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Is the richest person in the world taking over media? Molly, Fool Money starts now.
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Everybody needs money.
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That's why they call it money. But you can give them to the.
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From Fool Global headquarters.
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This is Motley Fool Money.
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Welcome to Motley Fool Money. I am Travis H. Joined today by Lou Whiteman and Rick Minarez. And we are going to be talking about the big media deal of the day. That is Paramount is officially merged with Skydance. But the next deal that may end up happening is another merger with Warner Brothers Discovery. These are kind of the two media companies that have kind of been back and forth. What is the future going to look like? Larry Ellison is the money behind this deal. We're going to get to Larry Ellison's new status as the richest person in the world a little bit later. But his son David is really the deal maker here. So Rick, what is going on with the potential merger of this new Paramount Skydance business and potentially the pre split version of Warner Brothers Discovery?
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B
Yeah, so obviously Warner Bros. Discovery is on the market and this is nothing new. Anyone that's followed Warner Bros. Discovery knows it's always waiting on the front porch for someone to show up on bended knee before this, Paramount at Warner Bros. Discovery, if that even happens. This is still up in the air. It sounds a lot to me like Warner Brothers and Discovery and before that Warner Brothers and AT&T, Warner Brothers and AOL. And it sort of feels like a Sadie Hawkins dance at an all boys school where not a lot of things are happening here because no one wants to dance and no one's asking any inviting anyone to begin with. So I think Warner Brothers Discovery would be an interesting piece for Paramount to have, especially because Paramount's also a company that the reason it was made available and why it was acquired was because it's not one of the major players right now in this new normal. It's struggling on the streaming end to become a profitable, thriving enterprise which right now is a very limited number of companies doing that.
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A
Lou, the question that I have here is what would this future even look like? I mean, Paramount does have some interesting assets. They do have cbs, so you have things like football. You're bringing in some of the Skydance assets as well. So you have a little bit more content, but you don't have the same critical mass as you have at a Netflix or at a Disney, which has Disney plus Hulu and now espn. So they're all trying to break into streaming. We know that cable is in decline. That's a structural decline. I don't think that's changing. That's one of the reasons that Warner Brothers Discovery is having so many financial issues. So they all want to break into streaming but to do that you, you gotta have the content to pull people in. Is Paramount and Skydance enough or do they need to make another deal like this and just gobble up more content, more assets to actually make a play at kind of these big two players in streaming?
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C
Yeah, this is so weird because I think it make, I think it's a no brainer to do it and I don't know if it moves the needle right. You know, if I'm Warner Brothers Discovery, I take this deal in a heartbeat. It feels like a get out of jail free card because they are in a tough position for Skydance. Whether it's a good deal or not. We'll talk about it later. But they have all the money in the world so they can afford it and we do need to consolidate. But I like some of the assets. I'm a soccer geek. I love Paramount for that. I know I'm in the minority. I don't know if this is a compelling thing. Thing. I think guys, this points to we are in this weird. We don't have a strong foundation here. We are, this industry is evolving in real time. I don't know where we're going but even with this deal, with everything we've seen, it doesn't feel like we're close to solidifying, to stabilizing. There's still a lot more work that needs to be done.
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So let's get to what that potential end game would look like. I think Netflix is there. Netflix isn't going to go anywhere. Disney, I don't know that they would be able to buy anyone else. The other thing to think about with these companies is the broadcast networks. You're not going to probably be able to combine ABC with NBC for example, or Fox with, with cbs. So where do these companies need to get to? Because the other two that we have not talked about is Comcast owned NBC and Peacock, which is their streaming service. And also Fox. Fox just launched Fox one. I can't believe we're having a new streaming service being launched in 2025. But they did just launch Fox One. That is going to be available in a bundle with ESPN and the other Disney services I believe starting in October. But those four companies seem like they're, they're kind of hanging out below the Netflixes and the Disney's of the world who do have over 100 million subscribers, who do have profitable streaming businesses. So Rick, it seems like this dance, somebody's got to, somebody's got to start dancing or they're all going to be in really, really big trouble.
