Robinhood CEO, Arm Holdings earnings: Market Domination

Today's episode of Market Domination with Yahoo Finance anchors Josh Lipton and Julie Hyman features insights from prominent CEOs and examines the market's reaction to key earnings reports.

Affirm (AFRM) Founder and CEO Max Levchin and Robinhood (HOOD) CEO Vlad Tenev join the show, sharing their insights following their respective first quarter earnings results, which were better than expected.

The spotlight then shifts to stock reactions following earnings releases from various companies. Duolingo (DUOL), Arm Holdings (ARM), Equinix (EQIX), and EPAM Systems (EPAM), all take center stage as the anchors analyze the market's response to their financial performances.

This post was written by Angel Smith

Video transcript

Hello and welcome to market domination.

I'm Julie Hyman.

That's Josh Lift in live from our New York City headquarters.

We are giving you the ultimate investing playbook to help tune out the noise and make the right moves for your money.

And here's your headline blitz getting you up to speed one hour before the closing bell rings on Wall Street, Warner Brothers.

Discovery could match with the Disney uh streaming platforms.

I think it is very positive who's stronger than Disney, um except for Netflix.

So it w it should be a powerful bundle is A I for real, right?

Because we've now had Intel A MD and Arm all kind of disappoint, um especially with respect to the amount of uh their revenue coming from A I going into the quarterly reporting period.

It's not uncommon to see expectations come down.

So you get to a point where positive surprises are nearly a given.

OK.

So the positive surprise dynamic with Q one earnings is not a surprise.

OK. First point, second point though is that when you look at what's happened with the aggregate consensus expectations for the full year, they haven't changed.

OK.

So we call it a beaten.

We have got one hour to go until the market close.

So let's take a look at the major averages sponsored by Tasty trade.

We've got a rally here happening, especially when it comes to the Dow, which is doing the best of the three major averages up about 307 points right now.

About 8/10 of 1%.

The S and P 500 out about up about half a percent.

And the NASDAQ up about a third of 1%.

But again, the dow the clear leader here today, take a look over at the bond market here.

We do have a little bit of a continued pull back in bond yields which doesn't hurt matters.

I wish I could tell you there was a clear narrative today as to why things are higher, some clear news catalyst there does not seem to be.

But again, the underpinning perhaps being that we are seeing that 10 year yield continue to push lower.

Also wanted to get a check on crude oil futures which have been moving as of late.

They are up today but still not back up to $80 a barrel.

You look at the groups within the S and P 500 what is on the move here?

Only tech is in the red and not by much here today.

So pretty broad based rally with real estate energy and utilities that have been leading those games.

Real estate, which does tend to be interest rate sensitive, but a part of those gains as well as which is a data center.

We're going to talk about that later that is helping that sector looking at those dow movers.

Since the dow is the leader today, we do have some pretty sizable up movers at Home Depot is up by 2.3%.

Here.

We've got Amgen up by 2%.

We're going to talk about that a little bit more at the close with our Josh Shafer.

But interesting here because of course, the NASDAQ mostly has been the leader to the up in the downside as of late.

So interesting that it is the doubt.

Amazon also stands out.

It's a trending ticker today on our platform up 1.4% Josh Julie markets moving higher today with the dow aiming for 1/7 straight day of gains here.

Our first guest is overweight us equities suggesting better times are ahead for more on where investors should be looking.

And we're bringing in Eric Friedman Cio at us Bank Asset Management Group, Eric.

It is good to have you on the show.

So you want to be overweight domestic equities.

Eric maybe we'll, we'll start there, walk us through why you're constructive on, on, on the US stock market, Eric and, and where you wanna be invested where you're seeing opportunity.

And Josh, I think you did a great job and, and, and ju in the lead up in terms of why it's really that broadening out effect that we think is gonna take hold as we get deeper into this uh this quarter.

So specifically, you're seeing a decent well represented consensus, we think actual increased earnings estimates, which, which has held.

So you're seeing a robust corporate profit picture, you're also seeing some more broad um participation by sectors.

Again, that graphic you had up earlier just showing just how widespread a few gains are.

That's exactly how we want to play this market.

We use weakness in April both across domestic equities as well as commodities to add to positions.

We think that both corporate earnings will accelerate.

We also think that inflation will accelerate as we get deeper into this year.

So those are two things we believe in the way that we did, it was through equal weight S and P. We think that gives you a more balanced approach.

It's uh it's certainly from a valuation perspective better than going into the, the, the obviously that the general S and P uh from a straight market cap waiting perspective.

So equal weight we think is the right way to approach it.

That broadening out effect we think is going to continue.

How will it continue?

If indeed, as you said, inflation still accelerates, doesn't just stay where it is but accelerates from here.

You would think that that could spell some bad news for different areas of the market.

Yeah, it's a great point.

Julie.

I think if you look at the, you know, the sort of rate of change that we're assuming with inflation it will be increasing but not increasing at levels that really cause a significant thwart if you will to corporate profit.

