I’m back from vacation! I highlight what I saw from the airlines, hotels, and restaurants… and why these businesses need to start paying more attention to their customers.
Daniel shares what stood out to him from RV retailer Camping World Holdings’ (CWH) recent earnings report… and why the company continues to shine despite 40-year-high inflation and rising interest rates.
We discuss power management firm Eaton Corp’s (ETN) solid earnings—and what they say about a global recession. Plus, we go over the positives and negatives from semiconductor company Advanced Micro Devices’ (AMD) results… and how it’s crushing Intel (INTC).
- Some highlights from my vacation [1:26]
- Why Daniel is impressed with CWH [6:05]
- A warning to the service industry [13:25]
- What ETN’s results say about a global recession [15:20]
- Why AMD continues to crush INTC [27:00]
Wall Street Unplugged | 928
The 3 companies that stood out this earnings season
Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on main street.
Frank Curzio: How’s it going out there? It’s August 3rd. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break down headlines and tell you what’s really moving these markets. So, today’s Wednesday. Bringing in Mr. Daniel Creech, senior analyst at Curzio Research, who’s been holding down the fort and getting lots of emails of how good of a job he’s doing. So, guys, you got to send him negative emails, not positive, you’re going to get him too excited here. Hey, thanks so much for covering me last week being on vacation. What’s going on, man?
Daniel Creech: Absolutely, happy to do it. Nothing crazy. Normally when you’re leaving town, the markets tank or something bad happens, leaving me here drowned on the island. We did good. The market rallied or is rallying, is bouncing a little bit, maybe a bear market rally. We avoided World War III, Frank, even though Speaker Pelosi’s having fun over there in Asia, and a trip around the world, stopping in Taiwan and everything. Things are good. Earnings are mixed but hey, life is good so far. How about you? It’s good to see you. You’re looking well. You look exhausted.
Frank Curzio: I’m tired.
Daniel Creech: I was going to say, “Oh, you look wonderful, Frank, you had a good vacation.” You look like hell, sir.
Frank Curzio: We got in at 3:00 AM. I thought we were going to get in more like 1:30ish. We got in late because we flew into Orlando, then I drove home from Orlando because the ticket prices were actually about $2,500 more for the four of us to get that extra trip to go into Jacksonville, and I was like, that’s crazy. So, I’d rather just drive two and a half hours and go there. I mean, the prices were insane for flights and everything. The trip was great. Spent a lot of time with the family. We had really cool things to do, excursions and stuff like that. We did one where it was called Evolution, which was awesome because you go in these dune buggy things and they’re like, “You’re going to get mud on you and stuff.” It’s four stage. You do that, and they show you how they make coffee and stuff. And they have this whole animal thing where you feed the animals which is really cool. And then, you go into the caves because they have a whole cave section and they have bats flying around. It was really cool.
Daniel Creech: No.
Frank Curzio: And then they take you to this water hole, which is beautiful, inside the caves that you can go in, it’s really cold. Man, that was in the Dominican. Holy cow. And Punta Cana. What an amazing experience. And the mud, they sell glasses and they have these masks, and I’m like, “Do you really need them?” I thought it was an upsell charge. They’re like, “You should wear them.” Let me tell you, I was doing-
Daniel Creech: You look like you’re a motocross racer or something?
Frank Curzio: 40 miles an hour through these fricking things with my daughter. And my wife and my other daughter were going slower and everything, my younger one. Mud was massive over our heads completely… And I love that my daughters love it because they’re not like, “Oh, we got mud under our fingernails.” They’re not like that. They’re like, “This is awesome, this is great.” I mean, we were literally full of mud in our mouth, in our eyes. We were just like, holy cow. And then afterwards, you wash off. It was great. Overall, real quick, Dan. We’ve been going to this place, the Hard Rock in Punta Cana since 2015. We got a membership. It’s like an equity membership through a company called Legendary. And we pay about 30 grand for it, and it’s worth well over 100 now.
Daniel Creech: You paid?
Frank Curzio: We paid.
Daniel Creech: Paid.
Frank Curzio: So, I already paid that. We wound up upgrading. It’s the hall of fame membership this time. And luckily we did because the service there has definitely taken a downturn, and even the hotel. A lot of these economies are all about tourism. And now, you’re finally getting back to it, right, finally. Especially international, there’s still people that are not… That refuse to fly international just in case. And they relaxed all the restrictions. You don’t have to take COVID tests, you don’t have to wear masks there where we were. You could see the difference in quality. Where they have 5,000 employees at this hotel, that’s how big it is. It’s massive. They have 12 pools, all-inclusive. It’s really cool.
