Amazon Wants More Power

Summary

Motley Fool Money – Episode Summary: "Amazon Wants More Power"

Release Date: June 27, 2025
Hosts: Dylan Lewis, Ricky Mulvey, and Mary Long
Participants: Matt Argersinger and Jason Moser

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Introduction to Today’s Episode

In this episode of Motley Fool Money, hosts Ricky Mulvey, Matt Argersinger, and Jason Moser delve into significant business and investment stories shaping the landscape in 2025. The episode covers Amazon's expansive data center projects, the booming yet potentially frothy REIT market, the turbulence surrounding Hims & Hers, an analysis of overrated and underrated business narratives, insights into Progeny's growth in fertility benefits, and a look at promising radar stocks like Uber and Otis Worldwide.

Amazon's Project Rainier and Data Center Investments

[00:25] The discussion kicks off with a deep dive into Amazon's substantial investments in data centers, specifically focusing on the New York Times' coverage of Project Rainier. Ricky Mulvey highlights the scale of Amazon's commitment, noting that Indiana's JAMO facility alone requires enough electricity to power one million homes.

[02:11] Jason Moser elaborates on Project Rainier, describing it as "a massive one of a kind machine" designed to support the next generation of AI. The project involves connecting hundreds of thousands of Amazon’s Trainium 2 chips across multiple U.S. data centers, positioning data centers as the new "AI factories." He references Nvidia CEO Jensen Huang’s vision, emphasizing that "data centers are AI factories processing massive amounts of data to train and refine AI models" ([02:24]).

[03:29] Ricky Mulvey adds that Amazon’s investment is not solely for internal use but also to serve customers like Anthropic, which is developing the LLM Claude. Moser explains that this cluster will provide five times more computing power than Anthropic's current largest training cluster, aiming to build AI systems that match the complexity of the human brain ([03:50]).

Real Estate and REITs in the AI Era

Transitioning to real estate, Ricky Mulvey raises concerns about the REIT (Real Estate Investment Trust) market, particularly focusing on Digital Realty Trust. He points out the company's high earnings multiple of 150 times, questioning the sustainability of such valuations.

[07:13] Matt Argersinger counters by explaining that REIT valuations often include depreciation and non-recurring expenses, suggesting that Digital Realty's true earnings multiple is closer to 25 when adjusted for "funds from operations" (FFO). However, he remains cautious, noting the potential for an oversupply analogous to the Sun Belt apartment boom during the COVID-19 pandemic ([08:05]).

[08:40] Matt Argersinger expresses concerns about the frothy nature of the data center REIT market, drawing parallels to the oversupply issues seen in the apartment sector post-COVID. He also questions the longevity of current investments, pondering whether future advancements in chip technology could render existing data center infrastructures obsolete ([09:44]).

Hims & Hers Partnership Fallout

[10:18] The conversation shifts to Hims & Hers, an online healthcare company. The company's stock plummeted by over 30% after Novo Nordisk accused it of illegally selling knockoff versions of Wegovy. Hims & Hers CEO, Andrew Dedum, responded on Twitter, stating that Novo Nordisk's team pressured them to prioritize Wegovy over clinically best practices ([11:19]).

[13:00] Ricky Mulvey questions the investment outlook for Hims & Hers, citing its recent revenue growth and the potential impact of the fallout with Novo Nordisk.

[13:21] Jason Moser expresses caution, highlighting the reputational risks associated with selling non-FDA approved compounded drugs and the importance of maintaining trust in healthcare services. He emphasizes that while Hims & Hers has seen impressive revenue growth, recent developments warrant careful consideration by investors ([14:08]).

[14:15] Matt Argersinger adds that comparisons to successful platforms like Netflix or Spotify are often misleading, using examples such as Nikola being likened to Tesla. He advises investors to be wary of overstated claims and to focus on proven performers ([14:46]).

Overrated and Underrated Business Stories of 2025

Overrated Stories:

• [15:37] Matt Argersinger labels the Department of Government Efficiency (Doge) as the year's most overrated story. Initially promised to save $2 trillion, it achieved less, reportedly cutting under $100 billion and sometimes increasing costs due to inefficiencies ([15:42]). The project, previously managed by Elon Musk, has been criticized for overpromising and underdelivering, turning into a "nothing burger" ([16:24]).

• [16:45] Jason Moser criticizes Tesla's robo-taxi initiative, describing it as overhyped and underdelivered. Despite ongoing developments, issues like the necessity for human supervisors and limited rollout to a biased audience highlight significant challenges ([17:40]).

Underrated Stories:

• [18:16] Matt Argersinger surprisingly underscores Robo Taxi technology as underrated despite its current setbacks. He believes the concept will be transformative for urban transportation, envisioning a future where autonomous vehicles dominate taxi services, thereby revolutionizing the economy and daily life ([18:20]).

• [18:53] Jason Moser identifies the IPO market as an underrated story, anticipating increased activity in technology, healthcare, and fintech sectors. Factors like private equity cashing out, stabilizing interest rates, and strong market performance are poised to drive demand ([19:34]).

