good morning it is 8:00 at facebook headquarters 11:00 on wall street "squawk alley" is live ♪ ♪ >> good morning. welcome to "squawk alley."

i'm carl quintanilla along with jon fortt. a big week for tech earnings amazon, intel, microsoft and twitter on deck this week on a positive start in the run-up in tech continue dan and steve are here with me with answers good morning, guys good to see you. i'm wondering, dan, before we get to the bignames, if you have been thrown as a breakdown of software and worries about i.t. spending the next few years? >> you are seeing cracks in the armor. high multiple software crowded from the institutional perspective. many head or the exits it is overdone in what we are seeing it shows the risk in earnings season continues to be front and center >> steve, quickly on that? >> i would agree software particularly has been taking a header. companies are doing fine you sell at 38 times and 8 times

sales, it doesn't take much to take the stocks down we will play it out a few more months before coming back. >> dan, it is cloud week how much does that matter versus intel with insight in the i.t. spending question? >> it is massive when you look at microsoft as well as amazon from the aws perspective, that is the key driver the fuel in the engine for the i.t. spending. that is a big focus from workday and others i see the strength on microsoft. i think 3% to 5% beat in cloud aws, you see strength. this could be something, a feather in the cap, take software higher. >> steve, the so-called faang earnings with amazon this week in the last couple years, they are performing which have powered mashltpower

ed markets they are trading in line >> faang is under performing the investor set we did is worse for faang. particularly with facebook valuations are reasonable if you look at facebook it is not too bad. what they are going through last week with mark zuckerberg's speech is the platform problem how responsible are they for what happens on the platform they were taking actions and now saying we have done as much as we can do. we need free expression. >> dan, i want to go back to what you were saying about cloud being a catalyst, i guess, or a bellwether for i.t. overall. how long has that been the case and how easy is it to read through the numbers for azure and the numbers for aws for the

semi manufacturers and server providers and so forth. >> and combine with intel. to put numbers around it, 30% of the workloads are in the cloud 55% in the next three years. you look at the i.t. spend, cloud is spending 6 to 7 times that number. a read through further down stream on the application players and infrastructure that is why intel is the other missing piece. if you look at chips and software, that's the one where you see the stock move higher. 10% to 15% i view as a positive catalyst with aws and microsoft as read through going forward. >> people are betting big on a cycle recovery even with inventory as high as they are. how much is being overdone >> they are overdone semi is the out performer in

tech particularly the equipment space. you have inventory which is high down 10% this year and up 16% next i expect improvement if the cloud guys come back and spend that is a jump a lot is discounted with pmi coming down. we like semi pulling in a little bit. >> dan, you cover so many names within the tech space. what do you like the best now and why? >> to me, apple. from a large cap perspective, apple. if i look at the asia, 15% to 20%. relative to where the street is on service i think numbers go higher. on large cap i like apple. software, these names have gotten hit cyber security going into year end. i think some names that continue to stick out you have palo alto and risk reward is positive.

>> steve, we have seen microsoft pretty much treading water since the summer amazon down since then what numbers do you think we have to see from the cloud businesses in particular to get those really moving higher >> well, microsoft treading water is pretty good in software we still feel that is a chart that is moving up of no reason to think the azure numbers are not going to continue to grow at a higher rate 70%. aws is growing 40% today there is the thought that for the most part the year the cloud guys are spending on buildings and going into next year and fairly soon you see spending on equipment again which benefits intel. people will look to see if the cloud guys coming back and if they are, it justifies higher prices for the names >> steve, the same question to you as i did to dan. is there a specific name you like the most right now and why?

>> as a strategist, i don't have stock recommendations. there are internet names i mentioned faang. video is well positioned for the longer term. held off the graphics competition over time. that is more important with the depend seance on artificial intelligence. >> guys, thursday is the busy day. thanks, guys dan and steve, see you soon. when we return, finally a good idea for facebook that's the title of the next guest's latest column. kara swisher joins us. stay with us after the break with geico's help was pretty fun too. ahhhh, it's a tiny dancer. they left a ton of stuff up here.

