>> raymond james, one of the last standing regional brokerage firms. a great place for a lot of the brokers to go to. down 10% year-to-date. >> good to see you. what you got? >> didn't pull back in august, energy. ieo at a 52-week high. >> good stuff. "the exchange" is now. ♪ ♪ thank you, scott. hi, and welcome to "the exchange." i'm kelly evans. and here is what's ahead this hour. just as important as the jump in bond yields this week is the question of why this is happening. for good reasons, like good economic growth or bad ones like too much supply and central banks losing control. we'll look at where you can find the best value right now. plus, major earnings drop on yes, shares of palo alto have dropped 17% since their decision to hold their earnings call today, a friday, after the market close.

dan ives warns it's a pr disaster. but our analyst calls it a super fun summer friday. he sees 30% upside from here. he joins us to make his case. one big name investors own, our guest is not following this, and says you shouldn't either. a special three bails and a buy is coming your way. but first, let's start with the markets. we kind of have a turn around. >> it's been a momentum shift. it hasn't been dramatic, but we are maybe near the highs of the session. so that point, i want to give you an ideawhere the range is. the dow is up 23 points, just about flat on the session. it may not seem like a lot. the s&p 500 down six points or 0.2 of 1% at 4363. but here is the thing. at the lows of the session, we were down 35 points. we were up two at the highs. so we're a little bit more towards that upper end of the trading range so far today.

trying at least to recover a little bit from the steeper losses we saw yesterday in the s&p and nasdaq. the nasdaq composite speaking of 13,262, down 53 points or one half of 1%. that's the current state of play. one place to keep a close eye on amid that bond carnage that we have seen on the treasury side of things, pushing prices down and yields higher is what's been happening to many of the regional banks. remember the ones during the crisis earlier this year, we had some problems with some of the losses in asset values that have led to distress in some of these banks. if you look at the rising rates and falling prices, they're having that similar effect on some of these regional lenders. co-america, similar decline. so watch that regional bank trade, just something to keep a close eye on. one other place has been in shares of tesla, which is down

another 2% after a drop yesterday alongside the broader market. $215 a share right now, on a six-day losing streak, that has seen us drop from the highs earlier this year. roughly 28% below those levels. keep an eye on tesla, amid a new round of price cuts. competitors may be losing ground there. the entire ev market, morgan stanley says there could be an interesting development with regard to the dynamic with regard to supply and demand for evs. back over to you. >> all very interesting. dom, thank you very much. investors are facing a big chicken or the egg question in the bond market, asking whether the surge in yields is growth given or massive treasury supply. the yield hovering near its highest level since 2007, just before the great financial crisis hit. so should we expect yields to stay high now or not?

and what exactly is moving the bond market? steve liesman joins us now. hi, steve. >> kelly, the recent sharp increase in bond yields, most people think it's the fitch downgrade august 1 and huge supply from the treasury. but i've spoke on the several managers. they say it's not clear the move is over yet, as well. meaning more potential pressure could be coming on stocks. this is what we call the bond b boyage. better economic data and some strains on the demand side from chinese and japanese flows. short-term issues, like lousy august liquidity and investors being off size in their positioning when we had those surprise announcements of all the supply. but central banks and foreigners are not as big in the market as they have been. he says --

>> rick reeder from black rock says it's just hard to go in and buy the long end of the treasury with all that risk, when the short end is paying 5% and higher, saying -- >> all that said, one big-time bond investor i spoke with said 425 ten-year makes fundamental sense. a 2% yield is only high if you are under the impression we're going back to those 2%, 3% yields, and kelly, he says we're well beyond that now. >> a lot of people think that. steve, stay with us. my next guest says the rising bond yields are increasing the likelihood of a recession, but warns the worst thing the fed

can do is stimulate further. let's bring in nancy. welcome. >> hi. thank you for having me. >> i want to jump ahead, but i like that little tease there. so talk about what is the higher risk from bond yields. gdp is going to be 13% this quarter or whatever the number is. >> pretty high. i just think you have leading indicators. the fed has tightened very aggressively, and bond yields are increasing. you have the biggest increase in the ten-year yield on a three-year basis since the '80s. so we've had a very significant increase in the yield. but because the economy hasn't hit a wall yet, there is a general perception that it won't slow. but we do a lot of modeling. we just look at a lot of data. the bottom line is, the lag effect of the fed raising rates dramatically, and mortgage