Additional Insights:

• [19:26] Ricky Mulvey mentions the resurgence of speculative bubbles in 2025, drawing parallels to the speculative fervor seen in 2021 ([19:58]).

Progeny: Solving Fertility Benefits Issues

In an exclusive interview, Pete Anewski, CEO of Progeny, discusses the company's mission to address fertility benefits, especially for self-insured companies. Progeny focuses on women's health and family-building solutions, targeting areas overlooked by managed care.

[21:08] Pete Anewski emphasizes the importance of fostering awareness and understanding of fertility benefits among employers, particularly as Millennials become the largest workforce demographic. He highlights Progeny's 99% retention rate and the company's strategy of expanding service offerings to include egg freezing, adoption, surrogacy, menopause support, and more ([29:34]).

[22:16] Holly Anderson, a benefits team member, shares personal anecdotes about Progeny's impact, underscoring the company's value in employees' lives and its role in enhancing employer benefit packages. She highlights the need for continuous education and promotion to maximize Progeny's adoption and utilization within organizations ([27:09]).

[30:05] Pete Anewski discusses Progeny's unit economics, explaining that client retention and product expansion drive increased margins over time. As clients add more services, Progeny's recurring revenue strengthens, ensuring sustainable growth and financial health ([29:34]).

Radar Stocks: Uber and Otis Worldwide

Uber (Ticker: Uber):

[37:03] Jason Moser puts Uber on the radar, citing its partnership with Waymo to offer robo-taxis in Atlanta. Unlike Tesla, Uber collaborates with established tech firms, positioning itself as an active participant in the autonomous future rather than a company being disrupted. Recent financials show Uber's bookings grew by 18%, trips by 18%, and revenue by 17%, indicating robust performance ([38:33]).

[38:42] Jason Moser adds that Uber's acquisition of an 85% stake in Turkish food delivery platform Trendy for $700 million demonstrates its global ambitions and diversified strategy, further solidifying its market presence.

[38:58] Matt Argersinger counters with Otis Worldwide (Ticker: Otis), the leading manufacturer and maintainer of elevator and escalator systems. Spun out of United Technologies in 2020, Otis boasts a 20% market share in new equipment sales and manages a 2.4 million unit maintenance portfolio. The company's recurring revenue from maintenance and modernization, coupled with steady dividend growth (110% over five years), makes it a compelling pick ([39:58]).

[40:10] Jason Moser humorously suggests Otis's critical role by noting that if Otis were to disappear, its impact would exceed even that of Uber, emphasizing its foundational role in building infrastructure ([40:10]).

Conclusion

This episode of Motley Fool Money offers comprehensive insights into major investment themes, from Amazon's strategic AI infrastructure investments to the nuanced dynamics within the REIT and healthcare sectors. The hosts provide balanced perspectives on current overrated and underrated business stories, spotlighting emerging opportunities and cautionary tales. Additionally, the Progeny interview sheds light on a vital segment of employee benefits, while the radar stocks section highlights promising investment avenues in Uber and Otis Worldwide. Whether you're an investor seeking growth opportunities or navigating complex market landscapes, this episode equips you with valuable knowledge to inform your strategies.

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Note: All timestamps correspond to the transcript provided and are intended to guide listeners to specific segments discussed in this summary.

Transcript

[Jason Moser]

Shh. Hear that? Big waves are calling.

[Ricky Mulvey]

Dive into refreshment with Kona Big Wave.

[Jason Moser]

Tropical flavor and the taste of aloha in every drop. So crack one open and let the great taste roll in. Kona Big Wave Liquid Aloha Copyright 2025 Kona Brewing Company, St. Louis, MO. Mahalo for enjoying responsibly.

[Ricky Mulvey]

Foreign Amazon needs more power. You're listening to Motley Fool Money.

[Jason Moser]

Everybody needs money. That's why they call it money. From fool global headquarters, this is Motley Fool Money.

[Ricky Mulvey]

It's the Motley Fool Money radio show. I'm Ricky Mulvey. Joining me on the Internet today, it's Matt Argusinger and Jason Moser. Motley fool analysts Matt Argusinger and Jason Moser. Great to have you both here.

[Jason Moser]

Mr. Rick Mulvey, good to be here.

[Ricky Mulvey]

There's a big tech, and I'm going to call it a macro story going on that I think we should dig into at the top of the show. And it's about data centers, the amount of real estate and big tech spending going on here. And we have someone who looks at tech, we have someone who looks at real estate. So we're going to get both sides of that story. McKinsey estimates, and let's take that estimate with a grain of salt from our friends at the consulting firm, that global data center spend will require nearly $7 trillion in capital outlays. And the New York Times recently reported on Amazon's Project Rainier. And just the mass investment going on here. It's Indiana facility JAMO will require enough electricity to power 1 million homes. That's a lot of juice, Jamo. What does Amazon want from Project Rainier?

[Jason Moser]

Rainier is Rainier. Rainer Rayner Raynor, Project Rainier. Yeah, let's just say Project Rainier. That's what I'm going to go with. I don't know. But what is Project Rainier? It is a massive one of a kind of machine.

[Matt Argersinger]

It's a mountain, jmo.

