Super Micro stock sinks, CrowdStrike earnings on tap: Catalysts

On today's episode of Catalysts, hosts Brad Smith and Madison Mills break down some of the biggest stories of the trading day, from sinking shares of Super Micro Computer (SMCI) to the rising prices of cocoa (CC=F).

Super Micro Computer (SMCI) stock is under pressure after the company announced it was delaying its annual report. This move comes after claims from short seller Hindenburg Research alleging "accounting manipulation" at the company. Defiance ETFs CEO & CIO Sylvia Jablonski suggests that if SMCI can demonstrate they have the situation under control and their accounting is accurate, "then this is a great buy on the dip opportunity." She highlights the stock's impressive growth over two years, the company's leadership in cooling data centers, and the upcoming 10-for-1 stock split scheduled for October.

As consumers show continued signs of weakness and tighter budgets, HSBC has downgraded the consumer discretionary sector (XLY) as a whole. HSBC Global Chief Investment Officer Willem Sels explains that financially healthy consumers are spending more on services and leisure than discretionary items. However, he emphasizes the importance of distinguishing between companies within the retail space: "you want companies that have the pricing power because of their positioning."

Toy giant Lego has reported double-digit sales growth year-over-year in the first half of 2024, rising by 13% in a "toy market that's not growing right now," according to The Lego Group CEO Niels B. Christiansen. Christiansen sits down with Yahoo Finance executive editor Brian Sozzi to talk about Lego's fundamental building blocks that continue to make the brand a standout among consumers. "The appreciation of the fact that playing allows you to gain some skills and to really develop your brain, but also a lot of skills that you need through life, I think that's actually well appreciated by parents and kids really like it," Christiansen says, later adding: "The Lego brand is just such a good bridge between digital and physical."

The price of cocoa (CC=F) is still trading over 128% compared to a year ago due to increased weather incidents and crop disease which have led to supply shortages. Saxo Bank head of commodity strategy Ole Hansen explains why prices may be out of control for some time, perhaps as far ahead as 2026: "That really is a combination of two things: first and foremost, that the farmers are receiving more for their product. They can spend more money on fertilizers and also pesticides, which is a key right now due to some diseases they have in some of the crops. But also that we see the weather continue to improve..."

Meanwhile, CrowdStrike (CRWD) will release its first earnings report since the massive software update triggered global IT outages in July. Citi US software equity research co-head Fatima Boolani notes that investors will be specifically looking at guidance as they look to rebuild their confidence in the company. "There is absolutely an appetite for this company to frankly just throw the book at guidance, just every possible parameter or permutation that they can throw into guidance and frankly, de-risk the numbers is exactly what investors are looking for," she explains.

This post was written by Melanie Riehl

Video transcript

Welcome to catalysts, everyone.

I'm Brad Smith alongside Madison Mills.

We are 30 minutes into today's trading session.

We're watching three catalysts today.

Invidious high stakes earnings, retail results, painting a mixed picture of the consumer.

And oh yeah, that fallout from crowd strikes.

Massive outage.

That's right, the first of the day that we've all been waiting for the biggest stock in the market and video Second quarter results out after the bell contributed to about a third of the S and P 500 games so far this year.

How much could the stock potentially move the rest of the market?

We will tell you all about that, and retail results are giving us a mixed picture of the US consumer.

We heard from foot locker coals and oh yeah, a Crombie and bitch rising sales for some of the raising sales.

And we've got some muted outlooks for other, signalling an uncertain environment for ahead here we'll talk to a strategist who just downgraded consumer discretionary and we're going to talk about that outlook for the sector in just a few moments and crowd strike reporting results for the first time since the massive global outage that affected over 8 million Windows devices and impacted a wide variety of sectors.

Airlines, banking, health care, just to name a few, will discuss how much of a hit the company could see to its revenue.

All right.

But first, investors racing for a potential big market swing following NVIDIA's highly anticipated second quarter earnings results to be released after the bell Today, the chip giant is 6% of the S and P 500 market cap and has accounted for about a third of its gains so far this year.

We spoke with a big NVIDIA bear in the morning brief David Bonson, chief investment officer of the bonding group.

This is what he had to say 70 times earnings, with 100% earnings growth priced in, uh, there's absolutely no margin for error and on a go forward basis, there's no doubt that there will end up being some snafus.

Some revenue hiccup, some margin compression, Uh, that will throw a lot of water on this party.

From one replay booth to another.

NVIDIA has outperformed for the last several quarters here, rallying 1000% from October 2022 lows, and most analysts are still confident that it will continue to do so.

Stock has 66 by ratings on the street here.

So with all of this focus going into the report, of course I was taking a look at some options.

A I movements and what could potentially take place going into this print that we're going to get later on here and the expected move.

As of right now, we're still looking at a potential move of just under actually now just over 10% post earnings here.

And so that's the type of swing we could see in one direction or another, based on options for the ticker symbol NVD.

A.

But it's going to be a larger question of some of the themes that our own Dan Halley has laid out.

What is the business look like in terms of the strength in China?

What do they talk about there and what they're delivering into that region?