rates, yields increasing significantly again, they will further slow economic activity. we have already seen a slowdown in the economy. why has the pmi dropped below 50? why have employment gains slowed? why has gdp slowed? because the fed timing cycle is creeping into the economy. and our work tells us, the bull's-eye will be the fourth quart e, and/or into the first quarter of 2024. for now, we're speaking with the fourth quarter as far as when the recession will start. we have to add to that. banks are tightening lending standards very aggressively. the leading indicators, there's a few, it hasn't hit the economy yet, and therefore it won't. >> opposed to therefore it will. not that you're in the business of giving investment advice, nancy, but under your quite plausible scenario here, this doesn't feel like a scenario day by day which yields would be

pushing to new highs. what do you think that's all about? >> well, steve i was surprised you didn't mention some of these huge wage increases we have been seeing out of many, many of the unions we are getting, from the airlines, starting back when the rail workers last fall, the airline industry that were on the cuff of very tough negotiations with the uaw. they're asking for a 40% increase over four years. i started in the business when you were finally obviously killing inflation in the early '80s. i've never seen a wage increase as much as we have seen. and there's like a contagion. federal express pilots rejected a 30% pay increase over four years, because of the american airline wage settlements. so sticky inflation is not appreciated as also another reason why bond yields have moved higher. now mortgage rates are over 7%. >> it's almost like we should have you guys predict the misery

index. we have rising unemployment and rising inflation, which is not a very pretty scenario. so there's these three or four plausible different paths people can lay out here. her points about wages are well taken. the wage data is probably the most closely followed data set as people figure out what this will settle out to be. >> yeah, nancy's idea here -- i'm sorry, nancy's idea here is the scenario that really incorporates the idea of lags to the economy, which is that we haven't seen the effects yet. i will say there is another side to this, which has suggested that the lags in the economy are less now than they used to be. we have seen a lot of it already. there are guys on the fed who believe that, like governor chris wallace, who say it's in the market, it's in the economy already. i will sort of counter that and side a little more with nancy.

as these rates rise and pervade the economy, it feels more and more like there's less place to hide. it was one thing when you had like a 6%, 7% mortgage rate, or 5 or 6%. but now that they're 7%, you can't find anotherb bank and fid another lower rate. i will say on the other side, we had very low unemployment. there will be an effect on the unemployment rate. i just don't think that in this world where there's such a premium on labor, which is what is driving those wage gains, that you're going to see tremendous increases in unemployment and a recession. >> nancy? >> it's not unusual. i went back and looked at the data. we have a lot of models. i looked at the unemployment rate. on average, it takes roughly two years from the beginning of a fed tightening cycle to un

unemployment rate increasing. we are not out of the woods with an increase in the unemployment rate. we think it starts in the fourth quarter, and frankly, these wage increases are going to put even more and more pressure on profit margins, and that snow balls into weaker employment. so we're not out of the woods. we have to go back and look carefully, which we did. and it's also a process for the fed tightening cycle to work its way through the system. corporate revenues, nominal revenues have already slowed. a lot of these revenues are bolstered by price increases. as the fed is successful in squeezing out inflation, revenues are starting to deteriorate. and it takes roughly a year after revenues for companies to go, i really have to take cost-cutting measures, and we start to reduce employment. >> the only thing there is

everything you're laying out to me is a world that inflation is going down. there's no way in a year or two we will face the same thing, and as things soften like you are describing. >> i agree. the word i'm using is "sticky." we don't think core cpi accelerating from here, we think it's sticky and sticky because of these wage increases. but i agree 1,000%. we think we need a recession. ie, we need an increase in the unemployment rate to see a shift down in inflation. and the forecast is, we're going to get it. >> 60% odds by q-force. final word, steve? >> yeah. i just add that if you read what powell said last year and read what's in the minutes last year, in jackson hole, it was just in the minutes this week. the fed believes that you need a period of below trend growth in order to vanquish inflation.