Frank Curzio: Just they restaffed, and you could tell the difference. I mean, you’d ask for something, if something’s wrong they’re like… If you ask them twice, they get pissed at you. It’s just weird. You definitely saw a difference in quality. I wonder if anyone else is seeing that? More importantly, you’re really starting to see the difference between the gap, right. Between lower income and people who own assets and that continues. And you even see it there, where there’s a massive difference where people are really struggling because of high inflation, where you have food prices and you have energy prices being expensive. You even saw it there, it wasn’t as crowded. However, we did upgrade to the new membership because it is an equity membership, and it was great because it includes certain benefits. But what a difference.
Daniel Creech: Okay.
Frank Curzio: What a difference in the food. You thought you were getting okay food, no, it’s such a difference, right. I’m like how come you don’t feed this to everybody? Meals being cooked in front of you and stuff is a big difference. It’s something I can pass on to my kids. But it’s amazing how people are paying up for services or paying up for vacations, experiences opposed to… You’re seeing people not buying as much clothes. You’re seeing Walmart, Target, Kohls, you’ve seeing that big shift in spending where you’re still seeing it pretty strong overall when you look at the numbers and even from the economy, but it is going to different things. We’re even seeing that in earnings, right. I mean, some of the earnings that you cover can’t be world. Stuff like that. And we can get into that.
Frank Curzio: It’s interesting to see that hey, we’re going to pay for these experiences because we didn’t go away, and that’s why we upgraded on membership. We didn’t go away really with the family for three years, it was fantastic. I spent time with my daughters. Quality time was great. I was totally unplugged-
Daniel Creech: Unplugged, for the most part.
Frank Curzio: Unplugged for the most part. You come back and you’re really busy, of course, but it’s nice to be unplugged. People are paying up for those services and experience because they haven’t gone away for a while, and that’s a great thing. You’re seeing less spending on clothes, on toys, even electronics at Best Buy on TVs and stuff. It’s just seeing that shift is really going to impact certain stocks, and we’re even seeing that through earning season so far. Talking about the experience, right. I mean, Camping World report, I know that’s a company that you cover, which is really, really… Reported really good numbers.
Daniel Creech: I’ve said on the sidelines, I like this because Camping World is run by Marcus Lemonis who is a very successful, very driven guy. He’s been on CNBC with a couple of different shows as well as guests and other things. I’ve talked about this in past podcasts, and I’ve talked a lot about this with you, Frank, because from the surface you can have a simple T-chart and you, obviously, want a great CEO, an honest CEO, and you want a solid business and you want a business model that can compound your money and you know what you’re getting. However, this business, Frank, happens to be in RVs. And what’s going on right now? Inflation is at 40-year highs, you got gas prices, even though they’ve come down, they’re still elevated from pre-levels and quote-unquote what normal levels are. And yet, this company continues to just knock it out of the park. I’ve been sitting on the sidelines.
Daniel Creech: It’s got a huge short interest. FINVIZ, which is a great free site, they put it around 25%. I’ve seen other websites suggest maybe even 30% of shares outstanding being sold short. So, when you got good numbers like this, the stock POPs people have to cover, I think it’s up 15 to 18% as we speak. They recorded great revenue. And remember, these guys are lapping tough comparisons. Meaning last year was a great year for them because what did COVID do? COVID pulled forward a lot of people to get into this lifestyle. Marcus Lemonis, on the conference call, talked about… And analysts did a decent or a good job, excuse me, about, hey, what are you seeing as far as demand? Marcus Lemonis said, “Demand is still at levels where they’ve seen compared to the best times in the history of the RV business.” What he’s worried about is manufacturers getting over their heels and manufacturing too quickly to throw off the balance supply and demand for that. Frank, do you have it up on your screen? I think it-
Frank Curzio: The stock up on the screen, yeah.
Daniel Creech: Okay. We’ll round down, and say it’s around to 8% dividend rate at current prices. Maybe a little lower than that because I don’t know if that’s taking in today’s POP-
Frank Curzio: It’s about 7% of stock.