And then, additionally, what is the overall status for a I demand, as seen through, or as via the Gospel?

According to NVD, a NVIDIA.

Right now that's 100% right, Brad, and we have to remember that even though David kind of threw cold water on me at this idea.

40% of the videos revenue comes from a couple of hyper scalers.

Sure, maybe that's a risk long term, but we've already heard from those hyper scalers.

I'm talking Microsoft meta Amazon Apple and they have all across the board said they've increased their A I spend.

That means more revenue to come for in video.

We are expecting 70% quarter over quarter earnings growth from this company.

I don't know how you going to an earnings report with that kind of anticipation and not see a move to the upside if the company is able to deliver.

But the of course is the degree to which the street thinks that delivering on those expectations is enough is is meeting the bar going to be enough, or do they have to far surpass that bar to be able to make the street happy?

It's going to come back to the corporate partners as well, and video has done a great job of making sure that on the B to B side of the business that they are seeing not just contracts come their way, which is what they would summarise as demand, but also the partners that are willing to say OK in our vision for our own data centre, we committing for not just this amount of chips but also building out our data centre even further.

And so we could potentially see as we've talked with some analysts about in this most recent few weeks as we lead up to NVIDIA's earnings, what could potentially one day be a 1 million chip data centre?

You got to imagine what that would be not just for video, but a rising tide for the entire chip space as well.

Here.

Yeah, really great point.

And then will we see more competition in the space?

Or will it continue to be NVIDIA as the big shark in the room?

Let's turn now to a broader story we are looking at.

And that is the cracks showing in the US consumer, another key driver for markets today.

Earnings reports from coal and Abercrombie and F generating mixed reaction from investors, leaders of both companies pointing to the more challenging and uncertain environment as shoppers pull back on discretionary spending.

So what impact can we expect this to have on the broader market here to join us, we will sell.

He's the global chief investment officer for private banking and wealth over an ABC.

Well, thanks so much for joining us.

I want to get to your downgrade of the consumer discretionary sector in just a second.

But I want to start on the market action that we are seeing for some of these retailers today.

Name like a Crombie and Fitch was down over 14% the last time I was able to take a look at it.

Is that an icra story, or is it a story of consumer weakness that could potentially lead to further pressure that could bring down the entire market?

It's about positioning.

I think of companies in the sector and as well.

So what we are seeing in the on the consumer side is not necessarily that consumption is falling, but that you have more of a bifurcation what we call a K shaped consumer.

So at the top end, Clearly, some consumers are benefiting from the healthy housing sector, a healthy stock market where else although inflation is falling, prices have not yet fallen, so people feel they are still not better off So it's clearly a question as to where you are positioned.

So if you are a company in the leisure space, in the hotel space, in travel and entertainment, those kind of things typically you are in a better environment than if you are in, you know, in the lower end, where competition is fierce, you talk earlier on the show about value.

You know there's a fierce competition in terms of having the rise price point so very much a stock pickers market where people need to differentiate.

And so, from what you're hearing from some very specific or specialty retailers, as of right now, what they're having to do just to move through inventory some of the deep discounting that they're talking about, some of the promotional price that may persist even from this point forward, even on things such as footwear.

What is that signal to you as we're moving through a period of the summer months where consumers are known to cyclicality wise, prioritise more of that services spending versus goods, and then on top of that, we're about to go into a very highly promotional period?

What is that pass through and that read through look like then for some of these specialty retail.

So as you are saying from a consumer perspective, people feel very differently when you are looking at consumer surveys and different surveys tell you different things.

Different types of consumers feel very different about their purchasing power, the state of the economy and so on.

And as you are saying as well.

And that's why I mentioned leisure, hotel business and so on travel and entertainment, because people are shifting the share of consumption more and more towards towards experiences rather than accumulating goods.

So it's all about finding those companies that are that have the pricing power and that are positioned in the right space to tailor to this, uh, you know more to the entertainment space, more to the services space and more to the higher end, we we often see the mindset of the consumer really hinge upon what the prospects for employment look like.

If we see an unemployment at the next reading come out on a five handle at some juncture, what does that do for the consumer psyche?

Ultimately, it should start to have an effect, that's for sure.

When it rises significantly, people have been talking about a half a percent rise, triggering that I think it also defends as to relative to previous cycles that you come from a very low base.

So if it comes from a very, very low base to a low base, then maybe it has less of an effect than if you go.

If you start a moderate level of unemployment and rise from there, because it's a question as to how afraid am I to lose my job and there It's important to realise that although we have fewer companies that are hiring, there are still there is still quite a low number, historically speaking of companies that are firing so that lowers somewhat limit the concern of consumers about losing their jobs at the same time.

As we said, wage growth is still relatively decent, inflation is falling, so the real spending power is rising.

But indeed, people are much more differentiating and choosing where they put their money to work.

So how much of this weakness that we are seeing is real versus kind of a feedback loop where people like me admittedly come on and talk about the risks of a section because I'm getting bank notes all day that tell me that people are still worried about it.

And then that leads to executives being worried about increasing hiring.

They may be focused on attrition instead of layoffs.

