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[00:02]
A
Earning season is in full swing and Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoyam, joined today by Lou Whiteman and Rachel Warren. And guys, we've got earnings on the mind. Today. We're going to get to four different earnings reports. At least touch on them. Lou, the first one that I wanted to get your thoughts on is one that I'm sure a lot of fools have in their portfolio or at least their watch list, that is SoFi. The numbers are looked pretty impressive. Total revenue was up 43%, net income was up 61%. And yet the stock is down almost 10% today.
[00:38]
B
Yeah, I think the stock is acting rational and again, I know I get a lot of hate for this, but
[00:44]
A
you just don't like growth. Lou let's be honest, I like growth.
[00:49]
B
It's just the question of what you're paying for growth. One thing we learned from that short report, and I think it's important, the short report was mostly just nonsense. But one thing that I think it did highlight is SOFI loves to use marks to market and other adjustments to create non GAAP earnings. That's fine, they disclose it. Again, the short report was overstated, but it makes apples to apples comparisons to other banks very, very deceptive. And I think flatters SoFi in a lot of ways. On a GAAP basis, SOFI is trading at 40 times earnings. The average bank trades at 10 to 15 times earnings. I can find you really good ones right now where the dividend Yield is at 4% or so and they're on the lower end of that 10 to 15%. So the question is yes, SoFi is growing faster than these banks and I think they can justify a premium valuation based on that growth. But I don't think the market is wrong in saying it ain't 40 times earnings, which, and we can go deeper into it if you want, but I think for all SoFi tries to say it is. SoFi is a bank and it should be judged as a bank. It's a fast growing bank, so give it a premium. But I do think the valuation is still eye catching.
[02:12]
A
So is that the criticism of the quarter and the stock right now still is that maybe this is a more attractive bank than other banks because it is growing more quickly. I just don't, I still don't want to pay this price. And at what price do you think it becomes more intriguing?
[02:30]
B
Yeah, my criticism is why now guys, we've known this for a while, so I don't Know why? Maybe that there was hope that we were going to see different in the new quarter. But I mean they are what they are. The fintech business is, it's not nothing but there are dozens of software vendors that'll give you banking as a service and inevitably these faux banks come and go left and right. There isn't really any differentiators. So that software business always seemed a little suspect to me. If you want a great fintech bank story, buy live oak, don't buy SoFi. SoFi is a retail bank and at some point we should value it like one.
[03:12]
A
Rachel, do you see this quarter similarly or do you look at kind of these, not only did they grow members, but they actually grew products faster than members, which tells you that their uptake on those products is, you know, a little bit higher. So getting more people in the ecosystem and getting them to use SoFi more.
[03:29]
C
Yeah, I have a few thoughts on this and I, and I don't necessarily think you can value SoFi the same way you would legacy banks and but I do think there's a few kind of very practical reasons why we've seen some of the pressure on the stock. I mean going back to the quarter, you know, they added over a million new members in the quarter alone. Their base is it just shy of 16 million people. On that banking side, management raised SoFi's full year revenue outlook so that that kind of core machine seems to resilient now. It was interesting. I think one of the things investors didn't like it was of course the tech platform segment that dropped 23% in terms of revenue and that was largely because we saw a major enterprise client that had left the platform at the end of last year. So we've been seeing the impact since then. Full year profit and earnings per share guidance remained the same. I think we're in a market where a lot of investors are hoping for not only a beat but a raise. The risk that I would be watching here is sofi is leaning heavily into capital intensive lending to fuel its growth story. So we saw total loan originations hit a record $14.8 billion. That included about $10.7 billion in personal loans. So you know, their CEO is insisting that the borrowers are remaining resilient, personal loan charge offs and credit delinquency trends are creeping upward across the industry. However, and the reason this matters is SoFi keeps these high yield loans on its own balance sheet rather than instantly offloading them. So you know, if we see a macro downturn, which I'm not Saying we will, but it's something to watch for or even a spike in consumer defaults that will hit the balance sheet. And we also saw that, you know, tech platform enabled accounts actually dropped about 16% year over year. So they have seen a bit of an impact from the loss of that major enterprise client. Fundamentally, I think this is a good business. I think it's a solid one and I don't think there's anything wrong that, you know, is leading to the pressure on the stock. I think a lot of this is just the machinations of the market. I do think that these are elements to watch though. If you own Sofi or even are thinking about buying shares.
[05:28]
B
We have a name for companies that make loans and keep them on their balance sheet. You know what that is.
[05:35]
A
I know where you're going with this, Lou.
[05:37]
B
It's a bank. Yeah. Let's talk about the products because I, and maybe I'm showing my ignorance here, but I was really surprised by one stat in there that they said the products per member reached 1.54, which is an all time high. Now I've been involved with banks for 30 years and most banks don't break down the numbers. But if you hire a bank consultant to what they come in, the first thing they're trying to do is to get that number to two or three per member.
[06:07]
A
That's why they get you to open a checking account and a savings account at the same time.
[06:11]
B
