good morning it is 8:00 a.m. at disney headquarters in burbank, california 11:00 a.m. here on wall street and "squawk alley" is live ♪ ♪ oh, that's the way, uh-huh ♪ uh-huh, i like it ♪ oh, that's the way, uh-huh ♪ uh-huh, i like it >> good wednesday morning. welcome to "squawk alley." i'm jon fortt here at post nine with morgan brennan and david

faber. carl is on assignment. markets are mixed today but off today's lows with the dow and nasdaq still on pace for their seventh straight positive week all the f.a.n.g. names still in correction territory, down 10% off their highs, but trending upwards as treasury secretary mnuchin and u.s. trade rep li t lighthizer head to beijing secretary mnuchin joined "squawk box" this morning. take a listen to what he said. >> the outlook is very strong. i was with a group of ceos yesterday. they continued to have a very strong outlook on u.s. business. i think we've made a lot of progress already on trade and i think the outlookfor the economy this year is quite strong >> sounds sunny. joining us now, jonathan gottli gottlieb, chief u.s. equities strategist at credit swooiuisse

tobias lutovich. so you're pretty optimistic on the economy. despite fears about an earnings recession, you think those are skewed by a few things that people are not thinking about. anniversary effects of taxes >> so what you had was, last year you had -- you know, third quarter, 27.5% eps the question is, how bad is the first or second quarter of '19 why were things so good and how can you do well against those ridiculous comps if you look at the two-year average number, you're looking at 10% eps and what you really had was energy was on fire, the semiconductors cycle was on fire, a lot of these internet companies are on fire and the comps have made it a little bit more difficult, but i think everything is fine and the market sees through what will be a downturn in earnings

>> and tobias, you also think that even though fears of a slowdown have been in the forefront for a while, that's not the place to focus >> so, look, i would have said that if we were talking about a week ago unfortunately, a couple days ago, we got the senior loan officer survey from the federal reserve board, showing a meaningful tightening in commercial industrial lending standards. that tends to be a really, really good nine-month indicator for the economy. it does suggest we could run into a little bit of trouble in the fourth quarter, with meaningful slowing from the trend up until then. i think some of the expectations around earnings in the fourth quarter and the second half might be a bit optimistic. on the other hand, management have taken down expectations for the first half, into a level where they can probably meet or beat so as opposed to many people think that are second half, i actually think better first half and there might be again, i don't want to overstate it, but there might be a little bit of a challenge late in the year >> can i just add on something that tobias is saying.

a number of the sentiment surveys have rolled over recently and i think the loan offices survey is probably similar it's not really clear that these are not just a reflection of a market that was down 20% in the fourth quarter and the fact that you were in -- you know, or in a government shutdown when some of this survey work was done so it's possible that when you look at the next loan officer survey, it pops back to something that's more healthy. you saw the same thing with future expectations for the -- you know, michigan consumer survey and i think that you're going to see some of these things pop back up and be better than you think. >> and to that point, tobias, how much of this is going to hinge on trade talks between the u.s. and china we've got some cautiously optimistic commentary between treasury secretary mnuchin on "squawk box," obviously, president trump referencing it as well as the challenges that are attached to this last night in the state of to union how important is that to economic growth, both here in the u.s. and more broadly around the globe for this year? >> so, i think most people

anticipate that there will be some form of agreement, maybe not be a full-fledged trade agreement, or some sort of arrangement to sort of defer the worst or the most calamitous consequences of a fullout trade war. having said that, that tends to be the expectation of the markets. we were in asia a couple of weeks ago talking to investors, talking to investors in the states all the time. i'll be in europe next week. and i'm assuming i'll hear the same thing there's already an anticipation that there will be some form of a deal not a perfect deal, but something to avoid the bad outcomes however, you know, investors are clearly focused, china is trying very desperately to stimulate economic activity, to grow it. we think there is some upward pressure on commodity prices that are going to result from that and the only thing i do -- john, i love you, but i'm going to push back a little bit that nine-month lead indicator still suggests that we get a slowdown in the fourth quarter it may not extend to something more significant in the first half of next year, because we could get this pop back up

