SARA SILVERSTEIN: Good morning, Action Alerts PLUS subscribers. I'm Sara Silverstein, in for JD Durkin. Chris Versace joins me now for a look at the portfolio as we kick off a fresh week of trading. Your post-earnings downgrade of ChargePoint certainly had a lot of members talking. What changed between your bullish note last Tuesday and Thursday's results?
CHRIS VERSACE: Well, I think there were a couple things, Sara. First, the company reported quarterly results that were disappointing, not only to the market but to us, as well. And I think, in hindsight, the reality is we just simply have to come out and say it. We've been leaning more so into industry-specific data. And that, candidly, led us to get the position and call with ChargePoint wrong. There's really no other way to say it.
And as a result of the company not only missing the quarter, offering softer guidance, and embarking upon a cost reduction program that also leaves us scratching our head as to how they can ramp in a period of time when EV charging station spending is rising, we have to take a more conservative stance on the stock. Is it, arguably, for some people, a little long in coming? Yes, we would admit that.
SARA SILVERSTEIN: And in your downgrade, you said you're putting the company and its management in the penalty box. But what are you looking for to either move forward with an exit or turn things around and renew your faith in the position?
CHRIS VERSACE: So one of the things that we've been a little critical on with ChargePoint in the past has been, candidly, the lack of headlines, the lack of news, that would suggest that the company is making progress. And so we look at last week. Tesla makes an announcement with Hilton that it's going to outfit 2,000 locations with EV charging stations.
Earlier today, EVgo came out with a positive announcement about similar wins. And that's really what we want to see. We want to understand that, yes, ChargePoint has had its challenges, but it is starting to get itself back on track. And if we don't see that, that's going to raise a lot more questions in our mind, particularly as the competitive distance, if you will, relative to Tesla, EVgo, Blink Charging, and others extends itself.
So if we don't see that type of progress, we're going to have to take an even further step with the position. And that could mean, at some point, cutting it loose from the portfolio.
SARA SILVERSTEIN: And at this stage-- it's a 3-- does that mean taking any money off the table? How long are we willing to take losses or to wait it out? What should an investor do at this stage?
CHRIS VERSACE: Sure. So when we talked about this during the monthly call last week, Helene Meisler brought up a great point, which was we're soon going to be entering into tax loss selling season. And obviously, given the performance in ChargePoint, it's going to hit a lot of folks. And so we expect them to do just that, tax loss selling.
Our thinking is that we're probably going to hang on to the position at least through the end of the year and be patient with it in that regard. In addition to potential announcements, we'll also have a much better sense as to how quickly federal spending is ramping for EV charging stations. Based on that, we can start to make our decision.
The one thing I wouldn't want to do is to be kind of penny-wise, pound foolish, as they say, is simply cut the position to do it when some positive catalyst could come along and reduce the drag on the portfolio, perhaps even pivot the position into something positive for the portfolio two, three, four, five months from now. So we do want to be patient.
SARA SILVERSTEIN: Great. Now, explain today's decision to add to Qualcomm.
CHRIS VERSACE: So when we added Qualcomm shares, first to the bullpen and then, later, to the portfolio, one of the big overhangs in the stock was the known fact that Apple was going to move into its own modem design, use its own chipset, for iPhone, really beginning in 2024. Now, that's been the big concern. What is going to happen when this large customer goes away? And we knew that going into the position.
However, this morning, apparently, Apple and Qualcomm have reached a new agreement in which Qualcomm will be supplying chips 2024, 2025, and 2026 for Apple, predominantly for its iPhone product. This is a very, very positive development.
It means that we're going to see revenue cash flow, EPS expectations for Qualcomm, rise for 2024, 2025, 2026. That led us to step in and not only raise our price target to 150 from 135 but really lean into the position using the recent weakness in the shares.
So I think it's simply removing a tremendous overhang, a lot of questions about Qualcomm's future. And it gives it a bigger runway as it continues to transition from wins in the automotive space into actual revenue and actual earnings. This is a great relief, I think, for a lot of folks.
SARA SILVERSTEIN: And over to last week's weakness in big tech. What do the reports of a China ban on iPhone use among some state and local government officials mean for the stock and your broader view of sentiment ahead of Apple's event tomorrow?
CHRIS VERSACE: So we wrote last week with members that we think this is probably more than a little overdone. It's a lot of blustering. Personally, I think it's a little bit of a negotiating tactic by China with Apple. We know that Apple is looking to diversify its supply chain. There's conversations about India and other markets, where it's trying to lessen its reliance, if you will, on China.
But we also know that China, its economy, particularly on the manufacturing side, continues to struggle. So I suspect it's a little bit of this, hey, we're going to make some noise. We want you to come along and play some ball with us.
But at the same time, Sara, I have to think that, in China, in and of itself, in its state companies and government offices, it's probably frowned upon for people to be carrying an iPhone, not a local-manufactured smartphone. So I really just don't see a lot of impact from this on Apple.
SARA SILVERSTEIN: And it's a big week of data, with highly anticipated CPI, PPI, retail sales expected. Where are you putting your focus? And how is the portfolio geared up for uncertainty?
CHRIS VERSACE: So for the market, I would say the big report is going to be the August CPI, particularly the core CPI numbers. And yes, they are expected to come down. But we've seen some data of late, notably the August ISM non-manufacturing index, that pointed to a big rebound in the service sector inflation. That's something the Fed has been watching.
We've also seen oil prices move higher, and gas prices have moved higher, as well. So there could be a little of an upside surprise in the August CPI data. And to be clear, it may not fall as much as people are expecting. And I think that might spook the market a little bit. For that, we're going to continue to hang on to our inverse ETFs, which served us extremely well during the month of August and again last week.
But in terms of the portfolio, it's going to be the August retail sales report that we really want to watch, given the data that it brings us, not only for Amazon and Costco but also for Chipotle and McDonald's and, of course, Mastercard.
SARA SILVERSTEIN: Great. Chris, thank you so much. That'll do it for today. Thanks for watching.