Right, right, right. 1.54. Maybe it just spread. I think it speaks to how much of Sofi is just paper thin marketing because that implies that a ton of their customers relative to a community have one product which, so I don't know if that's the flex things is one stat we can use. JP Morgan says to 30% of their retail customers have two or more products. So that's, you know, and again, but that's not an apples for apples. Like I said, most banks don't, don't list that. And it's kind of a weird thing to list, but I'm surprised they're flexing that number because I think there's community banks that I can walk to from my house that would really laugh at that number.
[06:53]
A
It's, it's funny you mentioned that because that is one of the metrics that I do watch with Sofi. But I have also opened accounts at all of these things. And if you open like for example we have a Wells Fargo account, they will charge you to have a credit, have a checking account unless you also have a savings account and you deposit, I think it's 25amonth into that savings account automatically from the checking account that you also created.
[07:17]
C
Yeah, yeah.
[07:18]
B
I don't want to be too hard on them. They are a good bank. But I do think as investors and maybe that we, you know, a lot of investors don't look at banks and Sofi has kind of attracted the eye of growth investors just because of the story and where they're based and who runs them. I think there is a lesson here that maybe I am being too hard, but maybe also the market is being too generous. It is really, really hard for a bank to be anything other than a bank. And at some point there is regression to the mean. And I think investors, they can both things can be true. It can be a very well run company with growth that exceeds national averages and still overvalued based relative to the opportunity.
[07:58]
A
Well, we will be keeping an eye on Sofi and I'm sure Lou and I will keep arguing about the future of the company. We'll see who's right over the next five or ten years. So listen on to the show. When we come back, we're going to check in on the health of the consumer. You're listening to Motley Fool Hidden Gems Investing.
[08:16]
D
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[09:14]
A
Welcome back to Motley Fool Hidden Gems Investing. Let's turn our attention to direct consumer spending. There's a number of different companies who are giving us an indication of how healthy the consumer is. Rachel One that caught your eye was Procter and Gamble. Maybe not the most exciting company, but it's at least telling Us people telling us how much people are buying, you know, diapers and the things, the necessities of life.
[09:37]
B
Right.
[09:37]
C
I mean, this is the company that's, that's known for those household name products like Tide Pampers. The list goes on. And so it does kind of provide an interesting insight into how consumers are behaving. And you know, this is, I will note, not a company that is typically high growth. Even in the best of macroeconomic times, the margins are slim. You know, a normal year of growth or a quarter, you might see 2% year over year gains. But Procter and Gamble actually missed Wall Street's revenue expectations by about 180 million for the quarter they pulled in, pulled in about 21 billion in this recent quarter. Volume was flat year over year. Operating margins were actually down. They actually saw profits decline by about 15%. And you know, why does this matter? I mean, their operating margins were compressed because you're seeing companies like this have to spend significantly on marketing to try to protect their share. And consumer staples operate on very thin incremental margins. So any drop in volume hits profits quickly. But I think, you know, what this tells us about the broader consumer is that a lot of average households are really reaching their financial limits. You know, we're not seeing a dramatic economic crash where people stop shopping, but we are seeing kind of very tactical retreats and approaches to how consumers are putting their money to work. You know, they're looking at these legacy companies that put these household name brands forward and they're not willing to absorb the higher costs that, you know, companies like Procter and Gamble have implemented over the last few years. They're stretching out their existing household supplies. They're maybe switching to cheaper store brands. You know, they're buying smaller packages. And you know, when you're a company like Procter and Gamble, they've certainly, you know, lasted through their fair share of market ups and downs. But it can really come in hard on the margins. I think if anything, this yields a continued ground to the likes of Walmart and Costco, who not only control the physical store shelves, but also have their own private label brands and really robust E commerce presence as well.
[11:27]
B
Yeah, I think Rachel's right. It is the store brands. And I don't know if this says anything about the consumer right now. That's a trend that was going well before this. Current.
[11:35]
A
Yeah, this is a decade 15, 20 year.
[11:39]
B
And I think it just speaks to. And we've seen this with Kraft, Heinz. We've seen this with so many. I don't P and G. It's just a terrible place to be right now. Consumers have realized the store brand, I mean, I remember in the 80s everyone joked about, well, it's the same product, it's just a different label. And that was kind of novel back then. Now it's table stakes. That vast middle, that big consumer brand with a logo has really suffered again. Yeah, I am reluctant to read anything into the health of the consumer that I think what the consumer right now has showed us is they will pay up for select things like maybe on shoes or something like that. But for most everyday purchases, the fact that it's tied and not Costco brand just doesn't matter. And I think that's what we're seeing. We can talk about Visa too if you want, because I think again.
[12:28]
A
Well, I just, I wanted to point out the store brand thing I think is really interesting because that was one of the things when I started at 3M's biggest manufacturing plant in 2005. The interesting thing there was you would have Scotch tape rolling off the line and then five minutes later there would be Walmart tape rolling off the line. It was literally the exact same equipment. They make it a little bit worse. So it is, it is not quite the same product. You want to have that, you know, that other product be a little bit higher quality. So there is a little bit of a premium there. But it's not like it doesn't, you know, hold a piece of paper on the wall. It's not like the diapers are going to be, you know, complete garbage. So that is something that we've seen for a very long time is that those big companies, the Walmarts, the Costco's, the targets of the world, have the power to say, hey, you know what, if you want to be in our store, we want to have our label on it. What do you think about Visa though, Lou?