But is that feedback loop was making us start to see some cracks in this labour market?

Or is there a real sickness there that maybe we are not paying enough attention to?

In other words, the fear of fear itself is what you are talking about that is ultimately a risk.

I don't think it is very high because if you look at corporate confidence in itself, Corporates not just in the consumer space but in other sectors as well.

If you add it all up, Corporates are making records, amounts of profits and margins are near record highs.

Profitability is being boosted, obviously by to some extent, improvement in innovation and productivity that we are seeing.

Interest rates are going to start to fall, and cost pressures, especially on goods, are easing as well.

So companies are in a healthy state again, more bifurcation between the big and strong ones versus the weaker ones.

But Corporates are generally in good health.

If that is the case.

I don't see a very sharp deterioration of the market or a sharp pick up in firing.

But indeed there is an easing of the labour market pressures that, by the way, helps the Fed.

But it leads to a picture.

I think, where the US economy is slowing but not stalling and recession risks are low.

Let's get to that downgrade to the consumer discretionary sector that you did too neutral, You said the sector needs a selective approach as some companies and some sections struggling more than others walk our investors listening to this through that.

What is the mindset for that stock picking narrative and thesis that they should be applying to their own stock picking?

So it comes back to that case shaped consumer where you have some consumers feeling healthy, being secure in their jobs and therefore choosing to spend more than others but also choosing to spend more on those services.

More on that leisure on those hotels and so on.

Those are the types of companies that you want in of positioning within the sector and then and then within those even within those buckets, we need to distinguish between the weaker and the stronger ones.

Because, of course, if you have a weakening economy, you want companies that have the pricing power because of their positioning.

They are in the market and their pricing power.

So those are the types of companies that you want to look at when you have a bifurcated market.

It's natural to be neutral rather than overweight or underweight.

There are opportunities, but there are also companies to avoid.

Willem Sales global chief investment officer for private banking and wealth management at HSBC William Great to see you.

Great to have you back on Yahoo Finance.

Appreciate it.

Real pleasure.

Thanks for having me.

Thank you.

Coming up, everyone.

Which stocks are well positioned to weather market uncertainty.

We'll talk to the CEO of defiance ETF S about her top picks.

Next There is a lot of uncertainty ahead for markets with rate cuts on the horizon, debate about the health of the consumer and the US election in November.

Oh yeah.

So which stocks are best positioned to weather any and every storm?

Our next guest has a few names in mind, including Broadcom, MicroStrategy, Super Micro Computer and Eli Lilly.

We've got Sylvia Jablonski here in studio.

She is the CEO and chief investment officer of Defiance ETF.

Sylvia, Great to have you here in the studio with us.

Good morning.

Thanks for having me.

Absolutely.

OK, so let's start if we may with Broadcom.

That's one of the big, bigger moves that we're tracking here on the morning.

Uh, we actually spoke to another bull on the stock last hour.

David Bonson, chief investment officer of the Bonson Group.

I wanna see what he had to say.

I wanna play for you What he had to say, and then we'll get your reaction on the other side.

Sounds good.

Broadcom to me is not about, uh, the A I chip story.

It happens to be up about 500% since we bought it, largely because of a I, but it's a free cash flow growth story.

All right, so So take us here into your thesis on Broadcom, and I mean contrasting.

Comparing that to what you heard from David.

Yeah, I. I agree with David.

I think it's a great revenue growth story.

It's one of the top leaders in the chip names.

You know, everybody is focused on.

But you know what else in chips is moving?

It's Broadcom, and I think what's interesting about this stock is that it's part of the telecommunication.

You know, the telecon connectivity trade, right?

So it's part of that six G, the lower latency, the you know, network services, wireless communications that that's what their chips feed.

And if you think about a I and what we need in order for a I to work and for supercomputing to work, it's processing data very, very quickly.

And in order to do that, you do need the Bron Broadcom chips and you need that six G connectivity.

So I think that there's a, you know, big win for that stock in the future.

Is that an anticipation that Broadcom is going to take more share from NVIDIA or is it specific to the Broadcom story?

I think it's specific to the Broadcom story, which is great, you know, in a way, they don't compete with NVIDIA.

They kind of go at it in a different in a different way because they are focused on that data.

You know, that data centre which they compete a little bit, but they have the wireless focus.

So I think it's it's, you know, the cousin of NVIDIA if NVIDIA goes up, but come also go up and we've levered it up, too.

We've put a two X leverage point on it, too.

So having that tradable product out there with leverage also increases the amount of shares that people buy on a daily basis.

You know, it's really interesting because I I I'm trying to figure out for Broadcom.

Where do they sit in this?

A. I stack here because you have the applications on top of the models on top of the chips.

I mean, where specifically for investors that are trying to wrap their name around where they'll see a delta in Broadcom's business as a result of demand that the company is talking about where they should fit them within that stack?

Yeah, I think that they should.

They should fit them specifically in the tech connectivity bucket.

So if you think about things like smart cars, robotics six G, five G, you know the evolution of smart cities, the evolution of way that we communicate, you know, chat, GP, T all the data that we consume.