[Jason Moser]

It's a mountain. This is the project, though. This is the project. It's this massive one of a kind machine which is ultimately designed to bring in this next generation of AI. And it's spread across multiple data centers here in the US and this cluster ultimately will connect hundreds of thousands of Amazon's Trainium 2 chips across the US as well. Now, what is Trainium? Trainium is that family of machine learning chips designed by Amazon Web Services, specifically designed for AI training and inference. What this does, this really goes back. It takes me back to something. Jensen Huang, CEO of Nvidia said a little while back where he envisions a future where data centers are AI factories processing massive amounts of data to train and refine AI models. This concept of the data center being the new unit of compute, I think we're seeing that play out. I mean, they built, Amazon's, built seven data centers in Indiana alone. They're going to be 23 more. This is just a massive, massive presence.

[Ricky Mulvey]

This is also for one customer, this one just for Anthropic, which has the LLM. Claude. And when you think about these AI factories that are being built at these data centers, it's impossible to imagine all of the use cases. But what do you think that Amazon is hoping that Anthropic and Amazon can achieve with these massive centers?

[Jason Moser]

So I know Anthropic is going to use this cluster, right, this new AI compute cluster to ultimately build and deploy future versions of its AI model. Claude, as you noted, now the project is going to provide five times more computing power compared to Anthropic's current largest training cluster. So, I mean, that's obviously a big step up. And when you consider Anthropic, they're trying to build an AI system that essentially matches the human brain, and then we'll go from there. I mean, obviously this is a big task. They have big ambitions. They plan to train and build AI systems with this complex. But then Amazon also notes that it should ultimately serve multiple needs. Like if when training becomes significantly more efficient or if AI development hits a wall, I can imagine at some point we'll run into that situation then. I mean, this facility, this project, could be used to deliver AI technologies to customers. So there's a big focus on efficiency here as well.

[Ricky Mulvey]

And when we think about Amazon as a whole, as a company, from a buyer, from a retail perspective, most of your interactions with that company are buying things on the Internet and having them come to your door within the next two days. But if you own the stock, you really want to look at Amazon Web Services because that's where most of the operating profit comes from. You're looking at these big outlays of these massive data centers being built. Certainly Amazon's betting on that. But do you expect that to be true, that Amazon's going to make most of its operating profit from Amazon Web Services? Is that's the profit driver for this company in the next five to 10 years?

[Jason Moser]

I think that's more than likely the case. The company made close to $69 billion in operating income in 2024, and AWS was about $40 billion. Of that, around 58% of total operating profit came from AWS. Now it's worth noting in 2023 it was actually 67%. That number has pulled back a little bit. Now. Obviously they're making a lot of big investments. I would say AWS is going to remain a very key driver. I think in time, as investments are realized, we could certainly see that number go back up. My suspicion is it will. But again, as an investor, and I'm a shareholder of Amazon, a longtime shareholder, the beauty of Amazon is it makes its money in a number of different ways. You just look at their ad business alone now tracking on around $80 billion annual run rate. And that growth rate is also tracking with aws. I don't think it necessarily has the same market opportunity that AWS has, but. But it just goes to show that Amazon has a lot of different ways it can win.

[Ricky Mulvey]

So lot to dig into in the New York Times story, it's titled, at Amazon's biggest data center, everything is supersized for AI. If you want to get something upset about a political story, one you can is that Indiana gave Amazon a 55,0 year sales tax break for data center equipment. And that goes, I think across the board for big tech companies. So just, just something to ruffle your feathers a little bit as we get to the real estate side of this story. Matt Argosinger, we are not the first ones to notice the boom in spending and demand for artificial intelligence. There's a huge amount of interest among REIT investors, real estate investment trusts. You look at something like Digital Realty Trust. It operates data centers and it is now trading at an earnings multiple of 151, 50 times. You see that for a growth stock sometimes, but not for a reit. Man, what's going on here?

[Matt Argersinger]

Well, so on the surface, Ricky, that definitely appears like an incredible valuation for Digital Realty. But you have to remember with REITs, particularly one that's completing a lot of developments, making a lot of acquisitions, they generate a lot of depreciation expense. So when you value a reit, you want to strip that out as well as other non recurring expenses. And you get what the REIT industry calls funds from operations or ffo. That's basically the ongoing cash flow to a reit. And if you look at management's latest guidance, Digital Realty is on track to generate around $7.10 in FFO per share this year. So that puts its earnings multiple around 25. Still lofty for a REIT, but a lot more reasonable. Than 150 and maybe not so inappropriate for REIT. That is really at or near the vanguard of this AI investment cycle we've been talking about.

[Ricky Mulvey]

Okay, so 25 is a little bit better than 150, but I still see a lot of interest here. And I remember what happened, sort of, let's say, peak Covid, when there was the real estate story of the great move to the Sun Belt where people are going to work from home and they're going to need apartments in the Sunbelt. It happened in mid America apartments. And there's a lot of growth can get pulled forward and then there's a leveling off, sometimes for years at a time. Do you think there's. Could the REIT market specifically for these data centers be a little frothy right now? Any hesitation for investors looking at this space?