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B
Yeah. So Lou played out a get out of jail free card. I'm going to take a different monopoly card for some of these companies. I'm going to go with the Go Back 3 Spaces card because it does seem like they're going backwards. So while they are coming together in the colts survive. And that's it seems right because hey, you know, let's see if we can make it go together. They're not feasting on the larger players right now. This is more like the rugby team from Uruguay that got stranded in the Andes. This is not a good place to be for these companies and it's more desperation, more fragmented market that needs to get together and do this. But I don't think they're going to make a dent in the big players. And eventually the companies that got acquired like Skydance and Paramount and Warner Brothers, they'll find another company to absorb. But in the end, it's not really moving the needle, at least not to viewers and definitely not to people watching the bottom line.
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C
Travis, I want to get bold here and Rick mentioned it earlier at and T Warner Brothers aol. This has been a sector that has been ripe for didn't see that coming type mergers and acquisitions. I said before, I think we are no closer to knowing what the end game looks like here than we were a couple of years ago. It strikes me that just a couple of years ago the idea of HBO and Showtime merging would have been just a non starter for antitrust and now it's an. These are two afterthought companies, you know. So this is a really rapidly evolving business. I think. I think Netflix is out there ready to do something that would have sounded crazy a couple of years ago. Maybe just kind of adding live sports, maybe adding to them. Maybe a network does move the needle and maybe like having Fox in house, maybe that would help solidify them. I think we're going to Fox is.
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An option, but what about NBC?
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I think that's an option too. Yeah. Because that core Comcast business seems to be less of a cash cow than it was just a few years ago. I think we are pretty early on here. I think we do know. I feel pretty safe saying Netflix and Disney are survivors and they are, you know, first movers, consolidators. I don't think we really know. I think that they all might have something a little out of Left field. And it might be genius long term. But I just think this is such an interesting, is such an important, like consumer facing business. But it is so unsettled right now. And I feel like a lot of the CEOs, they are no closer to having the definitive answers than we are talking about it.
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The other name that we haven't talked about here that is actually bigger than Netflix is YouTube. And that sort of seems to be the challenge when you come to all of these mergers and acquisitions. Great, you can combine CBS with Skydance's assets. But when you talk about who's going to win the next sports rights deal, NFL can opt out of their deal. I believe it's in 2029. That's going to be a huge deal. Who's going to have the cash to bid on that deal? Are we going to be at the point where, rick, where in five, 10 years we can only handle three, maybe four subscriptions? And either of these companies at the bottom that we've talked about, the Paramount, the Peacocks, you know, some of these other Fox, the smaller companies, they have to either sell out somehow or survive. And then the thing we haven't talked about, and this is what I'm thinking about as Lou is offering up Fox, you have a lot of egos involved. That's the Murdoch legacy. Would they just sell to a company like Netflix and just wash their hands of it? All of this is, is extremely complicated, not only on a financial perspective, but also on a personal perspective, because the Allisons are now behind this potential merger. So it's very complicated.
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B
Yeah, but the Redstones had an ego too. And sure enough, so eventually there comes a breaking point that, hey, you know what, let's move on, let's sell the team. But you mentioned football. And to me, I think that that's the fact that if you want the NFL Sunday ticket now, you have to go through Google. Then if you want the games, it depends on the night. Do I need Amazon prime for this? Do I need. Which network? Is it espn? Is it Apple? All these things are happening right now. It's very complicated for the consumer. And I think the leagues are losing out because of that. They're getting good money. But fan confusion is not the way to win. It's not like, well, you know, guess what?
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The most popular sport with kids right now, I see this in my house is Bluey. A sport, but not Bluey. But the, the Savannah Bananas are incredibly popular because it's absolutely everywhere. And you can get it on Netflix. You can get it. We've got it on YouTube TV. It is absolutely everywhere. And it's fun. That's a. That's a cohort of people that a lot of these leagues are missing out on because of these huge money deals that actually make your audience smaller.
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B
Yeah, and it starts like that, and then it becomes like the wwe, where it's not just a, you know, whole thing becomes a larger thing, and then. Then they can't afford the Savannah Bananas anymore. But, yeah, it is. It is that kind of market we live in now.
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C
So here's the deal. Chaos creates opportunities. And I, you know, on the content side's part of it. But there's a bigger picture here, too, guys, that this is broken and we need to solve it right now. I hate. I mean, going from my cable box flipping channels to the Roku experience, where I have to back out of one app, load another app just to check the other game or whatever, this will not stand. Whether it's Roku, whether or not it's a YouTube, we need an aggregator. I mean, my credit card can handle just the multiple dings each month. So on the billing side, it is what it is. But we need. There's a real opportunity for someone to. To modernize the consumer experience with all of this chaos, with this new world. And whoever gets that right, I think as an investor, that could be a big winner, too. And as a consumer, please hurry.
