good morning it's 8:00 a.m. at pinterest headquarters in san francisco. it's 11:00 a.m. on wall street and "squawk alley" is live. ♪ ♪

good mondays morning. welcome to "squawk alley." i'm carl quintanillag off. important day here. dow down 63. we'll begin with pinterest, though, set to make its debut on thursday at the nyse. leslie picker is about at hg. potential investors think this offering is priced well. >> pinterest is seeking a $9 million valuation now investors are trying to decide is that expensive or is it cheap? ipo values are decided on a relative basis. investors will take pinterest multiple enterprise value to forward sales and compare that with its peers in the market. pinterest doesn't have direct peers. it's somewhat of a unique business with the site that provides various how-tos, decorative inspiration and recipes. but it's revenue is generated from ads, so investors are

comparing its valuation to other ad based models like facebook, snap, twitter and google. this basket of search and social media companies trades on average around six times the projected 2020 revenue. because pinterest also enables users to buy things on its platform, investors are looking at a basket of e-commerce companies as well such as amazon, alibaba, far fetch wayfair. when compared with both the ad basket and the e-commerce basket, pinterest ipo valuation actually looks more expensive at the midpoint, it's about eight times projected revenue. this might be surprising to some since the ipo valuation is actually cheaper than the $12 billion it was valued at in 2017 during pinterest's last private round. investors still seem willing to pay that premium to its publicly traded peers, though, because pinterest's growth is so strong

relative to the more mature businesses in those baskets, guys. >> thank you. d.a. davidson ahead of its ipo and tom forte joins us here on set with more. you just heard that breakdown from leslie. based on your -- on your neutral rating on the stock, do you agree with her in terms of those metrics and the premium being given to this name right now >> i definitely agree that at $16 the midpoint of their 15 to $17 range it is trading at a premium to its peers. if you look at it on our 2020 estimate, it's more than six times enterprise valued sales. the company it's most comparable with it is roku. i think both roku and pinterest should have fat margins over time. we're looking for 35% long-term. on that basis pinterest would be north of six times revenue, roku's more like 4 1/2. i think it's pricey. >> so when i look at your note

and i see you say projecting strong sales growth, you think this is a solid business, solid company but the valuation is too heady for you right now? >> absolutely. if you look at pinterest, what does pinterest do well it's a visual based discovery platforms for consumers looking for merchandise they're interested in buying and it's a platform for advertisers for consumers with purchase intent. if google's where you go when you know where you want to buy. pinterest is where you go when you want to find out where you want to buy. that's important. given that 30% of their users are in the u.s., 70% are international. 90% of their revenue is in the u.s., 10% is international. the stock could outperform longer term. >> it's been called -- i've heard it called the antisocial platform and you laid that out just now. this idea that, yes, it's tied

to advertising and tied to users and growing those numbers but it hasn't been growth at all costs. they've been a little more stayed, maybe more cautious in terms of the approach they've taken, their ceo has not been as out there publicly until now with this ipo. i can't help but think that maybe there's an opportunity there, though, at this time when we are talking about regulation, when we were talking about, you know, blowback in terms of some of the other bigger social media names and companies that are, you know, data driven as well, though. >> to your point if you're talking about privacy related concerns as it pertains to pinterest, i think it could be a challenge where pinterest, though, has in its vantage is that it has a consumer looking for product information. so this isn't necessarily about selling consumer data to sell products. this is a consumer who's looking for information they want to buy a couch for their house, they're looking for ideas on recipes. they're trying to figure out what's fashionable today. when they go to the platform for

pinterest, you think it's different than someone going to facebook, connecting with their friends, facebook taking that information and then selling that data. so i do think in that regard, they might have a better way to navigate privacy related concerns than facebook. >> seems like the impression investors have it's largely about decor, furniture. you severiticals like cars, right, and financial services. is that all coming from them >> you would tell you that's growth opportunities for them and that would be something further down the line. when you think about their core competency today, it's home decor and apparel and recipes, cooking related items. >> sure. >> and then also if you look at their audience it's heavily skewed toward women and moms. to the extent they could expand themselves into financial services, cars, those are more male dominated fields, i think that suggests there's a lot of potential growth for pinterest. >> do you believe longer term -- i know they've played with this in the past and pulled back on