So we think there's a difference between what's called tail risk hedging within commodities, which is when you have, you know, oil prices just rally massively where you see really out of control, inflationary responses.

That's not the market that we think we're going to get.

We do think that again with a lot of inflation coming next week, there's a potential for some downward pressure in the very near term.

But we do think that's gonna pick up as we get deeper into the year.

So as long as it doesn't get to a, a massive acceleration, if you will, we think that owning commodities makes some sense and still owning stocks alongside commodities is a way for clients to be, to be participating in both uh both phenomena.

So, Eric, you want to be overweight domestic equities.

I'm just curious what worries you though, Eric, you know what, what are the risks you would call out the downside risk to your call?

Yeah, a couple of things.

One would be some pressure in commercial real estate, you mentioned, Reeds earlier doing well and, and Julie to your point about uh some of the positives in the fixed income market there is a decent 30 year bond auction today.

And that really has kept the, the rates uh if you will contained.

And that's what you're seeing really bolster if you will res also utilities, utilities also has an A IA I play as we all have been talking about.

But I think the first issue would be if we see some challenges to fixed income, we see some auctions go the wrong way and interest rates turn higher.

That could be a challenge for commercial real estate.

The trigger we're using is about five and a quarter to 5.5 in the US 10 year Treasury.

We're obviously well below that right now.

But again, we've been close to breaching that 5% level a couple of times, we obviously did breach it in October of last year.

So issue number one, Josh would be commercial real estate.

The second would be challenges to liquidity.

Again, we had a liquidity drag down to get too technical.

But whether it was what was happening in the treasury market, whether it was happening with uh the the tapering process from the fed, that's something that we think will reverse in May.

So if we don't see again, concerns on the liquidity side, that's obviously a good thing for our positions.

But if we do see some bumps in the night, if you will, with respect to liquidity, that would be an issue.

Last thing I'll say is this, if we start to see some of the uh broadening participation reverse.

And we rely back on, on large cap tech that for us would be problematic.

Just because again, we do think that corporate Capex is still there.

We think there's still delivery in terms of corporation spending on big data A I as well as cyber those trends we think are embedded.

If those reverse, we'd have some concerns, but those would be three risks that we have to our, our current thought process.

But uh again, this is a market where we're having, we're sort of short on hubris and, and long on on stops if you will, making sure that we're taking shots where we have opportunities.

But also, you know, recognizing that there's a very fluid dynamic in front of us, especially as we get closer to the election.

Um and speaking of getting closer to the election, something else you guys are doing that I thought was interesting is buying commodities and again, just like with stocks you're looking at, I believe a broad basket of commodities that could rally going into the election.

What are some of the dynamics there that could push them higher?

Yeah, I think a couple of things, you know, one and, and Julie your point, we looked really hard at being more discreet within energy related equities.

That's still a sector.

We like quite a bit.

We thought that having more of a broad based approach to inflation hedging was the right approach.

And I think there's a couple of things that going on.

Number one is that, of course, we're seeing given the human tragedies across the world right now, some supply chain disruption and, and that could certainly continue again, our hearts are with those affected, that's certainly more important than financial matters.

But that's an area that we think will not be resolved, you know, immediately or necessarily quickly.

The second thing that you're seeing is actually a broadening out of participation by outside of these, these uh these borders, if you will.

So if you look at what's happening in Europe, if you look at what's happening, even in Nan Japan, Asia, there is some real strength and momentum.

Again, everybody knows about China.

China is really trying to export their way to growth, they need commodities to make that happen.

So that shining story we don't think is going to reverse any time soon.

So if you factor in some broadening participation by Europe, but also some throughput by China, especially liquidity driven throughput by China that makes commodities a decent place to have some capital eric for fixed income investors who are listening right now as well.

What would be your guidance?

Yeah, I think a couple of things, one is, is it's hard to uh to move out uh beyond the first couple of years of the the maturity cycle.

We know just psychologically if you're getting, you know, 5 5.5% on short term fixed income.

That's a tough place to move out of.

We actually would still emphasize for those clients who are taxable municipal bonds.

It's actually a more normally shaped curve.

You know, typically the, the longer maturities yield more than the shorter maturities.

That's actually not happening within government bonds or within corporate bonds, but within municipal bonds across most of this country that is happening.

So it'd actually be extending duration, buying longer maturities with mu but still hanging out more market weight if you will within uh you know, tax exempt bonds.

So those are elements that we think will be, will be persistent.

So we wouldn't give up on fixed income.

We actually really like credit as well.

That's a space that we think has been underappreciated and a lot of emphasis on the front end of the government curve, which is appropriate.

But we think corporate credit is a great place to be right now.

You're getting some incremental yield, uh default rates are very, very low.

And, and again, that's a spot that we think uh you know, with broadening participation in earnings that obviously helps uh bondholders as well.

So those are very, very important areas for us with clients in the uh in the current environment.

Lots of ideas for investors, Eric Friedman.

