This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus gloom O Business Finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
All right, everybody, it is a fed Wednesday. It's also still we're thick in the earning season. Qualcom out the stock is up about two point five percent here in the after market. So the Qualcom forecast meeting estimates, giving that revenue forecast for the current quarter that was in line with analyst estimates, help by a recovery market for smartphone ships. We know that they're moving into AI areas.
They're also looking into the PC area. But when it comes down to it, it's their bread and butter and then some it's all about those smartphoneeships.
Analyst wanted to see nine point three to six billion. When it came to a fiscal second quarter revenue sales of the company said will be eight point nine billion to nine point seven billion, excluding certain items, probably two twenty to forty a share in the current quarter, versus an average projection of two dollars and twenty six cents per quarter.
We got a great voice.
On this, we do.
Lindwan in the studio making her way here, Managing editor of Technology Global Security a Bloomberg News. She's here in our interactive booker's studio. Okay, first gut reaction, how they do We were wrong?
We were all wrong. I feel like it was just like a week ago. We were like AI winners, not AI losers. And then you have Qualcomm, and Qualcomm is like as bored as you can get. They're like in headphones. They're trying to make it into cars, right, They're like in the non sexy and they may be the only ones in the past twenty four hours.
Actually they're trying to get into what matters is what they are in.
Yeah, it's forming the narrative. Over the last twenty four hours. You saw Microsoft earnings disappointed on AI, Alphabet disappointed on AI. AMD has been trying to make itself like an AI chip maker like Nvidia. They disappointed on AI. And then here it comes Qualcomm smartphone recovery headsets. Like that's interesting.
Okay, So I'm glad you saw said this because Christiano Aman, who is the president's CEO of Qualcomm said that they're not just of course interested in handsets and automotive that you mentioned, but he said, we're gonna build on the momentum with our leading snap Dragon platforms and tech differentiation and connectivity, computing on device generative aim.
Do we care about that?
Well, I mean, you see how diversified he's getting right there.
Do you see that diversified now?
Or that's where they're getting. I mean, like they are the company that is known for putting there, for putting there a lot of different baskets, and you know a lot of ones that are like rooted in emerging technologies that haven't yet proven themselves out. But in some ways this quarter has been good for that because you're not you don't have your eggs all in one basket like AI, and like the revenue outlook and the profit outlook are.
You can't say they're great, but the fact that they're not bad compared to what was reported yesterday afternoon is what's bolstering their stock today.
Well, to be fair of that range, I'm like doing quick math here about that two quarter revenue out look eight point nine billion to nine point seven the estimates nine point three six. I mean that's pretty much exactly.
It's like they're not blowing anything out of the water, and so like exactly, that's something about where tech investors are right now, which is like they're okay with not bad, Like they're okay, like they don't have to be blown under the water. But it's in there, right, the estimates in line.
Yeah, I think that's fair to a certain extent, given the run up in the Nasdaq one hundred and the run up in the S and P five hundred, and that. You know, it seems like Carol, almost every other day we're talking about new records, and some of these individual companies were talking new records.
Yeah, that's so, well, so valuate are you talking valuation?
Talking valuations?
Yeah, so we're coming back to earth on some of you.
You think.
So, it's a lot of this stuff was priced in again, not asking you for I don't worry.
Well, it's a twenty one pe if we're looking pe if not quite sixteen, that seems reasonable.
It's it feels reasonable, And I feel like investors are kind of like coming around to the idea that they just need to be in the reasonable range now more realistic, like less you know, euphoria and hype. I mean, I think this is like the first real quarter honestly where investors are kind of like, all right, great, we're over
the knee jerk reaction of AI. Now show us where it's actually contributing to your bottom line and being Qualcomm being like the diversified player that they are, They're like, look, we don't have just AI to offer, and we're often good bread and butter results that are in line, like we're a steady, reliable company. I mean, that's the message that they're sending.
Because there was I think worries that you know, smartphone demand has been kind of sluggish. Yeah, so how do you cross that thinking with what we got from Qualcom?
