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This episode is brought to you by Charles Schwab. Timing the Market, Fighting inflation, Managing risk Financial decisions can be tricky. Investing isn't just math, it's psychology. Your neurons are playing favorites and the market doesn't care. Financial Decoder, an original podcast from Charles Schwab can help join host Mark Reape as he breaks down practical strategies to help overcome the mental traps that may affect your investing decisions. Listen@schwab.com FinancialDecoder
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Papa John's Celsius Burger King It's a food and beverage earnings showdown. We survey who's winning, who's losing, and why. Surgical robotics competition in this space is heating on up. We look at the players and break down the impact that GLP1s are having on the industry and Gmail, Google Search, Google maps, all the GS one of the most influential engineers behind these groundbreaking apps is leaving Alphabet and investors are sitting up for and paying attention. We have the latest for Thursday, August6. It's Brew Markets Daily and I'm Ann Berry. More market details to come. But first, people. Yes, the real engines behind the companies we cover here on Brew Markets. Big name tech founders and media icons have a tendency to capture the headlines. Marquee product innovations get mind share and numbers of course, drive the narrative. We talk stock moves, after all, but it's the people who make decisions day in, day out that create those returns. Well, we've seen this crystallized in lots of focus around certain CEO moves. Take the example of Brian Nichols. When it was announced that he would be joining Starbucks, the coffee shop giant stock soared 24%, while Chipotle saw a drop of nearly 8% on news that he would be leaving the CEO job there. Such is the confidence the market had in his personal ability to drive value creation. It's much less common though, to see such stark stock price swings outside founder or CEO changes. Which is why this week's volatility in Alphabet's trading caught our eye as one of the most influential people in artificial intelligence you probably never heard of is leaving Google. Jeff Dean, chief scientist and one of its earliest engineers, is departing after 27 years in a move that sending shockwaves through Silicon Valley and Alphabets share price down. If you've used Google Search, Maps, Gmail or today's AI tools, chances are you've touched technology that Dean helped create. He was Google's 30th employee and co designed many of the company's foundational systems, including MapReduce, BigTable and TensorFlow software that anchors much of modern AI while Dean is departing alongside several other top AI researchers to launch a new public benefit AI company called Discovery Discovery Loop, aiming to focus on accelerating progress in drug development and clean energy and the like. Google is backing the new venture, suggesting that it's not a bitter breakup. But it's interesting because the set of departures alone would certainly rattle investors in Google's parent Alphabet. These are big hitters in the organization, but likely not usually enough to drive the 6% ish drop we've seen in the past 48 hours. He was bound to retire from the company at some point, and companies this big are used to succession planning. But the problem is that there's even more afoot. Demis Hassabis, the Nobel Prize winning co founder of DeepMind and the architect behind Google's AI strategy, is stepping away from day to day management of DeepMind to become chair. He's becoming Alphabet's new chief scientist for a more big picture role in building artificial general Intelligence or AGI at the tech giant. So here's why this matters. Hassabis is known for being a hard charging doer, a grinder who gets stuff over the line, sometimes against the odds. Dean, the engineer who helped build Google's past, will do his doing elsewhere. And when people like this, the hands on doers change roles or move companies, the impact can be as profound, if not more so, as a switch in CEO. A reminder that with the right people, the right products and performance can come. But without them, the market watches uneasily. Coming up in a moment, a spin through the headlines that are moving the markets today, including why investors are cheering on Versant's move beyond the TV screen. But first, this episode is brought to you by Charles Schwab. Timing the Market, Fighting Inflation, Balancing Risk no one says financial decisions are easy. In fact, it's the exact opposite. Financial decisions can be really tricky and it's often your own thinking that can lead you astray. Financial decoder and original podcast from Charles
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Schwab can help join host Mark Reap, head of the Schwab center for Financial Research, as he offers modern strategies to help combat the wait. What in your head? Mental traps like overconfidence, loss aversion and recency bias may cloud your investing decisions. When you understand those patterns, you can take steps to make better informed financial decisions.
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Listen@schwab.com financial decoder or wherever you get your podcasts that schwab.com financial decoder well, let's take a quick spin through some of the headlines moving the markets today as these Earnings continue to roll on in kicking things off with with Celsius, shares in the energy drink maker fell more than 17%. That's after the company missed Wall Street's expectations.
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The disappointment was driven by weakness in its flagship Celsius brand, where revenue dropped 12% from a year ago. And it comes as competition in the drink aisle is heating up. Earlier this year, Costco, a key retail partner, launched its own private label energy drink, a move that sparked a sell off in Celsius shares.
