tv Fast Money CNBC February 17, 2021 5:00pm-6:00pm EST
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is just off line right now for whatever reasons certainly the momentum has that going for it right now based on the weather conditions alone in texas and elsewhere. we're out of time here on "closing bell. thanks so much for watching. another record closing on the dow, not so much for others. "fast money" continues the discussion right now i'm alyssa lee and this is "fast money. the retail trading revolution heads to washington. the ceos of robinhood, reddit. this stock is about to see accelerating gains we'll tell you what it is and lay out her case don't forget, we have a special bonus hour coming up at 6:00 p.m "fast money" is looking for investments and how america changes doing business
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countdown for walmart. the leading retail fallen more than 4% from recent highs. have we seen a recent rating for the stock? where are we in that process is it over, maybe, guy, especially with the reopening on tap? >> i don't think it's over i have to point out both tim and karen have talked about this, and i'm on board now in terms of the rerating you want to compare it to costco costco is trading close to 33 times. sam's club lives within walmart and walmart at 20 times to me sounds cheap also you're talking about a company that's probably going to have close to 10% eps growth year after year, and they're operating at markets seemingly to improve i think we're looking at 4.4%. i don't see why walmart shouldn't trade higher than 25, probably closer to 30.
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>> by the way, when i took a look at historical pes relative to itself. right now walmart doesn't look higher than the four-year average, so if you want to poke holes in the pe, it's not quite there at this point. what do you think? >> right, i don't think the pe is crazy at all. remember, we have seen a rerating somewhat already, very deservedly so. we've seen a lot of changes in the last year, so online that business has exploded during the pandemic that's less profitable business. their grocery hasn't been as strong as some others, but they've done a remarkable job with online, and while they did that, they've been spending, so they're spending on walmart plus we don't know how much they're spending, but we know they're spending a lot that's hurting margins a little bit, so i want to give them a little credit for that we have a couple wild cards. we have vaccinations through walmart, what's that
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going to do for their business i think it will be a nice positive, and as the stores open up, as the country opens up, i think we'll see more of that in-store traffic which is a higher margin. there is a lot of good things going on at walmart. it has been rerated some, but this is certainly not an expensive stock. one thing i want to point out, though, target for me is actually a bigger position having appreciated more than walmart and trading at a little bigger meaningful discount relative to walmart. but i like both of them. i'm long both of them. >> target has been a year to date and on a 12-month basis in terms of walmart so, tam, concerning your love for walmart, has did gotten better concerning how much walmart has gone up? >> if we had done this on valentine's day, i probably would have gotten misty. i love this position
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it's a $180 stock people don't talk much about walmart's fulfillment. i think if you look at the expectations on the u.s. comp, it's somewhere around 8% that's a big number. on some level that's a big bar to get across, but also that's awesome. when you consider also where they had $10 billion to buy back, they have paid down debt and had a lower interest expense, there are things that work for you on the capital side as an investor which help in the multiple the negatives, there is a higher pressure wage on this country, there's no question about it it's going to continue to be a bigger issue for them and they'll have to play a part of some giveback, i think, socially and i think they will. i think if you look at the pull forward on covid and where they've been in a sweet spot, there will always be a concern of where are we when we get out of this eating at home dramatic. we'll talk about inflation, but
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these places do really well when there's higher food prices it's a good thing, not a bad thing. >> and i think it's important to mention what we've witnessed in the last year or so with walmart, how they have changed when we got the headline considering they were buying tiktok along with oracle, dan, it was like, what? walmart? that's interesting the reaction was kind of fascinating to watch >> yeah, i mean, i don't think it made any sense, to be honest with you it might have been just like some sort of -- i mean, we were scratching our heads you said interesting i was like, dumb so, listen, i think tim makes a really good point about the comps, though. when you think of how many retailers were shut down at some point in q2 of last year, the
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ones that remained open will have a difficult time with comps going forward. it's also funny that these guys have heard the term "pe" used a lot. this is 2021 it's earnings per meme, epm, so who cares about valuation. look at costco it's trading at a couple months lows here relative to the others this one could really set up to their earning rz and all the big points we had an 11% peak decline from its january highs. none of them have confirmed the highs in the s&p 500 i suspect this earnings season of the big box names will give us a real sense of visibility and expectations for investors for these guys who basically won
