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Paramount Gets Warner Bros. Discovery, But Netflix Comes Out a Winner
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Warner Brothers Discovery has a buyer again. Motley Fool Money starts now.
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Everybody needs money.
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That's why they call it money.
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From Fool Global Headquarters, this is mle Fool Money.
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Welcome to MLY Fool Money. I'm Travis Hoy. I'm joined today by Lou Whiteman and John Quast. And guys, our plans were all thrown out the window last night when we found out that Netflix is apparently not going to be buying Warner Brothers Discovery. Paramount has swooped in again. John, what did we learn? And is this saga going to finally be over or are we going to continue debating this for the next six months?
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Well, yeah, I think the saga is finally over. And I think that Netflix shareholders should breathe a deep sigh of relief. I didn't like this deal from the start for Netflix. In my view, Netflix's business is humming along just fine. Why saddle itself with a mountain of debt to buy an asset that is inferior to itself? That simply didn't make sense for me. And I think that Netflix shareholders are coming out good here now that Paramount is the winner for the Warner Brother assets.
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Lou, let's go through some of these details. Paramount Skydance is going to be paying $31 a share for Warner Brothers Discovery. The prior agreement was $27.75 per share from Netflix. That was cash. The difference between those two numbers is this spin off of some cable assets that was an unknown value, but could be more than the. The Delta there. Three dollars and three and a quarter, and it could be worth less. So is this actually a better deal for Warner Brothers Discovery? Is it? Because it seems like we're increasing uncertainty with. Does this deal actually close? We'll get to. We'll get to get to some of the huge weight that's hanging over this from a regulatory standpoint in a second, but just from a number standpoint. Why does this make sense?
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You say it adds uncertainty, but there was no certainty that the Netflix deal was going to close. So I think that that uncertainty, I think probably, arguably, Paramount has an easier regulatory hurdle here than Netflix.
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Just because they're not as big.
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Right, Right. Just because Netflix is a dominant player. There is more of a financing uncertainty just because Paramount is such a smaller company but have some guarantees from. From the Ellison family for that. So, yeah, any M and A has uncertainty. There is certainty in cash. If you kind of make the uncertainty of who closes for what reasons awash. Because they're both questions there. $31 in cash is $31 in cash that you can do whatever you want with 2750 and a stub you can argue what that stub is worth. It could be worth zero. It could be worth a trillion dollars. It's obviously worth somewhere in but yeah, $31 in cash is cash. And I do think that that is, you know, at the end of the day that, that almost always in these deals cash is, is, is going to get valued higher in terms of a fairness opinion or trying to figure out what's what.
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Lou, I also want your thoughts on some of these other details. There's the $31 per share in cash, but there's what's called, I'm reading from the press release here, a daily ticking fee equal to $0.25 per share per quarter beginning September 30, 2026, as well as a $7 billion regulation or regulatory termination fee that would be payable if regulators block the deal. That seems like this deal could get really expensive. And by the way, Paramount Skydance is only about a $12 billion company today. So has Larry just, Larry Ellison just swooped in and said, hey, I'll write a blank check as long as we, we get this out of the hands of Netflix.
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Yeah, I mean, basically, I mean it's fun to look at the relative size of these companies and certainly Netflix had a lot more they could do if they wanted to because of their relative size advantage. At the end of the day, if someone is willing to write big checks, that does even the playing field. I think the cleverness of Paramount here is I think some of those sweeteners, that's what might have been hard for Netflix to match or match in a way that was financially viable for them. I think Netflix shareholders should be happy that Netflix isn't just going to say all in whatever it takes. I do think though, I trust this management team. I like the Netflix management team. I do think that they weren't willy nilly here when they just went for this asset. I do think it spoke to, if not a need, I think it spoke to our life is getting harder with getting content and this is a source of content that we can just pay one price for and have. So I don't, I think this is more than a like to have for Netflix. I think they really did want it, but I don't think, I don't think they're in trouble if they don't have it.
