SOTS 2nd Hour: Not On Target, Cutting the Cord, & The Nvidia Earnings Playbook 11/20/24

Sara Eisen (0:07)

Good Wednesday morning. Welcome to another hour of Squawk on the Street. I'm Sara Eisen with Carl Quintanilla and David Faber, live as always from Post 9 of the New York Stock Exchange. Stocks are under a little pressure today. S&P's down about half a percent. Most sectors are lower. Energy and healthcare are your standout winners. Consumer discretionary at the bottom of the pack. Target Story, among other names, weaker today in that group. Consumer staples, information technology, communication services, they're all lower today. NASDAQ's down about three quarters of 1%. We're still higher, though, overall for the week after last week's losses as we get into Wednesday and ahead of Nvidia earnings after the bell, which will be super important. Netflix, though, higher. Warner Brothers, some of the media names higher, bucking the overall trend. Take a look at Treasuries. Again, higher yields have been the story, and that continues today. 4.4 on the 10-year yield. So we're not quite at the highs of, say, this cycle we've been in, but again, another day of selling of Treasuries with higher yields. 4.3% on the 2-year. It's a light week for economic data. We're 30 minutes here into the trading session. Here are some movers we're watching. Target shares slumping on pace for the worst day. Since all the way back in May 2022, the retailer missing earnings estimates, cutting its full-year forecast as well. Exclusive comments from the company COO for you in just a moment. Delta Airlines under pressure, the carrier holding its investor day saying it expects revenue growth in the mid-single digits next year, which is in line with the roughly 6% growth that analysts were expecting, but the stock is still down about 4.3%.

Our parent company, Comcast, planning to spin off most of its cable networks. Shares giving up earlier gains. Much more on what that means for investors and the entire media landscape later this hour. Also just mentioned Bitcoin because guess what? Hitting new all-time highs again. Crypto-related names riding the rally. Coinbase and Robinhood among them. Some rumors of who President-elect Trump might be looking at potentially for the head of the SEC, playing into that potentially coming from the crypto space. Every day there's a new catalyst, Bitcoin going higher.

Carl Quintanilla (2:11)

Micro-strategies up another 11 percent. Remember that Michael Saylor?

David Faber (2:14)

It's almost a $100 billion market value. Now in the top 100 market caps?

Carl Quintanilla (2:19)

Micro-strategy? I think it may be. It's almost a $100 billion market cap.

Sara Eisen (2:22)

Their balance sheet is all Bitcoin. They've gone from a tech company to a pure-play Bitcoin company. It's been a good bet and a good ride.

Carl Quintanilla (2:28)

It's only up 663 percent this year.

Sara Eisen (2:31)

Not bad. He keeps buying.

Carl Quintanilla (2:32)

Yeah.

Sara Eisen (2:33)

He just buys.

Carl Quintanilla (2:33)

It's about another $4 billion, something like that.

Sara Eisen (2:36)

Let's talk about Target, though, because I think that's key to focus on as it relates to what it tells about the consumer, and what it tells us about Target overall. So the big disappointment, Target's been having a challenge with sales and growing sales. The big disappointment in today's numbers was the earnings miss, because Target had been a good earnings story as well. The margin miss and earnings, earnings missed by 19%.

And it was driven by weaker Com Store sales, even lower than the market expected, and a 100 basis point gross margin shortfall. They have two issues, macro for sure, and where consumers are spending and how they're spending, and market share, clearly after the good quarter that we saw out of Walmart. I did speak with the COO, Michael Fidelke, about what the story was here when it comes to Target and what they were experiencing. Look, he started out by pointing out what he was pleased with on the good side and said traffic was higher, it was strong. That's good. Another bright spot he said was digital, which grew double digits and was an acceleration. But of course, Fidelke noted the disappointment in the earnings story. And the way that he explained that is he said softer than expected discretionary performance in categories like apparel and home, which are typically more profitable. So we lose the margin there and it shows up in the bottom line. Now, clearly that was part of the issue. Cargates more of a discretionary play than Walmart. The food business did well, the beauty business did well, but apparel was weak. Apparel sales, he said, were down slightly, which is a deceleration. But he said there's hope on the way because cold weather is coming, and that should boost demand for things like coats and sweaters, which they haven't seen. Homes and hard lines has also been a tough category and softer for them for a while. As far as what they're expecting for the holiday season and how he described the consumer overall, I said, did the consumer turn down? Are you seeing a weaker consumer?