Daniel Creech: Okay. On the conference call, this is one of the last paragraphs from Marcus Lemonis. He says, “I want to clarify because nobody has asked it today.” So far, this is just from the conference call. “We are very confident in every single model that we have run including the worst downside case that our dividend that we pay today will continue unless there’s something that we don’t know about that happens tomorrow.” Meaning, he’s aware that gas is going up, he’s aware that interest rates are moving up. They’ve gotten into the rental market and they’ve gotten in… Have you seen those commercials where they have, camping has never been more affordable? Have you seen those?
Frank Curzio: No, I haven’t seen them.
Daniel Creech: It’s basically a $5 a day deal is what it averages out. It’s a smart marketing thing. Here you have a driven CEO, that owns a huge portion of this stock, that’s telling you a huge high dividend.
Frank Curzio: You’re generating a shit load of money too.
Daniel Creech: Their cash flow is around-
Frank Curzio: Stress margin is 35%, wow. I mean, this is just a quick take on CNBC. And guys, you could see this on our YouTube page. I just bring it up so everyone can follow along on free sites and stuff. Otherwise, I bring up Capital IQ and really break down the numbers. I mean, the numbers are there. It’s pretty incredible.
Daniel Creech: And we’ll get into this in later podcasts but in the big picture of thinking about hey, where’s the world going? That’s what you want to think about as an investor. Are we going into recession? If we do, what does that mean? If not, it doesn’t matter. When you have great operating businesses with great CEOs like this with skin in the game, you definitely want to pay attention to that. You want to switch to you, Frank, on your earnings because I want to go to Eaton because that was amazing?
Frank Curzio: Eaton was great, and we definitely want to cover our earnings. When I upgraded to this hall of fame membership, which it goes 10 years, and they give you certain weeks, and you have just benefits over the long-term and a really, really good upgrade. It worked so well for me last time. It doesn’t work well for everyone. They do timeshares, and timeshares you can get screwed on a lot of time. This isn’t a timeshare. You get an equity ownership. I could sell this membership, I could gift it to people, and sell weeks and stuff like that. One of the things I said that was interesting for the amount that I paid. I was going to pay upfront, and before they’re like, “Well, financing, we’ll give you 0% over three years.” I’m like, “0%.” I said, “How is that?”
Daniel Creech: Three years? Sorry.
Frank Curzio: Yeah, three years for this membership. So I’m like, “How are you able to do that?” The people there they always upsell you at these places every time you go to make sure you go. And they’re like, “We’ll give you $500 off of this, this, and this if you just sit down.” They got this great salesman that comes and tries to sell you, right, and they’re really good. But I said, “How are you able to do that?” And he said, “Well, the upfront payment is probably about 15%, at least 20%, and once you pay that then you could finance the rest of it but you’re financing it at zero.” And they’re like, “If you don’t pay then we just take the weeks back and we’ll sell them to somebody else.” And I was like, “That’s interesting.”
Frank Curzio: Whether it’s RVs, whether it’s cars, right… Everyone always says with the car market and subprime, and people are going to get killed, and no one’s making their payments. It’s not housing. In housing, you can’t kick someone out of the house, it’s almost impossible to get people out of the house when they stop paying and every homeowner knows that. With cars, they just come and they repossess it, they take it. They take the car. They got the asset back, right, so now they could resell it, they could do whatever they want with it. It’s a big difference. Even if these people don’t pay, they could go there and take their asset back. I want to see how that plays out. Maybe that’s happened a lot, but I haven’t heard it.
Frank Curzio: I mean, I’ve been there, and they give me the pitch all the time, and usually, I never upgrade. This time, we upgraded because we haven’t been on vacation for a long time. The kids are at the age where we have access to tons of Hard Rock’s internationally, and I want them to experience internationally. I didn’t have that when I was a kid, and man, I wish I did. So this way, we could travel a bit more outside the U.S. But just different financing. Vehicles, that were surprising. I just wanted to mention that because they’re always 15%, 12%, or whatever, and that’s where they get you, right, they crush these poor families. Pay $400 a month and you’re good, yet, you got to pay for 80 years. And they destroy these people. I was just surprised at that, just that financing. I’m like, “How do you get away with that?” They’re like, “Well, you’re paying for those weeks upfront so you’re paying so we got our money. And if you don’t pay after that over the three-year period, they still cover that payment easily.”
Daniel Creech: That’s a hell of lot.