just to correct you, quarter, it was 5% on the -- >> i thought i saw six something, i don't know. >> maybe i missed something. >> just projecting how it felt. >> as you know from my work, this far out it is overly optimistic by around two program points. in any event, this is one of the big questions for -- i will be asking next week in jackson hole, how satisfied is the fed with an economy that is running at or above potential, and is that enough to bring down inflation? >> if they adhere to their own projection of what needs to happen. 5.8 is what they have in q3. >> steve, nancy, great to have you on. a very big week coming. steve, rest up.

next week is going to be a very busy one. steve will be in jackson hole interviewing patrick harker and others. now let's shift to china, where the country's central bank has been stepping up support for its currency this week. some are fearing a lehman moment in the country's financial system. the fundamentals looked worse and worse. the country announced a second rate cut in three months, and chinese evergrande files for bankruptcy protection last night. my next guest says, take a deep breath, the concerns are all a bit overstated. all right, nicholas, welcome. give me some context here, what is your reaction when you see china head into a possible lehman moment here? >> i think it's a bit overdone.

they had 6.3% growth in the second quarter. and i think the economy is doing reasonably well. they have some difficulties coming out of the covid recession, but there are a lot of positives here. imports are growing stronger than they were a year ago, which suggests underlying demand is bigger than a lot of people are saying. people are talking about inflation, but if you strip out food prices, consumer price inflation in july was up at a substantially higher rate than in june. so a lot of the things that people are pointing to could develop, but i think at the moment, it's premature to think that a lehman moment is around the corner. you know, the bank property company, they started defaulting on their bonds two years ago. this is old news. it's nothing new. they've had a significant

property correction for more than two years now that has slowed down the economy. but i don't think it's going to collapse the financials. >> i always feel like the currency is a bit of an objective judge of this situation. certainly in countries like russia and argentina, that's been true lately. but if we can show china's currency chart over the last 15 years, what we are seeing today looks like an important move towards that trend. so 7.3, so we're not quite to where we were in the mid 2000s. but we're starting to break out of this range, and flip this around. they have to intervene there. they seem to be stepping up. if everything is better as you are describing, wouldn't the currency be a little more calm right now? >> well, i think we need to get away at the rate against the dollar. if you look at it against a last of kurcurrenccurrencies, the r&

changed much. so the chinese currency is not weakening. >> if it's not weakening on a trade weighted basis, is the argument that in six months we'll look at this and say the deflation wasn't as bad as we feared, the currency was magnified by u.s. dollar strength, and those who last hour were saying they wanted to buy alibaba, because they think a major stimulus relief package is coming. based on what you are arguing, we shouldn't expect anything like that to come down the pike. >> i think a major stimulus is very unlikely. we've had a couple of modest interest rate cuts. china is sticking to their plan of 2017, and that is the try to slow the growth of debt. as debt and gdp from this

corporate and private sector was closing in on 300%, that was not a model that could be sustained. and they have slowed down the growth of credit quite substantially. since then, some of it has led to the property correction. i think they have taken substantial steps to reduce financial risks in the system. >> finally then, because it relates back to some of the major holdings people have in companies, do you think the government's crack dourn on those firms is largely over? and what do you think the plans are in terms of supporting tacitly or express italy their growth and their sort of earnings hopes for the next coc couple of years? >> they have normalized regulatory environment, that was the original normal.

we're now seeing substantial recovery of earnings in those companies, well into double digits. i think that's likely to continue. i don't think they're going to return to the high level of profitability that they had in the precovid period. but i think they will strengthen. they're already substantially stepping up their hiring. i think their investment plans will stabilize and increase, and that will be an eventual source of growth going forward. >> nicholas, glass half full, we appreciate your time today. >> thank you, kelly. coming up, the case for t-bill and chill. why buy stocks when you can get 5% risk free. that's next. plus, would you bet against these three? our trader has three calls based

on their latest callings. we have that contrarian take coming down. as we get to break, the dow is fluttering between dwaynes and losses. the nasdaq is down 1/2 a percent. the russell is now positive. and the ten-year note, below 424 at the moment. back after this. what if you could make analyzing a big bank's data... no big deal? go on... well, what if you partner with ibm and red hat, use a hybrid cloud solution to connect data across clouds, then analyze all that data with watson. okay, but this needs to meet our... security standards? yup. compliance standards? mm-hmm. so they get the insights they need... yup. in real time... check. ...to make quick decisions? check. aaaand check. that's the solution ibm and a global bank created.