this isn't necessarily 2000, 2001, or 2007 or 2008, but we are going to take a little bit more of a cautious stance after a 16% run off the bottom >> do i get the last word on that >> sure, you get to respond. go for it. >> i think here's the backdrop the market believes the fed is done and i think that that's largely the case we're printing, you know, pretty strong jobs. i think that where i disagree with the optimism that -- and again, i'm a pretty optimistic guy and i think my target's a little bit higher than tobias', but i think that we all want to believe that this trade thing is like one meeting away from being gone and what i think trump is probably trying to do here is to say, this whole thing about entering the china market only through joint ventures, where you're giving away your intellectual property or them stealing it, or them having higher tariffs, or them subsidizing industries, i think trump is trying to say, listen, we need to literally flatten this

and if we're willing to take a small victory quickly, we never get to the kind of arrangement that thing that we would all like to see. so i think that we're going to be dealing with this for longer than we like i think perhaps the risk will be better off at the end. so i think the backdrop is much better than we're saying it is, but i think this trade thing is not going away as quickly as tobias, and basically, the market wants >> guys, what about the v-shaped recovery in the s&p? have we come too far, too fast >> there's two things that happened first of all, the fed basically backed away and said, listen, we really are out for a while the second thing is that volatility has collapsed we went from a vix of 30 to a vix of 15 or so, and that means that, you know, the hedge fund community or others are buying leverage increased their position sizes when the value falls. that's a big story here. and i think that it's not over i think we'll see all-time highs this year.

not tomorrow, but i think it's going to keep going. >> tobias, where should investors be putting their money right now? you look at small caps, for example, they've been the outperformer since the start of the year >> right so we wouldn't chase small caps at this point. we think that is kind of the risk entron trade and i think markets are going to move higher from where we are today, but i think it's probably time for a bit of a pause. our primary sentiment metric ent from euphoria to panic in december back into neutral territory a week and a half ago. so we are starting to see kind of markets calming down. the vix is a representation of it, but isn't a great lead indicator. but i would expect volatility to stay evaluated here and this is -- there's a two-year lag between the shape of the yield curve and volatility, which would intimate that we're still going to have vol. the drivers could be china, it could be brexit, it could be a whole bunch of things. leads you to kind of more barbelled approach we do think the cyclicals got beat up too badly and there's

some value there, but we think that household personal care products should be in there as a hedge against that increased volatility more barbell, it's not as easy a call anymore >> jonathan, let me just go back to that china thing, briefly we're heading into another election cycle what gives you the confidence that we end up in a better place with this china thing, if it continues to drag out. >> election cycle, in a year and a half from now? >> yeah, why shouldn't china just hold their breath and hope that the pressure comes off because of politics? >> i think that's actually the risk the u.s. does not project this image of being willing to stick in a fight and if trump, after fighting this, without even a bloody nose leaves this in five months for a quick victory, then china knows, they never have to make a real concession so i think what the president has is a year and a half, i think that the u.s. consumer is the envy of the world and china desperately wants to sell in we're hearing from companies that they're beginning to diversify their supply chains away from china, which means

every day that this spat goes on, china loses ground with respect to the u.s and their economy is weaker and ours is a bit stronger you know, i'm not saying that we don't have some compromise, but i just think that the president's not going to walk away as quickly -- and i think here's the key we will be better off if we have true access to their market, if we hold on to our intellectual property so this, i think, is a fight that's worth fighting and we'll be better off. market volatility on it, yes >> we'll see if the president gets it. thank you, jonathan, and tobias. >> you're welcome. when we return, how disney's direct to consumer bet on espn is paying off. and take a look at shares of snap they are up big this morning after positive earnings results. currently up 28% we're going to take a deep dive into both of tse qrts houaer next, right after the break. stay with us

well, two big earnings to get to this morning. disney is out with what was a pretty big beat. snap surging that is the stock, at least, after posting a smaller loss than expected. julia boorstin covers both the companies and she joins us now for more on the results. julia? >> reporter: david, shares of disney trading pretty much flat right now, despite beating expectations across the board, with particular strength at its domestic parks division. on the earnings call last night, ceo bob iger focusing on the success of espn plus, which has doubled its user bay to 2

million in just five months. he also was enthusiastic about the potential for disney plus. iger saying disney's structure lends itself to quickly scaling content for digital distribution, without meaning of additional costs and its brands have a unique advantage in the direct-to-consumer space >> we're confident our iconic brands and franchises will allow us to effectively break through the competitive clutter and connect with consumers we'll also use our brands to help subscribers quickly navigate the content on disney plus, creating an efficient interface that enhances their experience and their affinity for the service. >> reporter: on the downside, disney warned of ongoing tough comparisons for the movie studio with revenues in the current quarter from the studio expected to be meaningfully below the year earlier quarter and iger said china's economic softness is impacting attendance at its shanghai park meanwhile, snap shares soaring, up more than 28% on stronger than expected revenue, a smaller