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do you feel like you are giving a green light to politicians? lie, lie, lie? >> i believe that it is important for people to be able to hear and see what politicians are saying i think when they do that, that speech is heavily scrutinized by journalists and people >> that is facebook founder and ceo mark zuckerberg with nightly news anchor lester holt. this comes after facebook announced a plan to police toxic social media content using an oversight board. our next guest says is a good idea all of thiscomes on a good wee

information facebook mark zuckerberg is going to testify on capitol hill. joining us is columnist kara swisher. >> good morning. >> mark zuckerberg just gave the speech last week defending free speech, i guess. what this has to do with facebook's algorithm and policies is not clear. what do you take away from that and this pr offensive? >> it will not end this week i was at the speech. it was an unusual speech i wasn't sure what he was trying to say except free speech good china bad. that's the cliff nots notes of . a lot of people objected to it with the binary choice of free speech and platforms the point he was making and he did it with the clip with the politicians.

the more people hear things, the better the more people hear lies, the more lies stick in people's brains that is the debate and complex issue he did not addresaddress. he started with the premise that free speech is good for facebook it is not clear how good it is the way it is presented for society. >> kara, why would an oversight board be a good idea why get behind that idea >> largely because i want to be chief justice of the supreme court of facebook. no, it is interesting. i think the idea of the major issues settled by a group that is not done by executives is really interesting it is affecting billions of people with type and content

it could be an interesting experiment of what 40 people around the globe can think about with content and have a really substantive discussion about it. >> kara, here is my issue. the oversight board is worried about the algorithm? you got to make a decision of reversing things, but should it be about the group thinking how should messages get out there? is it getting results it should be >> mark years ago talked about the algorithm would fix it it doesn't it has to be a combination of human decision making and this the supreme court works well in this country whoever is on the supreme court. it is an interesting way to rise

the biggest questions up it doesn't mean there are no millions of legal questions. certain rise up for decisions. if it worked properly and given the amount of power they say it has, you could cover a lot of big issues if they rise up correctly. that's the question. how is it funded how much work can people do? how much policy could it change at facebook without facebook wanting it to change i think one of the things that is difficult is facebook's business model of engagement and birality turns into even rnrage quickly. can this benefit mark talked about that without ignoring the problems. >> kara, the other problem is section 230 and what to do about that not just facebook. other internet companies how do you think about it and

what is the right move >> it is complex some people think they should get rid of it or a fairness doctrine or tweak it they tweaked it already. there's been some unintended consequences of hurting businesses and helping others. the question is how do we look at these companies in the modern age? not 20 years ago when they were start ups. it is devastating to get rid of it and thoughtless it is a really important law and it was important to the growth of the companies the question is how can we better help police themselves by regulation and take some of this off the hands because they are not good decision makers how can you make a decision that directly affects your pocketbook so you don't make that decision especially with shareholders you have to keep satisfied the thing is facebook and the social media sites have made your lives reductive.

we should spend time thinking about them in a complex way and not leave it to the companies to make the decisions there mark zuckerberg and i agree. >> you want to mention as well and msnbc reporting facebook unveil election security measures this afternoon. we will look out for that. >> yes, indeed that's coming. that's interesting around the politicians. allowing politicians to lie. what mark was saying in the interview is leave it to the media to clean up our mess is that the right thing? i don't know it should have a big debate about it we will see what they say about election security. do we want to leave the security of elections only to facebook? i don't think we do. that's a big question. i'm interested stay what they say. >> as far as zuckerberg on the hill goes. wednesday talking libre.