It has to come at high speed and be processed and things like this.

And I think that Broadcom plays well there.

I wanna talk to you about micro strategy.

I know this is one of your plays, and, uh, we have had the fascinating opportunity to speak with Michael Sailor several times on our programme.

So I want us to take a quick listen to our sound bite from Michael Saylor.

He is the chief executive chairman over at micro Strategy.

Take a listen.

We're buying all the time.

We're buying every quarter we're buying the the lows, the mids, the highs.

You know, I'll be buying the top forever because I'm expecting Bitcoin will continue to appreciate as digital capital.

So he's basically saying that we're we're buying even at the highs, right?

I'm not just buying the dip.

And, of course, that was in a week where where Bitcoin was moving to the downside.

But I I'm fascinated in his maximalist bullishness on crypto and Bitcoin, and he doesn't seem to ever want to sell it to make a profit.

How does that play into your thinking on the longevity of micro strategy?

Well, a couple of things I think you know the company is profit on their software and business intelligence sales.

But as he said, he is the best dollar cost average of Bitcoin that ever walked this Earth.

And he continues to do it at low as mediums and highs.

Right?

And that's I mean, that's kind of what we preach for investing right?

You can't time the market.

He just knows that he has to use his cash and buy it up, because long term, he's very bullish on this and it's paying off.

If you look at what happened to Bitcoin in like January February March, when it was up about 60% this stock was up three times that.

You know it's still tracking 2 to 3 X Bitcoin 2 to 3 X time, you know, multiplied by the performance of the Bitcoin ETF S out there.

This is another one that we actually levered up, and the the demand has been probably the fastest that we've ever seen in an ETF before.

People love Bitcoin.

They love the volatility.

They love the leverage versions of it and micro strategy is proving to be an awesome proxy.

For that, I mean, for Cryptocurrency, it's so interesting to track how it trades around specific events, whether it be events like ETF approvals or having.

And so you know, what is the next major event that we could see?

Uh, a dollar cost averaging type of momentum, or or or trade initiated from a whale like micro strategy as a result of knowing what we've seen in the past off of those events and and the volatility in some cases, but also the spikes as well.

Well, I think, you know, if you look at what happened over the last couple of days, if he's, you know, picked it up this morning and it goes back to where it was a few days ago.

Right there.

He's got a, you know, $4000 worth of gains on his crypto.

But the election could be interesting, you know, Suddenly everyone in politics is very bullish on crypto.

And if you get a president who's kind of like at the Crypto Conference in the face of crypto for, you know, maybe you get maybe that's the next you know, momentum.

That kind of pushes it up, uh, into that 70 K range again, who knows?

I want to end with you on Super Micro computer.

Fascinating.

24 hours for this name.

Obviously, the Hindenburg research report comes out now.

This morning, we know Super Micro is delaying its 10-K filing the shares for S MC I down over 40% in a month.

And I believe today they're down a little over 25% right now.

Does that change your view on S MC?

I It doesn't What it does is, uh so I'm going to I'm going to kind of, like, sit back and watch how this plays out, right?

But But if this if this plays out, meaning that the accounting is OK or there's, you know, kind of a procedure in place to to ensure we're on the right path with the reporting and things like you know Hindenburg is concerned about, then this is a great buy on the dip opportunity.

This stock has been up 779% in the last two years.

They're a leader in cooling data centres, so they have the most energy efficient way essentially to provide the the huge I.

You know, cloud providers like Amazon, Google, Microsoft with, you know, cooling Tech.

Basically, for a I so absolute necessity in this space, they you know, they have to clean up shop and I think buy on the dip.

You're gonna have that 10 for one split in October.

It's a great opportunity, but just, you know, let's let's sit on the news for a couple of days and see what happens.

The Definers are coming in already, though.

Are you one of them?

I?

I I'm gonna be one of them.

I'm gonna be one of them.

Yeah?

Yeah.

By how much?

By how much?

Um, how much to buy or like, how bullish are you feeling?

Yeah.

I mean, well, I'm not bullish in the short term.

I think that, you know, when you're down 25% there's a little bit of a problem, right?

But I really like getting things on sale.

And I think that this stock again looking into the future a I is going to go on forever.

There's gonna be different, um, iterations of a I.

And this is a top player.

So little bit of noise.

Now we'll you know, hope.

Hopefully get you to the pot of gold in the future.

Great stuff.

Sylvia, Thanks so much for joining us.

That news on S MC I with us, we do really appreciate it.

Sylvia Jablonski, Defiance ETF CEO and chief investment officer.

Let's get over to some trending takers that we've got for you this morning, starting with Bank of America Warring buffets selling Spree of Bank of America continues with an unloading of an additional 24.7 million shares totaling $982 million.

The sale disclosed F late Tuesday with the SEC.

Now what's interesting is that still does have a substantial stake in America, with nearly over 900 million shares.

So not a small amount of holdings, but still selling off that $982 million of Bank of America sale shares here is obviously going to be a potentially bearish signal for Bank of America.

And this comes as Berkshire, by the way, has consistently been selling off some of its Bank of America shares over the last quarter here.

