Matt Frankel (3:42)

There's a lot of companies that we all have differing opinions on and Applovin has always been one that despite its massive success so far I've always had a lot of questions and it's made it a little bit hard for me to get over the hump of changing my opinion on it. I've always kind of thought the business was a little bit on the fragile side. Perhaps I'm wrong but if we look back through its history, majority of its revenue did come from those owned gaming Suis. Now it did sell those off in the most recent quarter, still maintaining an equity position in them as part of the deal. And this E Commerce business that it has been standing up, it's actually stood it up on a platform owned by a board member of Applovin. It's a, you know, it's an interesting sort of relationship and it's, it has worked out so far. It's just, it's left me a lot of questions on some of, you know, how this, how the accounting works and things like that and not to say that you know anything bad about the company. It's just sometimes we have questions about companies and these are for me it's enough that it has made me want to learn more about the company before. I really want to commit to it unfortunately, I think I've been wrong in this assessment because clearly the market has liked what it's seen with its revenues growth and the company has been posting pretty impressive numbers. So maybe I just need to keep digging and figure out why I seem to be hesitant based on these sort of things and reassess my ideas.

Tyler Crowe (5:18)

Let's quickly move over to Airbnb's latest earnings. They reported Wednesday afternoon the results look pretty strong with revenue up 13% year over year, really strong margins, double digit growth in booking volume. But this stock is down primarily because management cautioned investors about demand heading into especially the fourth quarter of the year. So I'd love to get both of your thoughts on Airbnb. And we'll start with you, Tyler.

Matt Frankel (5:42)

I want to focus on kind of the guidance a little bit more on the numbers. I actually revenue growth of 13% cash flow margin strong compared to a lot of other companies. The numbers themselves actually looked in my opinion, relatively fine. So I want to focus on probably why so many people are a little apprehensive and that's kind of this guidance they're giving. And if you look at some of the broader macroeconomic numbers, I know Peter lynch would probably crucify me for talking about macro. But you know, things like the University of Michigan consumer sentiment scores, they're currently at some of the lows that we saw during 2022. Inflation Covid the Great Recession levels. It's it consumer sentiment surveys are hovering right around there. And a little caveat to me is it's even stranger is those don't that these surveys don't coincide with higher gas prices. Because one of the weird things is that consumer sentiment tends to go with gas prices. And with gas prices actually trending lower and consumer sentiment dropping, that's an odd correlation that we don't often see in those sort of numbers. The growth in parts of Airbnb's business are still good though, and I think that's maybe a little bit overlooked. Some of its less penetrated markets like in the Asia Pacific and the Latin America areas are still growing in mid to high digit or mid to high teens rates. So that's encouraging. They may not be showing in the overall numbers as much because North America and Europe are such dominant parts of the revenue pie for Airbnb today. But there are still green shoots in international markets that give it levers to pull. And yes, Airbnb has been a market disruptor for this industry, but it is a cyclical market that is based on consumer spending. Eventually you can only Disrupt so much, and a cyclical market will win. So not too surprising again, that, you know, little bit more tepid demand with consumer sentiment a little bit down. And, you know, just a weird caveat that I noticed, too, is, is Airbnb makes a ton of money on interest income because, you know, we pay for all of our sort of stays and things like that, and they get to hold that cash, so they earn a ton of interest income. You know, rate cuts come, we might actually see a little bit of decline in profitability from that.

John Quast (8:05)

You know, Tyler, I want to jump off there and talk about maybe the narrative that floats around among investors when it comes to Airbnb. You know, the stock's only up as of this taping. The Stock's only up 3% over the last three years. It's still down more than 40% from its highs in 2021. And so there's kind of a lazy narrative out there that, you know, consumers don't like Airbnb. They don't like its fees, so they're moving to hotels, kind of moving away from Airbnb. In my view, that's simply not accurate. Nights and experiences in Q2 are up 7%. Average daily rates. So this is what a place cost to book, up another 3%. So if Airbnb were having a demand problem, I would expect those average daily rates to come down. I would expect bookings to come down. That's not happening. Those key metrics are still trending in the right direction. What we have seen, though, is perhaps Airbnb stock was way too overvalued at one point compared to the growth that it has put forward. So I don't see that so much as a business model problem on that line of thinking. Right. It does need some better growth, I think, if it's going to reward shareholders a little bit. Interesting that it does have incredible margins. A billion in free cash flow in the quarter, but it also used 1 billion to repurchase shares. And so that's a little bit interesting that essentially, to me, this is telling me that management doesn't really have good places to invest the cash in the business. Share repurchases are good. It's just interesting that essentially all of the free cash flow went to share buybacks rather than investing in that second phase of growth.

Tyler Crowe (9:45)

Next up, we're going to examine some of our favorite retail REITs, and you might be surprised how they're doing. You're listening to Motley Fool Money.