than expected loss per share, and user growth that has stabilized from the prior quarter rather than declining as analysts had expected. ceo evan spiegel talking about hold up the company's discover content is working for consumers and for advertisers, who are spending more thanks in part to its self-serve ad system >> as far as i'm concerned, we're most focused on discover and improving the depth of engagement there we're really excited about the improvements we're seeing around personalization. i think there's a lot more to do there, and also around merchandising content more effectively. today, we see a lot of demand for content created by our community and also a huge demand for shows and more premium content. >> analysts seem reassured that spiegel has moved the company around the issues around snap's app redesign last year we've counted ten price target increases for snap right now 26 analysts have a hold rating on snap with 9 sells and 4 buys

guys, back to you. >> thank you, julia. joining us now is needham's senior analyst covering tech and consumer content, laura martin also with us at post nine, steven kahal let me start with you on disney. direct-to-consumer is the key now for investors in terms of where their focus is what did you hear on the call that was incrementally more information than we've gotten previously, that sort of helps to clarify your view of the opportunity and the cost >> yeah, so, i think cost actually is the key component. we walked out of that call with a much better handle on what earnings look like not just for the next couple of years, but we actually published numbers today out to 2025, which is really the timeline you need to think about for these investments that disney is making they talked about the foregone licensing revenue they'll have at the studio. they talked about some of the technology and engineering costs, some of the start-up costs. i think investors are more and more getting their hands around exactly what this looks like from a financial standpoint. and to me, that's the last catalyst, kind of getting that uncertainty out of the way for the stock to break out

>> you're clearly then making assumptions in terms of how many subscribers they're going to have, aren't you >> i am. >> and what kind of ramp are you giving them in terms of the growth of that base? >> i think they'll be exiting 2020 with around 50 million total subscribers between hulu and disney plus. that puts them certainly in the top tier of major streaming global platforms >> where's hulu right now? >> hulu's at 25 right now. >> so an incremental 25 million subs or something like that. >> hulu will add a few between now and then and the rest will come from disney plus. but i think a 15 to $20 million dollar -- a million subnumber for disney plus is where they can get to in a couple years' time and if i'm right on that, this is the stock to own in the s&p >> laura, how should we think about the risks associated with bob iger saying that direct-to-consumer is the number one priority and the foregone revenues from licensing from, you know, the likes of netflix i think 150 million was a figure that disney put on it last

night. what if they don't execute how long do they have? >> well, let's do some math real quick. $150 million is the money they're going to lose from netflix licensing this year, mostly in the second half. then he said he spent $100 million in the quarter and he's spending $200 million this year. let's assume $300 million next quarter and $300 million the quarter after that, which means round numbers, you have a $1 billion tax. let's call it a dtc tax or ott tax and they have about 1.04 billion shares you're getting 50 to 60 downdraft shares this year at a 20 times p\e multiple there's something like 15 to 20% downside to the shares, assuming this tax continues as they roll out -- that excludes any market expense s assigned with launchin with channel, and this is a marketing juggernaut, so you should expect to see good marketing expenditures around the launch so i think that's the issue with disney, is when they do their analyst day in april, we think they're going to put a fine point on something like between

800 and $1 billion of spending for the next two or three years on going dtc, which may pay off in the long-term, because that's his job, but for shareholders, we think there are better places to put your money in the next 12 months >> you know, laura, the key to me here, and i want your opinion, obviously, is iger believes the long-term growth of the company will be stronger than it would have been without these investments, but will it ever be what we've seen in the old universe it's going away. we know that ecosystem is breaking apart so there's no old world continuing, but is the new world going to be as profitable as the old one? >> well, importantly, one of the things they said was that both icahn and disney said that the linear tv ecosystem deterioration moderated to down 1% it used to be going down 3%. so that's interesting. and then they also said that scatter pricing in the advertising market is up 40% over may rates so right now, it feels like the linear tv ecosystem is doing much better than expectations.