I think I think that'll be really interesting. Like the big telling moment is going to be tomorrow Apple, right, Apple? Yeah, Like that's it says something about Apple. And you know, also what says something about Apple is when Verizon and AT and T and T Mobile get report it, they're usually trying to steal each other's share. This time around, they all reported gains in new wireless customers. So like maybe Qualcom, with all the telecoms, we'll say something about
tomorrow's Apple. I am not one to make forecasts. I don't make pario connection.
There is a connection we should know. Shares Apple in the after hours are up about seven tenths of one percent. So then can we say anything about the health of the PC industry and the health of the smartphone market in general? Apple notwithstanding, I mean, Apple is certainly a big player in both of those.
By reading into Qualcom's results, I.
Mean, Qualcomm certainly did not signal a rebound. It just signaled health, right and stability. And if you look at the other chips earnings thus far, granted we haven't gotten in video back and some of the others, but if you look at them thus far, it pains a very nuanced picture. I'm not ready to declare that we are over the chip's glut. I'm not ready to say that. I don't think that's what the earnings have panned out to say.
Either.
It's cross corn So what was it ASML that was like off the charts, and then we.
Had a md Texas Instruments was right, yeah, Blackluster.
Yeah, you know.
It's interesting too. I'm look at quam, Tim knows this like one of my favorite functions on the Bloomberg is the supply chain, and I'm just you mentioned Apple, Like twenty seven percent of Qualcom's revenue is coming from Apple, about twenty one percent from Samsung. I mean watching that right, like about six percent.
But how consistent is the Apple revenue moving forward given that Apple wants to do more of this stuff in house, Like, can Qualcomm still rely on Apple moving forward? That's a good question and maybe maybe I got asked Mark German about that.
You'll tell you that Apple is like very much in the business of diversifying flight chain and getting all and there's.
Been there's been some fighting between Apple and and.
You know, and there's been some fighting between Apple and some of its other sources, like broad So I can't say where that relationship is going. I mean, clearly all of these big tech companies are starting to do a lot in house, both by way of like trying to invest in manufacturing and chips design. So we'll see where that goes. I mean, maybe they'll offer up some commentary about it. And this earning is called today.
Well that's what I wanted to get too, So okay, we're gonna hear from them probably any moment. Now, what are top of mind questions for the Qualcom C suite.
Rebound is going to be the big one for smartphones, Like, yeah, does that mean a rebound of smartphones? But remember that they also have a very big market in headsets, especially in Asia, Like Asia is a big market for them, So people are going to want to know whether there is strength there and whether there's going to be a recovery and demand there. I mean, clearly people are going to want to know, like how the telecom sales like
correlate into demand for them. I think that's going to be the big question for qualk and AI AI AI all right.
AI, see it's still important, It's still important. All right, Linda Wan, thank you so much. We know it's a busy day. Managing Editor of Technology and Global Cybersecurity. A really great voice for us to rely on as these earnings come down here at Bloomberg News. She joins us, of course, in studio.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then Brout Auto with a Bloomberg Business app, or want us Live on YouTube.
Connect One Bank Corp. Reported earnings last week fourth quarter gap EPs one penny better than analyst consensus. Revenue a little bit of a miss, sales coming in at sixty one point eight two million versus an analyst estimate tim of sixty three point zero three million.
Okay.
Following earnings, three analysts raising their price targets. Shares of Connect One have rallied nearly fifty percent since October twenty seventh, the stock up two point four percent year to date versus a game of seven tens of one percent for the KIRE the SNP Regional bank ETF All.
Right, so back with us on the business and what he describes as the new normal. Frank Sorentino, founder, chairman and CEO at the new Jersey base and publicly held Connect One Bank Corp. To joining us from West Palm Beach, Florida. Hey, Frank's so good to have you here with us. Welcome back, Happy New Year. Did the FED get it right today? Why or why not?
Happy new Year? And everybody great to be back.
And I think the Fed did exactly what we all in the banking industry expected that they would do. You Inflation is still a concern of theirs. There's still some work to do on the balance sheet. They reiterated their stance that they aren't going to continue their QT program and continue to take dollars off their balance sheet, and they're going to sit pat with rates until they see
data that confirms that inflation is absolutely under control. And with the strong employment numbers that we keep seeing month after month, they're not getting that data as quickly as everyone else would like to see it. Right, everyone wants to see interest rates come down. I think we're going to see them in this range of altitude for quite a while.