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All right.
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I want to end on predictions of where this ends up and where you think the best opportunity is for investors. Rick, where are we going? And where are you putting your money as a result?
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Yeah, so I think Netflix has survived. It's not even breaking a sweat through any of this. So I think it will continue to be the leader. I think the Netflix stock is a little overvalued at this point. So it's not something that. It's a screaming value here, but it's never been that way. But it's the one company that I can say can safely be around even Disney, as powerful as it may be, you don't know if it'll still be this streaming juggernaut 5, 10, 15 years ago. They could change. Netflix has one thing and one thing to do only, and it's going to keep doing that. I think Netflix is the best play on the future streaming, which will continue to be a good thing, but I think they're the ones that just have the clear Runway to keep going.
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My only clarity about where things end up is that I don't think we have a clue again, I think we are well into the evolution. But we are not settled yet. So I don't want us to there. I would probably say Netflix too. Rick, just so we're different. I'm going to say Alphabet just for fun because I do think with their money and their access to the consumer, they have a role to play and you get all that diversified business. So I'm really curious what they do.
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For me, I was going to bring up that one. I think that one is. It's. People don't even know that Alphabet owns YouTube. But there it is, the biggest streamer in the world. Still underappreciated. Next up, we are going to talk about the potential owner of some of these media assets, Larry Ellison, and how much money he made this week. You're listening to Motley Fool Money.
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Welcome back to Motley Fool Money. Oracle was the hottest stock this week, nearing a trillion dollar valuation. The crazy thing is the company added $356 billion in remaining performance obligations for the past year. Nearly all of that is from OpenAI. We found that out after earnings. Funny, they didn't disclose that during earnings. By the way, this is mostly from one company that doesn't actually have $300 billion to pay us. But Lou, this is a huge story because this is now vaulted Oracle into the kind of the big tech space. It has also made Larry Ellison, the tie to the Paramount deal, at least earlier this week, was the richest person in the world. So what is your takeaway overall from this move from Oracle and OpenAI.
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C
Yeah. So the biggest thing to note is like you said, rpo, remaining performance obligations does not equal guaranteed revenue, period. But it does mean that at least the potential is there. You're right, OpenAI doesn't have the money today, but they don't have to have the money today. OpenAI also has a long track record of being able to raise cash and as of today I think they can probably raise that money. So I do think that yes, this can all work out and this is, there's understandable enthusiasm. I think though it needs to be tempered by, tempered with the nuance that yes, this is assuming the status quo. This is assuming that I guess the music doesn't stop. Right. Or it doesn't become Significantly harder for OpenAI or someone else to raise the money they need to pay this. And there is sort of, you know, grandmas don't count the chickens before they hatch here. As far as the stock reaction, I think, I think investors are rightly very excited about this and I also, I think cautious optimism is best here because I also again you cannot say, well then this is money they have, this is the potential that they might grow substantially from here. And that's an important difference if you're buying in.
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The other thing that I'll add before I throw it to Rick is that at least reportedly Microsoft and OpenAI have reached a non binding agreement to basically allow OpenAI to turn into a for profit company. That could lead to an IPO and the capital raises that will likely be needed. But, but Rick, you know, is this, is this the kind of thing that is a needle mover for Oracle's long term business? Because they have not been this cloud juggernaut considered in the hyperscalers, but this could make them one.
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Yeah, it definitely opened the eyes of investors when Oracle jumped 36% in a single day on Tuesday. It's like the NFL combine when a 330 pound lineman crushes a 40 yard dash in 4.8 seconds. You don't see this very often, but true to Oracle's form here you have a company that still has a lot of other things happening. I do think that obviously bears watching and this whole thing, Lou is absolutely right about the RPOs that this is not guaranteed revenue, but if it doesn't, and it reminds me sort of like when IMAX used to have like we have a backlog of hundreds of screens to install but they never really happen because they're in countries and deals and all these things that can fall apart but with this particular deal, I think it has a very good chance of going through and I think if it doesn't, it's going to be more problematic for Open and I OpenAI the reasons why it wasn't able to go through with it than for Oracle's bottom line. But again, I'm not only concerned, I think it makes Oracle more interesting. But I think the stock sort of started to tick down a little bit in the few days after Tuesday's jump. So I think maybe the investors saying, well, well wait a minute, let's, let's not get too excited until we see something happen. But it's definitely a positive development for him. There's no denying that it's a double since June 1st.