[13:17]
B
Yeah, so this is another way to look at the consumer and it's a much healthier look, which is maybe why I'm not sure how to read PG. But look, Visa reported 10% US volume growth in payments. That's the fastest growth rate since fiscal 2019. Transaction counts were up to about same 10%. So this isn't just an inflation story or something. There's actual transactions happening. Visa also, and Travis is something we've talked about a lot with the K shaped economy. Visa said spending is not isolated to high earners. This is strength across the board. And just last week the economists over at bank of America said they believe the K shaped Trade may be reversing in a good way. More spending power across the board with kind of the lower end of that K kind of picking up. I don't think we know that yet, but Visa's results sort of back up that idea. Now look, there was more, I mean, I think the World cup factored in here. There's international experiences which is kind of the upper end of decay. So I'm not saying that it is all just, you know, perfect and fine, but, you know, the quarter was fine. They're forecasting basically status quo for the rest of the year. I continue to think Both Visa and MasterCard are undervalued right now because of the disruption potential. I kind of like MasterCard better, but I think that, look, this is status quo is really good here and this was at worst a status quo for
[14:43]
A
yeah, things seem to be okay for the consumer right now and maybe that's okay for the market right now. When we come back, we're going to talk about an energy company that just grew revenue 166%. You're listening to Motley Fool. Hidden Gems Invest.
[15:00]
D
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[15:43]
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[16:14]
A
Hidden Gems Investing. Bloom Energy reported earnings last night and Rachel. This is one of the more interesting stocks out there right now. This stock has been absolutely on fire over the past year or two because this is one of the few companies that can put energy into a data center at a relatively rapid clip. Revenue was up 166%. What do we need to know about the quarter?
[16:36]
C
Yeah, it was a great quarter for Bloom Energy. I mean their, their adjusted earnings per share also were double what Wall street was guiding for. You know, they raised the revenue outlook as well, looking ahead into the rest of the year. I mean obviously as you noted, that the stock's down from its recent peak. I think that this is one of those businesses that is very vulnerable to having volatility based on unrealistic hype cycles. You know, this is a company that's executing well. It's, you know, worth noting just about every major AI hyperscaler has now proved their fuel cells to bypass utility grid bottlenecks. But I do think there is a question of when there might be periods where the AI power trade could run out of gas, where we could see the, the stock vulnerable to sector profit taking. I think that might be something we're seeing right now. I mean there's this question of when we're going to see this transition from buying a catchy AI narrative to really looking at the capital heavy reality of physical infrastructure. You know, fuel cells are a physical manufacturing business. Generating energy requires real factories, massive upfront capital, very complex installation timelines. Now Bloom's profit margins improved this quarter. Scaling up production to meet the demand that they're facing is a very expensive endeavor. It will limit their short term cash flows. Now I don't think that we need to worry that Bloom's business is broken just because they're down since their summer highs. But I do think that we might be coming towards a point where the market could force some of these AI infrastructure companies to just their valuations with some real world unit economics. So that could be some of it.
[18:04]
A
Yeah, Ludloose does seem to be kind of a theme where a lot of these picks and shovel plays coming back a little bit because investors are starting to go, wait a second, how sustainable are these growth rates and margins that we see today?
[18:15]
B
Yeah, let's get that in a second because I think that's exactly right. But yeah, stock's down 50% from its highs, still up 400% over the past year. It's still a double in 2026, even if it is off 50% since June. And it still trades at 75 times 4 earnings, which for an industrial company is pretty amazing. Corda was fine. Rachel's right. Given the AI power demand, anything short of fine would have been a real negative wow factor. But look, they held serve and that's great. Remaining performance obligations. Rpo, that was flat. And remember Wall street tends to pay for growth from here, not growth that has occurred. And I think that is the easiest way to explain is coming back to earth, kind of letting some air out of tires. And it's great if they can sustain at this level and I think they probably can given the demand. That's a fine company, but it doesn't make you a growth stock. Picks and shovels. I think it's really interesting because picks and shovels, it's so clever and everyone loves to look smart with picks and shovels trades. But they are imperfect traits. They are a trade you do because the underlying asset is overvalued. If you want to invest in hyperscalers, but the hyperscalers are overvalued, how about investing in their suppliers? It is just a secondary way to play a trend. Right now you can get the hyperscalers at much more attractive valuations than the vendors serving them. So why focus on the vendors? I think the market kind of looking away from somebody's picks and shovels. I think it's just over for now.
[19:50]
A
Yeah. It'll be interesting to see where that story goes because you're right, that has been a theme, but that when a theme needs to become a fundamental reality eventually for the market. Fundamentals eventually drive stock market performance. And Bloom is doing extremely well. But the ROI that we see today may not be sustainable long term. 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 for Lou Whiteman, Rachel Warren and Dan Boyd. Behind the glass, I'm Travis Hoyam. We'll see you here tomorrow.