>> steven, i get that disney is putting a lot of money towards this over the next couple of years, but they're going to be a direct competitor to netflix and probably one of the most formidable competitors to netflix. does that in and of itself warn of a greater valuation >> i think it does i think it does for two reasons. number one, there's a defensive element to this, which is that disney could probably manufacture higher earnings in the short-term by selling its content to netflix, but they're essentially, you know, helping undo some of their own market position and in the offensive element is the global addressable market. and i think that's the key in direct to consumer this isn't just taking a linear challenge and making it available on your smartphone this is taking content that's already global in nature, taking a relatively fixed global content cost and amortizing that on a global basis. i think disney could be half the size of netflix subs in five years, and people think that netflix could be at 300 million or 500 million subs.

even disney at 500 subs is a much more profitable business than what they get today by doing business with their other global streaming providers >> laura, let's talk snap. it's up to the levels where it was at the beginning of september. they're talking a lot about android and getting ready to launch that, but i feel like before the ipo, they were downplaying android, saying that they were focused on premium users and android didn't matter so much. has the story really changed that much or are they grasping here >> well, i think it's interesting we don't hear google whining about android. snap is 100% mobile company and apple only has 15% of the mobile market so the fact that they're not succeeding on the 85% penetrated mobile platform, i think, is troubling. their costs are down 50%, which is great this year, but i don't know what you do for an encore next year. and they're stable everybody's clapping, we have a sell we're one of those sells on snap, so we're wrong today

but everybody's clapping because their users were stable at 186 million. but let's remember that instagram copied everything snap did and now has 500 million users, just copying snap so clapping for snap's users, i think, is praise too high. that's my view >> laura, i want to get your thoughts on the video game stocks they are leading the s&p lower today. activision, blizzard, and ea, your thoughts? >> shocking, shocking that they released -- we had a game on the schedule for a year, premium game, and they released it for free in countering "fortnite." so after telling us for a year that "fortnite" didn't matter and wasn't affecting them, suddenly they've launched a battle royale free game instead of a premium game, which it has taken a big tax on their earnings i think people were really disappointed by that and also

"battlefield 5," yet another failure in the shooter mode from ea so i think they've taken numbers lower three times in the last two quarters so that all is bad for outlook and these are expensive stocks so while they own their ip, so that's okay in the end, they have a real content problem at ea today >> and you have been busy, laura, i would think >> i have. i'm on the wrong side of a lot of trades today. today's a bad day in my world. >> all right well, we'll let you get back to it and appreciate you taking some time with us. laura martin >> and still to come, what the ceo of spotify told us this morning about its latest podcast acquisitions a lot more "squawk alley," straight ahead don't go anywhere.

. welcome back to "squawk alley. european markets closing

momentarily. seema mody joins us now with today's action seema. >> a mixed day of trade for european earnings. so far 74 companies in the european stock 600 have reported earnings and 45% have beat estimates. that's lower than the historical average of about 50% the big stock in focus is daimler, reporting a 28% fall in net profits. its chief executive pointing to a number of strong head winds, including rising raw material costs, supply chain limitations, and added to this, they're saying that there's increased tariffs on vehicles imported to china from the united states, so referencing the ongoing trade dispute between the united states and china analysts also looking to earnings from fiat chrysler, jaguar, land rover, and volvo tomorrow to see if daimler's challenges are shared by other european automakers. france's finance minister expressing his disappointment in brussels brocking the merger,

saying the decision serves china's economic interests there are now a growing number of calls for the european commission to revisit its anti-trust policy to allow for more cross-border m&a, as china's state-owned crcc continues its expansion across europe john, back to you. >> thanks, seema now let's get to sue herrera for a news update. sue? >> hello, everybody. here's what's happening at this hour secretary of state mike pompeo welcoming the french foreign minister to the state department for a bilateral meeting. high on the agenda, continued support of the effort to defeat isis in syria and iraq pope francis says he hopes his trip to the uae will help relations between islam and christianity he signed a major document during his trip with high-ranking islamic religious figures calling for peace and harmony between all faiths yesterday, the pope acknowledged the sexual abuse of nuns by priests and bishops. here at home, fisher price