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John Netflix does now get to go back to kind of being what they were. I agree with you that this was probably a headache that, that they didn't even really want to take on, but it was better than creating A new competitor if with Warner Brothers Discovery and Paramount combining. But now we are going to potentially have that competitor. It's not going to close likely until late this year, maybe even into next year. But is a Paramount, Skydance, Warner Brothers Discovery combination going to be a viable competitor to the Netflixes, the Disney's of the world? You, you know, we even still have NBC and Peacock out there. Is this going to be one of the big players? And do they have the financial wherewithal to do that? Because this is going to be a company saddled with debt.
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That's exactly the question, Travis. And I think that Netflix is playing a very smart competitive game here. If it is playing a game. Listen. Yes, it does. It is going to have the assets, it is going to have the content. From that perspective, that definitely is going to be one of the major players. But if I have a major competitor in a space, I want that competitor to have less financial flexibility than I do. That is going to be an advantage for me. And so I. It's hard for me. I know we're not a cynical podcast, but it's hard for me not to think that Netflix was playing chess the entire time here. It had basically won this deal and then it lets Warner Brothers go out and get a better bid. And it does. And then it says we're out. Almost like it wanted this to happen. And the end result here is it gets 2.8 billion in free money for the breakup. One of its main competitors now has more debt than it can. Well, I mean, it'll be able to handle it in theory, but it's going to be definitely shackled to this debt for the foreseeable future and have less financial flexibility than Netflix does. So I say Netflix has won this deal hands down.
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I need to push back just to this idea. I don't think that Netflix risked $80 billion just to try and break up a competitor. I don't think that that was the goal. I think, look, I'm not dismissive of this new entity being a competitor, but there's a lot of competitors out there. I don't think Netflix made this move just because they didn't want to see Paramount and Warner Brothers Discovery put together. I think they saw it as a way to add content and they need content and then again they didn't need it as bad as Paramount, so they walked away as they should. But I think that it's, it's. I mean it would great script of succession or something like that, but I
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don't really believe that's going to be the next show.
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And let's be honest, if I'm a Netflix shareholder and they did just put their balance sheet on the line in hopes that Paramount would be slightly more risk on than them, I need to rethink my admiration for that management team. I mean, you are really, really throwing the management team under the bus if you think they were playing that game. Just, just from my perspective, do you
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think, do either of you think that it's going to be possible in the next, let's say, three to five years that we find some deal between Netflix and Paramount, Warner Brothers Discovery, whatever this entity is going to be called, where they go, you know, we're just going to license a bunch of this content that we just acquired to Netflix because Netflix can write us the biggest check. John sure.
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Anything is possible. And there are some assets here that I think that Netflix would have liked to have had its hands on in, in particular, the DC Comics intellectual property. I think that Netflix can do a lot of things like that a la Disney. So, yeah, there is a possibility that it's willing to license this from the new entity.
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The other potential winner here is potentially movie theaters. I think it's probably more likely that we'll see more movies in theaters with this combination versus with Warner Brothers Discovery going to Netflix. When we come back, we are going to get to a flood of earnings news this week. You're listening to Motley Fool Money.
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Welcome Back to Motley Fool Money. We had a lot of earnings come out this week and the big one was Nvidia. That was, you know, obviously the one that drives the market, both the S&P5,500 and the NASDAQ. John, what did we learn from Nvidia and was it as bad as the market's 5% decline in the stock indicates?