Well, that's exactly where I want to go with this, because you guys do a ton with real estate and construction and small business, So remind everybody about your business mix, exposure to sectors, and more importantly, what you're seeing out there right now and what you project to see in the next few months.
You know.
I'm not sure if it was the last time I was on or a couple of times ago, but I someone asked me what I thought the economy was going to look like as we got into the end of the year and into twenty four and I said robust, and everybody so to lost it. I remember that, but that's but that is the sentiment when we here connect one speak to our clients and they talk about business
opportunities in the environment in which we're in. Everyone, I don't want to say they're bullish, but they're optimistic about the future. And yes, interest rates are certainly higher than where they were two years ago, three years ago, five years ago, but let's let's not forget that was an abnormal place. Zero interest rates really don't exist for any
period of time in any economy. And actually the interest rate environment we're in today, but for the inverted nature of the curve, is more normal than what we've seen in the last ten or fifteen years. So look, I believe, and you know, we have these conversations with our clients. If you can't make money in your business with a six, seven or eight percent interest rate a true cost of money, then something might be wrong other than the interest rates.
That's interesting.
Our homebuilders are seeing that, our manufacturers are seeing that, and other segments that we're involved in are seeing that they can actually make money, They can attract good talent, they can get capital at these interest rates and still make money.
So that when you hear the news about New York Community Bank Corp, also another regional bank player of record forty six incher day loss or haircut it its share price after reporting a surprise lost time to deteriorating credit quality, and it cut to its dividend as it's getting ready to stricter capital requirement. Is that a one off? Is this one of those folks who are like, why can't you make money in this environment? What does that say? And are you seeing any signs of that?
Look?
I think there are a lot of things going on in that story that you would have to really parse and get under the cover of. They bought a large defaulted portfolio through the FDIC from Signature Bank. They are mostly a single family I'm sorry, a multi family lender in the New York City market. They had a fairly good sized office exposure. They are approaching or just over the one hundred billion dollar mark, which puts them in
a different category from a regulatory exposure. So you add all of those things up, none of those things are actually a great place to be at the moment you put them all together. I'm just not sure. I don't know enough and really wouldn't want to comment without having more specifics around all.
Of those facts.
But when you add that string of things up, it's no one that they're having some challenges in the.
Marketplace because you know the sector so well. Frank, I'm wondering if you see the problems of New York Community New York Community Bank Corp. Spreading potentially to other banks out there.
Look, we've been talking for a long time about issues within the within the real estate space. And if you recall if we went back, you know, two or three years ago, even before COVID, you know, retail was a really bad four letter word, and nobody, anybody that had exposure in retail. We had to spend an inordinate amount of time and we spoke on this program about retail exposure in banks.
Today, retail is.
One of the strongest segments in commercial real estate.
It's ready.
Some of the vacancy rates there are at the lowest they've been in thirty years. So, you know, there's a constant refreshment when it comes to real estate and real estate uses. As we went through COVID and came out of COVID, office became a problem. All office no, not really individual office spaces, certain types of office B class, C class you know, maybe a central business district office
where where vacancy rates are the lowest. So again you've got to really parse the numbers and dive into what's happening. Same thing now is going on with multifamily. Multifamily everyone thinks is a problem well by itself, but it really isn't. It's where that you have rent stabilized multifamily. So the banks that have larger portfolios of rent stabilized are going to have more issues and challenges, right and those that don't won't.
We talked about the different tiers of real estate. It's really important. Having said that, you know, Frank your you know your company's shares also got caught in the New York Community Bankcorp downdraft down four and a half percent on that news as well. Here's a moment to say, are you seeing any deteriorating credit quality? Are you looking to cut your dividend? You raised it last year.