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the pandemic because of the forced closure of most of their competition. >> yeah, forced closure of most of their competition stimulus, still, that is coming, guy. how do you factor that in in terms of the interesting period we enter when these companies are talking about forward guidance, we are talking about overlapping quarters last year that were during the pandemic. >> walmart wins, target wins, costco wins, to dan's point. i think in the case of these companies, the rich are going to get richer in this environment, and i don't want to jump the inflation shark yet, either, but that's a huge component of the thesis here behind these stocks. again, it's here, we just don't acknowledge it i think walmart wins you know what else wins? the dollar general we talked about, they're another winner in this entire thing. i think jp morgan put them on their focus list with a $206
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prize target unfortunately, that's just the way this has been playing out over the last nine or ten months >> i love when you guys say, we're going to talk about inflation, but we'll talk about it now and talk about it later, so we might as well just talk about it now ppi has risen since tuesday. today we get the data in the morning. is this proof, tim, of what we were talking about last night? the economy is heating up, and potentially heating up faster than we all think? >> yeah, i think you have to be careful about ppi. it's a very volatile series, and i think there are factors here that a lot of people believe are going to fall off on your yearly comps when we get out to april/may. some of these are covid related. i think if we were looking at
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merging markets in china, we would buy that market. the inflation conversation we weren't going to have earlier and now we're having, we have inflation. we have different forms of inflation. ultimately i would rather see inflation rather than deflation. i think you've had a very interesting kind of burn through on extra slack in the economy, especially on the services side. i think that's really where we'll run into it, i think you'll see a lot of businesses passing through those costs. i think in the short to medium term, what does this mean for the federal reserve? i don't think it means anything. i think they'll continue to follow a path that they have their own nengs of inflation i do think inflation is an issue, but ic'm excited about inflation. i think it's very good for home depot and lowe's
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>> and i know you guys comb through all the minutes from the january 26 and 27 meeting, but they did note it's important to take note of the temporary inflation factors, and they highlighted "temporary." that's sort of the rub it's only going to be a longer lasting inflation spike to get the fed to doing what they're doing now. unless you see the start of something that is lasting, things don't change, do they >> listen, we saw a lot of people calling for inflation for ten years after the global financial crisis, and it never really came. guy would tell you that it did come in a lot of other places, health care, education, places like that that maybe these gauges don't measure i look at what's on the tape here, and because of i look at that chart and pull up
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name -- that's the most attractive head and shoulders gap that you may see then i learn that danny moezs was buying calls in this thing that's the guy who was if. -- i think that's inflation that a company like heinz will look because we have all this stimulus coming, too >> that's the question, can they push through the cost, karen, or is it up to the retailer to absorb that cost and accept less margin how do you start thinking about how this inflation impacts the consumer >> i think some of it is very grant-specific, right? i think some think a lulu will have more of a pricing power than maybe athleta, to give you
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an example the stronger your brand, the more room you have to push through that cost, even if you have it very well contained. r, but we're going from an economy that was shut down to one that was m enormous, and i don't think that's the end fortof the big numbers. i think we'll continue to see them the fed could be right, but at the moment it seems to me that inflation is more present than just a transitory once we open then it will go back to the way it was i'm not really sure if that's the case i think positioned for inflation, if it skyrockets out of control, then the whole
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market goes down, and we come back with that notion of what's the risk premium if inflation goes up a lot, risk premium gets higher and inflation will go down a little inflation, that's where we are it's good for now. >> it is interesting to think that the fed, you know, thinks that they could have it under control. we are coming to a point where things will only get better for the economy and people have a lot of money i mean, you know, with the stimulus checks going out, hospitals have a lot of money in their bank accounts. people are all cooped up they have spent no money on insulation you won't get a lot of money, and as you go through the year, that is going to heat up more and more >> i believe lulu lemon