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Management said it plans to increase spending on promotions and advertising and to refocus on its core brand to reinvigorate growth. Now, though, that stock still down nearly 50% year to date.
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Moving over to pizza shares in Papa John's ticker P ZZZA fell over 15% today after the company delivered disappointing quarterly results. Same store sales dropped more than 8% from a year ago, marking the company's fourth consecutive quarter of declining comparable sales.
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Management also lowered its outlook, saying it now expects North American comparable sales to fall as much as 8% this year. Bad news for that magic metric, though, that is around double its previous fore. Executives blamed a softer consumer, lower order volumes and a highly promotional environment and
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not landing with consumers sandwiches. That's according to Papa's John's earnings call. The company suspended its dividend and instead of leaning into unsustainable discounts and promotions, it will instead invest in marketing that aims to differentiate the chain from its competitors. And now flipping over to burgers and another fast food turnaround, play Restaurant Brands International and announced earnings that topped Wall Street's expectations, driven again by a standout
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quarter From Burger King U.S. same store sales at the burger chain jumped eight and a half percent. That's a big number for that magic metric. And in comparison, rival McDonald's recently reported growth of that same store sales metric of just 0.8%. So a big delta there. Burger King's turnaround plan, dubbed quote Reclaim the Flame, is clearly heating up as investments in restaurant remodels, stronger marketing and a renewed focus on core menu items like the Whopper, those kinds of initiatives helping the chain to bring back customers.
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Nonetheless, shares dipped today on the weakness of other properties in the restaurant brand's portfolio, including Tim Hortons Canada and Popeyes Chicken. And moving over to media, shares of versant gained nearly 10% today after the Comcast spinoff of cable channels topped Wall Street's top and bottom line estimates and the company raised its full year outlook again.
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It wasn't led by the cable channels. Revenue there down over 6% and instead, Versant continues to lean in into a broader digital business, including momentum in its media platform, Gulf Pass and tea time reservation company Golf now. And this week, the company closes acquisition of golf simulator maker Full Swing Golf. All the way over there at Versant.
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That's right. And they do own the Golf Channel, so it's a good theme. Though about 80% of Versant's revenue still comes from the traditional pay TV business, management is eyeing a share closer to 50%. And finally, shares of United Wholesale Mortgage plunged nearly 50% this morning. The top US mortgage lender posted a loss of $450 million for the quarter. Compare that to a profit of around 315 million this time last year.
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Well, the company went public via SPAC in 2021 and grew rapidly during the pandemic. In recent years, though, demand for new mortgages has of course slowed dramatically.
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And the company's bid earlier this year to buy mortgager servicer to Harbors was rejected, denying its attempt at diversifying revenue beyond the mortgage. Shares of United Wholesale Mortgage are down over 70% this year.
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Let's take a quick break and when we come back, we answer a listener's question about the evolving landscape of robotics assisted surgery.
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Banking services provided by Cash App's bank partners. Bitcoin services provided by Block Inc. Brand for additional information, see the Bitcoin disclosures at Cash App legalpodcast.
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John, we got a letter from the audience.
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That's right, Brandt wrote to us on Spotify. Can you guys take a look at Intuitive Surgical? People are saying its moat and Surgical Robotics is deteriorating and that weight loss drugs are cutting into its bariatric surgery market. But the company continues to beat Wall street estimates and grow their recurring revenue. Would love to hear your take on the company.
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Well, thank you for the note, Brent. We love to hear from our listeners. So excited to get this one in. We're going to get into the effects of GLP1s on Intuitive in a moment. Because there are so many industries feeling the knock on effects. This one perhaps not top of mind. So it's fun to find a nugget that is feeling GL coming into its life. But first, John, give us a little background on the company.
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Yes. Intuitive surgical ticker ISRG on the NASDAQ market cap of $134 billion. Now, the focus here is Intuitive's Da Vinci surgical system. It's the company's flagship robotic assisted surgery platform. And picture this, Ann. A surgeon sits at a console a few feet away from the operating table and controls robotic arms that hold miniaturized surgical instruments. The system translates the surgeon's hand movements into precise motions inside the body, even filtering out the surgeon's hand tremors. It's quite remarkable. It's used for minimally invasive surgeries across urology, gynecology, thoracic and cardiac procedures. It was first FDA cleared in 2000, and it's on its fifth generation. So 25 years now of this process.