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Well, I mean, really the investment community is wondering about future growth more than anything and long term. Right. So IT just reported 73% revenue growth in the most recent quarter. It's expecting an acceleration to 77% in the upcoming quarter. That sounds good, John, more than just good. I mean, if this was a small company, we would say this is incredible. This is a company with over 200 billion in trailing twelve month revenue. It's incomprehensible. Analysts were asking, you know, is it realistic to expect this kind of growth to continue? And pointing out on the conference call, listen, the hyperscalers are spending like 700 billion this year in capital expenditures. Much of that goes to Nvidia for its GPUs. So the question is, how realistic is it to expect growth on top of 700 billion in spending already? Well, we're getting some news today that OpenAI just secured the bag for 110 billion in funding, some of that from Nvidia, which is interesting, but OpenAI isn't raising this money to park it in the bank. It is going to be spending this money on infrastructure, on AI. So yeah, I think that the capital expenditures can keep rising and Nvidia can keep growing. How much is the question, Lou?
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My question here is around whether this was just the market getting certainty around how much of that revenue that John said that hyperscalers are going to be spending over the next year, somewhere on 650, $700 billion. We now have sort of a matchup between what the growth of their spending is going to be in 2026 and what Nvidia is expecting to grow in 2026. Now the question, it's almost seems like it's already turning to 2027. Are those hyperscalers going to spend a billion or a trillion and a half dollars and this is going to be a continued growth story or have we hit some sort of peak or we're near a peak? Because when you look back at the capital spend spending in the late 90s and early 2000s, that was actually kind of the warning sign that we were. When you started decelerating, that was when companies like Cisco really, really took it on a chin I don't want to, you know, get too caught up into those analogies, but that is the real only historical comparison that we can make right now.
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Yeah, certainly the market thinks so. I find it interesting if you look at Nvidia stock, it has had a great, I mean it's been a wonderful stock right up 50% over the past year, but basically flat in the last six months. So it has done nothing in the last six months and I think this is the exact conversation that investors are having. Right. There's nothing wrong with this business but how much higher can it. So I think some of that, I mean look, Meta and some of these companies using off balance sheet kind of, it feels like we're getting to the point where we just can't go higher. Nvidia pushed back at this though. Saab. Yes, 50% of data center revenue came from the top five hyperscalers. So there is market concentration. But they talked a lot in this quarter about the diversity of demand coming from model builders enterprises. Sovereign customers are a big part of this. So there could be other levers to pull here. But I think that's what the market is debating here. There is no question about the strength of Nvidia's business. All of the metrics are off the charts. I don't think they are relative to what they're doing now, unreasonably valued. But how much more can we squeeze this as far as upside? That is the debate and I think it's a fair question. I think there could be an answer. I don't think it's set in stone but I do think that, yeah, there is just no way that the growth we have seen could continue indefinitely. Even these cash producing hyperscalers just don't the cash to keep jumping the way they have.
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John, the other news that we've gotten in the past week is companies like AMD selling a whole bunch of chips to to Meta. You have Google a lot of rumors about what are they going to be doing with TPUs. Are they going to be trying to find the, you know, sell those to other companies, maybe even form joint ventures? Is that another sort of headwind where you go Hey, 18 months ago there was no competition and now there's at least some competition in the market that could squeeze not only revenue but margins eventually?
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I don't know if I call it a headwind yet. It is definitely a question because for example you bring up the TPUs, that's not exactly new technology. We've been waiting for that to kind of scale and really Put any sort of measurable dent in Nvidia's business for a while now. I think that if you're looking at it though, from an investment perspective with Nvidia, you're looking at those profit margins. They're historically high. They're really incredibly high for a hardware. I know it has software, but we're selling a lot of hardware here. Those margins, over 50% for our hardware business, that is really quite good. The question is, and the reason it's so high is because of supply and demand. Demand is out, outpacing the supply. Can these other products come online, meet some of that demand and finally bring it into more balance? And then Nvidia's margins will compress to, to, to still good, but not what they are right now. That's the question on everyone's mind.