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welcome back to "the exchange." the ten-year yield making headlines this weekend as it hit 4.3%, making it the first time in 14 years that you can get a yield that high. the six-month yield, 5.5%. why bother with stocks when you can pick up 5% risk free? my next guest is ben kirby. before we get your answer, let's bring in bob. stocks are actually way outperforming bonds so far this year. >> yeah, it's not even close right now. the s&p is handily beating bonds this year, even though with two-year treasury battlefields near 5%, ten year is near 4% at this point. so really, not even close.

but there's a fascinating study published recently that looks at the global stock market returns. i've never seen a study this big. they look at 64,000 stocks in a 30-year period, from 1990 to 2020. and it's quite amazing conchooses. number one, very few companies account for the majority of the gains that are out there. so this is an amazing number. five companies account for 10% for all the global stock market welt in the last 30 years. meaning market capitalization. apple microsoft, google and ten cent, a chinese company. 44% of u.s. stocks, there were 17,000 stocks stud yesterday. 44% of them outperformed u.s. treasury bills. so the majority did not outperform treasury bills. so a couple things to conclude here. number one, very few investors

possess the ability to pick stocks over long periods. and number two, the key to the success in owning stocks is owning a broadly diversified portfolio. they recommend the best way is using index funds. the final thing is, they studied 17,000 stocks. there aren't 17,000 u.s. stocks in the market, most of them fail over a 30-year period or bought out. so the s&p looks like it goes up 10% a year. it does on average, including dividends. but it's a biased index. they keep the winners in and throw the losers out. and the market capitalization means the bigger winners have more influence over the smaller companies. so yes, the stock market indexes tend to go up. but the average stock is a very tough time of it. >> fascinating. i didn't expect ten cent to be on that list. ben, so all of this said, people are -- i think most people know

that stocks beat bonds. but for the first time, they're thinking, 5% risk free in bonds ain't bad. what are you hearing and what are you recommending? >> thanks for having me on the show. for sure, cash at 5% is better competition with stocks when cash was at zero percent. that said, over the long-term, stocks do outperform less risky assets. i manage a portfolio that has returned 9.5% over the last 20 years. of which 5% is income, and another 4.5% or 5% comes from growth over time. so if you want to look at over a very long time period, stocks tend to go up eight years out of ten, and cash or money market or something very much like that, is actually the riskiest thing you can do from a long-term total return perspective from trying to achieve your financial

goals. >> so we have seen this. sort of what bob is talking about, this idea if you miss the biggest days, you might miss the whole thing. the bigger risk is being on the sidelines. what about people who are like, i'm comfortable where i'm invested but i'm not sure of adding to that position. or why not have a position in treasuries. people are thinking that the market might weaken. you sound like the recession is only delayed, not canceled, so some of this cash is just being opportunistic. >> i think that's right. you want to have some cash and some less risky assets for when the market gives you an opportunity to buy more. but you want to have exposure to the assets that can grow over time. being active stock pickers, active portfolio managers, and bond managers, we think that we can outperform the market over

time. so as bob alluded to, many stocks have zero return over time. and most of the return comes from a relatively select few. so acting managers, our goal is to put them in there to have exposure to the better investments. >> what does it mean for the market, bob? money market assets hit a record of 5.6 trillion dollars last week. so is that considered a bullish sign for the market, or are we seeing headwinds for the stock market that we haven't had in 15 or maybe even 30 years? >> both of the things you just said are correct. yes, it's cash on the sidelines and it's potentially bullish. but yes, and i think it's wonderful, that bonds are finally -- look, below 1%, giving the government your money for ten years below 1% is crazy. that's what was an anomaly.

