board. the dow down more than 300 points, the s&p down half a percent, the nasdaq down just over a happen percent. that's when nvidia in the green. however, other chip stocks are weighing on the nasdaq today, talking about micron and a few other days that does it for us. "the exchange" starts right now. ♪ ♪ thank you very much, frank welcome to "the exchange." i'm kelly evans. here's what's ahead on a very busy day we see the massive and violent rotation into small caps and out of tech. the big question is whether stocks are finally broadening out or markets are breaking down one of our guests says there's a key signal she's watching that suggests more gains are ahead. she'll tell us what she's buying plus, it's no doubt one of the most dramatic presidential elections we have seen, and dan clifton says it's one of the most investable he's seen in his entire career. he joins us live ahead we'll talk about the latest developments netflix on deck to report.

the bar once again high. the stock up more than 30% this year but our analyst sees three catalysts that can keep it going and growing. let's start with the markets and dom chu has the numbers. this market doesn't seem to fit any template >> maybe the pullback continues, maybe not surprisingly so. we're not that far away from record highs, so put that in context, we did start with decent gains to start the day. and now the dow is down about three quarters of 1%, 282 points to 40,916 the last trade the s&p 500 moving even more below that 5600 mark, 5562 is the last trade there, off about one half of 1%, or 25 points to the downside hovering just off of the session lows right now and the nasdaq composite down about one half of 1%, as well. that's good for almost 100 points to the downside 17,898 is the last trade there kelly had mentioned this broadening out trade, and the

small-cap dynamic versus large caps we are still seeing outperformance on a relative basis even in today's trade. and just to put it in context, again, over the last week or so, that small-cap etf, the russell 2,000, ticker iwm, is still up about 5% versus a 1/3 of 1% decline for the spdr 100 and qqq down 1.5%. and i just want to pint out something, because we made a big deal of this yesterday the computer chip stocks were the epicenter, arguably, of the tech-led selloff yesterday we've been seeing at least a little bit of stability today. taiwan semiconductor reported earnings overnight, down about three quarters of 1% it was positive earlier on today. asml holdings in the news yesterday because of possible reported export restrictions in place, still down art 2/3 of 1%.

nvidia, broad come, seeing some gains. so we'll see what happens right now, because that chip stock, remember, kelly, has been seen as a leading indicator for the rest of tech and by extension the rest of the market back over to you >> dom, thank you very much. dom chu. meantime, j.d. vance taking the stain at the republican national convention last night, as former president trump gets read dy to take the stage tonig. and joe biden is taking a step due to having covid and maybe a bigger stepback. eomon, you know, look, biden's predicted chances have fallen quite consider ably throughout the day. >> that seems to be kind of square on the nose, right? everything we're seeing, you see a tiered set of leaks on the democratic side, first that there were meetings between democratic leaders and joe

biden. and then the content of those meetings was leaked. now you're seeing even more details about donors holding back funds from joe biden, all of that seems to suggest that it's just a very difficult path now for biden. the question is, it's only up to him. so it's sort of a biden emotional decision, emotional response, political. his family, his personal career, everything he's built in his life, all come down to this moment so the question is, how does that work itself out it's a very personal thing playing out in a very public stage. here in wisconsin, kelly, j.d. vance began the day at a prayer breakfast here in wisconsin after taking the national stage for the first time last night as the vice presidential nominee for the republican party a striking populist tone from vance last night, signaling a break from corporate america and the republican party here's what he said last night about big business >> we need a leader who is not

in the pocket of big business, but answers to the working man, union and non-union alike. [ applause ] a leader who won't sell out to multinational corporations but will stand up for american companies and american industry. >> kelly, i had a few minutes earlier today with eric trump, the former president's son i asked him about that populist tone we saw last night, and whether or not wall street should be concerned about what it saw you saw vance very, very critical of wall street last night, as well eric trump said no he said look, go back to the first trump term interest rates were low, inflation was low. those are things that wall street cares about he talked about commercial paper as a real estate developer himself. you know, the price there was much more favorable for developers and business. so he said if you look at the