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It's definitely still a buyer's market. I mean, competition exists. But I don't, I don't anticipate Nvidia having any issues, you know, clearing out inventory. And again, just, just the strength of this business. I'm going to steal this from our, our colleague Tim Byers. But I thought it, he, he's brilliant. And I think this is such a neat stat from year over year. Fourth quarter, fourth quarter, Nvidia spent 2 billion more in R and D sales, admin expenses that produced $28.8 billion in additional revenue. So about, you know, for every $1 a new operating expense, $13.68 in additional sales. That's the way you run a railroad, you know, I mean, and again, just, just for all of the, oh, no, it can't go up forever. Please, please appreciate what they have. And status quo seems pretty okay right now.
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On the other end of the spectrum, we have a company like the trade Desk. John, this Stock is down 83% from its highs. What did we learn this week? And are they in trouble?
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I think that we didn't learn a whole lot. We learned that growth continues to slow down more than what we're accustomed to seeing, more than what we ever have seen with the trade desk. That's a question. And what's really interesting about this is the company is a digital advertising company, right? And it launched its AI platform, Cocai, 10 quarters ago. Okay. And this was supposed to be the big thing. Seven out of the ten quarters since launch, revenue growth has decelerated. Now, Green is pointing out, Jeff Green, the CEO, is pointing out that 100% of customers are now using this supposedly better version of the platform. But there have been some reports from customers that it's too complicated. And that might be contributing to the deceleration. They might not like it as much as they were expected to like it. And I think that Green himself confirmed this on the fourth quarter call. He said, the complexity of our ecosystem is a moat for the trade desk, but that doesn't mean we have to hand the complexity back to our user. To me, this is him saying, well, we have in fact handed the complexity back to our users, and that shouldn't be what's happening. This should be simpler for them. It should be simpler to use. And if it was, maybe they would not be decelerating as much as they are.
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Lou, we also heard from Snowflake. What did we learn in the quarter?
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A decent quarter. But here's what I want I find so fascinating because the narrative has been about how AI is going to eat everybody's lunch, right? That everybody is doomed because of AI. And Snowflake definitely falls into the category of companies that are supposedly doomed. So contrast that with their cash from operations and free cash flow. They had a great $345 million in free cash flow. Where did that come from? Deferred revenue. Deferred revenue is revenue that customers are paying for, you know, future, future performance or future obligations. But it doesn't, you know, because it's in the future. It's not hitting the P and L sheet right now. So on one hand you have the the world Snowflake is doomed because of AI. And another hand, what's actually happening is customers are putting down hundreds of millions of dollars in cash to use Snowflake products in the future. I feel like the market should at least meditate on that a bit and think about what that might say for Snowflake's prospects.
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When we come back, we're going to talk about potential other buyouts that would be interesting in 2026. You're listening to Motley Foreman.
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Welcome back to Motley Fool Money. In this segment, we like to have a little bit of fun with investing. And since we've been talking about the Netflix Paramount, Warner Brothers discovery drama, we thought, you know what, other deals or mergers make sense. It might even be fun. I'm gonna throw out a few ideas for you guys. Lou just threw out a spicy one for us that I'm excited about a little bit later. But I want to get your your thoughts on this and whether these would be good ideas. Let's start with one that I've been talking about for a while. That is Spotify merging with Ticketmaster. John, does this make any sense to you?
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It doesn't make as much sense as Spotify moving more into a video platform. I really like that idea.
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You want them to become Netflix? Yeah.
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Or at least have a Netflix component that integrates well into the audio that they already do. That makes a lot of sense to me. Look, Spotify has a good thing going, so I'm just reluctant to suggest anything that might mess that up. But sure, there are plenty of synergies that a business like this can have with a business such as Ticketmaster. That could be some really cool integrations, some really cool promotional things that it can do if it had that. I don't hate the idea. I'm not necessarily in love with it, but it makes sense.
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It makes a ton of sense. There's obvious synergies. The question is, is it worth it for Spotify to spend about half of its market cap to gain those synergies? And that's where it gets a little harder. Spotify is about, I think, 100 billion. And Live Nation, Ticketmaster's parent, is what, about 40? So you figure with a premium, something approaching 50. I don't know if I think it's worth the hassle at the price if they could have gone back in time and gotten this Years ago. I think it would be a natural ad. Also, Spotify has done a pretty good job moving away from the baggage that comes with you ruining the music industry. You know, they've kind of moved on from that way to just step right back into the. Into the middle of the dog park, so to speak, if you do that.