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officianados call those bloggers i had those in high school, if anybody cares. and karen should i might play smhortstop for the yankees this year. ne neither of that is going to happen, and every time they open their mouths, the health gap continues to widen it's very miserable for people who are on the other end of the spectrum in this wealth creation, we used to go to barbecues back in the day when they actually used charcoal i'll give you this visual. there was always that one dude standing above the charcoal and the smoke is coming and he's always pouring the lighter fluid on it and he throws the match. you knew what was going to happen he was going to throw a match, it was going to catch and his eyebrows would be gone jerome powell better watch his eyebrows because they're about to get singed off. >> i don't know what kind of
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barbecues you go to. shares are jumping after the latest earnings report let's get to deirdre with the details. deirdre! >> itbaidu's core revenue is 6% non-marketing revenue was up 52% year over year co-founder robin li saying, our focus on innovation through technology is paying off baidu is well placed as a leading ai company with strong internet foundation to seize the huge market opportunities in cloud services, anonymous
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driving, smart transportation and other ai opportunities alibaba at a long shot with its own issues they are working on autonomous vehicle technology as china lays out plans to join a network. baidu is the leader for both transportational network and electric car technology. back to you. >> neal, i have to get over to you on this. if you like autonomous vehicles, this is it >> and you had some of the same comparisons as relates to autonomous and where google has been building and they've been building on ai the valuation not expensive here roughly 30 times but it's had a monster, monster move, again, since november-ish. you've seen this stock double. and, look, i believe in the mega
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cap china tech story i think all the regulatory noise is noise, and i think this is a company that has got multiple levers to pull, valuation that's not awful. not sure i needed to buy it tomorrow but it's a company that i'm certainly bullish on longer term coming up, it's going to be a big day in washington as the ceo of robinhood faces off with lawmakers. first, long-lagging wells trgo getting a boost today. ishis a sign that they're ready to play catch-up with their predators? we'll have that after this break. you'll make a plan that can adjust as your life changes, with access to tax-smart investing strategies that help you keep more of what you earn. and with brokerage accounts, you see what you'll pay before you trade. personalized advice. unmatched value. at fidelity, you can have both. ♪ more than this ♪
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topping the tape today, the stock jumping 5% on reports that the federal reserve had accepted its plan to overhaul its risk management and governance practices. the stock is now at its highest level since last march karen, this should be very good news in terms of the caps on wells fargo right now. >> right, exactly. wells fargo has been very expensive on a book, but not very expensive on a pe, and that's because of the caps you just mentioned while everyone else was growing its balance sheet dramatically
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from the time wells fargo entered the diagoghouse until n, we talked a lot about net interest margins even though the margins are coming down, the actual dollars of net interest earned of those others have been very big. they've missed out entirely on that so assuming they can grow again, this will be very, very good for their earnings and it's happening at a time when the yield curve has steepened so that net interest margin will be even bigger. this is a big positive for them, assuming it's true, and i do believe it's true. they've been in the penalty box for 3-plus years now this is very, very good news for them great for charlie sharp. it's turned around quslower tha they thought, but it was a critical step. i think on future earnings it's not expensive. >> let's say wells fargo is actually -- we have not confirmed this report. this is a report right now, but
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the stock did move let's say wells fargo is, in fact, out of that doghouse as karen mentioned but it enters dog purgatory. it's not able to go to the park and have fun with all the other dogs and puppies out there because it may take as much as i year for the fed to officially lift the caps. this is according to piper san sandler. they're worried it could take much longer for the caps to actually be lifted, tim. what do you think? >> the stocks are not going to wait for that. the other dogs will do what the dogs do in the park, by the way. that's for another show. one of the other brokers had a report titled "the end of the beginning. i'm not ready to fly a full flag high on wells fargo. i'm saying you had a case where you have had a major, major impedimentm to the stock, karen pointed that out, and there is an implicit green light.