jamie dimon said it is a neat idea that will never happen. now i have nothing else to say about it. >> that's about it me too having facebook -- you know i said this. wade into currency is something we should think hard about losing payment partners is significant. i don't know what they will talk about. one of the problems is that libre had other partners he probably can't comment on that it will be interesting to see his take at the very least >> kara, before we let you go. interesting weekend for interesting names. mark esperanta and pierre. >> i love that >> just to let people know what we are laughing about mitt romney admitted to be the owner of the burner twitter

account otherwise known as pierre delecto liked tweets of trump and defending himself gently against detract detractors this account was very much in romney's personality he did not have a weird alter ego on twitter >> the name alone, jon, come on. the name is weird. i love it. it makes me think i have to rethink mitt romney a little bit. it was clever. i like he talked about it and answered after he figured it out. i love the entire -- i love it this is when i love social media. it is funny. he was using it in an interesting way of the he admitted to it he is the anti-trump on twitter. pierre delecto

>> he replied 15 times over the period of four years and took it private. >> i think he should be president. only pierre delecto should be president. not mitt romney. i liked it nothing wrong with pierre. i think i said the name so many times. >> it's fun. pierre delecto also fun, kara swisher thank you. >> bye dow up 30 points with the drag out of boeing hovering near the flat line after the jump to start the day. here are the names leading the index so far we're back in just a moment. see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step

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european markets closing shortly. seema moody with more. >> jon, inn vefrt vevestors awas on the brexit.

a blocked vote on the boris johnson deal the british pound holding steady the attention shifts to tomorrow when lawmakers begin debate on the normal withdraw agreement bill to bring johnson's deal into uk law. the situation is fluid headlines are pouring through. britain scheduled to leave the eu in ten days time. one stock moving is maersk. the company issuing an up beat outlook. that is despite lower freight rates. up about 8%. tomorrow, two earnings reports on volvo and pernaud

thank you. sue herrera has more >> thank you, carl turkey's foreign minister reviewing the warnings of the military offensive in northeast syria if kurdish fighters do not vacate before the end of the brokered cease-fire. he was speaking at the world forum 2019 held in istanbul. hong kong police confronting protesters during the rally as demonstrations continue. dozens of riot police deployed for the sit-in protest at the subway station. julian assange appearing in a london court for the extradition case to the united states washington accusing assange for scheming with chelsea manning to break a password for a classified government computer that case is expected to take months to resolve.

day break in dallas, texas, revealing the damage from the powerful storm that spawned at least one tornado. the national weather service saying the twister touched down near love field airport before it tracked northeast through the city leaving a debris field nearly 20 miles long that's the news update this hour i'll send it back downtown to you, jon >> thank you, sue. now raymond james taking apple up to 280 this morning from 250 that's the price target maintaining and reiterating optimism ahead of the 2020-2021 cycle for iphones. shares up shy of 2% at 240 analyst behind the call on apple join us. chris queso. good morning >> good morning. >> chris, apple support 20%

since the summer on channel checks on the iphone what is not expected to be a really big cycle what gives you the confidence it goes higher from here and how much of this hinges on them releasing a mid cycle update to the iphone this se 2 early next year >> it is a follow through from the cal we made in july on the basis of the 5g cycle in 2020-2021. the fear at the time was this current cycle would not be so great. what it turns out, again, what we found going out to asia and supply chain checks, this cycle is okay. i think that gives you a good bridge between now and that 2020-20 2020- 2020- 2020-2021 cycle. the stock is reflecting that it is a two-year cycle apple, there hasn't been a

compelling upgrade for iphone in the last couple years. >> how strong does the holiday quarter guide have to be to justify this right now, we've got some great analyst notes on it, but no hard numbers on apple on how they manage inventory and how they see the season going. >> checks we had and other press reports that came out after us is iphone 11, the production uptick a little bit. in my view, this cycle is not what's important people are not buying the stock for this cycle they are buying for the 2021 cycle. as long as this year is okay, you have a good runway into the next two years >> chris, i'm curious what you think. wall street journal came out with the report showing that the iphone xr is made in india for the local mark there will we see more of the