Thank you so much.

Appreciate it.

Thanks so much.

Great to be here.

We're just getting started here on market domination coming up.

We've got interviews with Robinhood, Ceo blood tenant and a firm Ceo Max left and later on in the hour plus in our investor playbook, we asess in the state of streaming, who is best position, who's better left behind all that and more when market domination returns big quarter out of Robin Hood real record revenues, they were up 40% year over year crypto revenue up 232% lots going on at this company.

Let's welcome in Robin Hood, co founder and Ceo Vlad, 10 of Vlad.

Always great to get some time with you.

Hang with me here o on this one.

I recently caught up.

Uh but Reddit's co founder and Ceo uh Steve Huffman and I asked him, it sounded like after his quarter, the platform looked and felt like it's grown up.

I'll put the same question to you just given the gains and the numbers in this quarter is Robin Hood all grown up now and investors need to think about your company and your platform a lot differently.

Well, thanks for having me, by the way, I think certainly the platforms become more diversified.

Uh We've said for a long time that we don't want to help our customers with their investing activities.

We don't want to just do that, but we can help in lots of ways, high yield savings, retirement, uh the new credit card offering.

So you're beginning to see uh the strategy evolving and over time you'll continue to see more products from Robin Hood with, with the core essence of superior economics and superior user experience.

I think the real highlight for me and we'll dive into a lot of numbers that, but customers transferred 4 billion in retirement assets to Robin Hood and I know you give, uh, rewards or boosters to get some of those assets.

That's a very large number.

Why do you think people outside of those incentives?

Why do you think they're moving the assets to Robin Hood?

And, and what are you doing to, I guess, keep those, those numbers like that coming.

Yeah.

And, and one thing that we mentioned in earnings is it's not just the aggregate level of asset inflows, but also the fact that for the second quarter in a row, we're seeing net positive inflows from all of our major incumbent competitors.

So across our incumbent competitors, people are moving more assets into Robinhood than moving out.

And I think it's, it's a couple of things when we talk to customers, particularly for our retirement product, they love the user experience and the 3% match that is evergreen for contributions.

Um is just among the most compelling offers.

They've seen it.

Uh, a lot of them don't have 401k through employers.

The ones that do sometimes don't have employers that match.

So having Robin Hood provide that service in an individual self directed retirement product is, is really compelling.

So it's those two things I mentioned superior economic, superior user experience.

Do you have an age group?

The these folks moving retirement assets?

Is it folks like me over the age of 40 that are are making these move now or do you or do you have just retirees saying I, I don't know what some of these other retirement platforms are doing but I, I like what Robin Hood is offering me.

Yeah.

Uh I think with this offer, it appeals both to first time investors, millennials and, and Gen Z and there's a a long term trend of each successive generation being interested in retirement and starting to think about it at younger and younger ages.

So for example, Gen Z, there was a recent survey that says they start thinking about it when they're 19 years old.

And so it's compelling as a first retirement product, but also with the matches.

Um it's also very compelling with someone that has a very large pre existing Ira account at another broker.

And we've seen lots of customers who are maybe five years away from retirement age who uh the economics of the offer are irresistible to pass up and maybe they already use Robinhood and they like the user experience or the active trading products or the taxable account.

And we've seen uh lots of transfers which with much larger account balances.

And I think to us that shows that Robin Hood has evolved in feature set and capability far beyond where we started and now it actually can serve customers who have more complex financial needs.

And that was the goal from the very beginning.

We wanted to start with something very simple and evolve the feature set and the capability to encompass customers that have varied and more complex needs.

We're starting to see that work and uh we're going to continue on that journey in the years ahead.

No, it's fascinating to see.

And then also uh another good quarter in the, in the, just the bread and butter that stocks business for, for Robin Hood.

Do you think there's an economic read in there?

And I, by that, I mean, Vlad people are trading more on the platform perhaps because they don't, they're not beating inflation, you know, they're having trouble paying for their everyday needs.

Do you think they're now investing in stocks as a way to, to try to go out there and beat inflation?

I think that typically what you see and we did actually see this when interest rates go up uh relative to uh relative to cash stocks become less attractive and you see flows uh on a macro level away from the equity markets and into uh bonds as well as high yield instruments like uh the Robin Hood goal product.

Um but you have countervailing forces to that, you have what's happening in the crypto markets.

You have uh a tremendous amount of innovation uh concentrated in the US in Artificial Intelligence and uh younger customers who typically have a longer time horizon tend to be more optimistic about technology and they want to be early on to these trends.

And so that's balanced out some of the effects that we'd normally see in a higher interest rate environment on the trading front.

Um Perhaps you could just detail a little more on this wells notice um that Robin Hood received uh on the on the crypto front, a any update there and, and how do you plan to defend the company?

Well, uh we shared some statements uh on that.

I had uh a statement on X a couple of days ago.

Um We have been trying to work with the uh sec in good faith to register a special purpose broker dealer to uh trade crypto assets.