Frank Curzio: And then they’re like, “Okay, we’re going to take everything away and you don’t have anything anymore, and we could resell it to whoever.” It’s just interesting. And seeing Camping Worlds, it’s just another thing where experiences, it’s not surprising. Man, the hotels were packed. And I didn’t cover this before. Real quick. I mean, charging outrageous… I paid $50 for suntan lotion. I’m not kidding you. And you can’t get it outside the hotel. I was like, guys, I understand your mark-up shit but this is stupid. This is ridiculous, right.
Frank Curzio: Pringles were like 12 bucks. I was like are you kidding me? We have access all-inclusive. Everybody has all-inclusive there, but you have a lot of food for free. Everything you wanted to do outside of that or little things inside the hotel that they’ll charge you for. Escapology or whatever. Bowling and stuff like that. They were banging you out, man. They were just like, I don’t give a shit what you think, this is what you’re paying. Whatever they pay for bowling these days, three, $4 a game, whatever, it was $12. They just wrecked you. They were just like I don’t care. They’re wrecking you. So, you see that they’re trying to get back profits.
Frank Curzio: I didn’t want to go this direction, I’m just remember everything because I woke up a few hours ago, to be honest with you. The hotels, they’re going to run into a major problem. I know people want to travel but the hotels are really fucking people bad. Just with fees, they’re crushing you the amount of money that you have to spend. Airlines, you don’t have a choice. Hotels, you may be able to go to different hotels. But now you’re paying up, and your experience sucks, and that’s a major problem. That’s a major long-term problem. And long-term’s about two, three, four, five years, you’re going to remember that stuff. And everybody right now with inflation through the roof, they’re charging more but they’re giving you less and your experience is worse, which is resulting in you solely destroying your brand. I’ve seen this happen over time.
Frank Curzio: And I think hotels, I think airlines, you have to be careful with things like this right now. Yes, you’re making your money, you’re doing good, you’re seeing record sales. And yes, it was tough during COVID with some of those other companies, but man, that’s one of the things that I’m seeing where not only are we paying much, much, much more, the service is worse. And you’re seeing that across restaurants, you’re seeing… And you’re going to lose those long-term customers. That long-term value is what creates your business. What’s allowed me to work, where I’ve been doing this for 30 years, where when we do a financing or we’re doing an offering to buy virtual real estate whatever, a lot of people just invest because they’ve been with me such a long time, right. And I’ve invested with other people that have made me money over time.
Frank Curzio: Now, you’re seeing so many companies where well, I usually stay at this hotel, I stay at that hotel chain. I fly that airline. Even that restaurant that you eat, the service is getting worse, and worse, and worse. It’s crazy, and yet, they’re charging more and more. You’re going to see how this plays out. I mean, you’ve seen a lot of people get laid off and stuff like that so maybe the employee situation gets better for restaurants in a lot of these places. But man, that’s one of the things I just remembered. Sorry to go off on that tangent a little bit. Again, like I said, I haven’t slept much, but I’m here for you guys. Getting home 3:00 in the morning. Dan, let’s go over Eaton. Eaton is a company that reported amazing, amazing numbers. Stock’s still down 20% but talk about that. I know you listened to the call, I know that got you excited, and that’s also holding one of our portfolios.
Daniel Creech: Eaton, a powering business worldwide, they’re a power management company. It was interesting because when you read through this press release and or the conference call, you would not think that there’s any talk of recession or slowdown in economics. Basically, from a global perspective, they do business in I believe over 170 countries or something like that. It’s always interesting, Frank, from my perspective, to read through some earnings and then check the stock price. And you guess, as you read through this, you’re like all right, that’s a positive that’s a negative. And you think I’ll flip a coin because earnings are always a toss-up. The stock basically was flat. I think it might’ve even closed a little bit down. They recorded second-quarter earnings per share of $1.50. Numbers are tough to follow here so you can ignore those. The takeaway here is, it’s a record quarterly adjusted earnings. Now, that was up 9% over 2021.
Daniel Creech: Adjusted earnings just mean you have to factor in some one-offs and or different items that you don’t normally plan on all the time on a consecutive basis. They’re getting out, they’re divesting some of the businesses as well. It’s not as clear as waters where you are just vacationing probably, Frank, but it’s still a good takeaway. Record quarterly segment margins at 20%, that was a 1.5% increase. They had 11% organic growth and they were raising… Or excuse me, they raised full-year organic growth and adjusted earnings per share for their guidance. Now, cutting through all this, what was hilarious is that the question and answer started, Frank. And anybody that reads question… Or excuse me, conference calls, a little hint I give. You know the beginning of the conference call when you have the big wigs talking is going to be mostly positive, right Frank?