it, but longer term, do you think they'll make it easier for people to go to their site and buy things >> absolutely. it's interesting to compare the pinterest platform versus etsy and shopify. pinterest today doesn't make money in the same way that shopify and etsy do where you go and find a product you want on shopify's platform or etsy's platform, you buy the product on their payment platform and often times the seller's able to use a preprinted shipping label which is more money to etsy and shopify. i do think there's opportunities for pinterest that they're not unlocking today. >> all right. we'll turn to apple this morning and qualcomm, the staredown between their two companies gets personal ahead of the trial kicking off in san diego today. our josh lipton is live with the latest. good morning, josh. >> reporter: good morning. so we are right outside this san diego courthouse where apple and qualcomm are going head to head in a case with billions of

dollars on the line and during this trial, carl, we are expected to hear from some star witnesses for apple, tim cook, phil schiller and jeff williams, for qualcomm, and founder irwin jake cobs. at the heart of this case, apple claims that qualcomm monopolizes the market for mode emchips. extracting what it calls extosh tant royalties and that separately qualcomm owes apple $1 billion. more importantly apple is also challenging qualcomm's patent royalty rate. remember, qualcomm's business model here. it sells chips but it also licenses patents on the royalty for the price of each phone. for apple that meant paying qualcomm a royalty rate of $7.50 for each device. cook's company says that's just unfair allowing qualcomm to profit from innovations it had nothing to do with. but the chip maker fires right back countering that apple

contributed virtually nothing to the development of core cellular technology, built its products on the back of qualcomm's innovation and is now just trying to pay far less than fair value for qualcomm's technology. so bottom line, why should investors care about this case for apple, this case is going to decide how much money it gets to keep for every iphone sold. of course, that is especially important now with iphone sales under pressure. tech analysts patrick moorehead says this case is even more important for qualcomm because it goes right to the heart of its business model, that bread and butter licensing business. guys, back to you. >> josh lipton will be watching this closely this week. thank you for bringing us that preview. after the break, kara swisher says we've given up too much control over our digital lives. her idea on how to take some of that back. the dow's down 65, the s&p is just below 2900. we got more "squawk alley" rahthe. stig aad

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♪ ♪ we're not gonna takeit any more ♪ we're not gonna take it any more, kara swisher's latest headline saying enough is enough

in her latest "new york times" op-ed. she joins us this morning from washington. this is as fired up as i've heard you lately. >> it's not that fired up. i'm just trying to get people thinking about how we should have a privacy bill. i've been talking to a lot of people, talking troegters, people in the valley, citizens and i managed to talk to scott mcneilley who had that famous quote of, you have no privacy, get over it. it's part of a privacy project that the "new york times" is doing with a lot of really interesting incites into this area. >> yes, some phenomenal work and framed it in new and interesting ways over the weekend. what are the basic policy prescriptions now at least as far as your concerned? >> well, there's a lot. and that's what i wanted to start the debate and that's what the whole project is about. it's not just people who think there should be a privacy law, there are people that don't. obviously, it's a big topic. apple's recent advertising was all around privacy. nobody can be inside my iphone, kind of thing. everybody's discussing it and

wondering where it's going and i did an interview late last week with nancy pelosi, the speaker of the house, and she talked about the concept too of wanting to figure out what the right legislation is where you can balance innovation with the fact that these companies have so many tentacles into peoples' lives and are abusing that privilege in many cases. what do we do about it and how do we go about it and not ruin things for everybody, you know this great industry. >> i'm glad you brought up that interview but you also asked whether these companies should be allowed to buy more things and certainly they have been on a spending spree. what was her response to that? >> not so much. i think she's going to look at it -- she's a politician, so it's a case-by-case basis. i think you get the feeling in washington that it's going to be very difficult for these big companies to be buying things and everybody's talking about antitrust, everybody -- i also spoke in front of the house democrats and a lot of the questions including from all kinds of representatives