Uh Obviously, that process uh was not reciprocated.

And that's unfortunate.

We do believe we have the most compliant and safest crypto platform out there for customers were as you probably know, extremely selective about the coins that we offer on the platform, they go through a rigorous vetting process.

So it, it appears that uh the uh the sec is taking a hostile posture towards the crypto industry in general in the US.

And I think with us, we're eager to defend the company and the industry and our customers.

And I do believe over the long run that crypto is going to be an important asset class for us.

Consumers, you've seen jurisdictions outside, you know, in the European Union, for example, taken um a much more proactive route where there is more and more regulatory clarity.

So, uh yeah, we, we want to make sure America is not left behind here.

We should be at the forefront of innovation across all new technologies.

And I think it's incumbent on us to lead that and make sure that the conditions in, in the US remain favorable to technology and innovation.

Do you ever think that regulators will, will warm up to crypto?

I do think they will, I think you're starting to see it.

I mean, it's, it's been a little bit slower than we would like.

But five years ago, Bitcoin was in a, in a uh uncertain environment.

Now you're seeing regulators moving past Bitcoin and starting to investigate other things and to try to understand them, I do believe over the long run, the US will get there and it's just about accelerating that, but the people want it, it's an asset class that uh particularly in a high inflation environment is attractive.

You've seen it being adopted and lots of practical use cases emerging.

So I think crypto technology and the assets themselves are going to continue to be an important part of the economy.

Lastly that uh Vlad um Robinhood is sitting on a ton of cash, $4.7 billion any thought of.

Uh I guess a potential dividend.

Are you gonna buy back stock with that.

Well, uh in the past, we have bought back stock, we bought back uh about 7% of the outstanding in uh Q three of last year from emergent fidelity technologies.

We've also uh enjoyed having the flexibility for opportunistic M and A and we've been uh very selective about uh the companies that we look at and we end up moving forward with.

But um yeah, it's, it's, it's a huge strength for the company to have a fortress balance sheet in uh in all environments.

Uh Fascinating quarter from uh from you guys, we'll leave it there.

Rob Hood, co founder and Ceo of VLAD 10 of uh Thanks for always making time for y'all.

Finance.

We appreciate it.

It's always a pleasure.

Thank you, Brian time for some of the day's top trending tickers, Roblox on that list, the shares down about 22% after Roblox cut its annual booking forecast sign, consumers are pulling back on spending on the video gaming platform, booking sort of help uh you know, a forward looking indicator if you will in the second quarter, it's uh bookings forecast also came in short of analyst estimates at the same time.

Um We are still seeing engagement on the platform although total hours of engagement also fell short of analyst estimates 77.7 million active daily, daily active users uh in the first quarter on the Roblox platform.

Yeah, it is Michael Pachter who we both know Julie, a long time, respected analyst who's covered the gaming industry for, for a very long time.

He does rate the stock out perform.

And it was interesting to tell his clients, you know, he, he really did think this sell off in his word kind of overdone today.

And he was just looking at different magic metrics, daily active users.

He was pointing out still growing nicely, hours engaged growing nicely.

He just didn't see, you know, none of the figures he was pointing out look concerning to him.

So they're sort of your bull case but obviously investors not comforted today.

Well, and just a quick reminder because somebody reminded me today, not everybody knows what Roblox is like.

I know what Roblox is because my kids are on it.

You know what Roblox is because you work here.

Roblox is sort of a gaming platform that has tens of millions of games on it actually, although only a handful are the most popular and it's mostly sort of young teenage to upper teenage kids who are playing on here.

They can chat within the games, et cetera.

They're sort of more rudimentary uh graphics if you will and they're very popular.

But there have been questions about the sustainability of demand and engagement.

Investors have questions today.

Yeah, sure.

Exactly.

Arm shares under pressure despite beating fourth quarter earnings and revenue expectations, the chip design company posting kind of lukewarm full year revenue forecast that, that does seem to be the issue.

Julie the forecast for that, that fiscal year and arm, of course, you know, very synonymous with, with smartphones.

We know Co Rene Haas is, is kind of push them harder into, into new markets like data, data center hardware.

Um I know somebody else saying, listen it it it is though that narrow miss on 2025 2025 sales guy, it's just not good investors uh who had obviously very high expectations rolling into that print.

Yeah.

Mark low paces over at ever.

Cora I who has an outperform rating on the stock.

I I thought he had an interesting perspective on this.

Uh in his note, he said, um it's a tough set up.

It was a tough set up coming into this because he said with the stock up more than 40% year to date.

Very much outperforming the S and P 500 year over year revenues peaked in this first quarter.

The set up into this print was as challenging as any in our coverage universe.

So expectations, you know, the stock had run up, the expectations were relatively high.

Um He still likes the stock but he says we could still see some consolidation in the near term in the shares.

Yeah, I checked it with John then over over key bank.

Um John is long time tech analyst I telling his clients here was his take, you know, he he's sticking his overweight rating in part because he says still opportunities here for outside growth driven by royalty rate expansion from the adoption of RV nine.

