VIDEO: 3 Holdings Prepare to Report as Uncertainty Grows

In today’s Portfolio video, Chris Versace reviews the pressures weighing on the market on Monday and touches on why shares of payment companies, like American Express (AXP) , are the next focus of the market’s knee-jerk reaction to AI speculation.

Chris also reviews the swath of retail, restaurant and tech earnings coming this week, sharing what we’ll be looking for when it comes to Axon (AXON) , ServiceNow (NOW) , Nvidia (NVDA) and others. And with Paramount Global’s (PARA) best and final offer for Warner Bros Discovery (WBD) due on Monday, Chris explains why we’re following that bid and Netflix’s (NFLX) follow-up action closely.

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At the time of publication, TheStreet Pro Portfolio was long AXP, AXON, NOW and NVDA.

Transcript

CHRIS VERSACE: Hey, everybody, Chris Versace here, Monday, February 23, last week of the month of February. And boy, oh, boy, if you read our opening comments this morning, you know that the market is dealing with renewed tariff uncertainty. It's clearly taking its toll on the markets.

But we are seeing gold, silver, and some other, let's just call them, US-centric businesses, ones like Waste Management, Welltower, Labcorp moving higher. Of course, gold, and silver moving higher is nice for our EPS diplomat's basket, which has been performing extremely well quarter-to-date. And yes, we will revisit the position size of that basket as part of the larger portfolio when we reconstitute it next.

At the same time, we're also seeing some higher beta names-- Dutch Bros, Palantir. No surprise being drawn a little bit lower. We're also seeing our shares of American Express come down. A little surprising, but it appears this is just simply due to the latest round of AI disruption speculation spreading now to payment companies. We've seen this hit software companies, financial services, cybersecurity, and now here, too. But let's remember a couple of things, folks.

When it comes to American Express, it's a very differentiated business model, one that's heavily influenced by its membership. And they are currently in a very, very big push with the platinum card that should drive overall net card fees higher. We've seen that over the last one or two reported quarters since this refresh has started. Management was out recently earlier this month talking about the progress that it's making on the refresh.

So I would sit back and say that the pressure that we're seeing here in American Express shares, also Mastercard, Visa, it's simply the latest sign that the market is nervous. We are seeing another knee-jerk reaction over what could be. But as we think about it, given the toll of the last few weeks, developments over the weekend, what can we say?

Are emotions running high? Sure. But what do we know? That's when sloppy or regretful decisions can be made. And we're going to do our best not to fall into that trap, instead referring to the data, the signals.

And of course, I'd be remiss if I didn't say that the Northeast is continuing to get pummeled with snow. That's having another impact on the market today as well. We talked about it in our opening comments about how we're seeing disruptions for air travel, train travel, obviously, car travel, it's going to be another bump in the road of economic activity, especially when it comes to construction.

But more often than not, when we think about construction and weather-related delays-- and we've seen this before. United Rentals, when we own Vulcan Materials in the past, whether it was an extremely snowy winter or wet winter, typically, it's more of a timing issue. But we'll continue to follow that, and if need be, make some decisions along the way.

But again, what are we seeing today in the market? It's another wave of uncertainty and nervousness. It just continues to be pervasive. And I would like to say that we're probably near the end of it. But the reality is, folks, when we look at the VIX, is it back above 21? It is. Is it at such extended levels like it was in October or November, where it is it's the time, a signal, if you will, that we can become a little more aggressive in the market? We're not there yet.

So we're going to continue to watch the VIX, the fear and greed index, and the market oscillators until we see a point of time where there is extreme fear in the market. And as we wrote to you recently, when there is extreme fear in the market, that is the time to be greedy. That's one of the things that we'll be watching for.

Now, that is today. But let's talk about what's going to happen over the next several days. Tomorrow night, State of the Union address, likely to be the usual victory lap that almost any president does to tout their achievements. For us, the questions are going to be what is said about tariffs, trade deals, the shutdown that is continuing to happen for the DHS? What's happening on the geopolitical front? We have some things due later this week when it comes to what's next with Iran. Taxes, spending-- those will also be areas of focus for us.

And I do suspect that we might hear some jawboning, a, about the Fed, and some signals from President Trump that he really would like interest rates lower. Nothing new on that front. And again, if we remember the data that we got last week, inflation pressures ticking higher. And of course, the developments Friday over the weekend on the tariffs raises another level of uncertainty on the inflation front, and arguably, what the Fed may or may not do.

And I know there are folks out there that are really looking for the incoming Fed chair, potentially Warsh, to be a little more aggressive in rate cuts. Just remember, it's a committee. It's not any one individual. It could be a little tougher than a lot of folks think.

Also, we have a big week of earnings. We have retailers-- Bed Bath & Beyond, Home Depot, Lowe's, TJX, Dillard's, Urban Outfitters, and Gildan. What do they tell us about the consumer and inflation input costs? Do they address the change in tariffs? And what do they say about the severe winter weather that perhaps impacted the end of their January quarters and the start of their February ones?