is recalling 44,000 children's barbie dream campers the power wheels can continue to run after the foot pedal is released the recalled model number is frc29. it is printed on a label underneath the hood. and the black dress that marilyn monroe wore to a 1954 press conference announcing her separation from joe d'maggio is going up for auction the bidding will start on march 30th with the dress expected to fetch between $100,000 and $150,000 the seller's name, not being made public at this time you are up to date that's the news update this hour back downtown to you guys. morgan >> gosh, i feel like that's almost a bargain for a piece of marlin monroe memorabilia. >> i know. i know and it's classic the little black dress >> be interesting to see how that turns out sue herrera, thank zplp >> huh-huh lali binng up, is the market

votityehd us what goldman sachs is telling its private market class, next

welcome back a mixed market this morning. actually, all the major averages are in the red now, but it's been almost a straight line upwards in 2019 overall. the s&p is up over 16% since the december 24th bottom but what about geopolitical uncertainty, flpolitical gridlok in d.c.? you have no obvious solution to china/u.s. trade negotiations at this point in time despite those concerns, our next

guest is cautioning her clients to, quote, remain watchful but refrain from adjusting their portfolios with us now for her 2019 outlook is sharman most v what are you watching? it seems like there is no shortage of market-moving events this year. >> our advice has been to stay invested for ten years and we've had a theme of american preeminence or u.s. preeminence and we think those two themes still have legs. and even though there are a lot of geopolitical factors, there are tweets that everybody gets worried about, we think that people have to focus on the underlying fundamentals. earnings growth, economic growth, low and stable inflation, and not be rattled by all of these various headlines and eventually the underlying

fundamentals will dominate the market and drive returns >> i'm glad you brought up the inflation piece of this, because i was reading your outlook and you talk about the fact that we have seen slowing global growth, but you note here that of equal importance tw, this cooling of economic activity was arguably necessary to keep the world's largest economies from overheating. you don't hear that point of view very often. >> well, if one thinks about growth, and if the u.s. gdp were to continue at 3%, we would be so much above trend it would create inflationary pressures, the fed would have to raise rates more aggressively, and the odds of having excessive tightening that could lead to a recession would increase in fact, having growth slow a little bit and keep inflation in check is a positive thing. you couldn't have all of the developed economies growing above trend. so, in fact, in some ways, we are in a goldilocks period with low and steady inflation, which is very important to how you think about valuations so as people think about valuations relative to long-term

averages, in periods of low and stable inflation, one can have much higher median valuation metrics across all types of metrics. price-to-trend, price-to-earnings, whatever you might be looking at. so that's very important, in terms of how we think about the market >> so sharmin, you warn investors not to get rattled by all of these potential distractions, but what would you isolate as the key trends that investors should be paying attention to, whether it's the rise of a global middle class, whether it's technological innovation that's going to drive productivity in certain areas, what are the trends that people should watch to influence whether they put their money in one region or industry versus another? >> so in terms of our focus, earnings growth is the most important. even if the pace of growth is slowing down a little bit, people should look at earnings across sectors and what is remarkable is since the prior peak in earnings before the global financial crisis, so

let's say 2007 levels, compared to today, u.s. sectors across the board have outperformed sectors in other developed economies and in emerging markets. so when people think of different regions or places to invest, we recommend clients be strategically overweight u.s. assets, and we say look at the fundamentals of the earnings >> do you think investors are getting the fed a little bit wrong right now? and here's what i mean by that i know that they've -- the tone has become much more dovish. they've pared way back in terms of the rate hike outlook for this year, but even though the commentary has changed, there hasn't been any change on quantitative tightening. is that a bigger risk to the market here than has been expected >> there have been in the past several long-term periods soft fed tightening that have not led to a recession the fed has actually been quite clear, not recently based on what people have called the pivot, but even in prior q&a

sessions, that they are looking at the data. they have to be data driven. if they see things slowing down or if financial conditions are tightening too much, then they will slow the pace if financial conditions are too easy and the equity market were to go up another 10% from here and interest rates stay low and credit spreads come in, well, that would be easier financial conditions and they have to adjust so we think that people need to factor that in looking at what the data is saying so we don't think actually there's this huge shift. it will be data driven and that seems very prudent to us >> but if you have as long a timeline as you do, it would seem inevitable that you're always going to be positive. >> well, that's actually not the case there are times when people that we're being particularly negative, let's say, on emerging markets. we have recommended to our clients to have a very low allocation to emerging markets we think they have significant structural problems. they have done nothing to address these significant problems and we think over the long-term,