And the there he's referring to a new version of the company's technology that carries this higher royalty rate.

Um price target remains 135 for John.

Yeah, coming up interesting stuff.

Yeah, but we'll hear from the CEO of a firm stick around more market domination after this another strong quarter in the books for a firm as credit quality.

Well, that says Stable, let's get right to a firm founder and CEO Max Levchin.

Maxx.

Good to see you here in New York City for a change for a change.

Yeah, I I before we get to the quarter, I follow you avidly on Twitter and a couple of weeks ago you put out this higher for longer rates.

You, you seemed excited about it.

And why is that one?

Why are you excited about it?

And does it benefit a company like a firm?

Uh It's not a benefit, but I think there is an off repeated narrative that it's a huge problem for a firm that the rates are not coming down.

And that's just plain inaccurate.

Generally speaking, the reason I said hire for longer is a good thing is because that's an outcome of the fed.

Basically saying, hey, prices are not coming down, inflation is a little sticky.

We're gonna keep these rates a little higher.

For a little longer to make sure that the economy cools down just enough.

What that means though is the joblessness situation of the job claim just came out today, moved up a little bit but not a ton, still under 4% reasonably healthy.

So long as we are keeping job losses in check, people are able to spend, people are able to transact, people are able to pay their bills and that's really good for our firm.

So hire for longer is an outcome of a not great situation with inflation but not a terrible thing for us.

And as we have proven now, over the last couple of years, so long as the rates remain reasonably consistent, we're able to print an excellent quarter just like we showed yesterday.

What are you, what are you seeing in terms of charge offs?

Still quite stable?

You saw that they, they think ticked up a little bit but all within the ranges of uh of a very, very reasonable delinquencies.

30 plus is what we report to the street as kind of the forward looking metric down a tiny bit but again, very reasonable.

We expect some seasonality coming through the summer, typically a slight increase in rates, but generally speaking, our consumers still borrowing spending, paying us back.

Never a so go to sleep and don't look at it again, sort of situation at affirm, we look at it all the time at any given day.

They'll always something to, to look at and obsess over, but so far so good.

I know you're not an economist but you have a great insight into the health of the economy.

And look, we see consumer sentiment readings.

They're not great.

People are, are pissed off about inflation.

What's your read on the economy again?

I think there's a lot of people who have read the news and said, well, the economy is not doing so hot.

In reality, price of eggs is up a lot.

Some other prices are not up.

In fact, they're down.

It's averaging to a number that's not the 2% target that the fed has set for itself.

But it's not exactly at nine points where we were looking, you know, a year or whatever ago.

So I think generally speaking, the economy is actually in a better shape than the popular opinion will have you believe, I think some of the complaints you're hearing is actually from the upper echelons of income.

And if you look at the wage growth, I think the lower income groups have kept up better than the high income groups.

And so I think it's a little bit distributed, but from where we sit, people are spending, people are still traveling, which is an important growth vector over the last 12 months, people are still buying nice things for themselves, which is good.

Uh, we're helping them finance it and again, they're able to pay their bills back on time to us.

It doesn't sound like an economy that, that needs a rate cut.

You know, that's where I stop at.

The economists.

Like, not, not for me to opine where and when to have rate cuts.

What I do know is that we don't require a rate cut to be successful again, another great quarter just, just yesterday and looking forward to the rest of the fiscal year for us in fiscal 25 hire for longer is ok.

I wanna read this headline for you because I, I think you'll appreciate it or, or have something to say on it.

Phantom debt from buy.

Now, pay later schemes is a $700 billion black hole that economists aren't accounting for.

That is what they uh technically call Clickbait.

Um That math is so wrong.

It's worth doing it on air.

What is Phantom debt?

Well, the claim is not mine and erroneous as it may be is that Bile Pali is this thing that is existing in the shadows of the economy.

It's not reported to the credit bureaus and by a year 21,000, it will reach some obscene number and all of it is wrong.

First of all monthly installments, which is part of the overall bul system is reported has been reported to the credit bureaus and, and, and it it's been reported for a very long time.

So that, that's just not a thing at all.

So whatever indebtedness you see in the consumer land, it is visible in the Credit Bureau data part one part two, there's a fraction of bop pay industry called paying four.

Sometimes people call it split pay.

Sometimes they just call it B NPL.

But that's the pay over six weeks.

And um weighted average life of that loan is three weeks.

That means money turns 17 times a year.

Last year's overall industry estimate for the US was $50 billion.

That's $3 billion in outstanding balances.

Total us credit card debt, $1100 billion or 1.1 trillion.

That's 30 basis points, 30 basis points of debt that is not revolving.

Not generally speaking, compounding doesn't even pay interest.

90 plus percent of the time is not reported to the bureaus.

That's Phantom debt.

You're terrified of 30 basis points of us consumer debt.

That is just a headline that's made up to get people riled up and click on headlines.