Frank Curzio: Of course.
Daniel Creech: And it should be. You want somebody to give you the good information.
Frank Curzio: Of course.
Daniel Creech: So, just skim through all the way to the questions and answer. First question, Frank, check this out. So, you know the results were very good, okay, and it took people by surprise. A question from Bank of America says, “So, the view among investors right now, right or wrong, is that we’re seeing an economic downturn soon. So, would your electrical incremental margins perform.” And the electrical business did great for Eaton, that’s why he’s asking this. “In an environment where a majority of revenue growth is from pricing versus sort of nominal goods, periods, and balancing volume.” All that is a nice way to say what, Frank? Hey, we’re going into a recession, what the hell’s going on? Can this really keep up?
Daniel Creech: I’ll fast forward through the answer there because it was a positive, I just said this. I want to point out another one. This is from Melius Research, I’m not sure who that is. This analyst says, “Okay.” He says, “This all sounds super positive, in fact, almost too positive. I have to ask a question here. Do you have a sense of where investments are in each of your key end markets?” There’s a little bit of a buildup going on here. Take away. You’re basically asking the CEO of this huge company, who’s doing record profits, hey, what about the recession? Everything’s slowing down, you guys can’t be increasing margins.
Frank Curzio: Is it sustainable?
Daniel Creech: Is this sustainable? And the CEO keeps basically saying, “I know it feels too good to be true, but yes, we see strong growth, we see strong momentum.” They’re growing basically every business. They’re talking about how their electrical components business is done on a project base. Meaning, people aren’t spending money on these components because they’re going to do this in six months, they’re doing it right now. Now, the tough question is okay, is this guy just… Is the CEO and management team of Eaten just a bunch of cheerleaders and they’re basically lying? Or, are they just telling you what the data tells you?
Daniel Creech: And from an investor, that’s one of the reasons why investing is just as hard as golf, and I mean, golf from a mental perspective, Frank. Because when you’re seeing the world around you yell and scream recession, and you have a company in the heart of things on a global economy talking about strength, and growing their businesses, and growing market share, I just can’t believe the stock was flat to down. If you read through these earnings results and this conference called transcript, I don’t know how the stock doesn’t pop. It’s pulled off well off its high. Did you say it’s down 20% from its recent highs?
Frank Curzio: It’s down 20% from its recent highs. So, here guys. If you’re looking at the YouTube page, let me show you what I’m doing right now. I’m just showing you a chart of Eaton right now on CNBC. Again, symbol ETN. And you could follow along and just showing… Let me put this back up. So, year-to-date was still down about 20%. 175 was its high, it’s about 147 right now. You’ve seen a big bump where two weeks ago it was 125, and you’re already at 147. Again, the whole entire market really came back.
Frank Curzio: And just to bring you guys in perspective here when it comes to conference calls, everybody gets to listen to them, but you have the analysts from Bank of America, the sell-side analysts, are the ones that ask questions. And you could find the transcripts for free in so many places, just Google them and you could read them. Some of these questions are good. That’s where the meat is and they’re questioning if this could continue. The stock is still down and you’re looking at margins through the roof. Maybe margins come down. I can see it still pays 2.2% dividend yield. We’re looking at a FOLD P of under 20 so we’re not looking at a company that’s very, very expensive. It’s a company that is growing revenue, growing sales, has huge margins, it’s seeing strong business. What we pay for is Capital IQ.
Frank Curzio: So, I’ll go into Eaton Corp and I’ll go into segments, and I change it to percentages just to see where some of the revenues are coming from. You see electrical America is one of the divisions so is electrical global. I’ll try to make this a little bigger for everybody. Give me a second. Again, you can find this on YouTube for free, guys, but I’m explaining because I know a lot of people have it through YouTube. Or listen to us through iTunes. You’re looking at Aerospace a decent market. And all these things are pretty much up year over year and just up tremendously. It’s not record, right, you might be in a record quarter. This is annually. I want to see where a lot of this business is coming from. And you’re seeing the revenue is coming… The U.S. is 10 billion and out of the 19, but it’s about 50%, so they’re doing good across the board. They have a big presence in Europe, which is interesting. Electrical components in Europe I guess are killing it because everything in Europe seems to be getting crushed right now.
Daniel Creech: And they are seeing some weakness over there. It’s not as strong as other ones, but they have a good print there.
