Analysis: AAPL AMZN SBUX ABBV

Bob Lang and Chris Versace discuss Apple (AAPL) , Amazon (AMZN) , Starbucks (SBUX) and AbbVie (ABBV) and take a look at the Bullpen.

KATHERINE ROSS: Good morning, Action Alerts Plus members. It is Friday, October 29. I'm Katherine Ross. And I am, as always, joined by Bob Lang and Chris Versace. We do apologize for the delay in releasing this "Daily Rundown," but we've got a very special one for you today. We are going to break down Starbucks earnings, Apple, and Amazon.

So without further ado, Bob, I'm going to put it to you. What's your technical take on this market today?

BOB LANG: Well, here we are at the last day, trading day of October. And surprisingly enough, it's been an amazing month for the indices. The S&P 500, if we close here today, is going to be up about 6.75% just for the month, amazing after coming down about 4 and 1/2, almost 4.8% in September. We regained all of that loss and then some.

And we're trucking into the seasonally strongest period of the year, with a ton of momentum. The S&P 500 is probably up around 21 and 1/2, 22% for 2021. The other indices also are pulling up in kind. The Dow industrials, of course, we know posted new all-time highs earlier this week. And the NASDAQ actually is leading the parade above the S&P 500, more than 7%, Katherine, in October. So much for the month that the markets always see a market crash.

But of course, you know what? We did have a little bit of setback in the early part of October. We came back and really picked up the pace the last two weeks. So let's see if some of this momentum continues into November. That'll start on Monday.

KATHERINE ROSS: Well, Halloween just wasn't scary enough this year for the markets, apparently. Bob, I'm going to stay with you here. Let's talk about Apple earnings, since I had you examine that chart yesterday. It's down after earnings. Is this a buy the dip opportunity? And what do you make from this report?

BOB LANG: Yes, I would say it's a buy the dip opportunity. This may be a rhetorical question here, Katherine. But you have to ask yourself, do I really want to not hold any Apple going into the holiday season, when we know that, predictably, year in and year out, this company really crushes it on their earnings in the fourth quarter and coming into the first quarter? It always has a lot of momentum coming into a new year.

So while this might be a minor setback, I think setting expectations a little bit lower-- they didn't have a terrible quarter. But frankly, there's a lot of headwinds here with your favorite word, the supply chain. So I mean, I certainly think that a lot of what Chris has talked about recently with Apple and other retailers and the conditions that they've been under are going to alleviate eventually.

And I think Tim Cook last night set up a scenario where it could take a little bit longer for these issues to be resolved. They're being addressed right now. But lowering the bar, that's certainly something that Apple is used to doing.

It's called UPOD, under-deliver, overpromise, and overdeliver, or whatever-- something like that. Under-promise, overdeliver, that's what it is. So I think that we'll see some good numbers from Apple in the coming days.

KATHERINE ROSS: Chris, if we're going to continue talking about supply chain, we have to bring in Amazon here. They did miss on their earnings, which does make sense when you think about it, because if there is a company to have some issues with supply chain, that would be Amazon, right? So what did you make of this earnings report? And I'm going to put the same question to you. Is it a buy the dip opportunity?

CHRIS VERSACE: Sure. So let me take them reverse order. Yes, Katherine, it absolutely is a buy opportunity. Look, Amazon is dealing with the supply chain issues. You are correct that, given their retail-facing business, of course it's going to be a little problematic in the short term. They are hitting a lot of costs as a result of that.

They're also, Katherine, doubling the size of their fulfillment network. Now, that to me says investment. And when we've seen Amazon make these types of investments in the past, it has been phenomenal later on. And I do think that the one-time items that we're seeing in terms of supply chain issues, bottlenecks, will get worked through, like Bob said.

And I think in 12, 14, 18, 24 months-- take your pick, Katherine-- we're going to look back on this like another bump in the road. We've seen them in the past with Amazon. And people who use these to their advantage laugh all the way to the bank when they do it.

KATHERINE ROSS: Then we have Starbucks. I'm sticking with you here, Chris.

CHRIS VERSACE: Sure.

KATHERINE ROSS: They did miss on earnings, on revenue. And it wasn't that surprising because we did have a lot of issues with COVID and the Delta variant for this last quarter. Is this a buy the dip opportunity? And are you concerned about this name going into the holidays?

CHRIS VERSACE: So Starbucks, just like Amazon, just like Apple, tends to be a great beneficiary of the holiday season. You're out, you're shopping, hey, I'll pick up a Pumpkin Spice Latte or that mocha mint crack-like drink that they have that are nice high margins. So no, I'm not worried about Starbucks into the holiday season whatsoever.

Look, when we break down the business, they performed extremely well in the US. China was a little bit of a hiccup, down 7% in same store comp sales, but we knew this going in. In fact, it wasn't anywhere as bad as people had feared following the September quarter earnings from Yum! China. So I would say it was, on the revenue line, good.

Where Starbucks is going to get hit a little bit is on the cost side. And I think that's really the bulk of the reason why their forward-looking guidance is weaker than expected, around 3.10 or so compared to about-- sorry, 3.40 compared to about 3.70. So we are going to see some price targets come back. We're going to do the same.

But when we step back and look at how much the shares have fallen versus the opportunity and the support that they're going to get with $20 billion over the next three years in buybacks and dividend increases, we're going to stay the course with Starbucks. And yes, this is going to be, in a few days, a buying opportunity.

KATHERINE ROSS: You got to the question before I even follow up. Bob, going to now, let's take a look at that chart of AbbVie, which also reported earnings. What do you make of that here?