including alexandria ocasio-cortez was about the power of these companies and the invasiveness of them. it was a really interesting discussion to hear from them, you know, just in a casual setting, but what's really interesting is what kind of bill should it be, if there's going to be a bill because thereliforn 2020, there's ten state bills happening in this country. there's obviously what's going on in europe. there's going to be a whole lot more going on in new zealand and australia and that area. the question is, what will the u.s. do and what is the privacy bill that's appropriate for global internet companies with a lot of power most especially facebook and google? i'm not looking for onerous regulation, there needs to be some sort of guard rails from these companies which have had almost no regulation since they were born 20 years ago. >> i realize we have a new composition in congress this year after those elections last fall. i think back to testimony,

zuckerberg's testimony last year and tech ceos and executives on the hill again during the summer and what i think had been the takeaway was a lot of these lawmakers don't necessarily understand the business models and what these companies do. do you feel like that is changed, that is shifted as regulations and this focus on privacy has really moved to the forefront? >> i think there's a lot -- those hearings were ridiculous. it was lowest common denominator there. there's a lot of regulators that do know what to do and they've regulated lots of things. they regular chem companies and banks and phone companies. the staff does know who's going to be running this stuff and they are interested in it and obviously it's a concern. the power of these companies never have so many billionaires run around unfettered in history in terms of -- and have a lot of your information. you don't want to be screaming about it but at the same time there has to be responsible regulation to keep these powerful companies from abusing

the data that they are entrusted with. that's not an unreasonable thing to ask and so the question is, what should it be and how should it go? should it be like california's law or europe's law? they're going to get laws all over the world and privacy is linked with safety and cyberhacking and all kinds of hate speech. it's all linked together in a way. i think guard rails is how i look at it. >> you sort of addressed in your column, levels of personal responsibility that consumers need to think about. >> sure. >> i mean, we've talked to walt about how he deleted facebook on friday. we talked to jason cal la canis about not buying voice assist are you warning consumers not to do those things? >> sure. it depends on what people want. if they want -- what i want is transparency from these companies. sure, people should be responsible in the way they use things but it's like cigarette smoking. warnings were nice.

these were dangerous things or sugar or seat belts. after unsafe in any speed that put in seat belts. it's not up to the consumer to tie themselves into a car. you should have control in some cases and other cases you should be fully aware that what they do is do things to addict you to these screens. we all know that, carl. me and my relationship with my phone is well-known. you have to really -- they're making a lot of money off of consumer data and so they have to deal with it responsibly. i don't think that's unreasonable any way, shape or form. >> we're not done talking about it by a long shot. it's a column everyone should read, kara. >> thank you. good to see you. still could tom, what the founder and president of huawei is saying what the relationship with apple is. take a look at the worst performing stocks in the dow so far in today's session, boeing,

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and reaches everywhere. this is beyond wifi. this is xfi. huawei's founder and president sitting down with cnbc earlier where it is very late. it's almost tuesday, he joins us from china with the highlights. arjun? >> reporter: one of the key highlights is that huawei is open to selling its 5g chips to apple. huawei's consumer business has been growing rapidly, it's the third largest maker in the world. it's designing its own chips and has its own 5g modem. those have been reserved for its own deserves, the ceo and founder of huawei spoke to me about his smartphone strategy and how he's hope to working with apple. here's what he had to say. >> we have raised our prices and now many people think huawei is expensive. with higher prices, we have

started earning more. we will not distribute this extra money to our employees or shareholders. instead, we will use it to fund universities and scientists for their research and explorations into the future. this way, we will be able to make world leading products. >> reporter: and part of that research and development budget has gone into 5g, into chips. you've got your own 5g chip. are you starting to see how your own intellectual property could be used and sold like apple? >> translator: we are open to apple in this regard. >> reporter: let's be realistic here, any partnership between apple and huawei would be highly controversial from a political point of view given the u.s. government has accused huawei of being a national security risk and that it's equipment could be

used for espionage. if huawei and apple were to come out publicly and say they were moving forward with this kind of partnership, there would be a lot of pressure on the u.s. government on apple discouraging this. there's plenty more from that interview on cnbc.com. his views towards president trump as a great president and the arrest of his daughter meng wanzhou which happened back in canada. >> quite a wide-ranging interviews. in terms of the dynamic with the u.s. and these heightened tensions how does he expect that or how he is planning for huawei in the future in light of that does he expect the time will come where the two can work together or are there contingency plans in place >> reporter: huawei has shifted a lot of its focus to other markets. what's been interesting over the past few months is the u.s.