first trump term, that's what they're going for in a second trump term so don't be scared away, wall street executives, by this populist turn in rhetoric we saw last night from vance. >> as we were just a moment ago discussing what might happen on the democratic front, there's been some chatter or speculation that if biden stepped aside, could he even tried to do it tonight and upstage -- it doesn't feel like that's in keeping with joe biden or something like that could happen quite so quickly but there is a moment maybe to be seized if they really wanted to do so >> well, stepping down is not in keeping with joe biden he's been campaigning for the presidency since he was a young senator. this is a multi, multi-decade effort by joe biden to become president of the united states he feels he's done a great job the legislation they passed, what he's done in terms of ending covid, bringing the u.s. economy back, infrastructure

spending, he feels all those things are tremendous successes. you can tell that this call to step aside grates on him and that's as much about human mortality and ambition and sort of fear of irrelevance at the end of your life and career, all of those deeply personal things are wrapped up in there. but the timing really is up to him. i mean, it doesn't take anything other than an announcement he could simply put out a press release. he could issue a tweet or an x if he wanted to. it's not a complicated thing to do the complicated thing is deciding to do it. >> yeah. and i guess the final question on that front would be policy or machination wise, what would be those steps, is it sort of saying my delegates are free to be -- to go with someone else, to go with my successor. maybe he doesn't get into that >> that's the question that's the question. does he endorse kamala harris or does he say we need an open

convention and my delegates are now free to vote their conscious for any candidate that they want who should materialize in the field. two schools of thought on that one school of thought is if you -- as joe biden, if you endorse kamala harris, that's sort of an orderly succession. she's the vice president now it's sort of a natural fit that she would step up and be the nominee for the party. on the other hand, there are a lot of people in the democratic party who look at kamala harris and say she's not a strong candidate nationally her presidential campaign was not effective when she ran on her own. and therefore, we need to open this up to a broader group of democrats, particularly governors around the country who might be much more stronger potential chief executives, and the drama around that would ma n monopolize the conversation around donald trump and attract attention back to the democratic side, democratic issues and their arguments for why they need to beat donald trump. they could monopolize the political oxygen between now and august if they had an open

convention the downside of that, of course, the democratic party could tear itself apart over issues like gaza, for example, and support for israel and where they stand on that. it's risk all the way around for democrats. they are in a very bad position right now politically. >> i can't wait to hear what my next guest says about that thank you very much. my next guest just rewrote his latest note because of what transpired over the past 24 hours and says this is the most investable election in his career join us is dan clifton dan, where do you want to pick up >> well, great i would just start off by saying the odds oh of a republican win have gone up here. if they replace bide within kamala harris, trump will still be the favorite. but now because of all this news flow with the assassination attempt, with biden's debate, you're starting to see investors start to plug in and try to

understand the investable impacts of this election for us, it's less about the broader index and trying to identify companies that are going to get a significant earnings benefit if one candidate wins over another or one party has control of a complete sweep in congress you're starting to see those play out what i would argue, kelly, there's four major areas right now that investors need to be focused on you saw it last night with j.d. vance, but the tariff trade is probably the largest impact. we like to say this is a referendum on the speed which the u.s. will be globalized. will trump be globalizing us father than biden? the second is deregulation the third is if you get a republican or a democratic sweep. and fourth is what happens on a sector basis but what is so fascinating about this election is that up until this point, this election has impacted non-u.s. stock markets like china, india, and mexico

more than it has impacted the u.s. stock market. now you're going to see that broaden itself out as we think about what could happen over the next few months. >> i like how you tell us to watch fedex, that stock has been a good stock for globalization, is one of the most correlated to the election probabilities do you think the market is selling off today because trump's odds are lessened and maybe harris would be a better contender, should we read into that, do you think >> i just think there's less certainty about what could happen i wouldn't read into the broader market decline because of what's happening in the election itself you had a big news event yesterday morning where biden is starting about regulating the semi space we know that trump is going to regulate the semi space, and trump said he was thinking about taiwan needs to defend itself. there's a lot of uncertainty in an area that was getting frothy in the market. i think are's some rotation associated with that

