Netflix stock up after Ackman’s hedge fund takes stake, Intel shares slump, McDonald’s slips

Yahoo Finance's Julie Hyman and Brian Sozzi discuss stocks moving in early trading: Netflix, Intel, and McDonald's.

Video Transcript

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JULIE HYMAN: All right. We talked about Tesla. We talked about Dow. We're going to talk about some other important movers that we're watching today.

One of them is Netflix. The shares are trading higher by 6%. Pershing Square, Bill Ackman's firm, disclosed about 3.1 million shares of the company. Ackman tweeted about this action. He said, I've long admired Reed Hastings and the remarkable company he and his team have built. We're delighted that the market has presented us with this opportunity.

The opportunity, of course, he's alluding to is the plunge that the shares have seen. Even before they came out with earnings, we have seen a big tumble in those Netflix shares. What's interesting here, Sozz, it doesn't look like this is going to be an activist stake, in part because he talked about his admiration for Hastings. And there's no other sort of indication that he would necessarily push for changes. It seems like he just saw a deal here.

BRIAN SOZZI: Having followed Ackman for a bit, Julia, I-- he's not taking those activist type positions like he was back in the day, per se, with Herbalife. If you look at some of his recent buys and transactions, things like Lowe's, Domino's pizza, before that Starbucks. He hit a home run on Chipotle's recovery under CEO Brian Niccol. It's more consumer focused names that I think he views as dislocated from their fundamentals. So good old fashioned, Warren Buffett type stock picking, valuation stuff.

He's a noted, I believe, a Warren Buffett fan, here. And look, Netflix earnings report, stock finished down close to 25%. It's still-- it's been under pressure since then. Fundamentally, I understand the market's concern with the quarter-- slowing growth rates in the fourth quarter, slowing potential growth in the first quarter. But still fundamentally, it's hard to argue with Netflix's dominance in the space that it does business.

JULIE HYMAN: Well, and I would also say one more thing, which is Bill Ackman's no dummy. Right? He has to had to have least have suspected that tweeting-- you know he was not required to disclose right away that he made this purchase. The fact that he did so in a tweet, he probably suspected the shares would get a bump from this disclosure. And so, you know, not to say he's selling today after getting that bump, but you know. It doesn't hurt that as soon as he takes the stake, you've got an increase like that happening in the shares.

BRIAN SOZZI: Hey the guy has a perch. A lot of people follow him. And I'm sure he's done his homework on this. You cannot take away from the fact that Bill Ackman does his research on stocks, does it heavily.

And he holds on. You know, he's willing to hold on, as we learned from Chipotle, Starbucks, Domino's, Lowe's. He's willing to hold on for a long period of time.

JULIE HYMAN: Even when he's not always right. But by and large, he has been right, I think, more than he's been wrong. Let's take a look at Intel this morning. This is a really interesting story, and I know that you have been following it really closely. You've talked to CEO Pat Gelsinger a number of times.

And really, what the results show from Intel is that the company still is asking for patience from investors. Whether they're-- I mean, this is the question that has been plaguing Intel, I think, for a little while here. And it doesn't look like that necessarily investors are going to give them a lot of patience. Yes, the company beat in terms of earnings per share and in terms of revenue.

It really seems to be the forecast that's the issue for Intel. Earnings $0.80 share is what the company is projecting for the current quarter. $0.86 is what analysts have been looking for. And gross margins are shrinking a little bit, Sozz. What's your read on this, given that you quite a bit about this company?

BRIAN SOZZI: Yeah CEO Pat Gelsinger, I believe now more than a year into the job, or coming up on his anniversary. Nevertheless, he's built up a lot of goodwill on the street. And you talk to analysts out there, and he is very much the right man for this job. Tremendous amounts of energy.

Started Intel decades ago, then he left for a bit. But still, now back here leading Intel. Right man for the job. Right time for the company.

But to your point, they're investing billions of dollars to just go on to a new line of business of making chips for other companies. Really, it seems like week after week, this company is announcing really big, large commitments. Last week it was building a new chip plant in Ohio for $20 billion that might, over time, go on to cost $100 billion. When you make announcements like this, Julie, it's going to hit your profits.

And I think that's what you're seeing in terms of the first quarter guidance for Intel. At the same time, where it could be doing a lot better in data center. I know data center sales are up about 20% in the most recent quarter, but the conventional wisdom is they have lost market share to an AMD. So there's a lot going on here. I think the mood out there on the street just from the notes I've seen is a little bit of caution here, especially as it pertains to cost and profits for the balance of this year.

JULIE HYMAN: And what investors seem to really want here is a return to Intel with 60% margins. And it's not--

BRIAN SOZZI: It's going to take time.

JULIE HYMAN: --because, exactly, because of all this investment. It's going to take time. Now the company has been clear about that, right? I mean, they've definitely telegraphed what the plan is, that the margins are going to be 51% to 53% this year. They're not-- it's going to take a while to get back up to 60. So, you know, you've got the stock down by 7% this morning. We'll see what the longer term looks like for Intel.

And finally, in our trio of movers here, we got to talk about McDonald's. Earnings per share coming in below estimates. Revenue a slight miss.

Now I was impressed by the comps at first blush, here. Global comparable sales of 12.3%, which is better than estimated. It's also 10.8% on a two year basis. US comps up 7.5%.

But it is costing them, right, to get those comps. They continue-- I think you alluded to this earlier-- as we see the Omicron variant, you both have an issue of keeping restaurants open, keeping them staffed, et cetera. It's problematic.

BRIAN SOZZI: At the end of the day, McDonald's came up here and they missed by $0.11. And it was just not a good quarter. And you know, they provide a supplemental release on their disclosure forms and breaks down how their businesses are doing by segment. And I locked in on the 10% operating profit decline in company-operated restaurants.

And I think that was a large part of why McDonald's saw their earnings miss. We have labor pressures out there, throughout the economy. You're having to pay workers north of $15 an hour to flip hamburgers and fries, here. And that comes at a cost. And I think you saw it in McDonald's most recent quarter. They needed to sell more McRib, Julie. They need to sell more McRibs.

JULIE HYMAN: I guess so. And it needs to cost them less to do so, I suppose. I mean we were just talking about margins with with Intel and McDonald's. Operating margin this year is going to be in the low to mid 40% range. It was 43.4% last year. So that's something, too, that that investors are going to be watching here.