production shifts outside of china in light of the tariffs? we don't see the trade war with u.s. and china ratchet up more >> india had restrictions in place for a while. this is something they prepared for. the problem in moving production and tim cook referred to this himself. the manufacturing network that apple has built in china is very efficient and able to ramp a lot of units in a short period of time it depends upon the permanent tariffs and outcome of the trade negotiations that happen again, if they do it, it's going to be something that is permanent. what apple wants to make sure is that if there are tariffs in place, the tariffs are permanent. if they do that, they can work to move production it will take time. just as india production took time. >> chris, on 5g, we had people less enthusiastic about the

stock. arguing 5g is not consumer send tr tri innovation >> the holy grail of 5 sdg is nt consumer it is connecting cars and appliances your main benefit is you can connect more devices to the network. in doing so, it also improves the coverage so in midtown manhattan right now. if i go outside, it is difficult to get a signal when the network is congested that is compelling enough for people to go to 5g because it will fill in the gaps of coverage also, it provides a speed benefit when it is widely available. the argument is there are not apps to take advantage of that i think there is a little bit of if you build it they will come once you provide the low latency

netwo networks, app developers will find that. >> what is beyond that short of gaming >> you know, it is stuff that hasn't been invented yet gaming is a great example of it. you know, what it needs to be is an application that is mobile and you want to use on the go and requires a fast connection this is the tough part which you cannot point to something today, but you have to have faith the developers will use it one of the examples and what we found that we expect in the upcoming 2020 iphone is a face id camera on the back of the phone to enable augmented reality applications probably used for gaming to start, but good companion to 5g and open possibilities apple will put the hardware out

there and develop ters come up with the rest. >> we are sand bagging on applications we have seen which is high resolution live streaming could be interesting chris, we have not seen this in years. have been this optimistic of apple and iphone how bad would the numbers for in holiday quarter have to be in order for you to turn pessimistic given you are looking to the 5g cycle for the optimism >> the basis of the upgrade in july is this year somewhat doesn't matter we understand that we're at the end of the cycle right now whatever they do now, as long as it is not a real disaster, it will not change. >> what's a real disaster? >> again, from the short-term perspective with the stock up, within a couple or 5% let's say.

again, i think, you know, it would have to be something that would change your thesis going forward on 5g. it is not like with apple not talking about future products, it is not likely for them to do that. >> okay. chris, we'll see interesting note thanks for being with us. >> thank you getting more details coming from the last minute opioid settlement as mckessen and teva narrowly avoid a trial we will go back to meg tirrell in cleveland >> carl, companies have avoided the trial, but it is not over for these companies or others. before the first federal trial is set to kickoff, we got word settlement has been reached for $260 million with the two ohio counties which were the plaintiffs $251 million in cash from the three drug distributors as well

as $20 million in cash from teva we are hearing $25 million in anti-addiction drugs that teva will provide that is over flee yeathree year teva walgreens was named in the settlement the judge will work for a new trial date walgreens is not off the hook. four other drugmakers settled. $300 million or so going to the two counties in ohio as you look at the way the stocks are trading, distribution is down. they are still trying to work toward a global settlement there are more than a dozen defendants across the drug industry and supply chain that have been named in the thousands of cases litigation includes the next federal trial which hasn't been scheduled and state trials we talked with the lead attorney

for the plaintiffs in the federal trials about whether we keep seeing the piecemeal settlements. >> it will go that way until we reach the global we think the right thing is to have a global settlement it has to be a fair global settlement >> talks were going late last week settlement up to $50 billion from some of the companies joe rice selling us that the number is not high enough and it needs to go directly and quickly to the cities and counties of the people on the frontline of the epidemic back to you. >> meg tirrell, thank you. meg tirrell in cleveland. another tech mover pinterest. strong user trends and attractive risk reward mark is with us on the other si othbrk. n't go anywhere.