government has been pressuring some of the allied countries to also block huawei from their 5g networks. the likes of japan and australia have done so but actually europe has become a battleground. germany said it will not exclude huawei from its network. italy also said they can participate in their 5g. huawei is trying very difficult to convince governments in these market that it's still responsible and so far it's been successful in several markets but several markets have also block it had out. huawei is really turning its attention to the markets that are welcoming. it's taken the offensive to the u.s. earlier this year. it filed a lawsuit against the u.s. government claiming that bane on its products is unconstitutional. so it has come out over the past few months on the front foot, the ceo here at huawei actually came out swinging in this interview. he said the u.s. is scared of huawei and actually all the criticism it's received from the u.s. has been a great

advertisement for the company. they're not taking this battle with the u.s. sitting down. >> yeah, the intricacies are certainly in focus. thank you for joining us from shenzhen. european markets set to close shortly. sima modi joins us now with the breakdown. >> hey, morgan. the eu gives the green light to start trade talks with the u.s the trade commissioner saying the parties could finish a deal before the end of the year. in terms of sectors, banks leading the european indices higher right now, not a lot of economic data as we countdown to tomorrow's release of china's gdp. it serves as an example of how china is slowly opening up its financial markets to foreign players with the government now allowing foreign banks to take a controlling stake in security

ventures. jpmorgan won approval to launch majority earned gps early in the country. a subsidiary of alliance data systems both 250 million unique customers in the u.s. and the acquisition comes at a time when the traditional ad industry is facing criticism from google and facebook. also boosting shares of european ad rivals, wpp and omnicom. let's get to sue herera for an update. >> here's what's happening at this hour. white house economic adviser larry kudlow talking to reporters ahead of president trump's visit to minnesota. he pushed back against critics who claim the trump tax cuts benefited corporations more than average americans. >> got a very prosperous america

with low unemployment, blue collar workers are doing higher wages than we've had in years and the blue collar workers are doing better than the white collar workers although everybody is sharing in the prosperity. moon is ready for a 4th submit with north korea. kim issued his harshest criticism yet of south korea's diplomatic role. julian assange is being held at london's prison where a small group of his supporters were camped out. they say ecuador has betrayed assange at the behest of the u.s. and that ending his asylum was illegal. you are pup to date. that's the news up date. back to you, carl. >> sue, thank you very much. ipo expert jay ritter will join us on the other side of this break as lyft falls below 57 now. dow down 55.

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ahead of pinterest's debut on thursday, some investors are still asking what pinterest

actually is and how it makes money. our julia boorstin is in l.a. with some of those answers. hi hi, julia. >> reporter: pinterest brought in three quarters of a billion dollars in revenue last year, so we took a look at pinterest's business model. pinterest draws 265 million users every month, more than two-thirds of whom are female, to find spoigs for everything from recipes to planning weddings, to home remodeling. users save ideas by pinning them to their boards which can be shared either just with friends or with everyone on the platform. to navigate all this content, pinterest can follow friends' influencers or brands to see their pins or can search for ideas. all of pinterest' revenue comes from advertising. what the company calls promoted pins bringing in more than $3 per user last year. businesses can share images and links for free to their followers or can pay to target users based on interests or keyword searches putting their

promoted pins on to users' home screens or into search results. pinterest also enables brands to share video ads and shopping ads which invite users to click to buy. and while pinterest doesn't take a cut of the sales, the more it's ads drive purchases, the more brands want to be on the platform. now pinterest is looking to expand by bringing more types of advertisers on to the platform going beyond just retail advertisers to invite more advertisers from travel, financial services and even entertainment to advertise to those pinners. ceo ben silverman is looking to expand more internationally and to make it easier for small and medium sized businesses to advertise on pinterest through their new self-service platform. back over to you. >> really instructive video there, julia. thank you very much. we have pinterest and zoom this week, uber and slack still coming. you have a handful of others already making their public debut. joining us with more on the rush