Frank Curzio: Even with currency issues, we talk about when you’re doing a lot of business overseas could hurt you. That’s why you’ve seen a lot of companies say X currency, reporting X currency. We haven’t seen it with these guys. It seems like they’re doing very, very well across the board. They look like they’re diversified here. Their margins are strong. That question’s justified, Daniel. Could this continue?
Daniel Creech: Oh, they absolutely are.
Frank Curzio: Listen. With CEOs right there when you say, “Can this continue?” I’m going to tell you, right. So, you’re down 20… You always want to be optimistic because the last thing… Not always be optimistic, but you don’t want to be overly optimistic and miss your numbers because that’s when analysts get pissed off and you’re going to get a ton of downgrades, and you catch them offsides, and they look like assholes, and they hate that. They hate that, the analysts. So, for him to say this with the stock down 20%, and a lot of companies saying, “Listen, we can’t really predict the future.” We know inflation what the Fed’s going to do and all this, it was your chance to warn and be conservative and they weren’t. They weren’t overly optimistic though, Daniel.
Frank Curzio: I mean, I saw that the numbers, where they came in, and they said, “Listen, this is what we’re expecting,” and it basically meant the estimates, the projections. So, it wasn’t like we’re blowing them out, but they just said, “Hey, these are the estimates right now, this is where we’re expecting. They have a nice yield, nice business model. They’re seeing demand.” And it was a chance for the CEO to really temper that down, and the fact that he didn’t is good news because he wouldn’t have got punished for it. He’s just like, “This is what I’m seeing right now.” And these guys really project. They’ve been around forever, they’ve been through ups and downs. Right now, I believe them, and probably a good time to buy the stock, especially that it’s still down 20% off its high, it’s not really expensive, trading a little bit of premium to the overall market, paying a nice dividend. But this is a company that’s in a prime spot in the market where it’s seeing strong revenue growth, strong earning’s growth, and their margins are being maintained right now, so they have pricing power.
Daniel Creech: And it’s still dealing with the world problems that everybody else is. They note on the conference call that, “Hey, we’re still dealing with supply chain issues. Some of the sales would’ve been better if we could’ve gotten all the components or all the materials needed.” They have a record backlog, you need to take that with a grain of salt because backlog just means future orders on the books that you’ll turn into revenue at a later date. However, that’s going to naturally go up. If you have supply chains affecting you getting components to do the job, obviously, that’s going to go back to the backlog so you can take that with some salt. But overall, those numbers didn’t match up with a crazy slowing economy, so we’re going to have to watch this unfold.
Daniel Creech: When I was reading through these numbers, it was hard not to get bullish about this stock because yes, the CEO’s bullish, but he wasn’t overly bullish. And when you have a company like this with a pulse on the economy, from a global perspective, it’s definitely one everybody needs to pay attention to. It’s in our Curzio Research Advisory portfolio. And it’s up a little bit. Obviously, it’s not up as much as it used to be as it’s pulled back with the overall market. But this isn’t a company that you can’t sleep at night if you own shares, Frank. It’s all about sleeping well at night.
Frank Curzio: It is.
Daniel Creech: I say that because I know you’re dead tired.
Frank Curzio: No. I know I am dead tired. But it was funny because I saw MicroStrategy CEO come on and he was talking about Bitcoin, and he was really cool about it. He wasn’t this arrogant guy that’s… You got to buy Bitcoin, are you crazy. He just made sense when talking about Bitcoin and being very transparent. This is a quarter where you have to listen to these conference calls. You listen to the transparency from these guys going through the situation. What are they cutting back? Some companies are cutting back sharply. You saw Robinhood again lay off more employees. Some businesses are doing that more often, especially in technology. This is a chance to really dial down the businesses, how they’re cutting costs.
Frank Curzio: And remember, business is terrible right now. Stocks are down tremendously still, even though a lot of them are up off their highs. We’re seeing still they’re down 20% off their highs, right. I mean, they’ve come off their lows pretty sharply over the past couple weeks with the market bouncing back but they’re still down 20% plus a lot of these names. Some of them down 30, 40% plus. Now they’re cutting costs. So now, when you cut costs your earnings are automatically going to be pretty strong, much, much stronger, right. You’re cutting salaries, expenses. You’re going to take charges on that.