And we have seen Berkshire really increasing of its defensive players getting out.

Even Apple of Apple stock over the past quarter here, sort of taking a risk off approach to a quarter that has seen a lot of volatility.

We saw the market route happening in early August.

We've had continued geopolitical tensions.

We've got that election coming up in November and you've seen Berkshire and Warren Buffett, of course, taking a little bit of a defensive approach to a year with a lot of big question marks trimming from Berkshire Hathaway in its position in Bank of America.

I mean, and this is a big deal, especially considering for Bank of America.

I mean, it's a company that we're looking at that has about 64% institutional ownership.

So any time one of the largest holders of the outstanding shares is deciding, OK, maybe we want to sit on a little bit more cash right now.

Maybe we wanna have a little bit more dry powder to be able to deploy elsewhere, especially if you do see some significant dips and very ripe opportunities for larger GPI and growth areas in the market starts to make themselves known.

Then you wanna be able to activate that quickly, and so I think that's what we're starting to see a little bit more of, especially in some of the larger or more outsized stakes, um, that have seen their run up in financials and and now trying to figure out where we take profits and deploy that elsewhere once these dip buying opportunities start to emerge in critical mass?

Absolutely.

It's such a great point, Brad, and also points to kind of the So what factor for Berkshire and Bank of America in particular, this is Warren Buffett.

This is the king of investment strategies.

If he is taking a risk off approach to investments, what does that tell us about where the market might be heading?

What does he know?

That the rest of the investment community may not be sussing out?

So that is why we love to look at Berks Holdings clearly working for them as they hit that trillion dollar market cap earlier today.

Coming up crop shortages have led to rising Prices in cocoa will explain the impact that's having on some stocks in the consumer discretionary space when we come back.

Cocoa prices still on a tear this year, the costs primarily related to weather and crop disease in West Africa, which has led to major supply shortages, and this is why on some consumer facing companies here, like Hershey's, as higher chocolate costs will weigh on company profits, and you can see their cocoa futures up over 80% year to date.

So for more on the long term and short term future for prices, we're going to welcome in all and Hansen, he is Saxo Bank's head of commodities strategy.

It's great to have you here, so talk to me about the degree to which you anticipate cocoa prices continuing this run to the upside because we have seen a little bit of volatility over the last couple of months.

Particularly since May.

We've seen a couple of bottoms and cocoa prices.

Do you anticipate any relief in the price anytime soon?

Well, good morning and greetings from Copenhagen.

I think what we've seen, uh, right now is based the market consolidating, but obviously at a much higher level than we have, uh, have seen in previous years at the And it just highlights that even though when you say the when you look at commodities and you say the best cure for a high price is a high price because it incentivized production and the lowest demand so far we haven't really seen those structures really unfold because we because the producers in question here is primarily West Africa, and it does take time for the economics, the farm gate prices to raise to levels where they can increase production.

At the same time, it looks like, uh, global demand remains fairly robust.

I suppose we will still buy our chocolate bar even though we have to pay a few a few cents more for it.

Yeah.

I mean, we need those little luxuries L A So we gotta get the chocolate.

But all these things considered and and you're pointing out, uh, a key part of this industry, which is the end use industries that are reliable and tracking cocoa prices here.

So what does that mean in terms of pass through for higher prices and for how extended?

Are you kind of calculating or or running the math on your side that we could see higher prices for longer because of the cocoa price input?

Well, we just have to look at the, uh, the Ford prices in the futures market.

And while we are, we are currently settling in around, uh, just below $8000 a tonne in in, uh, in the front month contract, which is December.

That's basically, uh, above the long term average, which was around 2.5 1000 the next year.

If you look into the next season crop, which is basically between October and March, that the harvest once a week through that even though we have that harvest, the prices for May next year still around something like $6000.

So it does indicate that we are looking at we're looking potentially into 2026 before potentially we can get some of this under control.

And that really is a combination of two things first and foremost that the farmers are receiving more for their product.

They can spend more money on fertilisers and also pesticides, which is, uh, which is the key right now, due to some some diseases they have in some of the crops, but also that, uh, that that we we see here, the weather continue to improve, and obviously the weather is a big airfare because we have seen a very troubled season on the Southern Hemisphere.

When it comes to food production, we've seen cocoa, obviously, as we talk about now, but coffee prices hitting record highs as well.

So it is the weather that ultimately will determine whether we can get some more balance in the market.

And, uh, yeah, that is really not for us to to to guess where that's going.

You know it.

It's so interesting.

I was just about to bring that up, too, because, I mean, we're coming off of a year where in the US alone we saw during 2023 a.

A record number of billion dollar weather events.

And that directly passes through E, especially as you start to think about other parts of the the world that are producing crops and producing uh, cocoa and trying to make sure that regardless of whether there is able to be steady production, how is production going to need to shift?

How is the the the farming, the cultivation of cocoa going to need to change in order to not be so impacted by events and severe weather events?

Um, that foreseeable future are continuing to worsen at this juncture.

Well, it is ultimately a question about location, and when we look at where the bulk of the world's cocoa beans are being produced.