We just had our earnings called last week and we announced that we were pretty optimistic about the year ahead, and we've had a track record of raising our dividend and that we would like we'd be raising our dividends in this next quarter. Our credit is near pristine, like every other bank in the industry. There are one offs and by the way, here's another you know metric that people are looking at. Charge offs for banks have been
forget about historical lows. They've been at zero, which is just not just doesn't make any sense for the banking industry. We are in the risk business. There should be a certain amount of charge offs. We're still not back to what's normalized charge offs within the industry. Yet when some bank announces an extraordinary number, everybody suffers for a day or two. I don't think it's going to impact us going forward. We have a great optimistic business plan going forward.
Our clients and our markets are doing well, and I feel pretty confident about what's happening in twenty four.
One last question. We can feel your confidence forty seconds, So consumer business side of your business nothing. You're not seeing any kind of financial stress and just very quickly if you could.
Well again, not seeing any stress is probably a little could take it a little too far. Of course, there's individual challenges in various places, and you know, look, banks need to work with their clients, and we're seeing that in a lot of places. But overall, when you look
at the US economy. You look at the employment rate, the fact that people have jobs, the fact that we're manufacturing everything here in the United States, the fact that you know, we have so much going on to the positive, I see a pretty bright printing picture.
D Well, listen. We always appreciate getting some time with you.
Frank B.
Well.
Frank Sorrentino, Founder chairman CEO at connect One Bankcourt joining us on Zoom from Florida, Florida.
Nice this time of here, Caryl.
It's better than a grey January here in New York City, New York and New Jersey.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Say Alexa playing Bloomberg eleven.
Let's get to it.
With our Drive to the Closed. Guests Back with us is Walter Todd, President and Chief Investment Officer of at Greenwood Capital Zosias. He is on Zoom from Greenwood, South Carolina.
Or Walter.
Great to have you here on this FED day. So did the Fed get it right? In your view.
Yeah, I mean it's definitely a contrast to what we heard in December, honestly, So I'm a little bit confused. I'm I'm glad I wouldn't taking a drink every time the word confidence was used in the press conference.
He did say good economy several times though.
Yeah, yeah, no, absolutely, I think you know, obviously the Marcus a little bit disappointed. You saw the expectations for the March rate cut dropped from like sixty.
Pointed about considering he did say over and over again, it's a good economy. People are working, we've got growth, inflation continues to come down. Like, what is it that you think equity investors might be getting wrong here? Or do you not think they're getting it wrong?
Yeah, No, I don't think they're They're I think it wrong.
I just think it's just, again, a near term reaction to an expectation, not unlike what we've seen in a lot of earnings reports this year in terms of what the expectation levels are. So we're still about five percent above that level that we were before the December meeting, so you know, we could continue to drift a little bit lower, But I mean there's forty days between the March meeting and the main meeting, So I don't think it's that big of a deal than pushing it out.
Do you think it's the right move? I mean, is what you're hearing from Pedhair Powell, in your opinion, the right thing for him and the FED to be thinking about right now. Do you agree that the FED needs to see more data in order to declare victory on inflation?
Personally, No, I don't think they do. And actually we heard from Powell in December saying they really didn't need more data, but yet now they do, so they need better or growing confidence or more confidence, whatever the phrase is. So you know, again, I think we're kind of splitting the hairs on the timing.
You know.
I think they could certainly go ahead in March given what we know today, but there's there's a big gap between today and the March meeting. So we'll get a lot more data. We'll get a lot more data this week and see if it continues, Carol.
He did say we will begin rolling back type policy sometime this year, the FED chair, Well, yeah, right, sometime this year. That was like the hint that he gave for Okay, yeah, we get your message here, We're just not going to tell you that it's going to be in March.
Right, Well, and I think that's fair, I mean right, I mean, Walter, it comes down to we do expect great cuts of some sort. It's just quantity and when it all starts. So that's just the question. I mean, I feel like he was very very clear of kind of taking March off the table. He is concerned about peski inflation, and he's worried about you hit it. It's like a tag game, right, tag football or something or whatever you want to call it, hitting it and then
what if it goes above two percent? That is his ultimate endgame here, correct.
Yeah, but you know, he's very clear about what the ultimate end game was. The only the only kind of thing I would push back on is, you know, in December it you know, it seemed very clear they were kind of where they needed to be and it's seen what they needed to see. And I think, you know, I expected him to push back at that December meeting.