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the stock didn't just start to rally, though. if you look at the two years of wells fargo and jp morgan, the relative underperformance was staggering minus 5% to jp morgan to the lows in november and since that point has outperformed the best bank on the planet by almost 22% since november this isn't the first point of this, and things rally the most when they go from terrible to bad, so do with it what you want from here. i'm not sure i need to own this one now. >> wells fargo or jp morgan? >> wells fargo it gives me no joy to say that, by the way, and i think the best thing about it is the stagecoaches from when i was a young lad. if you just give them like a 1.3 multiple to tangible book, you're talking about a $43 stock, and i think it can probably get there to tim's point -- i don't know
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what dog purgatory is, not being a dog myself, but it sounds awful. i don't think the market is going to wait, to tim's point, and i think it probably continues to trade higher. 43 makes sense for a number of different reasons. >> i don't really know what dog purgatory -- i was trying to make a metaphor. not very successful there. danny thoughts >> i think they need an investment bank. we've heard this as part of an investment bank for a long time, and you hear about what they did last year, especially in the first half of the year when it was pretty challenging for commercial banks to me i just think they'll see some consolidation, and if i look at a money center bank like wells fargo that really got capped at its knees for the last new year's, i say not just that new ceo, they need to do something transformative and compete with the big boys especially if they're going to enter into this new digital, immunable, decentralized fantasy
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utopian world we're headed in. here's what's coming up next the revolution is heading to washington how lawmakers are like toll react as ceos of robinhood and reddit take the stand. and roku shares bufferring today after a red hot rally. where wall street traders are betting the stock will go after reported earnings tomorrow we have that and a lot more when "fast money" returns
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hill tomorrow as the reddit and robinhood revelation face lawmakers. kate >> melvin on capitol hill all ready to face gamestop tomorrow. we will start with robinhood and the ceo who right out of the gates plans to address some of the allegations that robinhood was co llluding with the hedge funds to buy out certain trades. he said, any allegation that robinhood acted to help hedge funds or other special interests to the detriment of our
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customers is absolutely false and market-distorting rhetoric by now this is probably the most famous of those traders, keith gill he also released his testimony this afternoon, and in it he says the idea that he used social media to promote gamestop stock is, to unwitting investors, was, quote, preposterous he highlights he is an individual investor, he isn't affiliated with the hedge fund and he's still bullish on gme he said it was dramatically undervalued by the market. finally capital ceo gabe plotkin. he said the january frenzy was untethered to fundamentals he also said he was humbled by what happened last month, investors in melvin suffered
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significant losses he said the firm it bet against gamestop since 2014. >> as kate mentioned, the reddit's ceo is out. we'll bring you more details on that there we have jacob frankel. jacob, glad to have you with us. who do you think has most at stake tomorrow >> i think everybody has pretty much the same stake, and that is they're all going to be, for the most part, under the spotlight accused by members of congress, and the a at the end of the day really going to take an investigation to figure out exactly what happened. was somebody responsible at a level that constituted a violation of the federal securities laws? in some respect, it's almost like a political debate. if somebody wanted to make a mistake at the table, is somebody going to say something that will put them in deeper trouble or at least give rise to an issue, whether it be in civil litigation or in the context of
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the inevitable ongoing sec investigations my expectations for this hearing are pretty low, because at the witness table it's about being safe and for those asking the questions, it's about showing their interest, showing their commitment, but what can congress really do here is, i think, a much better question. i think the obligation really is at the sec level to figure out structurally and substantively what happened, what can be done and is anybody culpable? >> in terms of what can be done, though, jacob, all of these parties who are going to be sitting at this table either virtually or in person tomorrow, they all played by the rules the rules as they are written today. you know, as keith gill and kate have said, if you look at his videos or his posts, he makes clear it's only for educational value only he says this is my position, and
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i'm not trying to promote the stock in any way melvin capital, they shorted to the rules of the system and they paid the price for it. ro robinhood, they played by the rules of the system and their value boomed over the course of that week of january 25th, but they still played by the rules what are we looking for, exactly? >> a terrible analogy but a somewhat interesting comparison was, you know, was anybody shorting stock before 9/11 were people selling stock options, trading in put options before 9/11? i mean, ultimately it's going to require an investigation to figure out whether what we're hearing at the table is really what happened. were there coordinated efforts was there a best execution it's only at the end of the investigative process we're really going to find out i don't think you change the rules merely because of one fact
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pattern, but i think what we're dealing with really highlights the fact, in my view, the markets were unprepared for this social media mail storm driving the stock to a level that was entirely insignificant with fundamentals, which gives rise to another question where are we entering an era where fundamentals don't matter and it's only technical trading? i think those are the structural issues where you really need an organization such as the sec's division of trading and markets to really look at. there has not been a comprehensive examination of market structure since chairman levin instituted one more than 20 years ago this may be the time we have a new chairman coming in who is very regulatory oriented and all eyes are going to be on the chairman i think one of the other issues is that the timing could not have been worse for the sec. in other words, the new chairman still has not yet been voted in
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by the senate and approved by the president. you know, as a result, there is no head of the division of enforcement, head of the division of trading markets general counsel. they're all acting heads i think the timing and dynamics are all such that it really just had a really compelling and a need for sort of a reset at the market >> jacob, it's tim thanks for joining us. i guess my question is around social media because this seems to have been the genesis, at least, of where a lot of these reactions have happened, do you think there is going to be some assessment of social media in a way that it hasn't already been? because, again, i think you've made it clear it's not about necessarily new regulations, it's about figuring out what went wrong and is there some sense that social media regulations aren't strong enough to withstand this again? >> tim, it's a great question, because what you're really
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raising is to what extent will the sec get involved in regulating speech? and it always has not done so, because regulation deals w with issuer expectations the sec brought in a case last year involving a short scheme where the ssec was involved in that we now we're going to discover the fraud in the market or act in the public market to make it known. in fact, they're still playing with the system. notice, i really want to wait to see what the investigation reveals, not what people are saying at the table, but were there coordinated regulations?
