. Not long after McConnell's official announcement, Representative Andy Barr released a statement saying he's considering a run for McConnell's seat.

The PGA Tour and officials for the Saudi Public Investment Fund are expected to meet with President Trump at the White House today to continue negotiations for an agreement between the tour and Live Golf. Sources tell The Washington Post any agreement would need to be vetted by the Department of Justice. Now, both sides are hoping Trump's involvement could help with overcoming regulatory hurdles.

And Netflix co-CEO Ted Sarandos announced today the streaming company will invest a billion dollars to produce TV series and films in Mexico over the next four years. The company already has 400 employees there. And two million dollars of this investment is earmarked for Churubusco Studios in Mexico City, which first began operating in the 1940s. Scott, that's the news.

All right, contestant, appreciate that, contestant Brewer. Coming up, calls of the day. One firm sticking with its bull case for the worst performer in the S&P today. Kerry owns it, which is why we discuss it next.

Are you still quoting 30-year-old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now. It pays to discover. Learn more at discover.com slash credit card based on the February 2024 Nelson report.

Sometimes you have to break from tradition to make something better, or in this case, a smoother spirit. Martel Blue Swift is made of French cognac, but because it's finished in bourbon barrels from America, they're not allowed to call it cognac. The shockingly smooth taste is rich and aromatic with distinctive hints of toasted oak from the bourbon casks, making it perfect for cocktails. Martel Blue Swift. Defy expectations. Enjoy our quality responsibly.

All right, welcome back. Take a look at shares of EPAM. EPAM Systems. It's the worst stock in the S&P today. Carrie, you own it. This was on a weak guide, correct? Correct. They had a decent quarter. They guided lower than expected organic growth, which was supposed to have been, I would say, high single digits. It's in the 3% to 5% range. And we see this as a software consultant that helps with integration of AI. It's had a

Tough couple of years. They moved from Ukraine to other locations, mostly in the U.S. Business is starting to be better. We see the signs of acceleration in bookings. And we like what we're hearing. It's just not happening fast enough. So this is a strong reaction. We believe that there is opportunity and we would be buyers of it at this price. Okay. Wells would be buyers of Autodesk about a week ahead of their earnings, Joe. They're pretty excited about this name.

Stock is not really in a very good place. I would call the momentum having a very strong yellow light. I think the US construction industry here is the challenge. And you're going to see a slowdown in terms of the revenue that is generated

for Autodesk from the U.S. construction industry. You're going to have to hear from them a degree of confidence that that, in fact, is not what they believe will happen as we move forward. What about Axon? Overweight Morgan Stanley today. They report next week as well. They're bullish on their durability of their growth rate. Look, there's a classic momentum name in the financial sector, public safety technology. Look at that. Yeah, traded to Axon.

an all-time high just two days ago. It's down nearly 22% in the last several days. So you have to wait for earnings on this. But this falls into the basket of what we were talking about. I mentioned this at the top of the show. It's, you know, 10% down. It doesn't have the extreme valuation that some of the other names have had.

had it grows it its revenue at thirty percent so you're paying a premium for that growth you wanna make sure that what you hear from the next week confirms that the revenue growth remains consistent above thirty percent they are certainly in the sweet spot

in terms of delivering products to an industry that has very strong demand. When you think about technology related to public safety, for law enforcement, it's critically important. So they've delivered on the earnings, which has been a strong reflection of what price has ultimately done. You're just going to need further confirmation next week because the stock is down 22%.

off its all-time intraday high from two days ago. Another stock that reports next week's workday. Neutral is the call at Monus Crespi today. They're looking for growth to decelerate. We added this day with autumn last year, just ahead of the S&P inclusion.

The company, the management is really honing in on cost controls. They let go of some of their workforce. But we do see this being a potential winner in AI as the year evolves. So when we put this on, we had high hopes, but it's also not a high flyer name. So I think if they can kind of beat a low bar of expectations here, it's going to be on a good path, I think, for the rest of the year. You want to give me something quick on Zoom? I still think Zoom has the potential to really be

one of the winning technology stocks in 2025. The valuation is more reasonable. They've diversified the business model. And here again, by the way, we're talking about all these stocks that are reporting next week. I think they report on Monday. We have more that we're going to do later in our setup. But next, after this quick break, Santoli is on the other side with his midday word. All right, welcome back. Senior markets commentator Mike Santoli here at Post 9. We led with the rollover momentum. That's the story.