in fact, china is a bigger source of risk than not. so we're particularly positive, you're right, on the u.s and we're particularly concerned about emerging markets and even though the u.s. is much more expensive than emerging markets and other developed economies, our recommendations is don't look at that valuation as an indication of going overweight in any of those regions. >> well, thank you so much for joining us here today at post nine sharmin mossavar-rahmani >> next, more from our exclusive interview with spotify ceo daniel eck is next stay with us

i'm scott wapner here's what's coming up on the "halftime report" at the top of the hour we're debating whether the tech takeoff is sustainable and where you should be putting your money to work in that sector and a possible stock on the desk is our subject of the call of the day today. and we've got unusual activity with both john and pete. it means we'll see you at noon on the half. john, we're about 20 away. we'll see you in just a bit. >> we'll count it down thank you. for now, let's get to the cme in chicago. rick santelli's got the santelli exchange rick >> thanks, jon you know, research research is important, especially when you're trying to move into a category called counterfactuals. counterfactuals is a simple notion take the credit crisis i personally think we did too much and we can go back and do research and try to create modeling with econometric models

that would mimic the economy under a variety of changing conditions and hypotheses. not an easy task there's another form of counter-factual that's being worked on right now. we just received a new paper from the san francisco fed and it's entitled negative rates would have sped up the economic recovery you know, when it comes to low interest rates, i think that there's big counterfactuals as to how helpful they were during the credit crisis. not only the fact that they were 0 to 25 for so long, too long, in my opinion, but the notion of misallocating of capital, business zombies, businesses that were able to get financing that probably shouldn't have existed. and it's very hard to qualintif and create and create the type of program that would give you anything on the output side that is reasonable. but this paper really tries to paint a picture that negative

rates, "a," would have helped by creating higher inflation. and logic goes something like this they said that if you had to pay a bank to hold your money, that your next move is basically going to be to go buy something. now win a now, i ask you out there maybe i'm just cynical but if i were told that interest rates are negative and that my funds are going to have a charge to be put in an institution, i don't know that spending is going to be the first thing on my mind. i think buying a shovel and looking in the backyard might be higher in my mental priority, actually and i'm very happy i'm not alone in this thinking see, here's the problem. new research, especially when it comes from regional central banks, and i'm not saying they shouldn't do research, but putting a positive spin on negative rates, to me, is making me nervous because is that just going to make this a tool for future use? but university of chicago's boost school of business, almost

the next day, also put out a paper. and guess what they brought up the same issues i did. that negative interest rates are good in the beginning for a while. small companies like them. but the big companies use them more, which creates a concentration, lack, lack of competition, and finally, the money ball, lower productivity productivity is the silver bullet i think that this research is important, but i also think it's important to keep the notion active negative interest rates should have no place for future use as a hammer in the fed's toolbox. just my opinion. and maybe chicago's booth school of business, as well david faber, back to you >> thank you, rick rick santelli at the cme group well, shares of spotify are lower this morning, down more than 4%, despite reporting its first quarterly operating profit ever the streaming music service also announced it's acquired two podcast companies this morning, gimlet media and anchor. founder and ceo daniel ek joined

us earlier on "squawk on the street" to talk about those acquisitions in the quarter and competition from apple and amazon in streaming. take a listen. >> these are formidable companies, no doubt. but what i look at is obviously how our business is doing and we had a phenomenal q4. the other part that i look at is, we're really just focused on audio. that's how we should look at this there's a ton of things that these other companies are doing, self-driving cars, whatever, other businesses they are into and i believe in this day and age that you need to be very, very clear with your brand of what you are for consumers in order for them to take it up and the best experience wins and now we're adding the best content to that, as well >> the content they're talking about is not just music, but is, as well, as he said, audio being podcasts he believes, john, over time, that it's a safe assumption, 20%

of all spotify listening will be non-music content. >> it's a gamble, because you look at the numbers, 96 million paid subscribers for spotify right now, which is nice apple announced over 50 million paid subscribers for apple music. so they're breathing down spotify's neck remember, spotify pioneered this area spotify is playing for engagement and loyalty and audio while the likes of apple are trying to bundle in not just music, but video they're making these hollywood deals. daniel ek, i guess in a way, wisely, they can't -- they can't play the hollywood game, so they're going deep in podcasts in an area that apple should own. they pioneered podcasts. apple keeps saying they're going to release more tools around podcasts, but haven't delivered. >> i feel like apple is another company that could have jumped into music creation, as well you've seen neither of these companies do that and i think it really speaks to the fact that

that is a business, that is an industry that's full of very competitive and also very broken right now. the idea that podcast is the area for growth and the area where you can add more subscribers and more churn, yes, i get that but i also think it really is a reflection of how much this other industry has just completely diminished and changed in the last couple of decades. >> yeah, line of sight to about 400 to $500 million on multiple acquisitions this year, including the two announced this morning. well, coming up, why apple's head of retail is leaving the company. we've got "squawk alley," continuing after a quick break the dow is down ten in rht w.potsig why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills.