That is West Africa.

It is close to the equator.

It's where the temperature and the climate in recent years has been the best, most supportive for this kind of production.

So it's not You can't just move it to somewhere else.

We we're seeing a bit of a pickup in in in Central America.

Uh, but but not not to the extent that you can replace what we're seeing in Africa.

So right now it is mostly a question of having the right, uh, having the means to, uh, to support the farmers through, uh, through, among other things, uh, fertilisers.

And then again, just trying to be, uh, be smart with how how water is being consumed.

But many of these farmers there are lots are probably the size of a couple of football fields, so they don't really have much in terms of selling power when they want to sell their product.

So, uh, so that's another another issue.

They really are dependent on what kind of price that the government is, uh is set for for them.

All right.

Ole Anson Saxo Bank's head of commodity strategy.

Thanks so much for joining us on all things cocoa prices.

We appreciate it.

We turn now to our chart of the day.

It is finally here.

Guys all eyes on in video.

They report their latest earnings expected this afternoon, but that extra attention it didn't just start today.

Since it's pull back last month, retail investors have been buying the dip in The Wall Street Journal, pointing out that $7.4 billion worth of retail trades tied to the were made on August 1st.

That was the third highest daily tally on NASDAQ since 2016.

I just want to talk to this chart behind me here, showing that retail trade tied to NVIDIA in billions and you can see here not a lot of activity around here.

You're getting to that October 2022 low for NVIDIA, it is rally up over 1000% since that 2022 low, and you can see the amount of money soaring in from retail investors again buying that dip that we saw in October with that market route.

Now, one key question is going to be smart.

Money versus retail investor money is that's traditionally referred to.

We know from Bank of America research from earlier guests.

We had on our show over with Russell Investments that hedge funds are pouring out of the magnificent seven at record rates for the year and specifically when compared to the rates that we saw back in February.

This is the biggest sell off we've seen from hedge funds in the tech sector.

So is that something that retail investors should be concerned about when they are the ones pouring into some of these big tech names?

Obviously, NVIDIA is the key focus for the day when some of those hedge funds have already been doing some profit taking, taking some off the top for some of these big tech names.

Of course, that's going to be answered when we get those in video earnings this evening.

We are expecting, from the options market side of things, a potential 10% move in either direction off of those results, we're gonna have all of your markets action ahead.

So stay tuned right here for more.

You're watching catalysts.

Let's turn now to another significant earnings report out after the bell today crowd strike.

This is going to be the company's first report since that massive software update triggered global outages back in July.

Now Delta has said that the issue will cost the airline about $500 million.

Crowd strike shares are still off about 20% since the outage, but are up by about 5% year to date, holding on to the those gains.

So what kind of fallout can we expect for crowd strike?

And what do they have to say?

We've got Fatima Bolani, who is the co head of US Software equity research over at Citi.

Fatima, thank you so much for taking some time here with us.

Uh, you've got a buy rating $300 price target on the stock.

What do you wanna hear from the company?

After a massive outage like the one that wreaked havoc across so many different industries?

Thanks for having me.

I'm happy to be here.

Uh, look, I think this management team tonight has the unenviable task of assuaging a lot of nerves about the extent of new business impact expansionary impact within their install base in the near term.

But then also, uh, helping rebuild investor confidence that this truly was a black swan error and it not going to impair the medium term prospects and trajectory of the business.

So a lot of threading of the needle here is what we're going to be expecting from this management team today and in the same breath.

Uh, we are also expecting maybe more media medium, longer term updates at the company's upcoming investor briefing at their conference slated for about three weeks from now.

Fatima.

How concerned are you about the guidance piece when it comes to crowd strike and the kind of conservative approach that they are likely to take to cutting that full year guidance?

Is that potentially going to put an undue amount of pressure on the stock after the earnings print?

You know, I think that's a very important question and a very fair question.

You know, the stock has had a very nice bounce off the bottom, so you know, in a lot of ways, in our conversations with institutional investors, there is absolutely an appetite for this company to frankly just throw the book at guidance.

Just, you know, every possible, uh, parameter or permutation that they can throw into guidance and do frankly de risk the number versus exactly what investors are looking for.

But again, I'll come back to the fact that hey, this is a battle they need to win the war again on reinvigorating that confidence and that is going to tie back to, you know, they have a big, hairy, audacious goal around $10 billion of a RR and longer term investors with duration are going to want to make sure that that's absolutely intact and there isn't going to be much aviation.

But back to your point about numbers risk today.

I think what they say about numbers risk is going to be equally as important as how much they derisk or you know how much they potentially guide below consensus, which is fairly appreciated and accepted.

We think, by most institutional investors, given the amount of a I demand that has been circulating for, I mean several earnings quarters at this juncture and just continue to be amped up in earnings calls as well.

It seems like crowd strikes should be in an ideal position to capitalise even as you know, this issue that we've been talking about with the outage has impacted perhaps the sentiment going into this report.

How do they need to be able to tell investors to showcase to analysts as well that they can be able to capitalise on where that market demand is going.