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Or maybe you're the savior. Everybody hates Ticketmaster, but no, you know, very few people hate Spotify. So maybe you're the savior. You lower your fees a little bit. I don't know. Maybe it's. Maybe it's a good thing.
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Again, if you're paying a premium for something. The reason that everybody hates Spotify is, I mean, it's Ticketmaster. Sorry, is that the business model works so well. I doubt you pay a premium and then, you know, drastically neuter the, the opportunity.
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It just is one of those things that every time I get an email from Spotify about some artist that I listen to and go, you know, hey, there's a concert coming to your area. I just. I just think there's so many commonalities between those companies that it makes a lot of sense. But I think at the end of the day, every time I look at it, Lou, I sort of come down to where you are, where, yeah, would it be worth the price? Live Nation ironically, isn't actually all that profitable. Maybe. Maybe you're right there. All right, let's go to one that I think could be more fun. Disney buying Lego. This would add more IP to Disney. That's what Disney does really well. More stuff for their theme parks and more consumer goods. Lou, does this make sense to you?
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I don't like this just because I don't want Lego getting any more expensive and you know, Disney would know, jack up the prices. I think it sort of makes sense. It definitely made sense in the past era of Disney. I don't know if current 2026 Disney is really just looking to add up new universes the way it used to. So I doubt there's be much momentum here. But Lego is a great franchise. They have some parks. They have all of the IP you could get. I definitely think Bob Iger 10 years ago, if 10 years ago, is now, Lego would make a ton of sense. I don't know if I see Disney really, really going in this direction right now, today.
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I agree with Lou. I don't know if it goes in this direction. However, among the companies that exist in the world, very few would make sense for Disney, and Lego would be among the ones that make sense.
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What about A company like Nintendo, again, that would be a much, much bigger deal, a whole different can of worms. But one of the things that has been rumored about the new CEO at Disney is that he's going to lean more into things like gaming and maybe even spin off some of these non core assets. Whether it's the cable companies, whether it's the sports business, that's going to focus you more on ip movies, games. That's Nintendo's wheelhouse. Anything there, John?
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Oh, tons of stuff there. That would be a match made in heaven. I don't think that it could ever get done just because of the sheer immensity of the Nintendo brand, the Nintendo company. But oh my goodness, Disney would be like a kid in a candy shop if it got Nintendo.
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All right, what about one of the legacy media companies that actually survived in the company that is trying to disrupt them? I don't know exactly how well their business model is doing, but New York Times and Substack, it seems like the direction of New York Times is to lean into these, you know, writers more. They're bundling. Substack doesn't really have much of a bundle. But Lou, does this make any sense or am I barking up the wrong tree?
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D
It kind of makes sense, but here's the thing. Substack's main selling point is writer ownership, that the writers own it. And that's not new. The New York Times. I mean, New York Times is trying to invest in writing, but that is not really, you know, their game. I, you know, antitrust could be weird here. I don't know what antitrust regulators would say, but it does feel like that almost by default. And I respect the New York Times, but almost by default. You would lose a lot of the value that the perceived value on Substack if it was part of the New York Times. So I feel like you'd be paying maybe a billion dollars. I think it's the valuation I've seen for Substack, so not an insignificant amount. And then see a lot of your best assets. Maybe, I don't know, you'd have to figure out a way to make sure they don't walk out the door.
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C
John, I agree with Lou here. I do think directionally this is a very interesting idea. Substack is, does seem to be kind of the future of reporting and these good journalists who are on the platform, this independence that they have. But the New York Times would have to change who the New York Times is to make this a good deal. I think that it would be skating to where the puck is. But you'd have to leave something of yourself along the way, and I'm not sure the New York Times is willing to do that.