what we are in now is more normal. if you look at the ten-year yield, it's much more common to be in the 4% or 6% range. same with mortgage rates. it was 3% mortgages, that's the anomaly. they were never 3% before. that's extremely unusual. where we are now is more normal. so it's wonderful that bonds are providing some competition. it's not great for stocks. the equity risk premium for owning stocks is terrible right now. that's one of the reasons the market might be having a little problem right now. i'm much more comfortable with sailors like my mother getting 5% on her one-year bank cd than getting nothing in her bank savings account. so i think this is all a positive development, even though it's serious competition for stocks. >> ben, last word. maybe it's tactical. that are some names in here, some individual names, maybe

it's not nvidia, but entice the people who are like, come on, entice them in. >> so look, there's still a lot of value in the market. there's individual stocks that have run a lot. their valuations are high. look, take out some of the stocks that have outperformed, there's still a lot of value in the market. taiwan semiconductor, they are an important company in the world, the valuation is attractive. it's just going to be a much bigger company over the next five, ten years and grow a lot faster than that 5% cash flow. >> thank you both very much for your time today. b and don't miss "taking stock" tonight at 6:00 p.m. we have been promised a debate. so i'm looking forward to it.

still ahead, palo alto is set to become the first s&p company in three years to report results on a friday afternoon. the shares are down 18% since that was announced. so what is the street expecting, and how much does the timing matter for reports? the answers from one an alyst ahead here on "the exchange." so you can improve your business however you see fit. rosie used part of her refund to build an outdoor patio. clink! dr. marshall used part of his refund to give his practice a facelift. emily used part of her refund to buy... i run a wax museum. let innovation refunds help you get started on your erc tax refund. stop waiting. go to innovationrefunds.com you really got the brows. (man) what if my type 2 diabetes takes over? (woman) what if all i do isn't enough? or what if i can do diabetes differently?

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(avo) ask your doctor about once-weekly mounjaro. somebody would ask her something and she would just walk right past them. she didn't know they were talking to her. i just could not hear. i was hesitant to get the hearing aids because of my short hair. but nobody even sees them. our nearly invisible hearing aids are just one reason we've been the brand leader for over 75 years. when i finally could hear for the first time, i started crying. i could hear everything. call 1-800-miracle and schedule your free hearing evaluation today. welcome back to "the exchange," everyone. i'm tyler mathisen with your cnbc update. former proud boys are facing up to 33 years in prison for their actions during the january 6th attack on the capitol. prosecutors also seeking a

20-year sentence for a fifth proud boy, who was found guilty of assaulting and resisting officers during the attack. the sentencing hearings are set for the end of august. residents in the capital of canada's northwest territories, rush to evacuate their homes, as wildfires in the region move closer to the city. winds have officials worried that the flames could be pushed towards the only highway leading away from the fire. ten planes left the capital thursday in the department of municipal and community affairs, saming for 22 more flights departing today. a canadian minister is demanding that meta lift its ban on canadian news from its platforms to allow people access information about the wildfires. the company started blocking news on facebook and instagram after the country passed a law requiring internet giants to pay news outlets for content. the transport minister said the

ban is unacceptable. kelly, back to you. >> see you shortly. coming up, a special edition of three bails and a buy, including this name that happens to be david's holding. if you know it, tweet me. see if you can guess what our trader is doing for it. that's after the break with the dow up 14 poin.ts

welcome back.

the moves of the biggest fund managers in the world were revealed in filings this week, so we saw how warren buffett and others are playing the market and we're going to play those moves, calling it this time, three bails and just one buy. joining me now is lee munson with our trades. lee, welcome. >> thank you. great to be here. >> it's great to have you. we're going to start, and good job, everyone, who guessed this. we're going to start with nvidia. is the trade still teflon? it is about 10% off the year's highs but on a monster run. why are you bailing here? >> for a few reasons. even if you look at the math and the valuation, we presume this is going to be a $350 million market in less than ten years and nvidia controls it all, even at this price, you're in the

95th percentile of valuation going forward. if i'm looking at the 95th percentile based on nvidia being an apex predator. but we know they're going to bring it. boundary is not an insignificant risk. you have taiwan semiconductor making all these chips for nvidia. they're in taiwan. they said next year, we don't really know how much of this stuff we can build for nvidia, it's unclear. and wednesday, intel hit the p brakes again on their turn around story that never does. why? because they were trying to acquire a tiny little foundry out in israel, and because of u.s.-china relations, that deal fell through. so i think going forward, getting the stuff to market is going to be important. if you are into the math, people should look up the stop base compensation of nvidia, really understand what the real costs are. that free cash flow starts to