D (9:53)

They say it's not what you say, it's how you say it because when you're someone who leads with confidence, who adapts, evolves and moves with purpose, you need a vehicle that mirrors that drive. Enter the Range Rover Sport. Blending power, poise and performance. It's a force both inside and out. With a design that's distinctly British and the capability to take on roads anywhere. The Range Rover Sport isn't just refined, it's ready. Its assertive stance hints at the experience within. An instinctive, exhilarating drive backed by a lineup of powerful engines, including a plug in hybrid that's an estimated range of 53 miles. Inside comfort meets control with cabin air purification, active noise cancellation and terrain response too. Fine tuning your drive across seven terrain modes. Stripped of the unnecessary, what remains is pure performance, agility and elegance. Modern luxury redefined. Explore the Range rover sport@rangerover.com us and configure yours today.

Tyler Crowe (10:53)

Several top retail real estate Investment trusts, or REITs, reported earnings this week. Simon Property Group raised its guidance and its dividend. Its malls are performing very well. Tanger Factory Outlets is in a similar situation. Even Realty Income, which is known for just kind of being really predictable, raised its FFO guidance as well as its investment spending expectations for this year. All this during a quote, challenging consumer spending environment. Tyler, what are your big takeaways from all this?

Matt Frankel (11:20)

Can I say that I thought it was a little weird and I want to go back to what we talked about previously with Airbnb and kind of consumer sentiment. Allegedly consumer sentiment is way down. It's in the dumps. And yet we look at some of these numbers that retail REITs are putting up and they're incredibly impressive and their outlook on the future looks really good. I want to focus a little bit on Tanger. I spent a little bit more time in their results than I did some of the other ones. But, you know, I looked at Tanger's results. Their sales per square foot for all of its stores were up. Occupancy was up. It's blended average lease rates, which basically means when you renew a lease or get a new tenant into a lease, Those are up 12%. Those are incredibly impressive numbers for a retail REIT that's kind of hitting for the cycle here. And it's weird, right, because it seems like everyone's miserable based on the sentiment surveys, but we're just kind of spending through it and it's really reflecting in these retail numbers. The last takeaway, and I'll leave a little bit of a question, is we have been talking for six months, seven months now, about Tariffs and when they're going to hit, they're not going to hit how big, how small, because it has been changing very frequently over the past several months. And I've been wondering this quarter, with so much aggressive changes in those tariff rates during the quarter, if we saw a little bit of everyone trying to buy now, pull ahead, pull forward some demand to sort of lock in prices or buy things before tariff prices really start to eat into people's purchasing powers.

Tyler Crowe (12:56)

I own all three of the stocks that I'd mentioned earlier, and I think you both own at least one or two. How do you see retail REITs like this performing over, say, the next three to five years?

Matt Frankel (13:08)

Tyler, for retail REITs writ large, I'm going to shrug a little bit. If consumer sentiment is a leading indicator of actual spending than some REITs in retail, especially the more experiential, maybe not consumer durables like growth groceries and things like that, they could struggle, but that's talking about the entire industry, not just these specific companies. The good thing about the three companies that you mentioned, Simon Property Group, Tanger Factory Outlets, and Realty Income, is they have proven over many years to be some of the superior operators and managers of their business in this respective industry. And I think that if we were to just focus on these three instead of retail REITs writ large, these are the kind of companies that will benefit during times of struggle. Maybe, you know, it might not show up in their stock prices, but they're the ones that can take advantage of struggling other competitors and things like that, either through acquisitions or, yeah, sure, we'll take a couple malls off of your plate because you're struggling. Why not? And then, and then we'll turn them into much more profitable engines. I think that's a little bit more accurate reflection on my opinions of retail REITs, because, you know, industry large, we're getting into a very wide field of sometimes not the best operators on the planet.

John Quast (14:26)

Yeah, I won't comment on retail REITs as a whole. I do own Tanger stock and I plan to keep holding Tanger stock. Like Tyler was mentioning, I do get concerned when you start looking at the consumer sentiment, but one of the things I have learned over the years is that negative narratives are really seductive and they're also very contagious. And so sometimes people do have negative thoughts and that tends to spread and people talk negatively, but really watch what people are doing. And what we're seeing is that they do continue to spend money, especially in these retail REITs. Those businesses are doing quite well. Tanger as Tyler mentioned, really good numbers that it's putting up. So I do plan to keep holding this stock. It's not my highest conviction for growth over the next three to five years, but just predictability, steady as she goes. I do like having it in my portfolio, reinvesting the dividends.

Tyler Crowe (15:22)

All right, so quickly, let's pivot over to Zillow. They just reported their second quarter results. Revenue growth. Growth was strong despite a pretty slow real estate market and the company exceeded expectations. Margins were strong and Zillow was actually slightly profitable on a GAAP basis. But Tyler, what's your quick take on Zillow's numbers?