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i think the commission is very much on top of what is said on social media and whether that's being used to manipulate the markets, and i think one of the statutes they're not looking at is section 13d, were people acting as a group? how were some of the existing regulatory schemes being applied in the current market environment? >> jacob, thank you for your thoughts appreciate it. jacob frankel. we had mentioned before that the testimony from the reddit ceo is out julia bourstin has gone through the regulations. >> talking specifically about wall street bets saying it is a real community and the community enforces its own rules, both written and unwritten. he goes on to say they have analyzed the activity of wall street bets to see whether bots
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and foreign investors have played a role. they have not. everywhere we looked they were working as expected. he said we will cooperate with a valid legal request from federal and state regulators that said, we do believe this community was well within the bounds of our on policies. it will be very interesting to see, melissa, what happens in terms of the questioning of steve huffman, but that is the statement that he has going into it >> julia, thank you. julia boorstin with the reddit ceo testimony. karen, i'll go to you on this. what in your mind is the mos outstanding issue that the testimony could possibly address? >> there's two, the one julie was just talking about, whether they did, in fact, act as a group, because we've seen other shareholders, 13ds have to be filed. i'd like to see a lot more disclosure on the short side if you have to file a 13d on the
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long side if you're over 14% no such filing exists for the short side t that maybe would have made things more transparent, but it seems to be a parody of disclosure on the longs and shorts i hope they address that >> dan >> listen, i think short selling is a perfectly natural function. if this turns into "get shorty" i think this turns into a waste of time, but i also agree with the prior guest that there is not going to be that much teeth to this. we've seen time and time again, whether it be business leaders in the silicon valley, they go through this panel and who knows less about what they're asking at the end of the day, it's a side show and i think these statements are about as meaty as it gets right now. >> i think back to the facebook libra hearings, for instance, and it was clear as day that not many people knew anything about
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cryptocurrencies or what facebook does or what libra could be, guy, so i'm not really anticipating any sort of, like, lights to be shown tomorrow on the dark corners of the market >> you talk about must-watch tv, that's going to be it. i would ask vlad, the ceo of robinhood, sir, i'm just interested, who are your clients? in the zero commission world, it ain't the people paying zero commission, so what exactly are they to you? that would be a great question i would love to hear the answer to, because robinhood clients, it's not people paying zero commissions, it's something else going on there so they answer to a higher power i would be interested to see what the answer would be for that one >> i agree 100% with that one, and for everyone with a robinhood account out there, you have to ask yourself, am i being served, and what are my expectations because i think a lot of people
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out there, tim, were expecting that they have certain rights when, in actuality, if you're not paying anything for a service, what do you have? >> well, i don't think the fact that the service is free means you have no rights, and i don't think they're treated differently whether they pay $10 a trade or zero, i believe but, again, guy is talking essentially about a pay for flow to big institutions who do a lot with that flow and who have a vision of the market that you'll never have again, this democratizing trading, let's be clear. the lack of full information exists for almost everybody in the market, and i think -- you know, the other side of this, because we all want the individual investor or even the institutional investor the sec doesn't discriminate, by the way, they're here to protect all investors. but i think accountability is the other side of this funk you'll be investing in something with zero fundamentals
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and you're along for the ride and you start thinking about terms like kamikaze investing, i can't help you let's see what happens not a lot of us expect much to come out of congress, but i think you have a case here where there could be some regulation coming out at some point >> karen with the hand raise >> can i just add one thing? yes, i know you pay zero commissions but you do get margin loans, so you're the question often i'm not saying they don't sell order overflow, i agree with that completely, but you get a margin loan and that's how they make money as well it's potentially dynamite if you don't use it correctly, but you do get it. >> what's interesting out of the robinhood testimony, and this is the last point on this, he does say that less than 3% of accounts are margin-enabled. so they're not really making -- in theory, they may not be making as much there are some really interesting stats in terms of their customer base. the median customer account size is $240, the average customer
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account size is $5,000 i think there will be a lot of questions tomorrow, especially as lawmakers -- they want to be before the people, so where do they stand on robinhood? that will be interesting tomorrow coming up, we have a lot more on this reddit rebellion. why everything you think you know about what happened on these forums, why all of that could be wrong but first, our next guest is going hog wild over thisto sck why she says it's a squealing buy right now. stay tuned i take osteo bi-flex. it helps with occasional joint stiffness, while it nourishes and strengthens my joints for the long term. osteo bi-flex. because i'm made to move.