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D
That one other idea. Yeah, I, I, I think you have to, like, talk to Cox Enterprises about this, but if I was the New York Times, I'd be much more interested in, I think, trying to get Axios for probably half the price. I think that fits the brand much better.
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A
Yeah. The combination of different business models would probably be a challenge for the New York Times and Substack, but I, I don't know there. You're, you're right, John, that the, a lot of the breaking news is now not necessarily coming from the big media outlets anymore. It's coming from these smaller producers. One of my hobby horses recently, as I look over at my Peloton bike that is collecting dust and my Garmin watch, is that these two companies make a lot of sense together. Garmin is a much, much bigger company. It is a profitable company. Peloton is struggling. I think they need to find a buyer. They're just, they're, they're losing subscribers and there's a lot of. Garmin is trying to move into that subscription business. And I, one of the reasons I'm not doing it is because I'm already paying for Peloton. So is there something there, John, where they can pull these two businesses together, kind of match up the common user base, and maybe make a bigger business than the sum of its parts?
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C
In a different timeline, Peloton would be the larger, more successful company compared to Garmin. And, and Garmin would make sense as a bolt on to Peloton's business. I'm not sure how much it makes sense to bolt on Peloton to Garmin's business if Garmin is the one in the driver's seat. However, I do see the integration capability between the two. You're wearing a Garmin that is monitoring so much of your own health, and then you're jumping on some Peloton equipment that is also integrating with that. That makes sense. But I'm not sure how much Garmin wants this, although the two businesses do have things in common.
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D
So my grand theory on these exercise apps is that they all advertise with people that look a lot buffer than I am, and they're selling the dream that if you just sign up with this or if you buy this equipment, if you do whatever, you will look like the model, and then inevitably we know what happens. That's not what happens. And so these things tend to be fads, which is a way to say that I would never buy one of these subscription businesses on the way down. I agree with you, Travis. I think a deal in theory could make sense. And you know, Garmin I think would like to go in the subscription. But you know, you're still going to pay a billion plus probably what 2 billion. I think repelaton is unless they can, you know, I think that. Why would you pay for these? These falling knives tend not to bounce back.
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A
All right, well, hopefully my peloton bike is still usable for the next few years, but maybe, maybe I'm, maybe I'm on the, on the wrong side of this. Lou, you brought up this one before we started recording this segment and I kind of like it make the case for Berkshire buying PayPal.
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D
It just feels like a Berkshire business. I mean, my criticism of PayPal is it's a mature financial services company. Where are they going to grow? But they have a massive cash flow generation ability. They're buying back their shares, an impressive pace. They are doing the things that mature companies do. Their problem is, is that they're still sor of viewed through the fintech prism. There's been a lot of talk about PayPal who might buy them. I think a lot of that, Travis, we talked about it earlier in the week. I think a lot of that is opportunistic potential buyers and not really a desire to sell. They have a new CEO coming in. I think they'd rather give the CEO some time. But Berkshire with their massive amount of cash to buy this company, take it out of the quarter to quarter spotlight of what growth is and just use that cash generation ability to kind of invest in the business and invest elsewhere. It just feels like a Berkshire type of asset. And it would be very much Berkshire to invest in a financial services business once it's past the bleeding edge and when it's more just predictable and we get this now.
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C
I agree with everything that Lou just said. From a financials perspective, I think from a valuation perspective, it makes sense for, from, for Berkshire as well. The one thing that I would say is up for debate Here is whether PayPal has a durable competitive advantage. And I think that Berkshire would be interested in. Does this business have something going for it five years from now, ten years from now that we can be certain about? I think there's an argument that you can make for both sides of that and I wonder where Berkshire would fall down as far as PayPal's competitive advantage.