Do you think that people are paying your bill first as compared to a credit card company?

There's a great question.

I think they are paying our bills in a very predictable fashion because whenever they agree to use a firm, they see not just well, here's your bill.

Please make a minimum payment.

Don't worry about the long term.

So the the buy now pay never, which is what credit cards are is or buy now pay forever is probably a better term.

Is a stark difference.

To what we do, we present the entire plan, you know, exactly when your next payment is due.

Generally speaking, it's quite rigid, which may seem like a problem, but in fact, it's a huge benefit.

Consumers love the sense of control where this is the bill.

I gotta pay it.

Of course, if you need to have a little bit more time to pay later, slightly later, we will accommodate you and there are no incremental fees or combining interest.

That is what gets us into this grade zone where people generally speaking, pay our bills just fine.

Some people prefer to have their affirm in the best standing possible.

And so I think they do prefer us to their credit card bills.

Some I think just paying their bills on time as you saw 2.3% delinquencies, 30 plus last quarter suggested they are paying our bills.

Good thing, good thing.

I, well, you and I have talked in the minutes, couple minutes.

We have left you and I have talked in the past about A I and I can never tell if you're like, man, I can't believe this guy's asking me this about, about this again.

Everybody in my life asked me about this.

But let me ask you from this perspective.

Since we have last talked, we are Warren Buffett uh out here annual share shareholder meeting, talking about the genie is now in the bottle.

Apparently some weird video of him was posted and it wasn't actually him.

Is he right to be that concerned about A I and, and I should note too.

Yes, you're the founder and CEO of a firm.

But you've spent many years in tech industry and of course, we're there for those early days of paypal.

So I think generally speaking, I am a, an extreme techno optimist.

And so asking me, should we be worried about some amazing technological breakthrough?

That's another form of Clickbait.

Like no, we should not be, we should be excited about all the opportunities we're going to make amazing things, efficiencies, assistant copilots, all of that is coming.

Most of it is not ready for prime time.

That an important thing to be worried about is how far have these valuations run ahead of themselves?

There's some amazing things happening, most of them in labs that said we announced in our last quarter as it happens that we have for a long time now been experimenting with A I as a customer service agent.

We still guarantee that any human who wants to talk to a human will be able to do so.

But we found that our ability to satisfy consumer requests, questions, complaints, whatever it is they have with a chat bot that is powered entirely by our BUILT A I is really, really strong 60% of the time, a little bit higher than now.

The consumer says, oh OK, great.

That works for me.

I don't need to talk to a human.

Lots and lots of gen ears and millennials like chatting.

Don't like talking to humans.

They get their satisfaction through a chat bot.

That is a I powered.

Very cool.

They need to say, hey, I gotta talk to a person.

You don't get me.

I want to talk to and I guess I'm the old guy now.

Uh You're the one mashing the button like operator, operator.

We will, we will always have that.

We'll always support that modality of interaction.

But a lot of people get their questions.

Simple ones.

Anyway, done very quickly with a single interaction with an A I.

All right.

Well, I promise not to ask you about that until I don't know a couple months from now when we talk again, Max Lech, uh founder and CLF firm.

Always good to see you.

Appreciate it.

Good to be here.

More trending takes for you now, including the shares of duo those share down 18% today.

Now, despite a strong first quarter earnings report, company stock taking a hit after reported again, new users at a slower rate than in previous quarters to an interesting one because Josh the shares, it's not like they were written and go into, into this.

They were about 8% year today going into today.

The shares are still much higher than they were.

I look back to the IP which is we just in 2021 they went public at 102 a share and they're trading at 200.

So not too shabby on that front.

But it is interesting that investors and traders zeroed in on this one metric that did show slowing because to your point, you look at the report, I mean Q one Eps beat company raised its revenue outlook for the year.

But yeah, it is dau it's daily active users.

It did, they did jump more than 50%.

Julie 31 point 4 million.

I was reading that was more than double what it was just 18 months ago, but it did only just beat out Consensus Street was closer to 31.1 million.

Uh CEO talked about how said, listen, we have like 10 quarters of accelerating dau growth.

He said, and we kept saying almost every quarter, this can happen forever, that comment, right?

And that, but that is to your point, what investors seem to be focused on, right?

You can't trees don't go to the go to the sky stock market.

Adage goes moving on.

Equinox shares, trending up.

I'm saying Equinox, Equinox Joy.

Uh they are trading up as the A I boom ripples into the real estate market company reporting better than expected first quarter earnings yesterday, largely due to its data center ownership.

So Equinox, this is an interesting one.

you know, there had been some talk Julie about their reporting time frame and and were talking, it was very kind of different cross currents here.

Internal audit Committee, Doj subpoena that we heard about in March.

There was that short report from Hindenburg that also came out late March, the bottom line.

Um They did report in what I saw described as sort of mixed results actually.

But the fact that they reported it all seems to be a relief because of the background that you're talking about, the fact that there had been what was perceived as a delay that there's this sort of noise around it.