Frank Curzio: But now, look, six months from now, now you’re a lean business. And say six months from now the Fed’s like, “Look, we’re done and we’re going to start lowering rates.” Now, you have a business that’s lean, that’s cheap, and now business is going to start to come back. That’s when you see these things absolutely explode so you need to pay attention to these conference calls and listen to these companies. Because as they’re cutting back, there’s going to be lots and lots of great opportunities once business starts getting better for these companies, and it will, right. A lot of this stuff is cyclical, it goes up and down up and down. We saw that in oil, we see that in a lot of consumer names, we see that all across the board. That’s the chance to really buy some of these names when they’re cutting costs, they’re going to be lean. Yes, business is weak, but the stock’s going to fall 20, 30, 40%. Some of these names are getting nailed.
Frank Curzio: Look at crypto. Crypto’s starting to bounce back a little bit. 23,000, 24,000. Again, it was a lot higher I know. And people don’t look back when it was trading $40 10 years ago, or even $6,000 five years ago, four years ago. A lot of those crypto names, as it bounces back, and you see more trading coming in, and more institutions and more regulation coming… More institutions coming into this market, you’re looking at the Robinhood’s, you’re looking at the Roblox’s, you’re looking at a lot of these names within crypto, within the metaverse. I mean, they’ve gotten hit so hard that these are the names that will bounce back tremendously, especially now, they’re becoming lean and going through this change in business sentiment and cycle really for the first time some of these companies this big where they have to learn how to cut costs. And again, it could be lean. And when business returns back to normal some of these industries, you’re to really see these things take off.
Frank Curzio: The last thing I want to talk about is AMD really quick before we go. I thought AMD numbers were pretty decent. Stock’s down from 160 to 100, Daniel. It’s still trading at 23 times forward earnings, right. That’s where we have to look at technology. A lot of these names have gotten killed. And yes, again, the past two, three weeks, we saw a big bounce. We told you this was going to happen. Not to pat ourselves on the back because sentiment has never been worse in the history of the markets. There hasn’t been that many people doubting that negative when you’re looking at all these indicators in the history of the markets right now. This is more than COVID, more than credit crisis, more than the ’87 crash, more than the 2000 recession, more than World War II. I mean, holy cow, your ’80s inflation worse ever. You’re going to see the balance which we got, but now it’s not being super bullish at these levels but technology companies are still tremendously overvalued.
Frank Curzio: I will say this. When I dug down, AMD, Daniel, you’re looking at data centers. People see the sales up 83% that’s because they took over Xilinx so they got that revenue. Record process of sales for Notebooks chipsets, that surprised me. Dell, HP, Lenovo, I mean, selling a shit load of computers right now which all have AMD processors now. Remember when they used to have Intel? Gaming also strong, sales up 30% plus. A few takeaways. AMD did warn of the decline of PC sales going forward, that’s why the stock hitting hit a little bit today down 3%. The cloud expected to be strong, but they said not as much for enterprise. Meaning that they’re seeing a slowdown in business spending across the board which is interesting or they’re preparing for that. So, you’re seeing that business spending slowing with AMD, and we’re seeing it I think in the big technology companies which shows that what the Fed is doing is working. You’re seeing slowdowns, right, in businesses.
Frank Curzio: Lastly, when you look at AMD, Daniel, I don’t know how familiar you are with this company. I’m very familiar in the Kramer days in 2006, seven, eight. This was the shittiest company in the world. And the only reason why they were alive because Intel had a monopoly, and they were like we have to keep somebody alive, right. It was a $2 stock in 2016 it was. Just crappy. Now, look at this name and how far they’ve come. Yes, it’s down off its highs and I get it, that’s fine, but you could see this still taking market share away from Intel. They’re still crushing Intel. If you look over the past month, you look at Intel is down over 20%, AMD’s up 6% even with today’s move.
Frank Curzio: But between AMD and NVIDIA, you look at Intel’s management team. And it just goes to show you, if you’re a business and you’re successful, you got to stay on your toes, man, and you become AOL, you become BlackBerry. I don’t how big you get, you always have to learn how to innovate, see what’s going on, hire the right people. You always have to be ahead of the market to try to be ahead of the market. I know it’s difficult, but you can’t just sit back. And Intel just sat back on what they’re doing. Where NVIDIA, look where… I mean, the market share then NVIDIA, AMD has taken away from Intel is an absolute joke now.