It's definitely the story today. And one of the big questions is, and we've talked about this whole dynamic for a while, I keep focusing on this really active avenue of froth and adrenaline in a subsector of this market. And so some of those names are definitely having an unwind this week. I mean, Robinhood, it's kind of like all that squared because it's business itself is relying on some of that. But yeah, the Applovens, the Palantirs, all that stuff. The question is, the rest of the market didn't get nutty along the way up. So

So can it act as insulation on the way down? Obviously some slippage in the sort of magical rotational powers of this market to keep elevated at the all-time highs. The way I compare how the market's been recently is it's like a team that keeps winning the close games.

Right? And everyone says, you know, great teams win the close ones. You know what great teams do? They play fewer close games. They are dominant and they kind of have much broader strength and offense wins, not just... We saw that in the Super Bowl. Exactly. The Chiefs won like 12 one-score games and then got

destroyed in the Super Bowl. And I'm not suggesting we're in for the kind of washout that they met in New Orleans, but I think of it more as like a basketball or baseball team long season. Those things are going to catch up with you because it's reliant too much on circumstance and luck if you're always playing the tight ones. We look ahead, obviously, you know, to NVIDIA next week. That's a big NVIDIA's up.

today in a sea of red. It is. It is actually kind of fighting it out and continuing there. And also just the non-AI chip names are a real bright spot, right? You see Texas Instruments after analog devices numbers. So, you know, this market is finding its way to rotate into things. Banks' weakness today is pronounced. And I think you have to keep an eye on that and make sure it's not a trend change. All right. I'll see you on Closing Bell. And we'll take our viewers to the final hour. The setup is next.

Let's do the setup now for you. Booking Holdings reports after the bell today. Carrie, you own that stock? Yeah.

Yeah, we think they're going to have a good quarter, earning about $36 a share and the guidance for 12.5% growth or more for next year. We expect that to continue over the next several years. People are still traveling. They're still wanting to go places. And experiences are a key relative to good spending. What do you think about this group? Don't you have Expedia? I do. Expedia looks really well on the charts. Good quarter. And has been delivering an excellent quarter. What about Live Nation? That's going to report tomorrow.

It did hit a record high today. It's interesting because you saw the revenue decline in the last quarter, and that's because in the second half of the year, Live Nation didn't really have the big stadium type shows. What are what's the premium being paid for in the stock? And it's the outlook in 2025. And there's a lot of big shows coming. And the expectation is that revenue growth is going to rebound significantly back into double digits. Is that already in the stock?

I mean, it's up 17 percent year to date. Presumably the market knows something. That's a great question. Yeah, I think that is largely in the stock. We're going to have to hear something a little bit more. And I think what's important about the earnings report is don't give us a further disappointment. We don't want to see the revenue decline in this quarter exceed what we saw in the last quarter. That would be problematic. All right. We will take a break. We'll come back. We'll do finals next.

so

All right, welcome back. We'll do finals in just a minute, but we do want to hit on Garmin and Quanta with you, Joe. Two other momentum names that are getting hit pretty hard today. Both casualties of momentum funds that are doing some selling here. Both of these names have reported strong earnings. I don't think it's idiosyncratic. It's more of an overall reflection of momentum itself as a factor. Yeah, earnings pretty good. This is going to be the third straight negative month for Quanta if this continues. So we'll have to track that.

What's your final trade while we're at it? Exxon Mobil. A little bit of quality. Okay. Is the momentum gone, by the way, in quantum? Third straight negative month? Dun, dun, dun. Yellow light. Carrie? Thermo Fisher Instruments and Devices for Healthcare. Great grower. We believe in it. You need some help rebalancing this thing?

Sure. You're good. You want to talk after the show? Let's do it. Bill. LNG, Chenier. Natural gas is starting to wake up. And Chenier topped out when Trump made the back off those exports. This thing fell off 20 percent. This thing is bottoming out. I really like it here. It's up today with natural gas off. OK, we'll track the final hour of today's trade on Closing Bell. I'll see you at three o'clock. The exchange is now.

You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.

Thank you.

as an expression of an opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com forward slash Halftime Report disclaimer.

At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at capella.edu.