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this morning on the bullish call out of rbc out performing and raising the priva price target to 35 the analyst of the call is joining us mark, thank you for being here today. break down the upgrade why now? >> thanks, morgan. we passed by the major lock up which is an overhang with the ipos uber and lyft went through it. we saw strong user trends when we tracked asset third, a lot of innovation we have seen on the ad site the big missing link is how lower the monetezation they don't have the reach or

scale like facebook. one way to do that is get out the self service ad tools so small and medium businesses can get on pinterest we think there is a gap up opportunity there. we like the valuation here risk reward is compelling. >> it is amazing we have been talking in recent years about ipos which have fallen flat. pinterest is not one of them stock up 40% since the ipo in april. in terms of the price target and how much this could go how are you thinking of valuation in light of the monetization metrics >> morgan, the right set up here little over 30% upside this is the stronger asset we see in midcap internet land. 17 billion market cap name $1.1 billion revenue run it is not yet sustainably profitab

profitable there are other business models like this have generated nice margins. facebook is one. twitter is another no real question about the long term profitability of the business we will start seeing sustained profitability next year. we would rather get in before that is clear to everybody and we think sustain high growth rate for the next two or three years. this is a 30% sustainable revenue grower we will have the management team to date which has shown a different track record than those two at the time of the ipos. >> mark, are you using the lock up aspiration in pins where it comes around >> you have to we put in the report with a buy on uber and it hasn't gone through the lock up expiration that traded out of the gateway down valuation was compelling there is no question we have seen a tradeoff in stocks going in and out of the market concern

which is supply will get unlocked if you believe that, it seems the market does, and a tradeoff going into the expiration and trade up out of it you can take advantage of that >> mark, pinterest users have high intent to buy and satisfied. on the other hand, pinterest overall doesn't seem to be hell bent on growing. is this a niche platform and what do they have to do to get you to either see it as a breakout possibility beyond that or to sideline it and say it is only ever going to get so big. >> i think a lot of this will come down to product innovation on the user and advertiser side. we are watching out for two things on the user side, can they break out of the core demographic? this is heavily female in terms of the products with the most traction to date beauty and home products fashion. if they can expand beyond those

verticals to show you model and one who reported is travel that is a bigger category old site think about it as a place if you go to austin, texas or san francisco or if you go to tampa bay, a great bucket list of things to do it is like tripvisor, but you can find it on pinterest on the advertising side, the most important thing is make the tools easy for businesses. that's really the secret sauce of internet advertising. where small businesses can get the word out pinterest is allowing people to get the word out and we will see that in terms of accelerating growth some time in 2020 >> all right mark, thanks for joining us. shares of pinterest up more than 4% on the upgrade. after the break, what if you couldn't subscribe to netflix?

former fcc commissioner will join us to explain the new law from his op-ed back in two minutes. vo: take control of your online reputation. get your free reputation report card at reputationdefender.com. find out your online reputation today and let the experts help you repair it. woman: they were able to restore my good name. vo: visit reputationdefender.com or call 1-877-866-8555.

sure, stocks like disney and netflix dominate the headlines, but the media sector in 2019, it is actually the old school names

out performing class is in session. dom. >> we look at communications services sets up it encompasses new media and old media. many faang names facebook, amazon and google. take a look at the sector overall. so far over the course of the year to date period, communications services in the white line out performing the broader standard & poor's 500. if you look at media take a look at how we as consumers consume television or media. no longer the traditional cable companies, but disney and netflix. other streaming companies. would it surprise you to learn if you look at the broadband companies, they are out performing the streaming names the equal way to basking it of

old television type companies. charter, comcast, parent company of this network. at&t and dish network. take that to disney and netflix and alphabet andsubscribed to streaming video. in 2019, those old name cable companies gained about 44% year to date. meanwhile, disney, netflix, apple and alphabet 26% higher. that's a massive gap. so the issue is whether or not that trend in cable, video, broadband, media continues. it will certainly be a fun trade to watch as this year wraps up. >> especially since we won't know which of the group they're in. if all this trend continues. in the meantime, what if you couldn't subscribe to netflix? that's the question our next guest asks saying courage could level the playing field.