you're also getting really powerful disinflationary data coming through, and it looks more likely the fed will cut rates. and then over the last couple of days, we just had a little bit of a liquidity drain, which tends to tighten financial conditions we think that's temporary. again, i would focus on the sectors that matter, and what we have seen since june 27th, and again over the last week or so, is that the stocks that are levered up to trump or hurt by trump, they have significantly moved. the one that i would point out are the stocks that benefit from deregulation, immigration, for-profit education, those stocks are up 14% the last three weeks. the s&p is up 1.5% so you're really starting to see investors begin to pick their stotts for the election. i think that's the right angle to take. >> again, education is one area where deregulation could give the stocks a boost we talked yesterday about that

a couple of others you say financials remain the greatest beneficiary of a republican win. defense could be viewed as less positive under trump on the tariff front, it's little mixed. but health care, this is one area if it is harris instead of biden, that we could see a real difference in the rise for medicare for all >> absolutely. there's not much difference between biden and harris, but he was much more aggressive for medicare for all during her campaign many argue that she was running in the democratic primary. health care, which is usually one of the most involved sectors for an election has been on the sidelines. it's very pick your spots, medicare advantage, medicaid, a little bit on drug pricing, but not much if she does enter the race, she'll see more attention focused on the medicare for all trade and a higher probability of a republican win would probably help some of the managed care and pharma stocks, all else being equal i know that knowing that trump

is not good on drug pricing. but that was a big weight on the market in 2020, and you would see that come back there are other areas like cannabis where she's a little more forceful than biden would be on the issue. but overall, a lot of the policy issues are the same. so that would be probably where the biggest change comes in. >> some have speculated that the raft of announcements we have gotten from president biden about rent control and things like that, that he's talking left in response to the challenge pressure on him to step down. you're saying that's obvious i would have almost thought he would go the other way and try to appeal to the broad u.s. base should we expect him on the issue like medicare for all, to try to pull a rabbit out of his hat and say i'm staying in the race and here are my really sort of jaw-dropping policy proposals that will give me another boost of excitement and maybe voter turnout in this election could he put something like that back on the table to save his chances? >> it's possible, kelly. and i would just argue that we watch where the democratic

voters are in replacing him, and increasingly you're seeing the number of democrat voters who want to replace him growing. he feels by tacking to the left, he will bring them back. but i have to be honest, this is no longer about policy this was a referendum on joe biden's policy until june 27th it's now a referendum on his acuity and ability to govern, and he could roll out whatever policy proposals out there i think that the democrats are worried that he doesn't have the stamina to make it to the finish line kamala harris is losing to donald trump not as much as joe biden was losing to donald trump or is losing to donald trump it makes it more policy focused and less about acuity and stamina if she gets on >> do you think it's over? >> i don't think the election is over, because we've got -- we have three black swans in the last six weeks we've probably got one or two more before the end of the election we have to see how this sizes up we have to see if kamala harris is there, who needs to be put on

there. if you think about probabilities, the republicans are unified. they're on offense the democrats are divided for right now, they're on defense. the swing states are increasingly moving to the republicans. until that begins to change and you have to start doing your due diligence on what a trump administration looks like, and it's not your father's country club republican party anymore. this is a worker populist party. trade is going to be impactful so it's different and when it's different it impacts different companies like u.s. multinationals that means that there's going to be greater opportunities and greater risk for investors those who do their work are going to be rewarded at the end of the day >> dan, we'll leave it there for now. appreciate your time >> thank you for having me what we have heard from the candidates would be how they would like to fix the economy, but where do we actually stand new data this morning is not providing much clarity we had the philly fed manufacturing blowing estimates out of the water, but jobless

claims were much worse maybe that was the texas hurricane effect or maybe not. joining me now is my next guest. tom, good to see you where would you draw our attention to in terms of the developing macro picture >> yeah, hey, kelly, good to be with you, as always. look, i think you're quite right with jobless claims. i don't know that i would make too much of it i do think we saw texas as an outlier, impacted by the hurricanes you know, the thing i would say about this is i think hopefully most people appreciate it only captures one side of the labor equation, that's the firing side sure, we know firings have been pretty muted of late but what we also know is that on the other side of the equation, hire has slowed down quite a bit. we look at something called cyclical hiring, which is private jobs less health care. when you look at that, the slowdown is notable. over the last few months, we're