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C
So anyone who wants to take a little gains here, you know, God bless. I don't blame them.
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A
Yeah, the other thing I'll note it was we had so many questions about this deal and I was trying to figure out exactly the details how you can add that much, who the counterparty was. The conference call was almost useless for investors because it seems like the analysts even had no idea what to ask and they were just congratulating them on a huge RPO number without sort of digging into is this contracted? Who's the counterparty? Do they actually have the money? So a lot to, a lot to learn there in the future for Oracle. The other AI story to touch on is Adobe. They reported earnings last night. They're at least trying to make an AI story out of their business. But Lou, is this something we should be buying into?
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C
You know, so look very careful here. This is one data point, this is one quarter and I'm loath to read too much into one quarter, but this one data point said that Adobe suggest that Adobe can be a net winner from AI. We're all worried about what AI, what free or low cost tools will do to Adobe's core business. I sort of think that there's a case to be made that the professional users of Adobe, they don't want to use what's free, especially when Adobe is using AI too and they are making their tools better. I think if you think about this as a marathon, Adobe has a huge, huge lead. And even if AI can supercharge who's coming up from behind, AI can also at least add to Adobe speed so it can keep the gap isn't going to close as quick as maybe it would if Adobe was standing still. I worry more about Figma here than Adobe, Travis, if I'm honest. Because look, the professional class knows what they know and they've been using one thing for decades and you have to be significantly better or significantly cheaper. So less profitable to take that away. But if free and cheap is taking the casual user, does AI cannibalize Figma's attempt to be sort of the, the disruptor here more than it cannibalizes the incumbent.
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A
Canva be the other name to add into that?
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C
Yeah, yeah, yeah. There's a lot of names. There's a lot of names that will do this on kind of the, the low end. And if the low end is where the crowd is, then that makes life harder for disruptor, not impossible, but it makes it harder for the disruptor because disruptors usually go from bottom up.
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A
When we come back, I am going to ask Rick and Lou to rank some baskets of stocks in some interesting categories. Media, autonomous vehicles, and restaurants. You're listening to Motley fool. I'm Christian McCaffrey, pro running back, and Abercrombie is an official fashion partner of the NFL.
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B
I'm not kidding when I say NFL by Abercrombie broke the Internet last year and I think this season's lineup is even cooler.
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A
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- [20:28]
B
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A
Welcome back to Motley Fool Money. Today we are going to have Rick and Lou rank their top stocks in a few different sectors. We already talked a little bit about media, so I do want to start there and I'm going to give you five stocks. I want you to rank them one through five. I'm going to have Lou go first here and then we'll, we'll see if we like his rankings before we get to Rick. So Lou, in the media space, I would like you to rank one through five. Netflix, Disney, Warner Brothers, Discovery, Comcast, and Fox. And here's, here's the information you need to know. This isn't just do I like the business, do I like the product? But also the valuation matters here. So this is do I like the stock? Where are you at?
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C
So Disney is probably first with the valuation, but you know, Disney and Netflix prize winner. Well, these are the top tiers. I probably feel more if this was who's definitely just going to make it and who's. I'd probably go with Netflix, but I do think Disney is close enough and I do get a little better value. But those two are in the elite category here. After that it's a mess to me. I might take WBD today just because or I don't know. I would have taken it two days ago before, before this announcement. But at least there is maybe an outcome here. Fox is just a mess. I don't know what to say. Comcast is there because they do have all of the non streaming revenue. I worry about that revenue. I mean the cable is declining, even streaming, the broadband is. It's not the growth opportunity or it's not the salvation we thought it was. I would largely rank these as two I or three I worry about and two I don't. And then the rest is detail. But I'm probably WBD just for outcome, then Comcast, then Fox going down just.
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A
To put some numbers on those valuations. Disney's price earnings multiple on a trailing basis is 18. Netflix is 53. So that's why evaluation matters here. Rick, what's your order?