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Can we just pause on that for a second? And actually just sort of really think about what you just said? It's absolutely amazing. So you've got a surgeon, to all intents, has this sort of console, right. Literally working the operating table and working the surgical tools that are being used. And a robot is taking its cue from what the surgeon is doing, completely separate and apart from those instruments that are touching the human body. I mean, it's just an incredible thing to think about.
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Absolutely. And as skilled as any surgeon could be, this robot can move in angles that the human wrist just can't get.
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Just the finesse. You know, I'm having not quite deja vu, but something close to it, because I remember when there was so much talk about how Oculus was going to conquer the world and it was all about virtual reality. And I remember sort of nerding out on this and thinking, look, the consumer applications are all very well and good, and it's very exciting, particularly for media, which you and I are involved in. But the application that really caught my attention was the idea that you could have surgeons with specialisms, literally in America using virtual reality to conduct surgeries on another continent by virtue of being able to communicate using virtual reality tools and also robotic systems like this, given you're sort of remote anyway, I mean, it's kind of amazing what's. What's possible.
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And I did look this up. Intuitive Surgical doesn't yet have applications of that very remote access.
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Yes.
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But there have Been demonstrations of how it could work. And so we're headed that way still.
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Well, razor razor blade. Let's talk about the kind of model that this is sort of touching on. Here's what Intuitive Surgical does. It's selling or leasing the systems and then makes 85% of its revenue by selling the quasi disposable surgical instruments for medical components, which makes a ton of sense. And you know, the razor razor blade model is exactly that. You have the highly durable installed base and then you have what's called the consumables in this case. This is the blade that gets consumed very frequently. And it's just an amazing recurring business
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and it's the point of contention here. So we're going to get back to that. It's really important. In the most recent quarter, Intuitive Surgical in the Q2 had revenue of $2.9 billion, which was up 19% year over year. Adjusted earnings per share of $2.80 beat by 32 cents. Nonetheless, the next day, the share price fell 11% in part because DA Vinci saw its slowest pace of growth in four years. Then came a wave of price target cuts. JP Morgan, Wells Fargo, Citigroup, TD Cow and others, all lowering their price targets after the most recent quarterly report.
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So let's talk about why that growth in the flagship Da Vinci surgical system has been slowing down. So there was still growth in the second quarter. We're not talking about decline here. Intuitive did place 468 new machines up 18% year over year. But what spooked the market on this particular name is the fact that real competition with potential for real scale is emerging for the first time in 25 years. And I make that distinction with scale because there are some very cool startups out there that are really leaning into robotics and applications in medicine and surgery. But here is, here is the big name that's coming into this. Last December, Medtronic, which is a massive publicly traded company, did put to work a robot assisted platform called Hugo in terms of getting it cleared by the fda. So making real strides to having a mainstream product through a scaled player. Again, that's Medtronic, something that was not good news for Intuitive stock. Now Hugo is also seen as a less expensive alternative to Da Vinci. So not only does Medtronic bring scale here, it's dangling the carrot of procedures costing 20 to 40% less. Johnson and Johnson, another absolute mammoth when it comes to medical appliances, is rolling out. Octavia won't ramp up for another two years. But again, having a competitor with that kind of Deep pockets, the resources. And R and D is never a good feeling when you're an incumbent.
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Absolutely. And so going back to the razor and blade, regarding that blade, which isn't always a blade in the surgery, but I know we're talking about razors. The disposable surgical equipment that's attached to the da Vinci system is designed and programmed for usage limits. So a chip in each instrument counts, uses, and after a set number, the system disables it. So regardless of whether it's still physically functional, this part of the robot, it has to be replaced. And for years, this has been the subject of lawsuits from hospitals and third party companies. The third party companies want to refurbish these surgical parts. The hospitals are saying this is driving up the price, that we have to replace them and maybe they don't need to be replaced. And this made me think, this is such a different scale. We're not talking about life or death here, but I think about my printer at home, where sometimes it requires genuine ink or toner that needs to be replaced. It's got a microchip on it. And even companies like hp, Lexmark and Epson have faced antitrust and right to repair litigation over these chip locked cartridges. So maybe it's something we've all experienced in our own homes.