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welcome back to "squawk alley. calm announcing this morning it has it's raised another $88 million in funding the app which was named a ed ap app of the year the now valued at $1 billion making it the first mental health -- enter health unicorn i think we should start with the capital you just raised. how are you going to put it to work >> good morning. we are going to be to try to meet our mission of world happier and healthier. build out hundreds of hours of

audio we have and accelerating the growth >> i think one of the most interesting things to me and looking at this news today the fact you're already turning a profit talk to us about the business model and how you expect that to grow >> it's a pretty extraordinary business we quadrupled revenue last year. pretty unusual it's just an amazing business, great margins and people genuinely love the content we created. it helps people falling meditatn we have about 40 million downloads. we think it's huge upside to continue growing >> michael, look at the drivers of your business crazy headline, perhaps. brexit what causes people beyond the installed base of smartphone

users, which i guess is a necessity for you. what causes people to download and engage with this over time >> i think in the early days i think people thought we were a bit crazy. mindfulness felt like a bit of a niche. the world needs this the world is not getting any less stressed. we lead these accelerated lives so the ability to learn how to balance your own mind and sleep better is really valuable. many people, well over a million now pay out $70 a year in subscription that's growing very rapidly. >> michael, a lot of focus on apple's app store with the case in front of supreme court. this debate about the 30% fee for initial subscriptions of apps how do you think about it? >> apple is an incredible platform as is google. it is quite a big fee.

we would rather pay less we'll be watching that with great interest huge fans of what apple and google have done >> a final point, do specific ve events drive downloads or usage of it? >> we see bumps when stressful things are happening in the world. biggest launch is when ever we launch new premium content we lawned the sleep story with matth matthew mcconaughey which has been well received we think is a very rapidly growing hair we'll be hadding more talent to the app and more content over the next few months. >> long term plans for the company. would you like to see it go

public, acquisiton, something else >> we think this can be a multi-billion dollar business. an ipo could be on the cards we're very ambitious as a team there's only 50 of us at the moment i think we need to bulk up a bit. we need a cfo first. if anyone is watching, hit me up >> thank you for joining us today. >> thank you >> but not overly ambitious. coming up this afternoon, do not miss former fed chair janet yellen that's at 2:30 p.m. eastern in an interview you will not want to miss. squawk alley returns

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apple announced its head of retail is leaving the company in april after five years with the company. josh is in san francisco with the latest on her departure and her replacement. josh

>> she led a retail powerhouse 506 retail stores, 35 online stoe stores and 70,000 retail employees. she expanded the company's international footprint and integrated physical stores with the company's online presence. average sales per square foot at the stores jumped from around 4600 in 2013 to more than 5600 i caught up with her in chicago when she opened a store there and asked her about other big tech giants that are looking to have more of a physical retail presence like amazon >> we're nearly 500 stores ahead of them. the tenure of our employees is unbelievable we have an 80% retention rate. i think it will take them a little while to catch up >> she hands the baton to another apple veteran.

ceo tim cook sent a letter emphasizing that o' brien launched retail stores this change coming at an important time for apple driving demand on the retail front would be critical for the company as it heads into this next product cycle. back to you. >> thank you your thoughts on this. stock is up despite this news. >> it's basic loss for apple when angela came in, it was after the exit everybody agreed he wasn't a good fit if mor the morale of retail was a mess.

>> one to watch. >> around important rule at one of the biggest companies in the world. that does it for squawk alley. let's go to the half all right. thanks i'm scott wapner the tech trade is back but how much is really left after one of the strongestrallies ever? it's 12:00 noon. this is the halftime report. tech stocks up 11.5% in a month with many chips leading the way. xilinx up 30%. is there still room to run what will lead the way big numbers from big players, disney and gm we'll take you inside those st x stocks and the sector they represent. what just happened to the