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B
Yeah, so I'm going to. So I'm saying valuation doesn't matter. We obviously I'm going number one will be Netflix. To me they are the leader and I don't mind overpaying for Netflix. People pay overpay for Netflix all the time and I mean the stock, not the service and they wind up being rewarded. So Netflix is my number one. Two is Disney is my favorite company but in media be my second favorite stock. Obviously they have a lot of things going well for them and it's a varied empire. But growth has been really slow for Disney the past couple years. So it's been a very lackluster stock over the past year.
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A
Do you think ESPN can turn that around or is that just going to be sort of hidden in the background, you know, in the, in the sports numbers, the way that they're reporting things. Because I've now used their streaming app. I think it's one of the more compelling new apps. They got some bugs. You know, I'd like to do some add ons of NFL plus. Can't figure out how to get, how to get that to work, but they'll figure that stuff out. But does that end up becoming a growth driver, especially as they start to bundle these services together or is it kind of more of a nothing burger?
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B
I hope it's not a nothing burger, but even if it wasn't, this is, it'll be found money if it works out because this is, this is a segment that like a year or two years ago their narrative was okay, Disney, just spin off espn, get rid of it. Programming costs are so high. We know ESPN is a great brand, but just the cost structure will never work for sports programming, despite its fact that's the one thing that people demand to see live. But I think it'll be fine as far as whether it happens or not. I don't think it's being valued into the stock right now. In fact, I assume that ESPN is just accounted for. Yeah, it'll be more of the same. Whereas this whole ESPN $30 a month unlimited plan, you know, may start to turn heads.
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A
All right. Worried about those bottom three. That's where things really get dicey.
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B
Yes. So Lou seemed to like lump them all as like the three worst ones before, sort of just, you know, ranking them at the end. I'm a little. Yeah, I'll go. I'll say Comcast is number three. And I know, I know all the bad things about Comcast. I know that we've known the cable cord cutting has been happening for several years now, more than a decade since we had peak cable. But now, surprisingly, we're seeing connectivity, so broadband. And you're wondering, where are these people going? And it's obviously some of the 5G wireless and all these companies are doing other products. We still need to connect it. Yeah, fiber. They're not doing it necessarily through Comcast, so that's sort of taking a hit. But it's still a cash cow business, these two. And I'll be honest, as a theme park enthusiast, I really. I've been to the Epic Universe that opened in Florida. I've been there six times, six individual visits since it opened. It opened in May, but I went there in April and first preview and then a couple days several times this summer. And I think that overall it's doing fine. And more importantly, the reason I like Comcast as a stock and you said the stock, not the business. It is selling at probably the lowest earnings multiple of these five companies has a dividend of 4%. So you're being patient while this company sorts itself out. And to be honest, I just got the first episode of the Paper, which is the Office Creator show streaming on Peacocks, and I'm going to keep watching. It's not bad. And at Warner Brothers and Discovery and Fox, I sort of having the same. Like Lou, forget about these companies. Obviously with wbd, you have the fact that it did pop already. So there's sort of like this appeal that maybe it does get bought out at a good price and there's that kind of appreciation. So there's speculative appeal to it. But once that goes, there's obviously A lot of downside too, if it doesn't happen. So I'll Put Warner Brother 4th and Fox 5th.
- [26:07]
A
Comcast trading for 5.6. Price to earnings multiple, even on a forward basis, it's under 8. That does not include the around $90 billion worth of debt or net debt that they have. So that's, that's a pretty big number as well. But yeah, that is interesting value play. Let's move on to more of a growth segment or a certain growth segment, autonomous vehicles. And there's a lot of things going on here, but you know, Lou, in your neck of the woods in the Atlanta area, Waymo is now operational and Lyft launched May Mobility earlier this week. So these are proliferating. I've seen a main mobility vehicle in the Minneapolis area. So it seems like these vehicles are coming faster than a lot of people thought just a few years ago. Some of them still have safety drivers, but a few of them don't. So here are your five stocks that I want to know how you think they're going to perform in the future. Tesla, Rivian, there's an AI autonomous vehicle story there. They have the full stack in house. They're going to be level two, but you know, visions of going to level three. Level four, Uber, a little bit of a different play. Mobileye, which is a company that's gonna be selling chips and technology to other automakers. And then we ride. Rick, I'm gonna start with you.