Summary5 min read

Motley Fool Hidden Gems Investing

Episode Title: The Consumer Is All Right!
Date: July 29, 2026
Hosts: Travis Hoyam (A), Lou Whiteman (B), Rachel Warren (C)
Guest Analyst: Dan Boyd (Behind the glass)

Episode Overview

This episode dives into the latest earnings season, exploring how company reports reflect broader consumer health and the state of several notable stocks. The team analyzes SoFi’s controversial growth versus valuation, Procter & Gamble’s consumer signals, Visa’s payment trends, and Bloom Energy’s explosive revenue growth amid the AI infrastructure boom. Throughout, the hosts weigh current results against long-term investment strategy, emphasizing business fundamentals and market realities.

Key Discussion Points & Insights

1. SoFi: Growth Versus Valuation

(00:02 – 07:57)

Earnings Recap:
SoFi’s revenue jumped 43% and net income soared 61%, but the stock dropped nearly 10% post-report.
Concerns about Accounting:
Lou points out SoFi “loves to use marks to market and other adjustments to create non-GAAP earnings,” making true comparisons to traditional banks difficult (00:48).
Valuation Debate:
On a GAAP basis, SoFi trades at 40x earnings, versus 10–15x for average banks. Lou argues the market’s premium for SoFi’s growth is overdone:

“SoFi is a retail bank and at some point we should value it like one.” – Lou (02:30)
Product Engagement:
SoFi touts 1.54 products per member, its highest ever. Lou is unimpressed:

“Most banks…try to get that number to two or three per member.” (05:36)
He believes SoFi’s customer engagement is unremarkable compared to traditional bank standards.
Balance Sheet Risk:
Rachel notes SoFi keeps high-yield loans on its own books instead of offloading them. She warns,

“…if we see a macro downturn…that will hit the balance sheet.” (03:29)
Summary of Analyst Views:
- Lou: SoFi deserves some premium, but not current lofty multiples; it’s “a good bank” likely overvalued.
- Rachel: Sees a strong core but flags risk from lending strategy and tech platform segment.

Notable Quotes

“It is really, really hard for a bank to be anything other than a bank. And at some point there is regression to the mean.” – Lou (07:17)
“Their CEO is insisting that the borrowers are remaining resilient, [but] personal loan charge-offs and credit delinquency trends are creeping upward across the industry.” – Rachel (03:29)

2. Consumer Health: The Case of Procter & Gamble

(09:13 – 13:16)

P&G’s Results:
Missed revenue expectations by $180M, flat volume, operating margins down, and profits down 15%.
Consumer Behavior Shifts:
Rachel observes:

“…a lot of average households are really reaching their financial limits…they’re stretching out their existing household supplies, maybe switching to cheaper store brands.” (09:37)
Brand Power vs. Store Brands:
Both Lou and Travis agree store brands now rival legacy brands, reflecting long-standing trends.

“That vast middle, that big consumer brand with a logo has really suffered.” – Lou (11:38)
Retailer Leverage:
Travis shares a manufacturing anecdote:

“…Scotch tape rolling off the line and then five minutes later there would be Walmart tape…It was literally the exact same equipment…” (12:27)

3. Spending Resilience through Visa’s Lens

(13:16 – 14:42)

Strong Numbers:
Visa’s U.S. volume growth hit 10%—the fastest since 2019. Transaction count growth matched.
Democratic Spending:

“Visa said spending is not isolated to high earners. This is strength across the board.” – Lou (13:16)
Potential Shift in Economic Trends:
Lou notes Bank of America is seeing signs “the K-shaped trade may be reversing,” with lower-income spending catching up.
Positive Outlook:
Both Lou and Travis see Visa and MasterCard as undervalued and consider status quo strong for these networks.