dw dwindle quickly. >> the one thing about nvidia and intel, if you want to go there, you can go there. bailing on nvidia after a move like this, listen, it's probably prudent practice at this point. but still, it's a controversial one. the next one might not be so controversial. but expedia, which one investor added to his portfolio last quarter. it's been down 19%. this one, why are you not a fan? >> well, listen, i'm a value player at heart. so all this tells us is that officially, now that he's involved, it's not a tech company, it's a travel agency. so they couldn't make the earnings work the last quarter. they had everything, all the wind underneath their sails. what they're trying to do is tie

together these very different brands they have, all this stuff, and they're going to offer a whop ping 2% discount. you're competing against a points economy. airlines are going to keep pushing it. the banks love it. as more people travel, everybody is starting to travel a lot more. they're learning what business travelers know. if you like a hotel, book direct. then they offer perks like free wi-fi, late checkout. they don't nickel and dime you. expedia has gone from the big silicon valley love fest to a mature company that will -- why do one key if they weren't concerned about brand loyalty? this is going to be a head wind going forward. >> it is interesting to watch how they are doing. a lot of entries seem to have

these winner and loser tales this quarter. the last one is in the news this week, cvs. it's pairing some losses after posting its worst since october. is that why you're out, the stock's down about 28% year-to-date. >> at some price, i'll buy anything. i'm a value player at heart. i'm not sure that most investors know that cvs isn't just a local drugstore. half of their revenues are coming from risk. so when cuba has a passion project of revolutionizing the pharmacy business, he really means he's going to destroy it. this is the trend going forward. it's not that people don't have a local pharmacist. i have a lot of clients that

need to see somebody, but when it's half your revenues, you to think about how much you want to buy this. o-street, they just bought it in may, slashing thousands of jobs because it's a tough, competitive business. five years ago, four years ago, three years ago, when you needed an entrepreneurial doctor, in the last year or so, no doctors want to get into that business. i don't know where you are, you know, out in the tristate area, but out in new mexico, there's urgent cares everywhere. so i think they're linked to that game. it's not that cvs is going to go away, but this is a story about half their revenues are at risk. i would love to buy this when people think it's game over. >> move on from the bails. there is a buy in here, and you're following warren buffett. when i saw this headline about berkshire and the home

builders -- let's lay it out. buffet bought more than $700 of dr horton and other home buyers. listen, i'm not going to say this, but the time to buy them was a year ago when they were trading at 3 x. but that's not the say -- listen, they bought apple and crushed it. so why is now a good time to be a buyer of dr horton? >> we were talking about it last summer, but i can't believe that trade worked out. i was not early. we've got 30% of all new -- or all home sales coming from new construction. that's over twice the historical norm. nobody wants to lose their 3.5% mortgage. that's not what is going on.

what's going on is the ratio of adult children living at home is plummeting right now. that's not a covid thing, it's that millennials were staying in school longer. they were staying at home longer. but eventually they get married, have kids and become parents. so the reason dr horton versus the other group, if you're going to go in now on a big secular move going forward, you have to deal with the 800 pound gorilla. because we need as many units as possible. so you go to the big players, there's safety in size. i agree, the move has been made. but i think it's time to consolidate up into the big player and let all the small guys fight for the rest. it's the only thing i really like. traders always -- we try to rally around warren buffett.

>> lee, thank you for your time today. have a great weekend. >> thank you. >> lee munson. still ahead, classic cars are flashing warning signs. robert frank is live in pebble beach with more. always in a nice ride, robert. >> well, kelly, it's the super bowl of super cars. the coachella classic, more than 80,000 pouring into monterey. we'll look at classic cars as investments and why the market may be showing some gns siof slowing down, coming up after the break.

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welcome back. it's kind of the super bowl for car collectors. this year's pebble beach car auction will be a big test of how healthy the high-end consumer is. robert frank is live with more. there were signs of cracks last year, robert, but have thanks stabilized? >> yeah, kelly, a big test. there are some signs of cracks in the market. over 800 cars scheduled to cross the auction block this weekend, over $420 million in sales, but

that's down from last year, first time we have seen that in a while. classic car prices are down 7%. it is the worse performing collectible asset class right now. compare that to let's say art, which is up 12%. but we talked to one well-known seller who collecting as many cars as as many cars as he did world series home runs, and he said demand remains strong. >> demand for the great cars and special and unique cars are still going to be attractive to the person that can afford them, and certainly the wealth has continued to grow, the interest is crazy. >> and guys, if you look at the most expensive car that's expected to sell this weekend, it is a ferrari over at bonham scheduled to sell for about $40 million, a 1967 race car. a lot of eyes on porsche like this one. the porsche market went crazy