Knowing that there's going to be a layering on of demand for cyber security components on top of the growing data centres, the demand for chips, uh, and all of the different end points that are required for generative a I to really hit critical mass.

Uh, look, I think we're very much focused on, uh, the blocking and tackling elements of this degenerative A. I angle to this story, and the investment case here is actually very attractive.

Uh, cybersecurity should.

It's no surprise that within cybersecurity there is actually a dearth of talent you can't hire, you know, qualified information security folks fast enough because there aren't enough qualified, uh, individuals.

I think some market estimates have about a 3 to $4 million.03 to 4 million person, uh, head count deficit.

Right.

So that is a tremendous, uh, place of value that generative a. I can deliver very strong value proposition, and Kaus is absolutely in the crosshairs of that in a very positive way.

But you know, I think very much right now within the context of this report, Uh, it's, you know, our our sense is it's gonna have to more focus around.

What are they doing to keep customers happy, Maintaining gross turn.

You know, um, doing right by customers with discounts.

And, you know, having the correct and appropriate customer satisfaction posture.

So the generative A I stuff is good, but we really have to vote on the meat and potatoes.

Fatima, final 30 seconds.

Here.

I know that you increase your price target on sentinel 1 to $25 from 20.

But you maintained your neutral rating.

To what extent is there going to be a read through from the positive results for Sentinel one, Even though the stock is down right now to crowd strike earnings?

You know, I think this is, uh, definitely, uh to us reads like a david versus Goliath battle.

Everything we heard from Sentinel one yesterday was very much around, uh, you know, building up the kind of anticipation and optimism around.

Hey, this is an opportunity as an underdog of smaller scale in this market for us to rise to the occasion.

But we respect the fact that the CEO kind of laying the cards on the table didn't necessarily over extend his hand on.

Hey, we can grab customers yesterday, uh, and and dissatisfied customers yesterday.

So I think they've got the right pieces in place, uh, for sentinel.

You know, we think it's mostly going to be a showy story here, as opposed to kind of positive vibes around, uh, market fair.

Uh, outsized market share capture.

So we're we're more on the sidelines, uh, to see more evidence that they are taking more than their fair share of these disaffected customers that they are gearing up to grab Fatima.

Always great to have your insights.

Thanks so much for hopping on with us this morning.

That was Fatima Ban and co head of US Software Equity Research over at City.

We're going to get another peek into the health of the consumer with Lego earnings that dropped overnight.

Our very own Brian.

So he got a chance to speak to the CEO about those results.

Lego continues to defy the odds in the toy industry.

Let's bring in, uh, Lego CEO.

Nils B Christensen.

Nils.

I can't believe it's been six months since we last talked.

Good to see you.

As always here.

So really, um, one number among many that sticks out in this first half, uh, results is your sales simply sales up 13% year over year against the backdrop of a struggling toy industry?

Help, uh, our community here at Yahoo finds understand how you're able to outperform some of those broader trends.

No, it's, uh it's clearly taking markets here in a toy market That's not growing right now, as you say, and it's it's about our brand standing really strong.

Right now.

We have a portfolio of products that cuts different age groups and different interests.

That really is performing very well.

We've been increasing our store network.

We've been investing behind the legal.com.

And so So I think it's all coming together and and really uh, yeah, really helping us to take the share that leads to growth right now.

How will Lego or how are you preparing the company for the age of a I, where kids may get even more engrossed in video games amongst many other digital activities they can do Now We are, I tell you, we're preparing for that So we were.

Actually, we're beefing up our own digital competence quite significantly and have been doing so over the last three or four years.

Because you're right.

You can imagine all kinds of things where you can get different.

I mean a I or different, actually different help to be creative.

You can just lift the creator level of of kids, probably sometimes in the future.

And if anything, building with Lego bricks actually would lend itself entirely to this creativity in this building thing.

So I, I think there are good potentials there.

We we make sure that we are.

We are front running that now.

I'm just realising real time.

My parents never helped me put my Lego sets together and he watched me struggle on the floor.

I mean, that's a discussion for a different day.

I'm gonna I gotta mention that to, uh to my parents.

What is your What's your sense on how the holidays, uh, holidays are gonna come up fast when you talk to these big retailers?

How are they planning the toy category for some of that?

That peak buying season?

No, I think by, and it's hard to say it's even four months out.

That's a long time in our industry.

But I think at least when I look at it with our from our lens here, there's good momentum and it doesn't seem like things are very different.

And I look forward forward than if I look for months backwards.

So in that sense, I would expect a bit more of the same and kind of the normal seasonality if you want throughout the year.

We also I think, for the legal brand a very decent Christmas season as well.

Take us inside some of the numbers in your business.

Nils, you know, we've started to see inflation come down across across the world, which is of course, a very good thing.

How are you?

Are you seeing that as well in the materials that are used to make Lego bricks?

And are you passing on some of those savings to shoppers?

Yeah.

No, we we we I think we saw most of that last year.

So we're seeing that continuing into this year and and therefore also we were never actually we were never loading any of those material cost increases into into products, so there's not been a big, big thing.