We also have restaurants-- First Watch, Portillo's, Dine Brands, Hormel Foods, Nomad Foods, Papa John's, Shake Shack, Sweetgreen, and I'm sure maybe one or two others. When we look at these, we're going to be comparing a couple different things. Of course, how do they stack up against Costco? How do they stack up against Walmart, for example? How do they stack up against a recent retail sales reports on a trailing basis? That usually gives us a nice yardstick.

But also, when we compare dining at home grocery to dining out, where are we seeing consumers spend more? And what are those places where folks go out to eat? What are they saying about the use of value meals and margins? Those are some of the things that we'll be watching on that front, more as signals for the consumer. I continue to think we're well positioned, TJX and Costco.

We also have some tech companies reporting-- NVIDIA, HP, Salesforce, Snowflake, CoreWeave, Dell, Zscaler. Clearly, AI and data center is going to be key. AI adoption-- what are we seeing in terms of the enterprise? Are we seeing rising adoption levels and usage levels? Are they being reflected in backlog levels?

If we see that, that would be a nice pushback against a lot of the concern that has pressured companies like ServiceNow, where the concern is that AI is eating future software revenue. We'll have a lot more to say about that as we go through all of these.

Obviously, with NVIDIA, AI and data center capital spending levels, up significantly year over year. That should be a very nice tailwind for their business. But as I shared with you in our opening comments this morning, the big question is going to be, if they beat the consensus forecast, can they deliver a big enough guidance beat to top the whisper forecast? And we'll be talking more about that ahead of NVIDIA's earnings.

But we also have HP, as I mentioned, and Dell. What are they telling us about AI and data center shipments? Is it all supportive of the narrative? And could this collective comments from these companies start to get Marvell, Broadcom, and NVIDIA shares out of the doldrums, or at least the trading range that they've been in? That's what we'll be looking for.

And just getting back to Salesforce and Snowflake, and to some extent, Zscaler, if they're very confirming that AI is not eating software, that could give us a nice boost for our shares of ServiceNow, Palantir, and Microsoft. But if for some reason they throw another level of a fly in the ointment, as they say, could we have a tough decision to make about the shares of ServiceNow? Yes, potentially, since there could be one or two other areas that we're developing and seeing perhaps more upside ahead in the near term. Talk more about that in a second.

Finally, just on earnings that we'll be watching, we have Trex. Now, Trex, if you know, it's kind of a corollary to the housing market. It can be tied to new home construction as well as repair and remodel. So we'll be listening to see where are they seeing the strength, assuming, again, that they are.

Last week we walked you through the latest single family housing starts figures and discussed why they were not robust. What does Trex have to say about this? And what do they also say about weather and construction? And what do they say about input costs?

We also have Axon reporting after Tuesday's market close. We saw very good numbers out of Motorola Solutions. And when it comes to Axon, what we'll be focused in on looking for the sequential and year-over-year improvement in their total contract value figures, average recurring revenue, and a bunch of other metrics. We also want to pay close attention to what they say about AI bookings, as well as international adoption of their products and services.

Now, there is one other company reporting later this week that I just want to take a couple of minutes and talk about. That is, of course, Warner Brothers Discovery. Here's the deal with that. They report, like I just said, on Thursday. But today, David Ellison's Paramount is expected to submit its best and final offer for Warner Bros. Discovery.

Now, if you're paying close attention to this, then you probably know that over the weekend President Trump did some saber-rattling over on Truth Social, saying that Netflix should face-- that it would-- sorry-- face the consequences if it didn't remove former Obama and Biden administration official Susan Rice from its board.

I don't know what to say on that. But I also know that that comes after reports last week that the Department of Justice is scrutinizing Netflix's behavior and whether it wields anticompetitive leverage over creators in negotiations for acquiring programming.

This would kind of seem to say that the Washington front is, let's just say, not exactly supportive of Netflix winning out of Warner Brothers. But we'll see what happens. The backdrop, remember, is that back in December, Netflix agreed to buy Warner Brothers for $27.75 a share, with the Discovery global cable assets being spun out to investors.

Paramount's most recent offer was for $30 a share, plus a $0.25 a share ticking fee payable to shareholders for each quarter in which the deal hasn't closed beyond the end of 2026. Paramount, like I said, is expected to submit a final offer today. Could it come back with a sweeter offer? 31, 32, or whatever it might be? Certainly possible.

But then the question becomes, will Netflix walk away from the deal? And if it did, that could be something that would get us to become shareholders in Netflix, considering the stock has fallen about 40% since its October high. So the question is, what are the odds that Netflix simply walks away?

Well, on Friday, when speaking with Variety, Netflix co-CEO Ted Sarandos, he said that Netflix, well, they have, quote, "rich history" of being willing to walk away and let someone else overpay for things.

Now, this certainly has our ears perked up. We'll be following and seeing what unfolds. And if it makes sense, if Netflix does back away, boy, that would remove a big overhang on the shares. And as you know, we do like subscription business models. And we do like how Netflix is continuing to lean into digital advertising. So let's see what happens, folks. Maybe we have an opportunity ahead of us. We'll find out.

We have a lot more coming your way. And remember, we got a big week, like I just said. So please stay tuned. Check your emails, your alerts. To the extent we make any movements with the portfolio, we want you right there with us. Thanks for watching.