of tech companies to the public markets is business professor and ipo historian jay ritter as well as our own bob pisani. good morning, guys. bob, your thoughts on pinterest to begin with? >> my hope here is that pinterest might be a model for other kinds of pricing. there's a tsunami of companies going public this year, more than 200 of them. many of them think they have very high valuations, at least the public seems to think so. pinterest valued theirs below the last round of funding and my hope is that the public has been dieing for more tech ipo for a long time. they'll get them this year. that tsunami might sattate that desire a little. i think pinterest was very smart the way they did their pricing. >> to that point, jay, we just had tom forte earlier on in the show and he's putting a neutral rating on pinterest because even though the price is going to be lower that their listing at, he

still thinks it's expensive. how do you see it whether it is pinterest or whether it is some of these other big names coming to market? >> with pinterest on a fully diluted value, it's got a valuation of about 15 times revenue and as was just pointed out, they only get about $3 per active user per year as compared to with facebook's $25 per year in revenue. >> i'm looking at some stats from you, jay. every had negative absolute returns after five years has that trend continue and given the fact that someof these names are so much more mature than ipos you've seen in the past do you think that's going to change the data? >> for tech stocks, yes, but on the other hand a lot of ipos are biotech stocks and there it's even more common to have negative long run returns and in

return there's also some upside potential, big upside potential if they come up with a major drug, but for tech stocks, because they are more mature now than they used to be, there's less downside risk. >> professor, right now, i'm not sure you're statistics are that startling. it doesn't really imply that the ipo business is a failure. most start-ups in general over time aren't that successful. they fall down. this is the normal course of events in the do or die world of stock investing. can we make any general conclusions about this and can you respond to my idea that pinterest was very smart in pricing below the last round of funding because that's going to attract people who are at least looking for who they think is a more attractive valuation? >> it's mislead to go say they're pricing below the last round of funding in that they're selling common stock whereas the last round of funding as

convertible preferred stock which is worth more than common. this is very typical, in fact, it's universal with venture capital backed companies. >> jay, what do you make of this trend of direct listings you had spotify last year and slack is going to list that way as well. could this be a new way for retail investors or a new way for these companies to ipo that might be a little more dynamic >> yes. i think it's mainly going to be a niche for some well-known companies that are desperate to raise cash. so for instance, i don't think biotech companies are doing this. but for well-known companies, it's a way of reducing the too expensive costs of going public. >> jay, lyft, we've been updating people on a daily basis. it's now below 56 at one point today. we're talking nearly 40% off of

the all-time high. at what point do you call this a disaster >> i think it's got a long way to go before i'd call it a disaster, before it went public, everybody expected the stock to be very volatile because there's so much uncertainty about how the future's going to play out for lyft and for uber. for uber, for instance, it's got a risk that alphabet might spin-off waymo, waymo might merge with lyft and when autonomous vehicles come along they might be way ahead of uber, so with lyft and uber, they've got upside potential, they've got downside risks. these are not stable stocks. >> bob, to that point, when you look at lyft performing the way it has since it went public, do you think that's tempering and setting the stage for some of these other companies -- >> it's a one-off here.

if you look at the performance of the rest of the ipos and i basically divide it into everything after levi strauss, the overall performance has been fairly good. this has been a notable misstep and i attribute it to the pricing. professor, if we can get one more thought. we've debate this had here. your own research indicates that dual class structures were not that common 20 or 30 years ago, very few in the '80s and '90s and your own data indicates there was almost 30% of the tech stocks had a dual class structure. is this a problem at all for you? do you find that it's an issue i do. i want some say in how the company is governed but a lot of people don't seem to care that much. >> i agree with you that it is an issue as long as investors apply a discount that's appropriate the market should be pricing things appropriately. since uber is going public without dual class stock, it's