BOB LANG: Yeah strong move for AbbVie today. The chart wasn't looking all that great coming into earnings here. But we decided to be a little bit patient with this one. And sure enough, they knocked the cover off the ball here, Katherine, and raised their dividend, which was already pretty strong as it was.

And the earnings were lights-out. They raised guidance. And the stock is moving up today. Hits a level of about 116-117. And then it follows through on that, maybe in the next several days, this thing is going back to its all-time highs. So we're pretty excited about this one. It had some really strong volume today. By the end of the day, it'll have a very big print, much bigger volume print than it's had in weeks.

It's been piling in on the options side. I happened to take a look at that one earlier this week and even today. There have been a lot of call buys coming in. What does that mean? It means basically, people are very bullish on AbbVie in the short term, the next two, three, four, five months. So that's going to help buoy the stock as well too, that demand for the stock, not just for the shares but also for the call options.

So I mean, we're pretty happy with this performance. Chris talked about it last week, that they could put up a good number. And they certainly did.

KATHERINE ROSS: Chris, you escaped Bullpen Friday last week, but I'm not letting you get away this time. What are you watching stock-wise or sector-wise for the bullpen?

CHRIS VERSACE: Oh, Katherine, all sorts of stuff. Bob and I [INAUDIBLE] quite a bit. And what we've done in the bullpen, if you've noticed this last week or two, we've actually quickly added and called up to the active portfolio Skyworks and Deere. I think it's fair to say that some of the others that we added, I believe that might be DoorDash and Airbnb, that we are taking a close look at those as well.

Some of them report next week. And we're always looking for new ideas. And I think you're going to see us talk a little more thematically in the coming weeks, Katherine. So stay tuned. The bullpen is going to get some love as well.

KATHERINE ROSS: OK, Bob, one thing-- we kind of hit on this last week. But I'm going to bring it up again to you because I've gotten increasing anxiety from members about the bullpen because they're worried that if you guys are pulling the trigger on names that aren't in the bullpen or haven't been brought up to them, that they're going to miss out on opportunities.

As I said, we did speak about this a little bit last week. But let's bring this conversation back up. How can members really truly understand where you guys are thinking? Is it reading your alerts? Are you guys going to start warming members up to what sectors and stocks are really getting your eyes?

BOB LANG: Yeah. So we plan-- I think Chris and I were talking. I think we plan on beefing up more of the names in the bullpen, just to give some ideas. The bullpen is just what it is. You're not technically in the game. So a bullpen stock is just going to be something that we have on our watch-list, something that we really have our focus on, but we're not quite ready to pull the trigger and put it in the portfolio yet.

But it's like a relief pitcher. He's warming up in the bullpen. So we need to keep an eye on these names. And we put them out there just as ideas for subscribers to take a look at. We've had some feedback from some people, at least I have, and some subscribers, not just for AAP but also for Trifecta saying that, you know what? I bought in on one of your bullpen names, and you're not following it and so forth.

And that's the protocol. We're not going to necessarily follow it until we bring it up to the portfolio. But some of these names have done fairly well for the time they've been on the bullpen. And again, credit to the other managers for bringing some of these names into the bullpen to keep an eye on.

But as far as that's concerned, Chris and I just have an eye on these names. We're not going to necessarily execute on bringing them into the bullpen, to the portfolio until we're ready.

KATHERINE ROSS: OK, Chris, I'm putting you in the hot seat here. I'm getting a lot of questions about buy now, pay later stocks. You could argue-- and I know you, and I'm reading your mind here. You could argue that PayPal has that kind of exposure. But if people maybe want to look outside of Mastercard or typical credit card companies and get more exposure to buy now, pay later, is that something that you guys are watching?

CHRIS VERSACE: I think we are. I think there's some inherent risks associated with that type of a move. I know that it's very popular now. And companies, some of the ones you've mentioned, are expanding their offering or doing partnerships.

Where I think it starts to fall down is what do their balance sheets look like over the long term? What happens if we go into an economic recession, and all of a sudden, consumers are not able to make those payments at that time? I don't think a lot of people have thought through those scenarios.

That might affect some. There might be some companies that are strong enough to survive. But as we examine those opportunities, Katherine, those will be the things that we're looking for to make sure that we pick the right companies at the right time.

BOB LANG: Chris, I wouldn't call these--

KATHERINE ROSS: And they're--

BOB LANG: I'm sorry. Chris, we call these teams-- sorry, Katherine, they would you call these the modern day layaway type platform or something?

CHRIS VERSACE: Yeah, I would say they're the digital form of that, yeah. This isn't--

KATHERINE ROSS: A digital form with some interest, though.

BOB LANG: Say that again, Katherine.

KATHERINE ROSS: Because some of these names-- the digital form with some interest. I mean, one of the things-- when you compare it to layaway, when you think about layaway, it was you pay the full price for that item when you could. When you look at buy now, pay later, this issue becomes, you're also paying interest. And that might not be as widely known to consumers.

CHRIS VERSACE: I think the other difference with pure layaway is that it would sit there. It would lay away as you paid for it. And when you were done paying, then you would get it. This is a little different, where you're getting the goods and have to pay later for it.

But this is just another aspect of fintech when we really dial it back. And fintech's a very disruptive, interesting place. And I can see us doing more on it over time.

KATHERINE ROSS: You are right about that. We will be talking about it over on our monthly call this Wednesday at noon, November 4. I believe that's November 3 or 4. I don't have it written down. But we'll be talking about it right at noon. And it's the third, I've just been told by our producer. So Wednesday, November 3 at noon, we'll be talking about fintech.

We'll be talking about the state of the portfolio. You can tune in. We'll get you some details in your inboxes shortly. Thank you, guys, for watching us today. And thank you, Chris and Bob, as always, for joining. We'll see you on Monday.