averaging 50,000 jobs. you think back last year at the same time, you were averaging 150,000 jobs so the labor is starting to show some cracks. i don't think it necessarily means recession is upon us but if there is a skew on that, i think the skew is leaning in that direction >> there are some out of consensus voices on the bullish side who say look, the fed has to be careful here real wages have helped retail sales do better, meaning better economy and jobs in the months to come. if the fed cuts in september and they're wrong about the slowing economy, maybe even about inflation, that could end up looking politically compromised for instance do you think a september rate cut is really a sure thing >> i mean, i think the -- if you look at the market right now, it's basically 100% priced for a september cut. and i'm sympathetic to some of that thesis, but what i would

say is policy was call wibratedo inflation that was meaningfully higher than it is right now. in the inflation story from our perspective, i don't think it's something that the fed needs to worry about anymore. you're going to say the right things about that obviously, but i think we're already there. so i think in the context of where you were calibrating for say a year ago with inflation, you're now almost sort of back to target. if you just strip out shelter from say like headline prices or from core prices, you're there you're at 2% and so i think that's what this is again, i think it's a really important idea this is about calibrating policy for the fact that labor has slowed down a bit from my comment earlier. that inflation is now -- has rolled over from the highs so this is a march toward neutral. i don't think this is a march toward the fed putting sort of an aggressive policy easing stance in place. >> we haven't seen a cycle like that since 1996. what was the last time that -- well, no, i guess you could argue that what we saw maybe in

the late 2010s was efforts to move rates here and there, move a little bit higher, but had to reverse course and so on and so forth. we're used to these clear cycles there's a hiking cycle and a cutting cycle. this time, you know, is a little less like that >> yeah, i mean, you know, the sort of -- i think the classic example that we have been using is the '94, '95 window where the fed was just sort of calibrating policy in real time. we've seen a dynamic like that again, most people -- people here conjures the image of the fed funds getting down to 1% or even zero over the last couple of meeting cycles. basically, that's an atypical outcome. the fed reserves that for dramatic events like the pandemic so from that perspective, it's probably smart to recalibrate the thought process. i mean, the higher for longer thing, depending on how you want to define that, i would say it's

normal for longer. i don't think that ten-year yields have to move meaningfully from here in the context of what we're thinking about the fed >> and there they are at 4.18. tom, thank you very much appreciate your time >> thanks, kelly coming up, alaska airlines plunging after missing revenue estimates and giving weak third quarter and full-year earnings guidance after this break, we'll speak with the ceo, with the shares having their worst day of if year netflix results are on deck, and those shares are expected to have a post earnings move of 7% in either direction, as well what will investors be watching for and how should they position ahead? we'll ask one analyst who says he sees 10% upside and here is a glance at the markets. the nasdaq coming off its worst day since december of 2022, is now 5% off its all-time high and, again, half a percent lower today. back after this. >> this is "the exchange" on cnbc

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welcome back shares of alaska airlines down nearly 7% after posting a second quarter revenue miss, falling short of third quarter profit forecasts, as well as they grapple with higher operating cost still, alaska soared past expectations and said it's looking to further expand high-end offerings, as demand continues to grow. we're joined by alaska airlines

ceo. ben, great to have you back. welcome. >> thanks, kelly great to be here with you. >> we have a record high number of travelers they might not agree, but we have really low airfares plaguing the industry's performance. who started this and how do you bring it to an end >> well, listen, i think on q2, i know everyone out there feels like airfares keep going up. but the fact is, from this year, this quarter, second quarter of 2024 compared to 2023, fares were lower and so -- but in terms of our performance in q2, even with all this increased capacity, we had a fantastic second quarter we had record revenues, a pretax margin of 15.8%, which will be the best of any carrier out there. and so we feel like we're in a really good place, especially with how we can fit a business model with premium i think we're in a fantastic

place with premium i want to take a moment to thank the fantastic employees of alaska for the performance >> shares are trading around $37 today. in the late 20 teens, you were in the 70s and 80s, the time of the virgin air acquisition, you were trading around $80. but then that brand name was sun setted do you think maybe you should bring it back or is it not about the brand and not about anything like that, and sit more just about capacity issues and some of the expenses that we mentioned as well, flight attendant contracts and so forth? >> kelly, you're asking a great question i think it's about all of that i think brand is very important. we worked hard on our alaska brand. it's extremely strong here in the pacific northwest. we have an amazing loyalty here, and -- but i think brand makes a big difference what you said is the business model is even more important this is why in the last few