And the company did an internal investigation of its accounting practices and that's now done.

However, there is still, there are still some investigations, some questioning into the company from official regulators, federal regulators that doesn't seem to be complete.

But this step that the company did itself seems to have made some progress and it looks like a bit of a relief rally really is what we're seeing in the shares today at T I think uh their sector weight Q one results, they said updated guidance, completion of the investigation.

They called it a positive city which is a buy on the name sticking with it.

So it looks like they say this is a long term beneficiary in their opinion from A I demand.

So, so they, they're fans that would make sense in theory.

Um And then this next 1 a.m. systems, uh the shares tanking as the company lowered its full year guidance and the CEO attributed the revision to a challenging demand environment.

Now to take a step back.

I had never heard of AMP systems, even though this is the stuff that had been part of the S and P 500 since December of 2021.

So it's been a few years here.

It's an IT services company and, you know, we've been trying to sort of suss out this earnings season.

How is the demand for enterprise it services?

And this is yet another sign that maybe it's not fantastic.

And there were some analysts who sort of question whether the discretionary spend on information technology is gonna remain robust this year.

And this latest report kind of giving some credence to that those questions.

Yeah, that was the bigger question.

I think you did see other it services names, you know, they were tra I saw some get um hit today.

It looks like on this accenture cognizant grid grid dynamics um stock, you know, glo globing as well, stock was at about 40% this year by the way, training its lowest levels in more than two years, by the way.

Interesting.

Another interesting for you coming up.

The next evolution of the streaming wars is bringing brands together, find out what it means for investors next on market domination.

Warner Brothers discovery said Thursday it is hopeful for a deal with the NBA.

After Wall Street Journal reports said the company is at risk of losing media rights for the league to competitor NBC Universal Yahoo Finance's very own.

Alexander Canal is here with more.

Yes.

And this was a big question mark for investors heading into this earnings report.

War brother Discovery Ceo da David ZZ off.

He didn't give too many details about this, but at the end of his prepared remarks, he did mention the NBA.

He said we've enjoyed a strong partnership with the NBA for almost for decades.

We in continuing conversations with them.

Now we're hopeful that we will be able to reach an agreement that makes sense for both sides.

He did say that they are able to match their party offers before the NBA enters into any agreements.

And he added that the company is prepared for the variety, a variety of potential outcomes that could see here.

But he would not elaborate on where current talks stand today.

And we've been talking about how important the NBA is to Warner Brothers discovery, especially when you look at their linear network business network advertising revenue falling 11% year over year in the quarter.

So if you lose the NBA, you lose that bargaining chip.

And then you also have to remember some of their upcoming announcements.

They have that joint venture with Disney and Fox at a sports streaming joint venture that's going to debut this fall.

They lose the NBA.

What are they really bringing to that table as well?

So a few question marks going on as we think about where the future of the NBA lies, where the future of Warner Brothers Discovery lies.

But it's clear that this league is seeking a very high deal.

Comcast is reportedly willing to offer more than double what Warner Brothers Discovery currently pays and they just might not be able to afford it.

So a lot of questions and analysts certainly are looking at any developments here that we can get a thanks for staying on top of it for us.

Well, what's funny is the future for any of the streaming services might look a lot like the past rebut and alliance has emerged in the intensifying streaming wars.

Disney and Warner Brothers Discovery teaming up to release a brand new streaming bundle later this year.

So what is this new partnership mean for the streaming landscape moving forward?

We're looking at how to navigate the big picture with the Yahoo Finance playbook and we're joined by Ken Leon, Research Director of Equity Research at CFR A and Jamie.

Lovely third bridge sector analyst, Jamie, gonna start with you.

You're here with us in studio.

I just keep getting like so amused by this discussion because it's like this new innovation bundling which is cable with cable did, right.

But do you think that this is the way forward and is this going to benefit the various parties who are doing it?

It definitely is an interesting development and we're seeing this increasingly in this space one thing we've been hearing at Third Bridge from the experts we speak with is just the fact that what streamers are looking for are ways to not only drive growth but also manage churn.

It's a huge issue.

Serial churners are one of the things which all these platforms have to deal with.

As people either at the end of their show, they decide to switch to a new platform.

At the end of a sports season, they decide to just cut off that service.

Having these bundles.

It's a new way that they can both drive longer term customer value.

Also showcasing different types of content, you know, with the match up of a Hulu and a Max and a Disney.

Plus it really covers all the bases of genres and can appeal to a lot of different audiences.

Ken, I want to bring you in you here as well.

You know, Ken, I heard um Rich Greenfield over, you know, long time media analyst at Lights Shed and he said something interesting, Ken, I want to get your take on this, which is that he said he thinks a lot of companies now have a bad case of what he called bundle.

And I think what rich was getting at.

I'm hopefully I'm not mischaracterizing rich, but if I am, he'll definitely let me know, I, I think what rich was saying was, you know, a lot of companies now seem to believe if I just bundle my services together.