during the pandemic and afterwards prices 40, 50%, this speed ster from 1956 expected to sell for $350,000. and and tonight ferrari. an exclusive interview with the ceo of ferrari at 7:30 and going to ask him about ferrari prices which have gone crazy and what he's seeing in the new car market and high-end consumer. >> one of the greatest stocks, spinouts. it's been incredible. it's up with lvmh. everyone wants to emulate their model. robert, great stuff. looks beautiful out there. thanks for your long day for you, robert frank. still ahead, pr disaster or much ado about nothing. palo alto's rare move to report on a fday teooriafrnn coming up in a couple hours. we'll talk about it next.

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welcome back. palo alto reports earnings this afternoon on a summer friday after the market close. while my next guest agrees it's unusual, he says, the concerns are overblown. the stock is down almost 20% since this announcement. but our next guest has a buy rating and sees 30% upside from here. joining me is joseph gallo,

software analyst at jefferies. welcome. it's almost like they should have moved the date after all the, you know -- they've had two weeks to think about this, and it's still tonight. >> yeah they have. it's led to conspiracy theories. we think that's overblown. a lot of people have been trying to say are they trying to hide something. if you think that, [ inaudible ] the cash likes things out front and center and accountable and so we think that part of the story is overblown. that said, fortnet's results two weeks ago are a concerning part, what happened them can help to palo alto. >> did you say hewlett-packard's results? >> look past the results? >> i'm sorry. which company's results? >> fortnet's. >> that would make more sense. i'm thinking, i didn't think that they were pierce here. they were showing shares of fortnet and why you think that is a yellow flag.

>> yeah. i mean they're competitors. they sell hardware appliances. there's reasons why palo alto would be more insulated. they have a higher mix of software. at the end of the day the past two years we've seen this tremendous surge in product, just given, you know, the covid pandemic led to the internet doubling overnight and needed more firewalls to support that. palo alto went through a product refresh cycle, so you saw two years of 20% plus product growth. you're going to have digestion that wouldn't impact the fiscal fourth quarter results but the one and three-year targets will have to come lower. >> what is the catalyst and bull case for owning the shares here and why not wait it out a little bit? >> we previewed being tactically cautious. once we get past the reset, we view it as a speed bump, investors can target the, you know, 4.5 to $5 billion in free cash flow in fiscal '26 and lock on and this company will drive

towards $100 billion in valuation. >> what would be the -- you know, what would you have to hear today to think maybe there are deeper problems? >> i think that for there to be deeper problems we would have to hear something along the lines of hey, this has been primarily a hardware led sale and we're to the as comfortable selling software only which we think palo alto is really good at selling just software. the problem is the channel might not be as capable. we heard things along that lines maybe we would be more cautious. at the end of the day this is one of the better executing companies, better platforms, positioned whether you want heir, software, cloud and we think that over the next two to three years it remains one of our favorite picks. >> i'm assuming the analyst community is not a fan of friday afternoon earnings calls? >> there's nothing i would rather be doing tonight on a friday in august than earnings. >> maybe they'll start a trend. joseph, thanks for your time today. we appreciate it. >> thank you. >> joseph gallo. he has a buy.

30% upside for palo alto. jim cramer will speak with palo alto's ceo nikesh aurora on monday. that will be a good follow-up to whatever they say this evening. that does it for "the exchange." r ler mathisen is getting ready fo"power lunch" and i'll join him on the other side of this break. so i called innovation refunds. their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your small business qualifies. the first time you connected your godaddy website and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

my cpa told me i wouldn't qualify for the erc tax refund, so i called innovation refunds. their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your small business qualifies. welcome to "power lunch." i'm tyler mathisen. coming up soaring bond yields and falling stocks, that is the setup for the markets right now. how worried should investors be about those rising rates an the impact on stocks in particular. plus, instacart reportedly planning to go public as soon as next month. arm holdings in the pipeline. will the ipo market finally unfreeze? >> perhaps. let's get a check on the markets ife