years, since the virgin acquisition, we began thinking about this premium space if you don't get here overnight, and i think as alaska, as a domestic carrier, we would compare ourselves to our other domestic peers, our entry into premium, it is the reason why we are going to be profitable we'll be one of the top three margin producers in the industry this year. it's why we're differentiated from all of the domestic focused peers. so business model matters, brand matters. as we go forward, i think we're well positioned, even despite what i believe is an overreaction to our stock. >> i want to ask you, how long do you think this period of difficult earnings and pressure, downward pressure on fares will last do we have months more to go, years more to go >> you know, kelly, it's kind of like your previous guest i think there's a lot to do with

the economy and how the economy is going to evolve over the next few months rate cuts, no rate cuts, how people are feeling with inflation. i think those things are all interrelated since the pandemic now, a lot of people are flying and we don't really see demand backing off a little bit demand is still strong, we're still fueling our airplanes. if you ask anybody on the street, airports and planes are full that's true. i think it's -- yeah, and i think as we go forward, i think it's having the right brand, business model, you know, loyalty platform, you know, having relevance and having loyalty are two big things that are really driving profit at the end of the day >> do you watch the election events like the rest of us somewhat bemused are there any implications for your company depending on who wins in november >> you know, for us, we've been

in business 90 years we've worked through many administrations. i think our focus with whatever administration is in power is really to focus on aviation industry infrastructure. we want to make sure that infrastructure, which the government plays a huge role in terms of air traffic controllers and in terms of air space and how it's managed with the faa, that is at the highest possible levels of efficiency and reliability. that's where our focus is at, and i'm sure that's where all the other airline as will be at as well. >> this could be bipartisan, better airline infrastructure. that seems one area that everyone thinks we could be better ben, thank you very much good to check in with you. thanks for your time today >> thanks so much, kelly coming up, we have another executive exchange, this time the ceo of novartis. that's next, with the shares on pace for their worst day in more

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welcome back to "the exchange." i'm contessa brewer with your

cnbc news update israel's parliament voted against a palestinian estate, as prime minister benjamin netanyahu prepares to address congress next week and meet with president biden. a vocal supporter of the two-state solution hyundai is recalling 67,000 vehicles the first recall affects more than 56,000 vehicles over a loss of drive power from a fuel pump failure. the second recall applies to more than 12,000 santa fe suvs for a software error in the transmission control unit. the new es recipient for the kennedy center awards. and the apollo theater in harlem will be honored for launching generations of black artists over its 90-year term. kelly, back to you >> thank you very much

contessa brewer. novartis having its worst day in more than three years, despite raising full-year earnings guidance. seeing sales of its prostate cancer drug climb 44%. shares are down 4.5% for more, we're joined by novartis ceo along with anjelica peoples. anjelica >> thanks so much. thank you for joining us today so i want to start, like kelly said, you had a good quarter, raising your adjusted earnings outlook for the year, but the stock is down almost 5% today. where is the disconnect here >> thanks for having us, anjelica, great to be here when you look at our performance, it's been outstanding. we have had a tremendous first half of the year it builds on a great 2023, as well raising our guidance twice actually, our shares are at a record high. all that's happened today is we have given back some of the gains we have had over the past

few weeks. what i would rather focus on is the strong performance we had, and how that builds confidence in our longer term growth outlook. when you look at our key growth drivers, all performing well strong innovation performance coming out of ten positive studies in 2023. and we're well on track to meet our 5% sales plus growth guidance and our core margin guidance of 40%, we're at 39.6 in this quarter. so i think what will happen is we'll have strong momentum in the second half of the year. we'll get our approval for our cancer drug, as well as continuing to advance our pipeline i'm sure the shares will continue to reflect our strong performance. >> well, there is something else i was reading about even though you did have a strong performance this quarter, you are not raising guidance for the sales outlook for the rest of the year, just maintaining it. why is that? and i want to talk about that prostate cancer drug and why we're seeing weakness with that