4. Bloom Energy: AI, Picks & Shovels, and Valuation

(16:14 – 19:49)

Dramatic Revenue Growth:
Bloom Energy’s revenue surged 166%; adjusted earnings doubled expectations.
AI Infrastructure Demand:
Fuel cells are key for data centers to bypass power bottlenecks.

“Just about every major AI hyperscaler has now approved their fuel cells…” – Rachel (16:36)
Caveats on Valuation:
Despite great results, the stock is down 50% from recent highs, but still up 400% YOY and trading at 75x forward earnings.
- Lou explains:
  
  “Picks and shovels…are a trade you do because the underlying asset is overvalued. Right now you can get the hyperscalers at much more attractive valuations than the vendors serving them. So why focus on the vendors?” (18:15)
Warning on Hype vs. Fundamentals:
Rachel cautions about “volatility based on unrealistic hype cycles,” especially as the capital intensity of scaling becomes clearer.
Travis agrees:

“When a theme needs to become a fundamental reality…fundamentals eventually drive stock market performance.” (19:49)

Timestamps for Key Segments

SoFi Earnings Breakdown: 00:02 – 07:57
Consumer Staples & Procter & Gamble: 09:13 – 13:16
Visa & Consumer Spending Trends: 13:16 – 14:42
Bloom Energy & Picks-and-Shovel AI Trade: 16:14 – 19:49

Memorable Moments & Quotes

“It is really, really hard for a bank to be anything other than a bank. And at some point there is regression to the mean.” – Lou Whiteman (07:17)

“If we see a macro downturn…that will hit the balance sheet.” – Rachel Warren (03:29)

“…a lot of average households are really reaching their financial limits… they’re not willing to absorb the higher costs.” – Rachel Warren (09:37)

“That vast middle, that big consumer brand with a logo has really suffered.” – Lou Whiteman (11:38)

“Visa said spending is not isolated to high earners. This is strength across the board.” – Lou Whiteman (13:16)

“Picks and shovels…are a trade you do because the underlying asset is overvalued…why focus on the vendors?” – Lou Whiteman (18:15)

“When a theme needs to become a fundamental reality eventually for the market…fundamentals eventually drive stock market performance.” – Travis Hoyam (19:49)

Conclusion

The episode frames a market environment that’s healthy but nuanced—growth stories like SoFi and Bloom Energy thrill with expansion but face questions over sustainability and valuation. Consumer giants like Procter & Gamble expose shoppers’ stretched budgets and the rise of store brands, while Visa suggests resilience and a more widespread economic uplift. The panel underscores the importance of long-term perspectives, fundamental analysis, and a healthy skepticism toward market narratives driven by hype.

For investors:
Listen to the full episode for an engaging, candid discussion of market currents, management decisions, and investor psychology as revealed through this earnings season.