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This one is so fascinating to me. I was thinking about this before we came on and I was just thinking about the stakes here and what's at risk. And I'm really sympathetic to everyone involved because you can imagine the hospitals getting really frustrated and saying, look, this is perfectly usable equipment that we should be using. We're all subject to our budgets. We want to use it to deliver the best care possible. But the minute that they do use one that's been refurbished and the life of the system is extended beyond this automatic cutoff point, if anything goes wrong. Right. If anything goes wrong, we know where that's going to go. Immediate, immediate lawsuit. To intuitive saying, how could you have not gotten correct or enabled a machine to go past, you know, a de facto expiration date is super tricky when it comes to this stuff. And so these kinds of debates that you have for other industries like printers, to your point, and I know that there's been suspicion around, you know, mobile devices and brands we will not name where there's a suspicion that the battery is designed to deplete itself past a certain number of users, the stakes are just so different when it comes to medical appliances. So it's a tricky one.
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Life and death.
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Life and death. Well, in May Intuitive did send out a press release saying that the company anticipates that next year, quote, the number of uses on certain core instruments will again increase, reducing part procedure costs for da Vinci surgery. Now, on the earnings call, multiple analysts did ask the CFO to quantify the financial impact of extending instrument lifespans, but the response was, quote, we're not ready to quantify it yet. We'll do that on the next earnings call. Well, that lack of specific financial impact may be what spooked investors again, alongside the specter of these massively well capitalized, perhaps not so agile, but certainly with the depth of resources to get to scale pretty quickly.
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Yeah, Intuitive is feeling the breath on their back from competition coming up. And then one other bit of competition we might not see. They're competing against GLP1s in a certain way. And this was mentioned by Brandt in his note. So Intuitive did say they're doing fewer bariatric surgeries due to GLP1s, and that's in the latest quarter. These procedures declined in the high single digits, so there are fewer people getting that surgery because they're losing weight from the drugs. Overall, da Vinci procedures were up 15% year over year, though across all of the procedures that they do, the company's always looking to develop new techniques new. And while in the early stages, Intuitives, nipple sparing mastectomy and heart procedures like coronary artery bypass grafting were highlighted as seeing 40% growth. And so even though there's fewer bariatric surgeries happening, there's always new applications of this system.
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Well, lots going on at Intuitive. So extremely grateful to Brandt for flagging this one. You know, let's take a look at the analyst community is saying it's very well covered. 33 analysts covering this name as of right now, we've got sort of 23 of them with a buy or a strong bar, nine of them at hold, you know, one or two at underperform. So overall, we've seen a lot of analysts standing behind this one. We have seen some recent downgrades, so worth watching this one sometimes, too. One of the big areas here to think about is the element of trust for something as sensitive as these kinds of robotics. And the stakes here, it's, you know, it's easy to say that people will switch to competitors, but the surgeons do have a say here. It'll be very interesting to see what kind of adoption records we tend to look at once some of these competitors do get their products to market. Oh, look, we love to hear from you. We say this all the time, but if there is a stock you want us to unpack or break down, if there is a CEO you want to get to know better, if there is some kind of playbook in the market that you're curious about, we love to hear from you. Email us snail mail or send a carrier pigeon to John Criteau. You can also leave comments on our YouTube videos and also on Apple and Spotify and everywhere you get your podcast, we listen to and read to all of them. It's 4pm on the east coast, the markets wrapping up for today. There's the closing bell and we don't have a ticker tape so instead let's throw it over to our human ticker, our producer John.
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Well, the markets pared back their earlier gains with the S&P 500 finishing down 2.10 of a percent, the NASDAQ finishing flat and the Dow snapping its run of record breaking finishes, ending the day down eight tenths of a percent.
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Well, a quick tee up because tomorrow on the show we have a great guest joining us that is Nate Baxter, President and CEO of Sports Scott's Miracle Grow. It is the brand you may associate with a slightly dull looking chemicals with which to treat your lawns and your gardens and if your plant parents for taking care of those too. But Scott's is actually trying to do something pretty interesting, a little unprecedented and Nate's going to break it all down for us. That's it for today's Brew Markets Daily.
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Brew Markets Daily is hosted by Anne Barry and produced by John Curto Tarkov, Della Teeth Avenue La Roya and Emily Millarn. Technical direction by Uchena Wa OGU Brittany to talk it was our audio engineer and the president of Morning Brew Inc. Is Devin Emery.
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Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. See you back here tomorrow. Same time, same place.
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I'm not giving up. I am selling the building.
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The final season of FX is the Bear. The restaurant is flooded.
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Everything's either gonna be okay.
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No, stop.
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Or not. We are outgunned and we are outmanned.
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But we have each other. FX's the Bear the final season, all episodes now streaming on Disney plus.