drug >> yeah, absolutely. first on the sales guidance, we already have a guidance at low double digit growth. we see really strong continued growth dynamics in that single -- low single double digit range. but one other thing that will happen is we have tougher comps because of one timers than we had. so when you factor in the comps, it's just peru temrudent to main the sales guidance overall, i think most importantly, we're confident in the long run trajectory of this medicine i think we're just going through a transition period right now. as we prove the drug out of large academic medical centers into the community and get broader use of the medicine. >> how will you do that? because for viewers that might not know, this is a radioactive material that goes and kills cancer cells, which is really

unique, but it makes it hard and limits its access. how will you get out into the community with this drugsome >> we've made great progress we have 450 centers in the united states that can give this incredible medicine. this is pioneering work, developed by some of the top nuclear minds in the world it's able to direct microdoses of radiation t it directs it directly to cancer cells. we have two medicines approved, a large pipeline behind that what we are finding is it's just taking time to get centers up and running, understanding how to bring patients in, provide the therapy and then, of course, monitor them over the four to six courses of the therapeutic so you often see this when you have high technology therapies getting rolled out but it's quite simple in the end. once you get the certifications

done, once you get the clinics appropriately set up, and then i think oncologists in the community will be very excited to make these medicines available for patients you see most importantly, incredible results and patients appreciating the quality of life benefits you get with this therapy. >> you made some really interesting comments on obesity this morning i know we talked about that last time you were with us. today, you said you don't want to be -- you don't want to enter the market with a fast follow to what's already there, but you are interested in next generation therapies how much of that work is happening inside novartis versus what is happening outside and might you buy something in this space? >> we're looking we're acknowledge this fact that this is a very important class of medicines what i tried to articulate in the call, you have broad portfolios that are building and a couple of other companies, it looks to be a space with relatively low barriers to

entry, at least in the first generation of medicines. that gives a big advantage to the first movers, particularly in how the u.s. health care system is set up, where you can create rebate walls and other barriers for new entrants to come in. so it's much more prudent to look at therapies given less frequently or to get novel mechanisms of action so we're doing that in house we have research partnerships also so it's a long game, and we're very happy to play much more for the 2030 plus period to find the next wave of medicines we just think in the current period to pile on with another glp-1 or oral glp-1 or any of the combinations related, probably too late to play that segment today. much more try to win in the mid to long-term >> ceo of novartis, thank you for joining us back to you, kelly >> planning for the 2030s. i can't even plan for next week.

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welcome back with recent high flyers, tech and discretionary becoming the laggards my next guest says if we're in an ai bubble, it's still early days, and the mag seven will likely continue to gain over the next 12 to 18 months joining me now is samantha mclemore great to see you again welcome back >> thank you, kelly. great to see you >> you've got stocks in all the areas that our audience will want to hear about let mess start with nvidia you were involved with this stock pretty recently. what are your thoughts on the valuation and what's going on more broadly there >> yes, it was an unusual purchase for us. normally, we like to buy names down, not up but i think we saw anchoring in nvidia so obviously, nvidia results over the past year have been astounding you know, tripling earnings. coming into this year, it was

trading at only 25 times forecast earnings for the next year people were worried that it was the next cisco when we looked at the business model, we didn't think it was just a hardware business, we thought it was hardware, software, platform dynamics and thought it could perform over the next 25 years in line with microsoft, so we thought it could be easiy worth $900. it's hard to make a real case that it's undervalued in here. we still think it can earn market-like returns. >> so it's just a hold for you now? >> yeah. we like to let our winners run and hold it. we can still get higher values if you believe operating margins are going to be in line with current operating marngins >> as we debate whether this is a broadening out or breaking

down of the markets, do you have a vote to cast in one direction or the other, or do you think that you're being a little too quick to call the end of the kind of mag seven run? >> kelly, we think the bull market continues and the path of lease resistance is higher so people have been -- i've been in the market for a long time now. the whole time sense we've been in this bull market since the lows of march of 2009, people have been worried about the end of the bull market the s&p is up 1,000% but fear and pessimism have been strong i would say we're in the later stages, but we don't see any end to the bull market we do think there's a good chance we see a rotation and small caps do much better in the second half of the year as the fed starts to cut rates and the earnings growth rate converges between them and the mag seven >> are there any names in that basket -- again, you're a traditional -- you look for value, you look for some o