going to be able to get a little higher price than it otherwise would. >> wait. uber had a dual class structure, remember, and prior to 2017 as i recall and they changed that specifically because of the behavior of the ceo at that time, so this goes to my whole point. they were worried about what was going on and one of the reforms they put in there was the abolition of that dual class structure. uber no longer has that. >> i'm in complete agreement with you that if uber hadn't done that there would have been more concern and a bigger discount. >> bob, jay, thanks guys. a lot to talk about. >> fascinating subject. >> oh, look at google, google has that and the stock doesn't trade that much differently. i prefer to look at what happened to uber and how they dealt with that issue. >> exactly. bob pisani, jay ritter, thanks. the analysts taking apple down to a sell, but first rick

santelli. what are you watching today? >> i'm watching all the yields along the curve. they're at very important places. we'll discuss that after the break.

♪ ♪ ♪ each day, brings new possibilities. that's why you need a partner dedicated to helping your company reach its goals. u.s. bank -- the power of possible. here's what's coming up at the top of the hour. we are on record watch as the s&p closes in on history. investors are telling what to buy and avoid. you'll get your first look at it

on "the halftime report." the reaction on our desk as well plus a big upgrade for a battleground chip name. our investment committee tackles that in our call of the day all coming at noon. and morgan, we're just about 15 away. see you in a little bit. >> sounds good. let's get over to the cme for the santelli exchange. >> a lot of important things going on in the market so this is a two fer for this morning. we'll look at internal and external factors in the market. this is a charter yield notes and the important thing is the pattern. it's not so important where the yields are. just look at the pattern. the main point i want to cover is, early in the year on a 3rd of january, the entire curve made some important bottoms. with respect to a two year note yield while it was at 238. fives 236, tens 236 and a half,

30 year bonds 290. we started to see get back above it and remember, once we close below these in any maturity, we had a nice unimpaired almost complete 100% no heat against you move. now we're back testing it. as a matter of fact, the pattern is virtually the same in every maturity, the only thing that changes is the level with respect to how much higher it is. for example, 238, we're now basis point higher than that on twos. they all closed at or above it on friday. you're right there, call it safe, tie goes to the market. it's right there and now we're up 30 basis points on 30 year bonds. the point of this is, is that it was such an important level established early in the year after the chaos we saw at the end of last year after the double top. i can't stress how important it is should we continue to hold here and the reason i'm calling

it internal is because all i like to is look at the market and all the relationships. now for the external, in this today really catlized in my mind after i saw the bank of japan on, i saw our own charlie evans on, those are external forces. the reason they need so much explaining in my opinion, when we talk about trade, we say trade war. it's not my vocab because in my opinion we are in an economic war and trades at the epicenter and we have central bankers who's mantras are whatever it takes. i guess today after hearing mr. karoda be so happy with how things have worked out and yet they're so far below key levels whether it's with regard to the equity markets or a lot of things in the economy that have just been cumulative weaker for decades, do we really want a whatever it takes? is that the mantra

to see central bankers coming in buying stocks, buying fx, buying bonds, buying etfs. the problem with when you have an economic war is, there's advantages. we don't want to call them the enemy. they're not really the enemy. the advantages are those purchases. we could look at china or europe or japan and look at the foreign exchange and say they're not manipulating, they're going for advantage. at the end of the day, these advantages are very difficult because should their policies not work, what do we love do in the u.s. and that's what investors truly need to think about at this point in time. carl, back to you. >> all right. well said, rick santelli at the cme today. take a look at both citi and goldman today both out with earnings and both getting a couple of shaves from the investors. goldman is down from 3% and citi down half a percent.

still ahead, new streak cutting it's news on apple to sell last week. we'll have the analyst behind that call after the break. lyft is below 56. down over 36% since that all-time high in late march. dow'do 7s wn5. what's an etf? an ipo? 401(k)? where do i start? empower yourself with the free tools and resources on investor.gov. before you invest, investor.gov.

welcome back new street taking his rating on apple down a sell citing negative iphone demand trends.