Loading summary

Transcript34 lines

[00:02]
A
Earning season is in full swing and Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoyam, joined today by Lou Whiteman and Rachel Warren. And guys, we've got earnings on the mind. Today. We're going to get to four different earnings reports. At least touch on them. Lou, the first one that I wanted to get your thoughts on is one that I'm sure a lot of fools have in their portfolio or at least their watch list, that is SoFi. The numbers are looked pretty impressive. Total revenue was up 43%, net income was up 61%. And yet the stock is down almost 10% today.
[00:38]
B
Yeah, I think the stock is acting rational and again, I know I get a lot of hate for this, but
[00:44]
A
you just don't like growth. Lou let's be honest, I like growth.
[00:49]
B
It's just the question of what you're paying for growth. One thing we learned from that short report, and I think it's important, the short report was mostly just nonsense. But one thing that I think it did highlight is SOFI loves to use marks to market and other adjustments to create non GAAP earnings. That's fine, they disclose it. Again, the short report was overstated, but it makes apples to apples comparisons to other banks very, very deceptive. And I think flatters SoFi in a lot of ways. On a GAAP basis, SOFI is trading at 40 times earnings. The average bank trades at 10 to 15 times earnings. I can find you really good ones right now where the dividend Yield is at 4% or so and they're on the lower end of that 10 to 15%. So the question is yes, SoFi is growing faster than these banks and I think they can justify a premium valuation based on that growth. But I don't think the market is wrong in saying it ain't 40 times earnings, which, and we can go deeper into it if you want, but I think for all SoFi tries to say it is. SoFi is a bank and it should be judged as a bank. It's a fast growing bank, so give it a premium. But I do think the valuation is still eye catching.
[02:12]
A
So is that the criticism of the quarter and the stock right now still is that maybe this is a more attractive bank than other banks because it is growing more quickly. I just don't, I still don't want to pay this price. And at what price do you think it becomes more intriguing?
[02:30]
B
Yeah, my criticism is why now guys, we've known this for a while, so I don't Know why? Maybe that there was hope that we were going to see different in the new quarter. But I mean they are what they are. The fintech business is, it's not nothing but there are dozens of software vendors that'll give you banking as a service and inevitably these faux banks come and go left and right. There isn't really any differentiators. So that software business always seemed a little suspect to me. If you want a great fintech bank story, buy live oak, don't buy SoFi. SoFi is a retail bank and at some point we should value it like one.
[03:12]
A
Rachel, do you see this quarter similarly or do you look at kind of these, not only did they grow members, but they actually grew products faster than members, which tells you that their uptake on those products is, you know, a little bit higher. So getting more people in the ecosystem and getting them to use SoFi more.
[03:29]
C
Yeah, I have a few thoughts on this and I, and I don't necessarily think you can value SoFi the same way you would legacy banks and but I do think there's a few kind of very practical reasons why we've seen some of the pressure on the stock. I mean going back to the quarter, you know, they added over a million new members in the quarter alone. Their base is it just shy of 16 million people. On that banking side, management raised SoFi's full year revenue outlook so that that kind of core machine seems to resilient now. It was interesting. I think one of the things investors didn't like it was of course the tech platform segment that dropped 23% in terms of revenue and that was largely because we saw a major enterprise client that had left the platform at the end of last year. So we've been seeing the impact since then. Full year profit and earnings per share guidance remained the same. I think we're in a market where a lot of investors are hoping for not only a beat but a raise. The risk that I would be watching here is sofi is leaning heavily into capital intensive lending to fuel its growth story. So we saw total loan originations hit a record $14.8 billion. That included about $10.7 billion in personal loans. So you know, their CEO is insisting that the borrowers are remaining resilient, personal loan charge offs and credit delinquency trends are creeping upward across the industry. However, and the reason this matters is SoFi keeps these high yield loans on its own balance sheet rather than instantly offloading them. So you know, if we see a macro downturn, which I'm not Saying we will, but it's something to watch for or even a spike in consumer defaults that will hit the balance sheet. And we also saw that, you know, tech platform enabled accounts actually dropped about 16% year over year. So they have seen a bit of an impact from the loss of that major enterprise client. Fundamentally, I think this is a good business. I think it's a solid one and I don't think there's anything wrong that, you know, is leading to the pressure on the stock. I think a lot of this is just the machinations of the market. I do think that these are elements to watch though. If you own Sofi or even are thinking about buying shares.
[05:28]
B
We have a name for companies that make loans and keep them on their balance sheet. You know what that is.
[05:35]
A
I know where you're going with this, Lou.
[05:37]
B
It's a bank. Yeah. Let's talk about the products because I, and maybe I'm showing my ignorance here, but I was really surprised by one stat in there that they said the products per member reached 1.54, which is an all time high. Now I've been involved with banks for 30 years and most banks don't break down the numbers. But if you hire a bank consultant to what they come in, the first thing they're trying to do is to get that number to two or three per member.
[06:07]
A
That's why they get you to open a checking account and a savings account at the same time.
[06:11]
B
Right, right, right. 1.54. Maybe it just spread. I think it speaks to how much of Sofi is just paper thin marketing because that implies that a ton of their customers relative to a community have one product which, so I don't know if that's the flex things is one stat we can use. JP Morgan says to 30% of their retail customers have two or more products. So that's, you know, and again, but that's not an apples for apples. Like I said, most banks don't, don't list that. And it's kind of a weird thing to list, but I'm surprised they're flexing that number because I think there's community banks that I can walk to from my house that would really laugh at that number.
[06:53]
A
It's, it's funny you mentioned that because that is one of the metrics that I do watch with Sofi. But I have also opened accounts at all of these things. And if you open like for example we have a Wells Fargo account, they will charge you to have a credit, have a checking account unless you also have a savings account and you deposit, I think it's 25amonth into that savings account automatically from the checking account that you also created.
[07:17]
C
Yeah, yeah.
[07:18]
B
I don't want to be too hard on them. They are a good bank. But I do think as investors and maybe that we, you know, a lot of investors don't look at banks and Sofi has kind of attracted the eye of growth investors just because of the story and where they're based and who runs them. I think there is a lesson here that maybe I am being too hard, but maybe also the market is being too generous. It is really, really hard for a bank to be anything other than a bank. And at some point there is regression to the mean. And I think investors, they can both things can be true. It can be a very well run company with growth that exceeds national averages and still overvalued based relative to the opportunity.
[07:58]
A
Well, we will be keeping an eye on Sofi and I'm sure Lou and I will keep arguing about the future of the company. We'll see who's right over the next five or ten years. So listen on to the show. When we come back, we're going to check in on the health of the consumer. You're listening to Motley Fool Hidden Gems Investing.
[08:16]
D
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[09:14]
A
Welcome back to Motley Fool Hidden Gems Investing. Let's turn our attention to direct consumer spending. There's a number of different companies who are giving us an indication of how healthy the consumer is. Rachel One that caught your eye was Procter and Gamble. Maybe not the most exciting company, but it's at least telling Us people telling us how much people are buying, you know, diapers and the things, the necessities of life.
[09:37]
B
Right.
[09:37]
C
I mean, this is the company that's, that's known for those household name products like Tide Pampers. The list goes on. And so it does kind of provide an interesting insight into how consumers are behaving. And you know, this is, I will note, not a company that is typically high growth. Even in the best of macroeconomic times, the margins are slim. You know, a normal year of growth or a quarter, you might see 2% year over year gains. But Procter and Gamble actually missed Wall Street's revenue expectations by about 180 million for the quarter they pulled in, pulled in about 21 billion in this recent quarter. Volume was flat year over year. Operating margins were actually down. They actually saw profits decline by about 15%. And you know, why does this matter? I mean, their operating margins were compressed because you're seeing companies like this have to spend significantly on marketing to try to protect their share. And consumer staples operate on very thin incremental margins. So any drop in volume hits profits quickly. But I think, you know, what this tells us about the broader consumer is that a lot of average households are really reaching their financial limits. You know, we're not seeing a dramatic economic crash where people stop shopping, but we are seeing kind of very tactical retreats and approaches to how consumers are putting their money to work. You know, they're looking at these legacy companies that put these household name brands forward and they're not willing to absorb the higher costs that, you know, companies like Procter and Gamble have implemented over the last few years. They're stretching out their existing household supplies. They're maybe switching to cheaper store brands. You know, they're buying smaller packages. And you know, when you're a company like Procter and Gamble, they've certainly, you know, lasted through their fair share of market ups and downs. But it can really come in hard on the margins. I think if anything, this yields a continued ground to the likes of Walmart and Costco, who not only control the physical store shelves, but also have their own private label brands and really robust E commerce presence as well.
[11:27]
B
Yeah, I think Rachel's right. It is the store brands. And I don't know if this says anything about the consumer right now. That's a trend that was going well before this. Current.
[11:35]
A
Yeah, this is a decade 15, 20 year.
[11:39]
B
And I think it just speaks to. And we've seen this with Kraft, Heinz. We've seen this with so many. I don't P and G. It's just a terrible place to be right now. Consumers have realized the store brand, I mean, I remember in the 80s everyone joked about, well, it's the same product, it's just a different label. And that was kind of novel back then. Now it's table stakes. That vast middle, that big consumer brand with a logo has really suffered again. Yeah, I am reluctant to read anything into the health of the consumer that I think what the consumer right now has showed us is they will pay up for select things like maybe on shoes or something like that. But for most everyday purchases, the fact that it's tied and not Costco brand just doesn't matter. And I think that's what we're seeing. We can talk about Visa too if you want, because I think again.
[12:28]
A
Well, I just, I wanted to point out the store brand thing I think is really interesting because that was one of the things when I started at 3M's biggest manufacturing plant in 2005. The interesting thing there was you would have Scotch tape rolling off the line and then five minutes later there would be Walmart tape rolling off the line. It was literally the exact same equipment. They make it a little bit worse. So it is, it is not quite the same product. You want to have that, you know, that other product be a little bit higher quality. So there is a little bit of a premium there. But it's not like it doesn't, you know, hold a piece of paper on the wall. It's not like the diapers are going to be, you know, complete garbage. So that is something that we've seen for a very long time is that those big companies, the Walmarts, the Costco's, the targets of the world, have the power to say, hey, you know what, if you want to be in our store, we want to have our label on it. What do you think about Visa though, Lou?
[13:17]
B
Yeah, so this is another way to look at the consumer and it's a much healthier look, which is maybe why I'm not sure how to read PG. But look, Visa reported 10% US volume growth in payments. That's the fastest growth rate since fiscal 2019. Transaction counts were up to about same 10%. So this isn't just an inflation story or something. There's actual transactions happening. Visa also, and Travis is something we've talked about a lot with the K shaped economy. Visa said spending is not isolated to high earners. This is strength across the board. And just last week the economists over at bank of America said they believe the K shaped Trade may be reversing in a good way. More spending power across the board with kind of the lower end of that K kind of picking up. I don't think we know that yet, but Visa's results sort of back up that idea. Now look, there was more, I mean, I think the World cup factored in here. There's international experiences which is kind of the upper end of decay. So I'm not saying that it is all just, you know, perfect and fine, but, you know, the quarter was fine. They're forecasting basically status quo for the rest of the year. I continue to think Both Visa and MasterCard are undervalued right now because of the disruption potential. I kind of like MasterCard better, but I think that, look, this is status quo is really good here and this was at worst a status quo for
[14:43]
A
yeah, things seem to be okay for the consumer right now and maybe that's okay for the market right now. When we come back, we're going to talk about an energy company that just grew revenue 166%. You're listening to Motley Fool. Hidden Gems Invest.
[15:00]
D
Support for the show comes from Fundrise. For the past 70 years, there's been a room in finance most people couldn't enter. A room where you could have invested in some of the biggest names in tech companies like Airbnb and Uber before their multi billion dollar IPOs. I'm talking about venture capital. Fundrise recently took a sledgehammer to those closed doors by launching a venture capital product that's available to anyone. Their mission is to give everyone the chance to invest in the best tech and AI companies before they go public. You can visit fundrise.com fool to check out Fundrise's venture portfolio and get in early today. All investments involve risk, including the potential loss of Princip. Past performance is not indicative of future results. This is a paid advertisement.
[15:43]
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[16:14]
A
Hidden Gems Investing. Bloom Energy reported earnings last night and Rachel. This is one of the more interesting stocks out there right now. This stock has been absolutely on fire over the past year or two because this is one of the few companies that can put energy into a data center at a relatively rapid clip. Revenue was up 166%. What do we need to know about the quarter?
[16:36]
C
Yeah, it was a great quarter for Bloom Energy. I mean their, their adjusted earnings per share also were double what Wall street was guiding for. You know, they raised the revenue outlook as well, looking ahead into the rest of the year. I mean obviously as you noted, that the stock's down from its recent peak. I think that this is one of those businesses that is very vulnerable to having volatility based on unrealistic hype cycles. You know, this is a company that's executing well. It's, you know, worth noting just about every major AI hyperscaler has now proved their fuel cells to bypass utility grid bottlenecks. But I do think there is a question of when there might be periods where the AI power trade could run out of gas, where we could see the, the stock vulnerable to sector profit taking. I think that might be something we're seeing right now. I mean there's this question of when we're going to see this transition from buying a catchy AI narrative to really looking at the capital heavy reality of physical infrastructure. You know, fuel cells are a physical manufacturing business. Generating energy requires real factories, massive upfront capital, very complex installation timelines. Now Bloom's profit margins improved this quarter. Scaling up production to meet the demand that they're facing is a very expensive endeavor. It will limit their short term cash flows. Now I don't think that we need to worry that Bloom's business is broken just because they're down since their summer highs. But I do think that we might be coming towards a point where the market could force some of these AI infrastructure companies to just their valuations with some real world unit economics. So that could be some of it.
[18:04]
A
Yeah, Ludloose does seem to be kind of a theme where a lot of these picks and shovel plays coming back a little bit because investors are starting to go, wait a second, how sustainable are these growth rates and margins that we see today?
[18:15]
B
Yeah, let's get that in a second because I think that's exactly right. But yeah, stock's down 50% from its highs, still up 400% over the past year. It's still a double in 2026, even if it is off 50% since June. And it still trades at 75 times 4 earnings, which for an industrial company is pretty amazing. Corda was fine. Rachel's right. Given the AI power demand, anything short of fine would have been a real negative wow factor. But look, they held serve and that's great. Remaining performance obligations. Rpo, that was flat. And remember Wall street tends to pay for growth from here, not growth that has occurred. And I think that is the easiest way to explain is coming back to earth, kind of letting some air out of tires. And it's great if they can sustain at this level and I think they probably can given the demand. That's a fine company, but it doesn't make you a growth stock. Picks and shovels. I think it's really interesting because picks and shovels, it's so clever and everyone loves to look smart with picks and shovels trades. But they are imperfect traits. They are a trade you do because the underlying asset is overvalued. If you want to invest in hyperscalers, but the hyperscalers are overvalued, how about investing in their suppliers? It is just a secondary way to play a trend. Right now you can get the hyperscalers at much more attractive valuations than the vendors serving them. So why focus on the vendors? I think the market kind of looking away from somebody's picks and shovels. I think it's just over for now.
[19:50]
A
Yeah. It'll be interesting to see where that story goes because you're right, that has been a theme, but that when a theme needs to become a fundamental reality eventually for the market. Fundamentals eventually drive stock market performance. And Bloom is doing extremely well. But the ROI that we see today may not be sustainable long term. 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 for Lou Whiteman, Rachel Warren and Dan Boyd. Behind the glass, I'm Travis Hoyam. We'll see you here tomorrow.