[Matt Argersinger]

I'd say it is a little frothy, Ricky, and I think the apartment comp you make is a good one. So many developers rushed in to build apartment buildings in states like Texas, Florida, Arizona right after Covid, and that led to a huge oversupply that has pressured rents on these buildings in those states. It's hard to say whether data centers are in that same kind of bubble loop, but the sheer amount of spending to me is just extreme. And it's coming from so many different players, whether it's REITs like Digital Realty, which we talked about. You've got the hyperscalers like Amazon, Meta, and you've even got private equity. I mean, in that New York Times report as well, you've got Blackstone, blackrock, KKR making huge investments. So I think taken altogether, it feels a little frothy. And you have to remember, to me, we're dealing with technology here. What if smaller, more powerful chips come out over the next decade that just don't require the same amount of space or the same amount of power? Could that render a lot of the this build out we're seeing obsolete? It's not an unreasonable question.

[Ricky Mulvey]

After the break, hims and hers get knocked down more than 30% on a bad breakup. What happened there? Stay right here. You're listening to Motley Fool Money.

[Pete Anewski]

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[Ricky Mulvey]

Welcome back to Motley Fool Money. I'm Ricky Mulvey, joined by Matt Argisinger and Jason Moser, listeners. And Matt and Jason, before we get back into the show, just want to note that next Friday will be my last time hosting Motley Fool. Money more to come. But for now I just want to express my gratitude to this organization, to you, the listener, for making us a part of your daily routine in some cases. And just say that I will dearly miss working with the good people at the fool every day and that I'm optimistic about the future. I'm excited about what's to come. No good way to get to the next story for that, but I will try let's get to this Hims and Hers story. Earlier this week, online healthcare company Hims and Hers dropped by more than 30% after Novo Nordisk accused the company of illegally selling knockoff versions of Wegovy Hems and Hers CEO Andrew Dedum biting back responding on X that quote Novo Nordisk's commercial team increasingly pressured us to control clinical standards and steer patients to Wegovy regardless of whether it was clinically best for patients. End quote. This breakup comes shortly after the partnership was announced. Jmo, why was this partnership such a big deal for Hims and Hers in the first place?

[Jason Moser]

So it gave them access to a leading GLP1 drug, which I think enhanced credibility, which I think could help the company achieve its long term growth plans. I think it was some validation of the model. Now on the flip side, HIMS is certainly not the only company that does this, but they have a focus as well on these compounded drugs, which serves a purpose for sure, particularly in shortages, but they're also not FDA approved. There are questions as to whether they are actually serving the patient's best interests. I think when you put all of this together it just gives investors at least a little pause. I'm not saying it's something fatal for the company, but I think it gives investors a little bit of pause there. Dave Moore, the EVP of Novo's US Operations, said as much regarding the decision. He said, we expected that the efforts towards compounding personalization would diminish over time with when we didn't see that we had to make a choice on behalf of patients. It's just very interesting to see him's perspective there and Novo's perspective there when it comes to the best interest of the patients. I guess we will see how this evolves. But it's worth noting give Hims a lot of credit that shares have been on a tear recently and it's easy to see why the company's grown revenue annualized 80% over the last five years. It's just been on fire.

[Ricky Mulvey]

This is a company I've taken a look at and the bull case that I've heard, there's a lot of excitement. The bull case for hims and hers is that it could pool a Netflix or Spotify for direct to consumer healthcare personalized treatments. And you've also got an AI driven platform. We're redefining healthcare. Are you buying the bull case sort.

[Jason Moser]

Of on the fence with this one? I think it's certainly possible, but they need to be careful about how they go about it. This is something that comes with some reputational risk and if they become this platform that just provides non FDA approved compounded drugs and utilizes questionable marketing tactics, I mean that could absolutely scare people away. Right? I mean that sort of isn't the best look when it comes to health care. So they'll just need to be very thoughtful, I think about their next steps and how they ultimately communicate with not only their prospective customers but also investors because part of their growth strategy is explicitly stated in building partnerships and expanding globally. And if they're not able to achieve that, that's going to be a big problem for the, for the growth picture going forward.

[Ricky Mulvey]

Matt, any concerns when you hear X stock? Is the next Netflix the next Spotify?

[Matt Argersinger]

You always have to be careful with those, Ricky. I mean, it wasn't, I think more than several years ago when investors were calling Nikola the next Tesla. Remember Nikola? It demonstrated its electric trucks by rolling them down hills. And there have been so many companies I've fallen for this over the years that have compared themselves or called themselves the next Berkshire Hathaway. I have a long list here. I won't get into it, but I've learned and I think Jason has as well. When you say XYZ is the next abc, you're almost always better off holding or buying abc.

[Jason Moser]

I feel like you were getting ready to say Big Laurie holdings, by the way, it's on the list.

[Ricky Mulvey]

I thought you were on the list.

[Matt Argersinger]

Holdings, by the way, when Eddie Lampert was running it.

[Jason Moser]

Yeah.

[Ricky Mulvey]

Hey, don't forget Boston. Omaha had a guy running it. Who was it? Warren Buffett's great nephew.