You know, that really is sort of the answer to a lot of my problems when it comes to churn or engagement.

And I, I think what rich was getting at Kenny is he was kind of disagreeing with that.

It really isn't.

Rich was saying really you wanna, you wanna answer these questions and these challenges of churn and engagement.

Well, you know, the answer to that is great content but you gotta invest in that.

What is sort of your reaction to that?

Ken?

I I think when you look at the bigger picture, it's really a lot of these media companies trying to figure out how can they be profitable.

So the first step was reducing programming and content spending.

The second was de risking because they have no control really of the customer, unlike wireless uh or even cable TV, decades ago, you had one or two year contract.

So churn is very high, they will never release that.

Um And also uh if you look at where entertainment has moved to events, to live sports, so none of these managements will say uh that they can get to a 20% operating margin on this business nor a 50% ebita margin like wireless.

So it's not a business and I think they're all de risking, they're reducing capital and they're gonna say Gee Netflix is a winner, large technology companies can play here.

What can we do for two things?

One try to grow subscribers and two try to get advertising revenue.

So that's where bundle comes in.

But it's only gonna be maybe a number three or four.

There's gonna be a lot of players that are really not going to make it in this game because it's just not as attractive as before.

So I guess there's sort of two questions here, then there's which bundle is most compelling to customers and then which of the individual streaming companies is most compelling to investors, which is maybe those are the same question.

I don't know Ken, but those seem to me to be the two most most pertinent questions here.

Well, they are and, and, and they're mostly more US or North America centric outside of the US.

It's a very different game where the average revenue is much lower.

And if you don't have an Agile technology platform like Netflix, you're way behind uh both for trying to get subscribers and keeping them and programming.

So when you talk about bundling again, this is a defensive move by these companies and they're looking to reduce their path in this business because it's just not as attractive as it was before.

Uh for anyone like the CFO of Disney to opine that three or five years out that this is gonna be a great business.

They are not showing a case example of the profitability of streaming.

It's a very difficult business.

It's technology agile and subscribers can watch house of Dragons on Mac and then go somewhere else, Jamie.

I wanna bring you back in here because we were talking before Disney reported earnings and, and we were talking about the streaming business and your big question, Jamie, correct me if I'm wrong was really beyond this quarter.

Really?

You're like a long term question still about what exactly both growth and profitability looks like for that streaming segment.

What do you, what's your current thoughts on that?

Well, certainly, if we look at what Disney just reported, they definitely had some key positives in the most recent quarter.

They are now at profitability in their entertainment streaming segment.

Bear in mind that they have some software expectations for next quarter.

They are roughly on schedule for the profitability metrics.

They set out when they launched Disney Plus back in 2019, but they're definitely scrambling for growth drivers here.

If you look at the subscriber editions they had, there are 6 million core Disney Plus subscribers added.

Um But a lot of that is attributed to the chart communications deal which was set up last year and there could be some softness going forward.

And what was really interesting to see is they cited Netflix is really the example here to follow when it comes to cracking down on password sharing as really this business is looking for ways to grow and they increasingly have to be creative to find out what the best way is to tap subscriber growth because ultimately, while they are focused on profitability, they still really want to see this be a full transition away from a legacy linear business and be a new, not just, you know, barely profitable but strong resilient business with strong fundamentals.

So what I'm hearing both of you say is it, it sounds really hard what they're both trying to do.

So Jamie, I'll start with you and then Ken, I want to get your take.

So who's best positioned then in the streamlines?

I mean, you guys are both saying Netflix, Netflix, Netflix, are there other companies that are gonna come out of this strong besides Netflix?

Well, Netflix certainly is in a great position.

I mean, if we look at them right now, uh Ken was talking about operating margins.

They're at 28 which is certainly head and shoulders above every other player and in terms of their ability to catch up, it will take a while.

Even for those who might be capable of that, it's also worth highlighting Amazon.

There's certainly a different platform.

They obviously rely on e commerce for e commerce for a lot of their business.

But increasingly advertising is going to be a huge revenue driver for them.

If you look at right now at the percentage of the Amazon prime users who are on advertising, it's the vast majority, they will increasingly be a revenue driver for them, which could make that potential eventually be a profitable business and then it's worth remembering that Disney can get there.

It's just a question of how long it will take for it to really reach those double digital operating margins.

Everyone though below that 100 million subscriber mark, it'll be a tougher story Warner is kind of there depending on how you really look at the way they report.

But the question really is, is paramount gonna be able to deliver this particularly when they're in this time of turmoil as well as Comcast.

So Ken, same question real quick, what should investors who should investors be buying here in this space?

So they should be buying Netflix for and also uh Spotify for music.

Investors don't have to own three or five names in media because the business models are not that good.

And I think when you look at growth and algorithms of intelligence for global platforms, it's Netflix and Spotify for music.

So you need to do Netflix and Spotify, Ken Jamie.

Thank you guys both for joining the show.

Appreciate it.

We are wrapping up today's market domination.

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