- [27:19]
B
Yes.
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A
How do you rank these five companies?
- [27:23]
B
Yeah. So I'm gonna say. So again, we're judging the stocks, not the companies. Right, Right.
- [27:29]
A
That's what makes this tough because Tesla's valued very differently than a lot of these other companies.
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B
Yeah. So, I mean, Tesla would be. Well, yeah, it's a great company. I'm happy with my Tesla, my second Tesla. I mean, I traded my Tesla for Tesla last year, so I'm clearly happy with the experience. But as far as the stock goes, I'm going to start with Uber. Number one. To me, this is a company that you thought that, okay, the pandemic, okay. This is when it's going to thrive. But then post pandemic, you figured, hey, we're going to go back and we're going to start eating at restaurants again. We're going to go say, why are we going to be paying someone and tip someone to have brought food, brought here or groceries when we can go get it ourselves? But sure enough, that business is still growing heavy free cash flow out of this company. So definitely Uber would be number one on my list. For number two, I will go Tesla again, the valuation frightens me. I'm afraid of what's going to happen after September when those $7,500 tax credits go by. Because the Model Y And the Model 3 are the cars that fall under that category. They're their best sellers by far in volume and everything else.
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A
Volume was down before those subsidy cuts, so that could be tough for.
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B
Right, yes, yes. No, growth has been slow even to become with I think this last quarter, this third quarter that we're in right now is going to be that last great quarter for them as far as that goes. That's what I was going to be buying before to get that last 7500 dol dollar check those that qualify. But again, I'm sort of concerned about the valuation and everything. Number three, I'm going to go with Mobile Live because I always think of picking shovels, play matters. And there's no denying that the whole move towards autonomous driving has to be technology driven and you have to have a company like mobileye getting in there and getting the chips and the hardware in there. So I'm all for that. And number four, between Rivian and We Ride. So I'm not a big fan of Rivian and I know there's a lot of fools that love Rivian. I'm going to just make it number four for the sake. But again, I do think that this is. It needs to go mass market the way that we saw with Tesla, you know, the Model S, the Roadster, the X, they were great cars, but it wasn't until they had that breakthrough with the Y and the three that the company really hit, you know, that kind of scale. I don't know if Rivian can do that without sacrificing the brand that it has. And number five, I'll put where we reride last. And it's also probably the one that may wind up being it's either going to be the best or the worst stock of these five.
- [29:39]
A
Yeah, very binary outcome.
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B
Yeah, very binary outcome. Again, Chinese autonomous driving trying to get from level two to level four, doing all these things. And there's so many companies working on this right now and I hope they succeed because who wouldn't want cars that are safer on the road and that we can actually just relax while we drive. But I don't know if, as far as investment goes, it may be too early to pick a winner and it may even earlier to assume that we ride will be the winner.
- [30:03]
A
All right, Lou, where are you at.
- [30:04]
C
Yeah, I mean I'm somewhat similar for slightly different reasons. I'm Uber first too. And the reason slightly different. I think if autonomous driving, if we figured it out, it sort of becomes commoditized at least. And so who controls the customer matters more than I think the tech. And they are in such a great position with that with just their, their roster of customers. So I really like them. I think they're about middle on the valuation thing of these five two. So you're not getting a bad valuation beyond that. I know you said Travis, folks on valuation, but look, there are a couple of these companies, I don't even know if they're going to make it. So it's hard to get too caught up in valuation in that I'm at mobileye second because valuation. And I do think again, I've never liked automakers, but I've done real well with the right auto suppliers and I think this couldn't be the right auto supplier. I don't love the valuation I get. So I'm not, I'm not eager to add here, but I think it's a solid company winner. Tesla's third for me. Tesla, I don't know what to think of what they're doing with Robotaxis. I don't think what to do with their auto automotive. I think they'll figure it out. But you also have optionality elsewhere there which as an investor I like. You know, energy, solar, all of that.
- [31:19]
A
You want an optimist robot. I know what you're really saying here.
- [31:22]
C
I love dancing robots. Who does not like dancing robots? Okay. At the bottom end, I think yeah. I struggle. Rivian I don't see. Especially since we're judging on autonomous. I'm less, you know, they feel like an afterthought there for me a little.