the analyst behind that call, pierre joins us now on the phone. pierre, great to have you. i remember last year when you started to turn cautiously bearish on apple why the leg lower today? >> yes, so if you remember in august, we came out with this downgrade. seeing the iphone x as being very successful in 2018 and putting -- so what's happening now in 2019 was what we have anticipated which is a lot of consumers who would have normally refreshed their iphone this year did it last year because they like the iphone x and they are not in the market this year that's still the way we look at the business today this is much better on the street by the market we know apple guided down and then disappointed on earnings of

q1 and what we see is the market is expecting shipments to start recovering in q3 and we think that's too early. we think as the company needs like three full quarters to adjust to the weaker demand for the iphone sothat's point number one. and point number two is simply that when we look at 2020, we are actually facing a situation where first time -- firsthand iphone users is a population that is not growing anymore. so you don't have that much room for shipments to rebound next year expecting a significant year-on-year growth in 2020. we think it's too high so we think there is still like more -- like another, i would say lineup of disappointment coming through on the iphone front. >> pierre, the counterargument has been the fact it's doubling down and growing that services business we'll have those new subscription services that are going to launch later this year. you don't think that changes the narrative?

it's still about iphone shipments? >> yes, exactly. i think -- i don't disagree with that more like -- that apple has a great opportunity in services. i see them growing their service business so if i'm worried that the firsthand is not growing anymore, the broader -- they' they're -- those using -- apple can sell more services to more people. so i completely agree with that. the question of timing, when the market is looking at the company for new opportunity, it usually needs to have some confidence. the core business, the legacy business has stabilized, and we haven't reached that point yet i think we still have more disappointment and today we see iphone revenues stabilizing, then it will be time to talk about the --

>> what you're saying echoes what credit suisse said last week and that's the perception of the company now is a hardware play, and shifting that perception to one that is built on services, growth, wearables is going to be hard to shake so, really, it sounds like your issue is more timing rather than the actual narrative that's been built in, right? people will think of it differently. you just think they're not there yet. >> yes, but when you talk about timing, you have to be careful if you look at the hardware play for apple over the next two, three years, what's going to happen it's really the consequence of people like -- still liking the iphone but sticking to the iphone much longer it's more expensive. we spend more money on iwatches. so we tend to keep our phone

longer that's the underlying side for the hardware side of the business then in addition to that, there are a lot of clouds on the horizon for apple. we are -- in 2019, how are consumers going to welcome the new iphone are they going to wait for the next one, the 2020 one that will most likely be 5g compatible and then you have another that you have to keep in mind which is the entry of -- we've seen additional models last year in barcelona. next year we'll have like a full line of foldable screens and if that happens in 2020, apple is not going to produce a foldable phone immediately they incorporate innovation with -- so all these things are still

planned on the hardware front. yes, it's difficult to buy the service story. >> pierre ferragu, thanks for joining us after downgrading apple stock to sell, $170 price target. appreciate your time >> thank you dow within a range here. losses of about 62 points at the moment we're right at 2900. no surprise as that is the new battleground, at least for now "squawk alley" is back in less than three minutes the rhythm of the world. but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it. nasdaq. rewrite tomorrow.

getting a news alert the justice department now saying it plans to make a redacted version of special counsel robert mueller's version available to congress and the public on thursday morning as if the market didn't have enough to deal with this week, thursday we'll be getting travelers and unp and american express. >> and pinterest and zoom. >> and this as well on thursday morning. >> meantime, this is the late paul allen's space venture just flew the large's largest plane by wingspan, a maiden flight over the mojave desert 385-foot wing span, two fuselages, six engines designed to carry satellite-bearing

rockets high enough to launch into space stratolaunch designed the plane with a northrop grumman subsidiary plans to launch rockets into space. we talk about billionaire-backed space race paul allen was one of the originals. >> his memory lives on >> look for j.b. hunt tonight. let's get to the judge >> i'm scott wapner. the march to new highs getting closer by the way. what to buy, what to avoid it's 12:00 noon. this is "the halftime report." >> where should you put your money with the s&p 500 approaching a new high goldman sachs has a list of 20 stocks to buy now. plus, the disney upgrade one of the most outspoken bears raises his rating on the stock after being on the sidelines for more than two years. >> and our call of the day the bold case for western digital. an analyst is saying the

cyclical recovery is