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A
You know what would help with that competitive advantage is if PayPal was the one operating payments for Dairy Queen and Geico and all of these other businesses that Berkshire owns. So that could definitely be a help. Let's end on this one. Doordash and Lyft. John, this was your idea. Make the case for it.
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C
Yeah. If I'm CEO of DoorDash, I would acquire Lyft right now and figure out what I'm doing with it later. I would let it operate.
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A
You're saying the price is too good.
- [33:04]
C
Exactly. I mean, what is it trading for five times its cash flow or something like that? I would acquire it, allow it to operate independently. And if I let it operate independently, I think this works out well for me. If I figure out ways in the future to integrate it into one kind of roll up platform. Better go toe to toe with Uber. Maybe I do that. I think you can buy it now and figure it out later.
- [33:27]
D
I love this. I think it's a great idea. I don't think there's any chance of it happening because Doordash said we're going to spend a couple hundred million on building our infrastructure and the stock got punished. So I don't know, I don't think the market would like it, but maybe because it is a real, you know, it's not just, I promise you we're gonna, we're gonna spend and it's gonna work out. It's gonna be a real asset. But Lyft is a very, very good second fiddle in its industry. And there's a lot of ways that a smart management team, I think could combine this to Dash's platform. I don't think it's gonna happen, but I love this idea. You.
- [34:03]
A
They're also partners and this is kind of the non Uber ecosystem. I think this makes a ton of sense. The other one that I would throw in there too, that has been kind of rumored to be looking at a company like Lyft is Zuk and that's, you know, this is an Amazon company. But what if one of these autonomous vehicle units get spun out, maybe acquired by like a Door Dash of the world? They can have custom made vehicles. I don't know. There's just, there's a lot of opportunity here. Door Dash has a nearly $80 billion market cap. They have the money to play with. I love this as well. Maybe we'll be talking about this deal at some point in the future.
- [34:36]
D
So, Tommy Zhou, call your banker. John only wants a 5% finder's fee. Otherwise the deal should come together quick.
- [34:44]
A
All right, when we come back. We're going to get to stocks on our radar. You're listening to Motley Fool Money the
- [34:48]
B
devil went down to Georgia he was looking for a soul to steal he was in a bind because he was way behind and he was willing to make a deal when he came across this young man Sewing on a fiddle and playing it hot and the devil jumped up on a hickory stump and said, boy, let me tell you what, I guess you didn't know it but I'm a fiddle player too and if you'd care to take a dare I'll make a bet with you.
- [35:09]
E
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- [36:16]
A
As always, people on the program may have 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 Lou One of the interesting pieces of news this week was that Joby is moving closer to actually flying their EVTOL aircraft, and one of the first places they're going to do that is in Dubai and you're going to be able to access it on Uber. Is this a big deal or nothing?
- [36:51]
D
I mean, it's Somewhere in between. But what part of this is new?
- [36:54]
C
The.
- [36:55]
D
We knew about the partnership. We knew that we saw what the
- [36:58]
A
app is going to look like. And it's kind of cool to have a little helicopter icon there to be able to pop into.
- [37:04]
D
Sure. But I mean, we knew this was coming. We knew Joby was going to launch in 2026. We knew it was going to be Dubai. Look, it's not insignificant, but right now the arms press release, arms race is going strong. Joby's arch rival, Archer, they just announced a deal with Starlink today. You know, it's like everybody's trying to get their friends together. Once we're actually in the air, we can judge the economics, we can judge the stocks. I mean, look, this is great for Uber. It's great optionality, but just like Waymo right now is just a teeny tiny part of the business with potential Joby, it's going to be even a smaller part of the business. These are some stuff for investors to monitor, to be aware of, to hope for the future. But this is not actionable right now. This is all just kind of, you know. Oh, neat.
- [37:52]
A
The Archer announcement I think was interesting because, yeah, Starlink on board. These are not going to be very long flights. If you can't get away from your device and you're being connected for 15 minutes while you're on an EVTOL aircraft, I mean, look out the window for a couple of seconds. I thought that was just sort of a strange announcement, but maybe we need to be connected 247 it.