- [31:42]
A
They've come in really with an autonomous story that a lot of people have bought. But it does seem a little bit like Fox getting into streaming in 2025. It's like, yeah, yeah, if you were going to do this, you should have done it when you went public three or four years ago.
- [31:55]
C
They are still mostly a hardware story and that is, you know, they're vehicles and so I. But, but look, we ride, like you said, it's just all over the place. We ride is everywhere doing everything. I mean look, you know, hardware sales, subscription sales, service revenue. So in a way, wow, look at that diversification. But in an unregulated, soon to be regulated, there's also just risk all over the place. You throw in the wild Card of the Chinese. Chinese. I just, I, I can't get my head around that one. So it's, it's last for me. Just almost on the too hard. Who knows? I can't say.
- [32:30]
A
It's interesting how the narrative have changed, has changed over the past six months to a year. I don't think a year ago we would have thought Uber was going to be a leading autonomous vehicle company. But I think you're right, Lou, and you guys are both heading in the same direction. That seems like there's so many players here that this is going to kind of commoditize itself one way or another. Quickly, I want to get to your thoughts on restaurants. Rick, you're maybe our restaurant expert in this group, but I wanted to get a feel for where, where do you rank Chipotle, Darden, Cava, Portillo's and Wingstop? Because there's a lot going on here. We've talked about this on a number of shows. People may be sitting down more, maybe eating out a little bit less. There's growth in certain stocks. It's, you know, negative. Same store sales in other stocks. But where do you have these ranked?
- [33:16]
B
Yeah. So number one, I'm going to go with Cava with the caveat that we're talking about the stock and that the stock has taken a big hit in recent. So this is not Kava from high flying where it was several months ago, it's fallen substantially. Comps were up just 2% in its latest quarter, which is not very impressive, but better than most of the other chains that went negative. Number two, I would say Chipotle, one of the companies that did post negative comps. It's hard to go bet against Chipotle and right now you have a chance to actually bet on Chipotle while it's out of favor. And just as we saw several years ago when they had the foodborne illness outbreak. It's not a bad time to bet on a company when everyone's assuming that their time is up and they're like on their third CEO or whatever. So Chipotle number two, third. I would go with Wingstop here. And Wingstop also had a very rough quarter, but the stock moved up and you are seeing some signs where this is the company that was so golden coming out of the pandemic that it was able to just have positive comps even in the actual quarter when people had sheltered places, had strong takeout business and strong digital sales. They were built for this. And then for fourth and fifth, I'm going to Go with Portillo's fourth. And again, it is very speculative. I'm a fan of their hot Italian beef. I'm a fan of their chocolate cake shake. And it has a lot of room to grow. It has more upside than all the other ones. And Darden, even though I put them last, they work on a different fiscal year. Their fiscal year ended in May, so we don't know what happened in the summer quarter where a lot of companies seem to have stumbled. They did post positive comps at Olive Garden and Longhorn Steakhouse. So that's it. That's my 1, 2, 3, 5.
- [34:47]
C
So as a consumer, I'm going to Kava nine out of ten times. But Rick, we're supposed to do valuation. Even with the declines, it is still by far on an enterprise value to Ebitda. It is still up there. I struggle here. Look, here's what I'm going to say on this. I'm actually going the exact opposite. I'm going Darden tops. Because Wall street, if I'm an investor, Wall street pays for growth. And I wonder if fast casual, it's a category that didn't really even exist when we were kids, guys, and has just come up and become a wonderful thing. But I'm wondering if it has just become saturated and reached its natural limits. And I don't know. I'm just not sure if any of these guys will really be able to post substantial growth. I think we're just doing fast casual maybe as we want to. Darden tried and true. There's still even in this economy where maybe the fast casual is, is falling off, but you still go out to celebrate a night or do that. I think slow and steady is the play here. It's also, I think, the second best valuation among these guys. The rest of them, I mean, throw a stone, you know, I think because I think they can all be market beaters, but I wonder about all of their growth. I probably maybe Chipotle Second Cav and in Portobello and Wingstop, but I really, really struggle with that. I just Darden's to stand out for me here and for weird reasons.