[Matt Argersinger]

I think he's still running it.

[Ricky Mulvey]

I think he is.

[Matt Argersinger]

He's now the only CEO. But yeah, definitely not the next Berkshire Hathaway.

[Ricky Mulvey]

I can promise you that's a real stretch. I gotta start publishing. Who? My cousins are on the show. All right, I wanna do this story and I'm stealing it from a podcast. I really like Matt Bellany's the Town and at the midpoint of the year, which we're at about at. They looked at sort of the overrated and underrated business stories of the year. So I thought it would for entertainment for them, but I thought it would be fun to do it more holistically for business stories. I'm going to stay on Matt with this. So, Matt, first up, what is your overrated story of the year so far?

[Matt Argersinger]

All right, I don't want to ruffle any political feathers here, but Doge. Remember Doge?

[Ricky Mulvey]

I do.

[Matt Argersinger]

I mean, there was supposed to be, I don't know, 2 trillion in savings and it became 1 trillion in savings and they got rid of the guidance. But I mean, I don't know. Most reports right now say that the Doge, by the way, the Department of Government Efficiency, previously run by Elon Musk, it saved or it's cut somewhere under 100 billion in costs. And there's even some reports out there that suggest that actually it's actually cost taxpayers more some of the efforts because of the inefficiencies and some of the replacement costs. So again, I don't want to get into politics at all, but I think clearly there was both significant hype and significant concern about Doge, and it basically has turned into a nothing burger, as far as I can tell.

[Ricky Mulvey]

I went to a crypto convention earlier this year and they had a McLaren that had the Doge logo on it and then like a stand that was just like for the Department of Government Efficiency at this cryptocurrency convention. And Matt, that is when I first started to have my doubts about that project. Jason, what is your overrated story of the year so far?

[Jason Moser]

Well, I'm sure this is going to ruffle a few feathers too, but I got to tell you, that Tesla robo taxi thing just seemed like a dud, man. I mean, Musk has been promising this thing for years. Granted, he's delivering in some capacity, obviously never really hits his timeline, but he's all the way. He's been ripping on geofencing. They got to use geofencing. He's been ripping on having human supervisors in cars and he had to have human supervisors in cars. The rollout was to a very limited invite only audience. You have to assume that's a very biased audience in Tesla's favor. They're going to say it was great no matter what, but the videos that I've seen, the accounts of misfires, some of the things these cars did, I think just demonstrates that they still have a lot of work to do. I'm not saying they won't get there. Eventually I want to take my hat off to them for doing what they're doing. I think it's important technology but man, it's just going to be a while. In that event I felt was just overhyped and underdelivered.

[Ricky Mulvey]

I'm going to give you a quick one. That's non musk and that's the rise of investor interest in evodles, these personal air electric taxis. There's companies bidding up these companies, there's investors bidding up these companies by the billions for companies that don't have revenue. And a lot of big questions about the regulatory landscape for putting these electric air vehicles in cities. And this is one of those things you hear about self driving cars crash. What happens when that's an air taxi? Okay, that's a, that's a negative story. Let's go to underrated stories of the year so far. Matt, what's your underrated story of the year so far?

[Matt Argersinger]

All right, this would be strange based on what Jamo said, but my underrated story is actually Robo Taxi.

[Jason Moser]

Yes.

[Matt Argersinger]

I love it. Not because, I mean I don't want to. I'm not reversing this here. I think the Tesla rollout was, was pretty much a disaster. But I think the concept in general is going to be hugely life changing. If in five years most of the taxi rides you get in a major city are through an autonomous vehicle, I think that has major implications for life, for the economy, et cetera. I actually think it's, even though it's all over the headlines, we've talked about it, it seems underrated still.

[Ricky Mulvey]

Jmo, as we start to wrap up, you got an underrated story of the year so far?

[Jason Moser]

Sure, yeah. We talked about this a few weeks back, but I think we're starting to see the IPO market open up a little bit. I think there's some potential for some above average activity here in the back half of the year. Looking at technology, health care and fintech. We've got some drivers there, private equity looking to cash out. You get stabilizing interest rates. It looks like relatively strong market performance which could help drive that demand. It just doesn't seem like something that's being talked about a whole lot. But I expect activity to pick up here in the back half of the year going into 2026.

[Matt Argersinger]

There's been some big IPOs so far this year.

[Ricky Mulvey]

My quick one will be the return of speculative bubbles. I think there's a lot of speculative investing action going on in 2025. That seems a little like 2021. All right. Up next, we are checking in on a company solving one of the most important healthcare problems. Stay right here. You're listening to Motley Fool Money.

[Jason Moser]

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[Ricky Mulvey]

Welcome back to Motley Fool Money. I'm Ricky Mulvey. Pete Anewski is the CEO of Progeny, a company solving a life creating problem. Progeny specializes in fertility benefits, especially for self insured companies. Anewski joined Motley fool senior analysts Tim Byers and Holly Anderson, who works on our benefits team, to talk about Progeny's growth path ahead and the company's unique partnership strategy.