former commissioner joins us this morning. commissioner, good to have you. good morning. >> thanks for being here. thanks for having me. >> you're basically talking about lifting ownership caps. what prompted this idea? >> the changes in the market place. back in 2004 when congress passed a law that said a single or individual broadcaster or owner could not reach more than 39% of the country to market it's video. or 78% of the country if they used weaker signals. that was in an era before internet video, before netflix or amazon prime. so now you have a huge shift in the past three or four years of people looking away from traditional tv screens and more towards smart phones and other internet connected devices of all kinds. and that's where the eye balls are going. the biggest competitor is sleep.

he's trying to get more people to spend more time watching video. you no longer need to worry about free over the air tv broadcasters having some sort of gate keeper status over video. in fact, more and more people looking away from free over the air tv and towards other areas. millennials are blending free over the air tv with digital internet based over the top content providers. >> sure. >> that law is outdated. it needs to be scrapped. >> is it your view that the old school legacy players are disadvantaged here we did a segment of how the stocks are doing better. >> you have comcast. you had an interesting mix there. there are different silos cutting cross tabs on the analysis. so you're seeing a lot of experimentation in the market place. you only have one market segment that's constrained by such a law. every other video content producer and distributor can try

to reach 100% of the american people except for free over the air tv broadcasters. and that's just outdated and not needed. >> so i wonder, it seems like some things we used to talk about local newspapers and tv about about cross ownership. now we're talking about facebook for that sort of thing. do you think that's warranted to take it out of the conversation of legacy media a little bit when you look at what these restrictions were intended to do, are they needed over a platform like facebook or youtube today? >> so i'm not arguing for regulating tech the way broadcasters are regulated. that would not be a good idea. >> i wonder if you will. >> i would hope not. i think the market place is so competitive rathe now, it's such a great time to be a consumer of video content. you can get it on all sorts of platforms and from different producers of video. so this is not the time for

1960s style or in this case 1930s style media regulation. this is a time to relax those. let these market players knock the stuffing out of each other in the market place and see what happens. there is tremendous potential for investment and innovation. you have one segment that has the mill stone around its neck. that's this silly law that does not allow an individual owner to reach 100% of the country for video content if they're distributing that over the air over tv stations. that's insane. >> the fact that this law pertains to one specific segment, with all of the different companies, some of them owning broadcasters, but also building out their own services, their own video services. how do you think this is incentivising or i guess driving where investment and innovation is going and also potentially deal making?

>> excellent question. by law, a broadcaster cannot go above that 78% sealing. that's going to stop some consolidation right there. and in a way that's not good. as the companies like gray are investing in local news and content and are able to distribute cost, that's exactly what a netflix can do. it can distribute costs across the country. you're absolutely right. that is influencing. another thing we need to talk about is a federal appeals court out of philadelphia that for 15 years, every time the fcc tries to relax rules this appellate court gets in the way. there are two judges getting in the way of sensible modernization. that's going to cast over deal making and innovation and market experimentation, as well. hopefully the fcc can win that

on appeal either before the full circuit or supreme court if necessary. all the broadcasters are looking at that decision wondering here in the coming months what's that going to do to deals going forward? >> provocative piece. thank you for elaborating on our air. good to see you. >> thank you. as we head to break, keep an eye on shares of peloton. several firms initiating coverage on the stk.oc we're going to break down the highlights next. stay with us. - at southern new hampshire university,

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some ipo news. initiations coming out on peloton mostly positive. the stock is going the other way today. it's down about 6%. ipo price was $29 a share. online mattress retailer casper is working on its own coming ipo. casper is expected to debut in the first half of 2020. >> don't sleep on that one. it could be big. >> oh, boy.

>> tomorrow we're going to get mcdonald's, proctor & gamble, ups, hog rbs chipotle s&p 3002. cramer joins the judge for the half. let's get back to hq. >> carl, thanks. front and center this hour, earnings and the runs to new highs. should investors bank on another burst? it is 12:00 noon and this is "halftime report." boeing, mcdonald's, caterpillar, amazon and microsoft just some of the big names set to report earnings. will their results push the market to all-time highs apple hitting record levels and the price target just got raised to a street high. jim cramer weighs in on the stock. stock buy backs have been a major catalyst for the bulls