We kind of kept kept our level through that and we're doing that now.

But we are also, if you think about the business and our materials.

We're investing heavily into sustainable materials, so in this half year we're actually buying 30% of all the resin or the raw material for living Bricks have been what is called certified mass balanced material, so material that has a very high element of non fossil based materials in it.

So either renewable or sustainable bio based materials.

So 30% of everything we have bought for raw material that translates into 22% of illegal brick on average, being non fossil or not being dependent on oil being pumped up from the ground.

So we've been able to grow 13% as you say, and we have spent less less oil based plastic for the same period, and that's a milestone for us to be able to grow while spending less and less fossil based materials.

That's a major thing.

We've been investing heavily into that those materials are more expensive, obviously than normal materials, and we've been able to do that and decided not to unload that cost, either to consumers to really make sure we are standing in there and trying to push the industry in the right direction on materials.

So I think that's probably one of the biggest shout outs for this half year.

Apart from the financials, then that's a big milestone.

Do you think in our lifetime we will get that fully sustainable or renewable?

Lego Brick?

Yes.

How do you get there?

I think I think we are.

We've actually spent if you go five years back, we spent some years really investigating.

I think we were deep into 600 different materials to really figure out what would be the way forward to take the break that you and I played with when we were kids and make sure that it's compatible with the one you buy tomorrow.

And that's the case.

That's not so easy with some of these new materials.

So by doing the groundwork, we've been able now to focus in on what we think is the path to a solution, and now we are investing heavily behind that.

So getting to 30% this year, we are committed to increase that percentage again in the second half and into next year.

I think there is a line of sight to us being 100% sustainable on materials by 2032 which is our ambition.

So it won't be.

It won't be inexpensive, but we are committed to take that journey.

That's good to hear.

And lastly, before I let you go, you and I in the past have talked about your expansion plans in China.

Uh, you've opened up retail stores there.

I didn't see it mentioned the earnings release.

Uh, what are you seeing in terms of growth in China, Of course that economy has slowed down.

And then what are your expansion plans in China look like over the next six months, right?

I mean, it's clear we are growing rapidly in the US and in Europe we are more flattish in China.

I think that's even taking markets here, probably in China, where the economic environment is more is more strained.

We believe in the long term potential in the Chinese market.

There are a lot of kids in China that that would benefit from legal play.

So so over that we continue to open stores at a slightly lower pace than what we've done in recent years.

But we opened stores.

We built the brand and and invest into the longer term potential.

While right now we see more momentum in in the US and and most of Europe.

All right, we'll leave it there.

Always great to get some time with you.

Lego CO Nils B Christensen Good luck this holiday season.

We'll be in touch, Thank you very much.

We will.

Thanks.

All right, Much more ahead on Yahoo Finance.

On the other side of the break, Apple is laying off 100 jobs across its digital service group.

That is, according to reporting originally from Bloomberg.

Now the cuts will reportedly come from the team that runs the Apple Book and Apple News areas of the company, and this would be the fourth round of layoffs at Apple this year.

Now, obviously, it's important to note that these layoffs are coming from very specific parts of the company again, Apple Book and Apple News are the two, so it's It's not also that big of a layoff.

Obviously, it's 100 job cuts, but it is interesting given the shift we have seen from Apple into the services side of the business that has been the primary driver of their earnings growth.

Quarter after quarter, we have seen this story.

So is this a sign of things to come from the company?

And, of course, Brad, as you know, this comes after news that Luca is leaving his post as the CFO.

He was able to maintain a a lack of layoffs, focusing rather potentially on attrition at the company to maintain lower costs for labour at Apple.

Is this the beginning of a potential shift where more layoffs could come from Apple?

Or is this just more of the same focus on the services side of the business?

One of the huge things I mean, it just showcases some of the priorities for Apple.

As of right now, even with this shift, it is important to note as well that this comes after, as you were mentioning, the cuts that seen earlier in the year of a little more than 600 jobs, Um, and that was the biggest round of layoffs since the pandemic.

We had heard from tech companies about where they over hired and where they now needed to re strategize or Reprioritize, given some of where the market demand is actually moving and reallocating some of those internal resources here.

So it's not just cuts.

It perhaps also entails for some of those positions being real, located elsewhere within the business.

Uh, and we'll see how that actually gives us a little bit more inclination or a line of sight into how Apple is really prioritising what its output needs to look like at this near point in time.

Um, but ultimately here?

Yes, major kind of C suite shake up.

Um, but not even a shake up.

Uh, you you've got a person that's been there for years.

And, Kevin, who's gonna be taking over, uh, as the CFO now.

So, uh, more of kind of the keeping of the guards, Just one of them kind of rolling off and saying, Hey, I'm passing the baton, passing the baton, but still staying in the room a little bit, Still staying involved, you know?

I mean, in that chair over there, just like in the back, he'll just be monitoring from afar, but also close.

I love when they do that.

I'm sure the people taking those jobs over love that feeling too.

All right, well, coming up.

We've got we dedicated to all of your personal finance needs.

Brad's gonna stick around with you right here for the next hour, so stay tuned for more.