He didn't.
So maybe this is a little bit of a replay that he gets here in January to push back on financial conditions easing so dramatically since that meeting.
Just a headline to bring to everyone's attention. FED swaps cut odds of a March raid hike to contract low near thirty percent, Carol, So.
For the March meeting.
For the March meeting, Yeah, that's March rate cut.
Yeah, no surprise that, you know, if you've got Japal coming out like, Okay.
We're listening, but there's still a thirty percent chance.
Well, well yeah, go.
Ahead, go ahead.
No.
I was just gonna say, they basically just pushed out, right.
I mean, if you look at the January twenty twenty five number, that actually went up, so they're just pushing out. They didn't take away cuts. They actually added half of a cut for the remainder of the year, but they pushed it out beyond March. So they are listening, but they aren't listening because he said, you know, the FED has three in their dot block. The market's still pricing in over five this year, but they just pushed it out beyond March.
Hey, well, anything of the FED decision, and especially since you feel like a little bit of a disconnect from what we heard in December and what we're hearing today, that would impact your portfolio strategy for clients.
No, not really.
I mean I think you know, you use opportunities like this, given the strong move that we had at the end of last year, you use these pullbacks to you know, put new money to work, take opportunities to buy names that you know, maybe you were waiting on a pullback.
On and put the additional capital.
There is this enough of a pullback or do you think there's further to go?
I think there's probably more to go, and I think you need to be mindful of the earnings events, you know, obviously for individual names, because that can create further pullbacks and individual names. But I would not be surprised to see us kind of leak back, maybe towards that level that we were in mid December before we kind of reset and move higher.
Hey, there's valuations to watch, and then there's also earnings fundamentals. So far on that front, what is that telling you about the corporate environment right now and the ability to maybe maintain earnings going out through to twenty.
Four Yeah, it's a great question.
I mean, it's it's really kind of tough to figure out because you're getting such mixed signals from different companies, you know, Witness ups yesterday versus GM, for example, I would.
Say, in general, they're okay but not great.
It is the growth is definitely concentrated in a you know, a pocket of the market, as we know. So I'm you know, I'm very interested to continue. I have a list of calls that I need to listen to to hear more data. But you know, I would say, it's okay, right now, calls.
What's on that list of calls when you've got some downtime that you're going to listen to. What are the companies that you think bear you're listening to?
Oh gosh, well, well as of today. I mean, I want to go back and listen to Starbucks. I've got boeing to listen to a M D.
Google. I'm really kind of behind, honest, So.
Give me how much work you have to do. We're glad you came on our program.
Thank you for doing Yeah, no, no, no question, but even listening to me. We don't own ups, but I listened to that call this morning just to kind of understand the dynamic and what was going on there.
So even listening to.
Companies that you don't own, just to get a better kind of signal and things.
Hey, just just thirty seconds from you on that. We continue to get news of layoffs every single day. Odyssey plans to cutch obs and it's Pineapple podcast division. Flex Support has laid off fifteen percent. Novax's cutting twelve percent of its global workforce yesterday was ups What do you like? What do you make of all this? I mean, this is are we looking at? Is it too anecdotal or is the data actually coming in?
No?
I think you know, you are starting to see softer kind of data. Power alluded to this in the labor market. I mean, the ADP report today wasn't too great one hundred thousand, So I mean that to me, that's the key for this year, right. If we continue to see positive job gains of a one hundred and hundred fifty thousand, that's fine. If we start to see negative prints there, if some of these anecdotal stories show up in the actual numbers, filming got a problem, I think yeah.
And the fit chair saying like he doesn't want to see the job market fall apart, you know, hoping to you know, keep that dual mandate in mind, inflation low but still people working, and maybe ideally ultimately say we are at that soft landing. Walter, thank you so much. As Tim said, you're in the midst of a lot of stuff, so glad you could take some time for us. Walter Todd, President, chief Investment Officers at Greenwood Capital Associates on Zoom from Greenwood, South Carolina.
This is the Bloomberg Business Week podcast of a Little Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal