Motley Fool Money: Tales of Unexpected Losses — AXON, TREX, WRBY

Date: November 10, 2025
Host: Tim Byers
Analysts: Jason Hall, Emily Flippen

Episode Overview

In this episode, Motley Fool Money’s Tim Byers, Jason Hall, and Emily Flippen dissect the latest quarterly earnings from three companies—Axon Enterprise (AXON), Trex (TREX), and Warby Parker (WRBY)—all of which faced surprising drops after their reports. The team discusses what spooked the market, their own takes on the results, and whether these setbacks represent buying opportunities. The second half features a spirited game of “Faker or Breaker,” evaluating the long-term prospects of select innovative stocks.

Key Discussion Points & Insights

1. Axon Enterprise (AXON): Surprising Loss With Growth Foundations

[01:00–02:24]

• Street’s Reaction: The return to operating losses for the first time in almost four years triggered “shoot first, ask questions later” sentiment in markets, notably due to headline misses and weaker guidance.
  • Emily Flippen: “The most obvious thing is their return to operating losses...that’s largely what led to this mentality of shoot first, ask questions later.” [01:24]
• Explanation: Losses were partly anticipated, driven by tariff impacts on margins and heavy investments in fast-growing business segments. Despite the loss, AXON posted its seventh consecutive quarter of 30%+ revenue growth.
  • Emily argued this quarter was deceptively strong: “Expenses have gone up, but they're investing in future growth. And that's what I love to see.” [01:50]
• Odd Accounting Note: Effective tax rate clocked in at 113.9%.
  • Tim Byers: “I don't think I've seen this before. 113.9% is what Alpha Sense reported for us here.” [02:24]
• Takeaway: Despite the drop and expense spike, AXON’s growth and scale remain compelling.

2. Trex (TREX): Cyclical, Cheap, But Facing New Headwinds

[03:02–06:51]

• Market Reaction: Trex fell sharply—up to 75% from the previous high—despite fair earnings results.
  • Jason Hall: “I've seen the stock fall 30% like 10 times and 40% or more about half of those...This is a very seasonal cyclical business.” [03:02]
• Quarter Details:
  • Revenue up 20%+, margin dollars improved, but inventory pullback and margin compression flagged.
  • Increased spending on marketing, and delayed revenue from a new factory, signal further near-term earnings pressure.
  • Competition:
    • Emily: “Competition is stiff out there now...bamboo is cheap, accessible, and way more prevalent today than it was a decade ago.” [05:11]
    • Jason: The real differentiator is Trex’s cost advantages—95% of inputs are recycled, compared to 65–70% for the main competitor, TimberTech.
      • “Cost advantages when you're a manufacturer in a cyclical industry really, really matter.” [05:57]
• Takeaway: Trex trades as cheap as it did in the early 2000s on earnings and sales multiples, but faces both macroeconomic and competitive threats.

3. Warby Parker (WRBY): Brand Power Tested by Macro and Supply Chain

[06:51–10:07]

• Key Issues:
  • Missed its own revenue guidance—Q3 came in short, and Q4 is projected at just 11–12% growth.
    • Tim: “They missed their own revenue guidance. Management had guided for larger than 15% revenue growth in Q3...they had to come out and say...we came in lower than planned.” [06:51]
  • Downward pressure on average selling prices as customers stuck to lower-priced frames and contacts.
  • Major supply chain pain: Tariffs hit Vietnam (main supply source) hard.
• Bright Spots:
  • 9.3% increase in active customers (2.7 million), strong store-level margins (“over 30%, close to 35%”).
  • Adjusted EBITDA grew ~50% to $25.7 million: “This is still a highly efficient business even though the macro factors are really crushing it a bit.” [07:57]
• Industry Challenges:
  • Jason notes increasing costs of physical expansion and the cyclical/deferrable nature of eyewear purchases. He does, however, suggest Warby Parker’s cost leadership could serve it well long-term.
    • “Because they are a bit of a low cost leader already, that's part of their business model...the near term headwind could...drive more people to Warby Parker.” [09:18]
• Customer Loyalty: Anecdotes of high satisfaction, particularly among value-focused families.

Notable Quotes & Memorable Moments

• Emily on Axon’s Heavy Spending:
  “Expenses have gone up, but they're investing in future growth. And that's what I love to see.” [01:50]

• Jason on Trex’s Cyclicality:
  “I've seen the stock fall 30% like 10 times and 40% or more about half of those...very seasonal cyclical business.” [03:02]

• Emily on Industry Shifts: “Part of the lack of performance recently has to be because there's just so many alternatives. I mean bamboo is cheap, accessible and way more prevalent today than it was a decade ago.” [05:11]

• Jason on Trex’s Core Strength:
  “The thing that is probably its biggest competitive strength is its cost advantages...Cost advantages when you’re a manufacturer in a cyclical industry really, really matter.” [05:57]

• Tim on Warby Parker’s Store Economics:
  “The four wall EBITDA margins on a Warby Parker store are absolutely outrageous. They are over 30%, they are close to 35%.” [08:20]

• Jason on Consumer Behavior:
  “People will wait another year to get glasses if the finances are tight.” [09:18]

Buy, Sell, or Hold? Analyst Calls

[10:07–11:47]

• Warby Parker (WRBY):
  • Tim Byers: Buy — “I like this management team...they have a significant brand advantage...proven to be very good at capital allocation.”
• Trex (TREX):
  • Jason Hall: Buy — “It's so misunderstood and the opportunity is still incredible...Trex is built, it's a block and tackling business at its core...a better manufacturer than anybody else.”
• Axon (AXON):
  • Emily Flippen: Buy — “This is the tax you pay when you own what is basically a quasi monopoly...growing at a breakneck speed for decades with no signs...growth is expected to slow down.”

Game: Faker or Breaker

[12:49–18:29]

Analysts debate whether innovative companies are “breakers” (capable of sustained, disruptive growth) or “fakers” (flashy but unsustainable):

1. Archer Aviation (ACHR):

   • Tim: Breaker in the making.
   • Emily: Faker — “Their timeline for FAA certification...is hilariously too aggressive...It’s basically just a science project.” [14:08]
   • Jason: Faker — “I don't think any companies in this space are going to prove to be Rule breakers. There’s no real differentiation.” [14:38]

2. Hippo Holdings (HIPO):

   • Jason: Faker — “Probably going to be more of a traditional business than an actual rule breaker...I don’t think they’re going to change things in any fundamental way.” [15:26]
   • Emily: Faker — “Every single option [for insurance] more expensive than what I’m already paying. Until they’re able to reduce my costs, it’s a faker in my mind.” [16:09]

3. Champion Homes (SKY):

   • Emily: (Leaning Breaker) — “We’ve under built housing in the United States for decades...this is a type of opportunity that could be a leader in its space.” [17:40]
   • Jason: Skeptical — “Never going to be a rule breaker until the financing issue gets resolved...it’s the math that doesn’t work around paying for the property.” [18:03]

Timestamps for Key Segments

• Axon Enterprise discussion: [01:00–02:50]
• Trex breakdown: [03:02–06:51]
• Warby Parker analysis: [06:51–10:07]
• Buy/Sell/Hold calls: [10:07–11:47]
• Faker or Breaker game (Archer Aviation, Hippo, Champion Homes): [12:49–18:29]

Tone & Language

The conversation is energetic, candid, and insight-packed, with good-natured banter and a heavy dose of market wisdom. The speakers are optimistic about well-run companies navigating headwinds but realistic about industry disruption and the limits of growth stories.

Summary Takeaways

• Short-term pain often masks long-term opportunity (AXON, TREX, WRBY all reaffirmed as “buys” by the panel despite rough quarters).
• Market overreactions to earnings misses can create favorable entry points for investors who understand the underlying business.
• Macro and competitive headwinds can bruise even industry leaders—but don’t negate their core strengths.
• True “breakers” are rare; analysts remain skeptical about the latest hype stocks unless there’s clear evidence of long-term disruption and consumer value.