[Holly Anderson]

Pete, so, so great to see you. Thank you for, for being here. We really appreciate it. I mean, we gave you a quick intro for what Progeny is, but we would love to hear before we get into the opportunity, how you see progeny. How do you, how do you describe it? And again, thank you for being here.

[Pete Anewski]

Yeah. So first of all, thank you as well. I was really looking forward to this for a couple reasons. One, as you guys already mentioned, you're a partner and you offer Progeny to your employees. We're really proud of that. But also just for my own personal success, feel or achievement, I discovered Progeny personally, not Progeny, sorry, Motley fool personally, in the, in the early 90s. Used it a lot. Loved it, loved it as a service. And so to come full circle and be invited to do an interview on the platform, on the show is really a fun fact for me personally. So thank you. So Progeny is a global leader in women's health and family building solutions. We focus on areas that are either overlooked or underfunded by managed care and we address issues that fill those gaps. And so that's generally what we do across all of our products. We started first in the facility and family building solutions product set, but then have expanded beyond that. So really excited to talk about what we do.

[Holly Anderson]

Yeah, we're going to get into more of that because you're right, there's been some expansion in what you do, but I want to just start. We're going to get a little bit more into your story in a minute, but before we do that, let's get into the progeny story. This is how I've heard you describe it, Pete, is that there's. The opportunity is there are about 105 million covered lives that you could address and you're currently addressing. These numbers may have changed, fools, so don't hold them to me. Exactly. But roughly 6.7 million of those, or about 6.5%, 6.4%. So how much do you need to invest to scale that? Because this does sound like, if I'm an investor, this is a scale story. This is a benefit that we could scale to a lot more people. What do you need to do to scale that? What does that cost?

[Pete Anewski]

Yeah, it's a great question. So. So it's not necessarily a cost answer. It's a constant evangelizing and creating awareness around and understanding of why this benefit is a top five benefit that your employees want. Millennials, as an example, in the workforce are the largest portion of a population today in the U.S. right. Millennials are also the age group that will use a fertility benefit. The average age of a woman going through fertility treatments that's infertile is 36 years old. Right. So it's an important part of your workforce. It's usually your middle management. It's usually the glue that holds a lot of things together. And so it's a really important benefit, and it's one that, you know, based on benefit consultant surveys that employees look for when they're looking for a job, because it's that important to them. So it's a really important area. So it's constantly making sure. Constantly competing with other decisions that companies are making relative to managing benefits overall, relative to addressing medical cost inflation, relative to anything that's sort of out there that they're struggling with. And so it's a prioritization exercise for them. And so whether they do it today or do it down the road, more and more companies are adding the benefit, and we'll keep doing that. And as more and more companies offer the benefit, those other companies who realize they should be offering the benefit but aren't sort of, you know, come on board. So it's a. It's a. It's. It's constantly educating the market.

[Tim Byers]

One thing that stands out to me about progeny is the unique smart cycle approach to fertility benefits. So I'm curious, when you're looking at potential partnerships or acquisitions, what's your process for identifying opportunities that will enhance both progeny services and financial strength? And then also, what ensures that these partnerships stay true to progeny's mission?

[Pete Anewski]

I Love the question. So we leverage partnerships in many different ways, right? We leverage them relative to go to market. So in terms of financial strength, we leverage them and go to market. And so we have partnerships with many of the constituents within healthcare. So, for example, we've been adding a lot of payer partnerships. So we've taken what our competitors and now they become partners. And, you know, the payers recognize that we have a solution that's sort of differentiated versus what they're offering, and it's a function of the fact that they're dealing with managing thousands of conditions and we're focused on one, and so could do a much more comprehensive job, you know. And as a result, you know, most recent announcement around that was our agreement with Cigna, right. And so that's one of the partnerships. We use partners relative to advancing our ability to go to market with products. To the extent that they can, we can do that. And so whether they're partners or an acquisition opportunity, we'll. We'll look for those opportunities to the extent that they're on our roadmap and things that we're looking at or if it makes sense with the audience that we address today, we will add those as well. And so it's. It's a, you know, on a. On a product basis, it's a classic buy versus build or partner. And then. And then in terms of go to market relative to the overall offering, it's leveraging. You know, the partners are out there in the healthcare ecosystem.

[Holly Anderson]

I think one of the tough things is progeny seems to be one of those benefits. And Holly, maybe you could speak to this first. It's one of those benefits that doesn't come up until somebody has a question about, hey, does the Motley fool offer this? And then we introduce them to progeny, and it's amazing. And they end up doing it. So there's like, you talked about this in terms of evangelizing, but, Holly, what do we do on our end? Like, how do we get more of our people sort of digging into the progeny benefits?

[Tim Byers]

We do a lot of training, education. We send out postcards, or actually, we didn't. Progeny sent it out on our behalf for Women's Month. That was awesome. We promote it to our prospective employees. And I say that because we've had people join the fool and start using progeny the very next day. So we've had to be very quick on getting them enrolled so that they can start. And now one person in particular, you know, she has a baby now because of It, So I love the benefit and I think that it just really, it's a benefit forever in a sense that once they have a baby from the Motley Fool's support of progeny, that even 10, 20 years down the line, they'll look back at the Motley fool and progeny and think, look what they gave me. We do. I think my passion and our passion as a company also helps because we're always sharing like it's a great benefit.