less-owned names are there any places that you think would benefit from that rotationsome >> yeah, there's lots of interesting names. one would be iac, run by some of the best capital allocators in the world. it trades down at about $50 a share. they have a collection of businesses they ore ant 20% of mgm and over 90% of angie if you look at the value of those two pieces plus the cash on the balance sheet, the stock is trading at a 14% discount if you include all the other businesses, which are really interesting and diversified, we have a 20% conglomerate discount in the 90s this is a great team that we expect to make value decisions, and grow the value over time >> so let's talk airlines then we talked about delta, which had a great start to the year, then obviously things have gotten tougher. we just spoke with the ceo of alaska, and that stock's had a

tough run. you still have delta in the portfolio, i know you're looking for more in the 70s range, and you have united, as well >> yes, we own delta and united. if you look at the airlines, our view coming out of the financial crisis, this is a different industry we have had consolidation, management teams delta is a premium brand, and united has moved in that direction, too so you always have this problem with airlines that, you know, you can bring out capacity quickly, too much supply relative to demand that's where we are now, s prices have come down. but delta and united are earning the majority of the industry's profits. we have not seen an environment like that where you have legacy players doing that they've moved up market and gone premium with their brand, diversified their business so the low-cost carriers are in a lot of trouble >> you have some health care names. we could talk cvs, there's a

wide variety say hi to bill to me as well just so tickled to see how well you're doing thank you for making the time for us >> thanks, kelly coming up, bank of america flagged netflix has a prime candidate for a stock split as the price of $645 is well above their $500 key level we'll discs atusth and preview results from the big streamer, next

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netflix climbing back towards the 2021 pandemic highs as it shifts focus from growth to profit. my next guest thinks its ad tier can take the stock to new highs. joining me is alicia reese, equity research, covering media and entertainment. do you think the earnings tonight will be part of the story? >> i do. i don't expect a blowout to be necessarily on the earnings tonight. i think netflix is poised to come in line with expectations, more or less, and expectations are fairly high. what i'm excited about is the third quarter guidance i think expectations are

relatively in line q3 -- q2 to q3, and our survey work indicates there is going to be an acceleration from quarter to quarter despite the olympics i think part of that is due to net netflix's shoulder programming around the olympics, like "sprint," "simone biles rising," and some other content they have produced or licensed over the past few months. they have some really nice content out, really nice balance of original and licensed content right now. i think on the earnings front, they're poised to beat, as well. just because they've been really productive with content, really buying an efficient balance of that original and licensed content, as well as international content. >> talk about the importance of this ad tier you know, it is -- do they make more money on the ad tier or subscription tier? >> currently, they're making more money on the subscription tier i think they're nearing increase

on the domestic, the ucan region i think they're dilutive with the other regions. it'll take some time to catch up i think overall, you're going to see accretion in 2025, possibly by year end this year. the main benefit of the ad tier, though, is that it limits churn. that's why you've seen, you know, some nice net subscriber additions over the past year i don't think that ends. i think on top of that, you're going to layer on profitability. you know, in spite of that, netflix is still able to expand arpu a lot was the password sharing crackdown. they're able to add family tier members on top of that which is incremental arm. they're also able to, you know, raise prices selectively that's really helped arpu. the next leg of growth is the ad tier, though. >> fascinating basically, the existence of the ad tier, a little cheaper one, means people are less likely to

cancel people who go to planet fitness, i go once a year, i can keep it. it is cheap enough the stock was all-time highs, around 700 now do you think it goes back there? how quickly, and what's the proper valuation >> right, yeah we do think it can go back last year, we had netflix on our best ideas list. it basically doubled over that time we have taken it off the best ideas list we still think it will rise, just not at the same pace. expectations are high, and a lot of that is priced in once the ad tier is incremental to profitable, and that may happen as we don't get the subscriber numbers anymore, so we do have to wean ourselves from the subscriber numbers. >> it's hard. >> coming up in 2025 but doi thini do think they'll profitability to keep the shares rising into the 700s and above. >> make at long last, i should get a netflix subscription alicia, appreciate it. there's still pent-up demand

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welcome to "power lunch. with kelly evans, i'm jon fortt. according to ferris bueller, the markets move fast. first, small caps, and now everything is selling. we'll look into whether retailers are selling and whether they could b