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welcome back to "fast money. it's been a rocky road for harley-davidson, down 10% this year kate, great to see you again why do you like harley-davidson since it's such an underperformer this year >> i like harley-davidson because it's cheap and management is working on a turnaround there is a new management team in place but primarily it's the cheapness. >> it's the cheapness. what kind of turnaround are you anticipating what are they going to do to spruce up the business >> you know, they're going told a number of things
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number one, first and foremost, they have a new ceo, new management team, new strategy. they have a new wire, new products, they're trying to reach out to customers they weren't getting before and just the whole -- i think they just brought the company into the modern era. >> what kind of new customers? i remember a time when harley-davidson was going hard after the female demographic, for instance i don't know if that ever panned out. maybe not since they're still trying to go after demographics. who are they targeting and are they trying to retool things or is this a new market trick >> they're going after what they call cycle graphics, so your kid just left home and you want to buy a car. you went through a divorce, so you want a motorcycle. then they have a new electric-powered bike, very expensive, high-end. they're doing a better job of
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understanding who their customer is there are people who can afford this, people who are in the position to spend this, and they're going after them it's no more the scatter shot approach >> you know, the quarter was a disaster, i think you would admit. operating margins were negative 37%. shipments came in i think at half of what was expected, but i think one of the bright spots to kw your point about new management, the ceo bought 1 million shares of stock does that resonate with you? >> it does, because he's putting his money where his mouth is you have to remember, we had covid, okay, revenues were down 25% for the year that's going to do a number on your margins i'm giving him a little bit of credit, grace for that this year they expect revenues to recover up another 25%. >> kate, thank you for bringing the idea to us, appreciate it. kate faddis, owner of grace kapt
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although pete, what do you think for the hog? >> the excitement around the company is i think something that's four or five years past its prime. the concept of an electric harley, i can't get my hands around it. i think the valuation is kind of interesting. the hard wire announcement was obviously a disaster, and i think working around the regulations is something kate was talking about and partly why expectations were so awful roku hits new higghs based n its earnings tomorrow. stay tuned
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to friday. compare that to about an 8.5% move the last eight quarters those moves have averaged about 20%, so moves on earnings. and the trade that really jumped out to me, about a thousand of the february calls, putting yourself at 5% over where the recurrent stock is mind you, the stock had rallied so the optics looked a little bit better, but what i'm seeing and what really jumps out, as opposed to the other calls, it was at a 10% move. i thought this was a pretty strategic approach to earnings going into the release >> thank you for that, bono. be sure to tune into the full show "options action" on friday at 5:30 p.m. eastern
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the green economy will have more tesla. >> the whole interview coming up on ""squawk box"" at 6:00 a.m. eastern time >> we should do a spac week. >> spac-tacular. >> look at you >> always thinking >> i can't top that. walmart is as good as i will bring. i do think it should turn over in a world where sales are starting to crank up
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>> karen >> so all this talk about walmart and rerating te ing mad think, target is doing really good, too. target is a little cheaper and they're doing well target is in a little bigger position right now >> guy >> the winner is specifically nasdaq, mel. >> "fast money" special report on the new american investor coming up at 6:00 p.m. see you then has no penalties or advisory fee. and we can monitor to see that we're on track. like schwab intelligent income. schwab! introducing schwab intelligent income. a simple, modern way to pay yourself from your portfolio. oh, that's cool... i mean, we don't have that. schwab.
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