[Holly Anderson]

It is. And I have to say, I mean I have, I won't, I won't go into, into the details for privacy reasons, but I have, I have recently held a baby that came into the world with the help of progeny. Man, it's, it's pretty amazing. Peter, want to come back to bit of financial reality? And again, fools, you can ask questions about this. This is a rule breakers pick and it hasn't, it hasn't quite worked out yet. I want to talk a little bit about unit economics. You've already answered some of this, so I'm going to flip it a little bit. You've talked about kind of expanding the opportunity. Could you help us understand what's the situation that really is ideal for progeny? What you want to see is it over time, a progeny client tends to add more services and spend more money in terms of a unit economic benefit. You know, like staying power, like aging is something that really works best for you. So if you have a client that has been with you for five years, the margins on that client tends to get better. Or is it, or is it something else like help me understand the unit economics. How do you grow, or maybe put it this way, expand the cash flow that you're already generating today. How do we get it to even higher cash flow margins and say over the next year, 10 years? What needs to happen for that to come to be.

[Pete Anewski]

Yeah, so there's a couple things that are really important. I'll also throw in the macro trend that are going on that's helping fuel the need for our services. Right. The natural. The fertility rate overall, nationally has been declining, continues to decline each and every year since 2000. The age of a woman having a baby in the U.S. in the latest reported data from the CDC, more babies were born to women over 30 than under for the first time. And the average age of a woman. There's a decline in number of babies being born in the US over the last 10 years of roughly 1.7%. But the 35 and over population has been growing at a compounded rate over the last ten years of two and a half percent. And again, the average age of a woman going through infertility and needing fertility treatment is 36 years old. Right. So that macro trend is fueling sort of the need overall. Right. At the trend with our clients since the beginning is a couple of things. One, we have a 99% retention rate and have had that for years. That's sort of unheard of in the health care space. There's a reason for that. We provide a great service and we help a lot of people out and we're very differentiated. But the second piece of that, and the Motley fool is an example of it, is the product expansion. So every year roughly 20 and last year it was 30% of our clients add to the benefits somehow they expand either smart cycles, they'll maybe add egg freezing, facility preservation. If they didn't have it, they'll add adoption and surrogacy. They didn't have it. And in the latest year, on top of those things, they also added menopause and, and pregnancy and postpartum. Right. And so it's all of the above. Right. As time goes on, it's continuing to provide a differentiated value based service that changes people's lives and create more and more of those solutions so that you have a stickier overall client base. And on top of it, continue to create products that are useful and address a larger population, larger portion of the employer's population, so that more and more problems get solved and we help more and more people and then obviously the financials take care of themselves when that happens.

[Ricky Mulvey]

As always, people on the program may have interests and the stocks they talk about in the Motley fool may have formal recommendations for against no buyers or stocks based solely on what you hear. Personal finance content follows Motley fool editorial standards and are not approved by advertisers. Advertisements are sponsored content provided for informational purposes only. See our full advertising disclosure. Please check out our show notes. Up next, Radar stocks Stay right here. You're listening to Motley Fool Money.

[Pete Anewski]

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[Ricky Mulvey]

Welcome back to Motley fool money. I'm Ricky Mulvey joined again by Matt Argersinger and Jason Moser. Fool's a good time to check in on the summer box office season well underway. And one surprise to me is this opening of Eliot, which was the Pixar movie this summer. Usually that does really well. It's a family friendly original film from Disney. Brought in 21 million at the domestic box office this past weekend. Matt, it turns out audiences, they're not asking for original movies, they want ip. This is interesting to me because there's parts of Disney where they've done really well. They had Inside out two last year, one of the biggest animated films of all time. But it's definitely had some stumbles lately. I'm a Disney shareholder. How should I take in this news, if at all?

[Matt Argersinger]

It's not great news, but Disney has such a vast and diversified portfolio now. In the past, it really needed like that once a year or once every two year Pixar film to really hit. Now it can have a clunker like Elio as long as there is Inside Out 2, Moana 2, or even the Thunderbolts movie earlier this year did a lot better than expected. So I think there's a lot more though riding on this Fantastic Four film coming out next month. Because if it's a hit, it will set the stage for that next leg of MCU films over the next several years, which are going to be a lot more vital to Disney. But I don't think Elio is going to be going to mean much in.

[Ricky Mulvey]

The long run, which are no longer guarantees, by the way. So Thunderbolts, which was a good movie, critics liked it, audiences liked it, I saw it, I had a good time at the Thunderbolts. And you would think, oh, with Guardians of the Galaxy you can get people in to see new superheroes. Not really. The film didn't perform that well.

[Matt Argersinger]

Right. So yeah, we'll see.

[Pete Anewski]

Yeah.

[Jason Moser]

And I think that's also a function of just. It's a different time. Right. I mean, getting people out into the theaters is just a tougher proposition because we have so many other things competing for our attention today. So, I mean, it's not just making a great movie doesn't seal the deal. Right. You still gotta get butts in seats and that's just more difficult to do today than it was 10 years ago.