- [36:14]
B
So you didn't put this on there, Travis, because I mean no one's going to put Brinker International on it. But Chili's is the one chain that has post monster comps. And if you pull up a stock chart on Brinker International, the ticker symbol eat great ticker symbol has been a monster stock. And it's again, I don't know what they've done to Chili's I've gone to Chili's. I go to Chili's once every couple months. So I mean, I haven't noticed a turnaround, but something has happened there magical over the last two years where they've had strong comps on stock on top of strong comps and it's and it's working out great for them. But yeah, very much like the Darden story of, you know, an old brand that you don't necessarily trust. But hey, not just like count on being a growth stock, but definitely interesting company.
- [36:53]
A
And maybe the one to play them all is Uber. When we come back, we are going to get to stocks on our radar. You're listening to Motley Fool Money.
- [37:02]
C
I found the property to get you off your feet. I got the special sauce to get you out your seat. And thanks and secret that's been passed down on relief Stick up your biscuit Tossed Drinking at the don't defeat her Eczema isn't always obvious, but it's real. And so is the relief from EBGLIS. After an initial dosing phase, about 4 in 10 people taking EPGLIS and achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing. EBGLIS Librekizumab LBKZ a 250mg 2ml injection, is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema, also called atopic dermatitis, that is not well controlled with prescription therapies used on the skin or topicals, or who cannot use topical therapies. EBGLIS can be used with or without topical corticosteroids. Don't use if you're allergic to Epglis. Allergic reactions can occur that can be Severe eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with Epglis before starting Epglis. Tell your doctor if you have a parasitic infection searching for real relief? Ask your doctor about ebglis and visit eglis.lilly.com or call 1-800-LilyRx or 1-800-545597.
- [38:26]
A
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 the Motley Fool's editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. We like to end the show with stocks on our radar. We're going to have Dan Boyd behind the glass give his thoughts and see what is going to end up on his radar. Rick, I'm going to have you go first. What's on your radar this week?
- [39:00]
B
Yeah, I'm going to go with Celsius C, E L H ticker symbol. This is the company behind the sparkling beverage, namesake beverages that has thermogenesis and all these cool things. The stock had taken a beating from late last year to early this year to the beginning of this year. And then it made an Aulani new acquisition which basically transformed everything starting in April. Their last quarter was amazing growth for a company that posted negative growth on the Celsius side. And actually even the Celsius brand had a positive turnaround. But the company's doing well. PepsiCo got so excited that they own a piece of the company, they own a bigger piece of the company now just because they want to get in on that. Alani new distribution, not just Celsius. So good times for Celsius holdings.
- [39:37]
A
Dan, what do you think about Celsius Holdings? I just happen to have one sitting next to me right now. I've never had one of these things. I know that they're popular. I assume they're good. Rick, you got a favorite flavor?
- [39:48]
B
So I got into the Lonnie new stuff and I know actually it's targeted to women, but to me, I enjoy the cherry smash. I think that's what it's called Cherry slush flavor of the Alani Lu. I always enjoyed the orange vibe of Celsius if you ask for that brand.
- [40:03]
A
Lou, what's on your radar this week?
- [40:05]
C
Yeah, it's just carbonated tang, you guys, come on. But look, I'm bringing Truist financial ticker TFC. Truist is a poorly named product of a 2019 merger between BBT and SunTrust. And on paper, this is a powerful banking franchise with a presence throughout the mid Atlantic and Southeast. But look, the integration didn't go well. The stock has underperformed. I'm seeing signs of life though. Truist is going on the offensive, announcing plans to open 100 new branches in high growth areas. They made a lot of loans during the zero interest rate times. Those are maturing, which provides an opportunity for repricing and improved profitability. Right now you can buy the shares at a discount to the company's book value and get a 4.6 dividend yield to boot. It looks intriguing to me, Dan. For a company, I think that's on the upswing.
- [40:52]
A
Truist may be a good energy drink name, but it's a bank. So what do you think?
- [40:56]
C
Dan?
- [40:57]
A
Yeah, the name still stinks. So I think I'm gonna have to go with Celsius this time around. They have really made a big turnaround in investors eyes over just the past few months, so I am watching that one as well. For Lou Whiteman, Rick Minarez, and our production leader, Dan Boyd, the entire Motley fool team, I am Travis Hoyam. Thank you for listening to Motley Fool Money. We'll see you here tomorrow.
- [41:20]
C
Sam.