Frank Curzio: And just see where Intel is, no clue. It was supposed to get what was it? The seven, nine-meter chip out, and three years ago, everybody beat them to it. It’s amazing to see the difference in these companies where they just took all the market share, all the growth. And you have to think since 2015, down 2014, where we’ve come with crypto, with gaming, with AI, with EVs. All these massive markets that need millions of chips all throughout, and Intel it’s like they missed it, they just missed it, and they’re still missing it. Microsoft missed the mobile boom, they missed it. They messed up. They ‘re like, “Holy cow, we missed this completely.” But you know what? They didn’t miss cloud completely. They got in a little bit later than then Amazon, but they got in and look at that transition Microsoft did. If they didn’t get to cloud, where would Microsoft be? Microsoft would be maybe the 50th, 60th largest company instead of the second behind Apple in terms of market cap.
Frank Curzio: You have to be able to adapt, try to see what’s coming. I know it’s difficult but you just can’t sit on your hands even though you have market share across the board. Where Intel was controlling all the governments, all the market, and now look where they are. They’re still playing catch up after five, six years, and it’s just sad to see because Intel is just a stock that everyone followed for a long time. Nice dividend, nice cash flow, but at the end of the day, you’re a technology company you have to see growth. This company’s not seeing growth anymore and that’s why Intel got nailed, and it’s still getting nailed. People thought it was the end. It’s great, it’s good stock to own even in this market. It’s a bad stock to own it in a shitty market, it’s a bad stock to own in a bull market.
Daniel Creech: And I’ve been wrong on that.
Frank Curzio: And the therefore you can’t own Intel. You can’t own Intel until they change something or do something right you just can’t own Intel. It’s insane. They’re probably going to get acquired next week or something, right, if I said this. They may at this price, they are cheap but again, cheap doesn’t translate into a good stock price. It means that if you are really, really cheap it means that you’re not growing usually, and that’s why you don’t have that growth multiple like your competitors. It’s just sad to see these guys just fall by the wayside with AMD. I don’t know how much you covered that stock, but wow, just for a transition.
Daniel Creech: I don’t but I’ve been a fan of Intel thinking man, they’ve dropped the ball for so long, at some point you think they would get their act together. And their latest quarterly report was terrible. I got to give a little cred to management saying, “Hey, this is pretty bad, we got to do better.” The stock dropped I think eight or 9%. It was right after I said, “Hey, if you’re in a long-term, I like this,” then they reported it and made me look like I have egg on my face. Intel continues just to whoop me.
Frank Curzio: No. It’s a name that we’ve had in and out of our portfolio, but it’s just sad to see because I know so many people want that value, and good cash flow, and dividend, and buybacks, and stuff like that. But at the end of the day, you’re missing a lot of the biggest growth markets, and it’s never been a better growth market than it is in terms of chips. Yes, you have supply chain concerns, but man, chips, holy cow, going into everything, and some companies are getting it done some aren’t. This whole industry’s not taking off anymore, it’s just certain players are taking off. I like AMD here. They’re seeing a decline in certain segments of the business, I get it. And Nvidia as well is down tremendously, still an expensive stock, but man, just when I look at Intel and where they are, they should be doing well right now and they’re just not. It just surprised me. It’s crazy, it really is crazy.
Frank Curzio: That’s it for us. Daniel, thank you so much again for covering my butt, which I definitely needed to be away for a week. Really, I wasn’t dialed in at all, it was nice, it’s refreshing. Not as refreshing today, since again, I’m only on four hours sleep, but it’s refreshing just to get away and clear your head and come back. I’m excited to really go crazy with this market. I love earning season, a lot of fun. Dan, thanks for keeping down the fort, buddy, I really appreciate it.
Daniel Creech: Hey, absolutely. Like I said, best thing I get to do. I told everybody last week, I can’t believe I get paid for this. Don’t have any change of hearts there, Frank.
Frank Curzio: Wait until you’re wrong on everything and you get all those emails, you’ll say, “Holy shit, I need to get paid more for this.”
Daniel Creech: Well, we can talk about that as well.
Frank Curzio: You got it, buddy, you got it. Thanks. All right, guys. So, any questions, comments for me, I’m at firstname.lastname@example.org. That’s email@example.com. Or, you can email Daniel at-
Daniel Creech: firstname.lastname@example.org.
Frank Curzio: All right, thanks, buddy. Again, I can really appreciate all the support. Glad to be back. And I’ll see you guys tomorrow, take care.
Announcer: Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decision solely on this broadcast. Remember, it’s your money and your responsibility.
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