[Ricky Mulvey]

And great original movies can still bring people in. Check out sinners. It is. Awesome question before we get to radar stocks though, if you could buy stock in one movie coming out this year, even in this tough environment, Jamo, what stock are you buying?

[Jason Moser]

Okay, so is this a movie that has been released or has has yet to be released? Because it feels like to me begins and ends with the Mission Impossible movie with final reckoning, like Tom Cruise is single handedly saving the industry on his own. But I will say, if you're looking for one that is to be released, I'm going a little under the radar here. Spinal Tap 2 the end continues. I think it comes out in September. Turn it back up to 11, Ricky.

[Ricky Mulvey]

Matt, I thought it was pretty clear we were doing movies yet to be released because I just wanted to make sure less information about it. But Moser wanted to cheat a little bit. That's okay. By picking a Tom Cruise movie that's already come out this year.

[Jason Moser]

Spinal Tattoo is my final answer.

[Ricky Mulvey]

Fair enough. Matt, what stock are you buying?

[Matt Argersinger]

I'm buying Superman, Ricky. Next month. James Gunn. I mean, this is a pivotal movie to revive the DC Universe film franchise, which actually has never been that great. So I really hope it succeeds. I also have a vested interest as a big owner of Superman comic books. So I have a lot riding on this release next month. I'm pumped, I'm excited for my pick.

[Ricky Mulvey]

I'm taking one battle after the other, $100 million plus Paul Thomas Anderson movie. But I think that movie rules. I hope it does. I really do. Let's get to Radar. You'll pitch a stock that you are interested in and then Dan Boyd, our man behind the glass, will hit you with a question, concern, or a backhanded compliment. Jmo, what you got this week?

[Jason Moser]

Yeah, I'm going to go with Uber. Ticker Uber. We were talking earlier about Tesla's Robotaxi event and on Tuesday, Waymo Robo taxis became available to Uber users in Atlanta under much less fanfare. And that's honestly kind of one of the things I like about Waymo is they're under that shift shelter of Alphabet, so they don't really have to get out there and sell the sizzle. They just kind of get to work and do what they can. But it seemed like it was received well. It covers approximately 65 square miles around the city and it's something that is available to Uber passenger rides only, not Uber eats deliveries. But when you look at Uber, we talk about how autonomy is going to disrupt them perhaps. It's very clear that Dara Kashmishari is completely in on the autonomous future. I personally would not look at Uber and say, well, this is the company that's being disrupted. They're a Company that's participating. They're participating today by the partnership with Waymo, for example. We'll see how that all goes. But I don't think this is a winner take all market. I assume Tesla will succeed. I also assume Waymo succeeds. I think that Uber succeeds by virtue of however it approaches the space. And right now it's via that partnership. But see, the most recent quarter they had, they grew bookings 18%, they grew trips 18%, revenue was up 17%. I just think this company has so many different ways to win and very forward looking. So I think it's one worth keeping on the radar.

[Ricky Mulvey]

Dan, question about Uber.

[Matt Argersinger]

Yeah, Jason, how's that total addressable market looking these days? Does it steal the entire population of planet Earth?

[Jason Moser]

I think that's a fair assessment. They just bought this 85% stake in a Turkish food delivery platform called Trendy. All go for $700 million. Hey, they're going global. Dan.

[Ricky Mulvey]

Matt, what you got this week? I hope it's not a Turkish food delivery platform.

[Matt Argersinger]

No, Otis Worldwide Ticker Otis. So this is of course the elevator escalator company. So it was spun out of United Technologies in 2020. So it's actually only been a publicly or say public independent company for about five years now. It's as you guessed, it's a leading manufacturer. And this is key though, leading maintainer of elevator and escalator systems around the world. 20% market share of new equipment sales. But here's what I like best. 2.4 million unit maintenance portfolio. So that means Otis has this very large stable base of units that has to keep in working order. If you're a landlord or a major building manager, you've got to keep those elevators running. And so you need Otis to come out there and service them. And with Otis in service and modernization, which is about 65% of revenue, 24% operating margins on that business. So it's a great business, great recurring revenue business. The dividend yield is only about 2%, but they're raising that dividend by quite a lot. They've grown it by 110% over the last five years. Also buying back a lot of stock.

[Ricky Mulvey]

Dan, quick question about Otis.

[Matt Argersinger]

Yeah, I think with respect to Uber, but I think that if Otis disappeared tomorrow, I think the impact would be a little bit bigger than if Uber did.

[Ricky Mulvey]

So I think I know what's going on your watch list this week, But Dan Boyd, what stock is making your watch list?

[Matt Argersinger]

Sometimes we go up, sometimes we go down, but this week we're going with the best.

[Jason Moser]

I love it, love it.

[Ricky Mulvey]

I hate it. I hate it. You can love it, but I hate it. Okay, that's the end of the show. I'm Ricky Mulvey. Thank you to Jason Moser, thank you to Matt Argersinger, and thank you to Dan Boyd for mixing the Sam.