Matt Frankel (15:41)

I liked where the growth came from, which was mostly rentals and mortgages. These are kind of their nascent businesses. Rentals is also nice. It's not as interest rate sensitive as buying homes. So there's some encouraging things there to maybe take a little of the cyclicality out of this business. The one thing I kind of would pick some nits against is the profitability. It's still producing operating losses and the actual net income gain was interest on cash balance sheet. So the fact that it's still operating profit losses still makes me a little bit wary.

Tyler Crowe (16:16)

Just real quick on Zillow and I want to get both your opinions on this. Do you think it's a buy a hold or a runaway? Tyler?

Matt Frankel (16:23)

I was an early doubter, but there have been some green shoots that have started to prove me wrong, like with residential and mortgages. I'm still holding out until they can prove that those businesses can generate consistent operating profitability.

John Quast (16:35)

Yeah, for me, I would rate Zillow as a hold. I mean, when it comes to real estate, it is undeniably the name. Everyone does go there. It does have a super app strategy. It does seem to be the right company to pursue that. If anyone's going to pursue it, I can see why it would be Zillow. That said, they've been talking about that for quite some time and it really hasn't produced the kind of consistent growth that I'm looking for in a company such as this. So I ask myself, with companies like this, like, what is different now? If they've been talking about it all along, what's different now? What is going to lead to better growth and better profits from here? I'm hearing a lot of the same from Zillow, so call me somewhat skeptical, but it is still a great business and a great name. I'm just in the show me camp.

Tyler Crowe (17:18)

Next up, we'll learn what stocks the three of us are watching as earnings season continues.

E (17:23)

Wish you could lock in rates without locking out liquidity? Meet lddr, a lifex treasury bond ladder ETF built to simplify your cash flow plan for the next 10 years. With LDDR, you can lock in today's interest rates for a decade. It's built to deliver predictable monthly cash flow that boosts interest income by including tax free return of principal. That means the potential for higher, more stable cash flow without worrying about rate cuts, reinvestment risk or market swings. Lddr Take the guesswork out of your cash flow plan. Learn more@lifxfunds.com the LIFX ETFs return principal over the life of an ETF and therefore expected to have little or no assets remaining to distribute at the time of liqu. Individual bonds carry an obligation to fully return the principal to shareholders of maturity. However, ETFs have no such obligation. The net asset value of the ETFs will decline over time as income payments are made to shareholders. The tax discussion herein is general in nature. Investors should consult with their tax advisor about the effect that an investment in Lifex ETFs could have on their tax situation. Investors should consider the investment objectives, risks and charges and expenses of LDDR carefully before investing. The prospectus contains this and other information about the investment company and can be obtained by visiting www.lifexfunds.com or by calling 1-888-331-5558. The prospectus should be read carefully before investing. Investing in the LIFX ETFs involve risk. Principal loss is possible. The LIFX Income ETFs are distributed by Foresight Financial Services LLC.

Tyler Crowe (18:54)

These past few weeks were the peak of earnings season, but there's still a lot of stocks left to report, so let's each give one on our radar and I'll start with C limited Tick se. It was by far the top performing stock in my portfolio last year. Growth and profitability progress has the turnaround from 2022 and the downturn has exceeded even my most optimistic expectations already. So I'm really looking forward to seeing what they report on the 12th. John what is on your radar?

John Quast (19:21)

Mediterranean restaurant chain Cava reports on August 12. Fast Food and fast casual are struggling a little bit here in 2025, whereas casual dining is doing better. Those are generalities. There are some fast food that are doing well. There are some casual dining who are not, but I'd say that's a general trend. And so where does kava fit in? Consumers minds. They're only forecasting 6 to 8% same store sales growth this year compared to 13% last year. So they're already looking at a deceleration management is. But does it decelerate faster than management anticipated? That's something I'm considering especially as it's trading at 10 times sales. So. So we'll see when it reports.

Matt Frankel (20:00)

So I'm going to go with BBB Foods. The ticker is TBBB and it's a Mexican hard discount grocer. It actually reports on August 11th. Hear me out. I know this is it sounds like an oddball one, but this company has been posting impressive operating results ever since it went public last year. We're talking double digit same store sales growth on top of double digits store count. So we're looking at like 25 to 30% year over year growth for a grocery company. All of the operating metrics say that they're doing great. High inventory turnover, good returns on initial returns on a lot of what they're doing. I think it really has a lot of those hidden gems qualities that we're looking for in a business. I don't see any reason why it would start to slow down outside of some drastic macro macroeconomic sluggishness in Mexico because it is Mexico only that we're talking about here. But how much does that really hurt a discount grocer? Kind of one of the places people go to shop in the event of macroeconomic sluggishness. I don't think think I'm going to see much of a change and I really look forward to the update.

Tyler Crowe (21:02)

As always, people on the program may have interest in the stocks they talk about and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertisement advertising disclosure, please check out our show notes for John Quass, Tyler Crow, our production magician, Dan Boyd and the entire Molly fool money team. I'm Matt Frankel. We'll see you tomorrow.