- [38:16]
D
Hey, it's all about who has the best friends.
- [38:19]
A
All right, let's get to stocks on our radar. John, you're up first. What are you looking at this week?
- [38:24]
C
Listen, I'm tired of Lou beating me week after week, so I'm going with a stock that I think that even he would vote for over his own pick this week. So I'm going with Mercado Libre. This is symbol M E L I. This is a business that many of our listeners probably don't know firsthand unless they're in Latin America. The company has operations in Mexico, Colombia, Brazil, et cetera. It has an e commerce marketplace, fintech, logistics, advertising, lending. It does a ton. Here's the thing. The stock is down over 30% from its high, and it doesn't have anything to do with business execution. In fact, 2025 was the company's seventh straight year of 30% growth or better. The stock is down because investors are worried about execution risk. From here, it expanded free shipping that compressed margins, it increased lending and so now it's setting aside more money in reserves. Investors seem to fear that the business will suddenly make a major misstep after years of flawless execution. On one hand, I get it. There is a new CEO, so maybe a little bit more execution risk. But I think investors are being overly fearful here. The valuation is the cheapest it's been since the Great Recession. That's too good to pass up.
- [39:32]
A
Dan, what do you want to know about Mercado Libre?
- [39:35]
H
John, how are you going to say that our listeners aren't familiar with Mercado Libre? We did a whole segment on them yesterday on this very show.
- [39:45]
C
I meant as a consumer, Dan.
- [39:48]
H
That's fair, I suppose.
- [39:49]
A
John, do you have firsthand use of Mercado Libre?
- [39:53]
C
I do not. I lived in Paraguay and it didn't have a big presence there.
- [39:56]
A
Lou, what's on your radar this week?
- [39:58]
D
All right, so John's right. I do love Mercado Libre, but I also love Rocket Lab. Dan, I'm going to talk to you about Rocket Lab Ticker rklb. They released earnings this week. It was a beat on revenue and ebitda, but. But really investors didn't care. That's not what we're focused on here. Rocket Lab pushed the timing of its first neutron launch into the fourth quarter of this year. They had previously been targeting the first half of the year before that they promised last year. We knew a delay was coming. They warned of a tank ruptured when they were testing it. But the timeline is probably a little longer than investors had hoped. This is important because the neutron rocket will increase the size of payloads the Rocket Lab can launch into space in turn create a lot more opportunities for the company.
- [40:41]
A
Company.
- [40:41]
D
Here's the good news. Rocket Lab ended a quarter with a backlog of 1.4 billion with a B in future space system business. Nearly 500 million in launch contracts. Company continues to acquire components, kind of making sure the supply chain's good. They still have over $800 million in cash on hand. As for the neutron, I'm still optimistic. I don't think long term investors are going to care if it gets off five years from now. We're not going to care if it was this quarter or that quarter. They just need to get it airborne. But until this happens, Neutron will be an overhang and it could create buying opportunities. So I'm watching it close. Dan.
- [41:19]
A
Dan, what do you think about rockets?
- [41:21]
H
I just want to point out to all these rocket investors and everything is that we're never going to be on Mars, gang. It doesn't have a magnetosphere. We cannot live there.
- [41:30]
C
No.
- [41:30]
A
We're going to the moon now.
- [41:31]
D
Yeah. No, you are 100% right.
- [41:34]
A
All right, Dan, which one is going on your watch list?
- [41:36]
H
We're going to go.
- [41:37]
C
I don't know.
- [41:38]
H
I kind of like both companies, to be honest. So we're going to go micrado libre, because, you know, we talked about it yesterday.
- [41:44]
A
Thank you to John and Lou for joining me and Dan Boyd for their work behind the glass. I'm Travis Hoyam. Thanks for listening to Motley Fool Money.
- [41:51]
C
We'll see you here tomorrow.