What Cybersecurity, Shoes, and Homebuilders Tell Us About Change

Summary

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Motley Fool Money – Episode Summary

Episode: What Cybersecurity, Shoes, and Homebuilders Tell Us About Change
Date: August 19, 2025
Host: Emily Flippen
Analysts: Sanmeet Deo, Dave Meyer

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Overview

This episode explores how companies and industries are adapting to rapid changes—whether it's cybersecurity firms responding to new digital threats, footwear brands chasing evolving consumer preferences, or homebuilders struggling with challenging market dynamics. Drawing on fresh earnings reports and sector analysis, Emily Flippen and analysts Sanmeet Deo and Dave Meyer break down what innovation, adaptation, and strategy look like today.

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Key Discussion Points and Insights

1. Cybersecurity: Platformization and AI-Fueled Change

[00:05–05:14]

• Palo Alto Networks’ Quarter:
  Palo Alto Networks' latest results show that its controversial shift to a “platformization” strategy—bundling products and encouraging vendor consolidation—has begun to pay off.

  • "Bundling works. If you look at the quarter, sales were up higher than expected, margins are expanding." – Dave Meyer, [01:27]
  • Enterprise clients are especially attracted to the one-stop-shop approach, increasing deal sizes and accelerating sales.

• Industry-Wide Movement:
  Many cybersecurity firms, both newer and legacy, are converging on similar full-service models; mere firewall protection is no longer sufficient.

• Investment Strategy:

  • Sanmeet recommends a basket approach: "For me personally, I would rather own maybe like a basket, two to three stocks... Palo Alto has done well for a long time." – Sanmeet Deo, [02:49]
  • The overall need for cybersecurity is growing with technology (AI, cloud computing), making the sector essential for portfolios.

• AI as an Opportunity and Threat:

  • As AI drives more tech interactions, it simultaneously creates new opportunities for both attackers and defenders.
  • "Basically it's an AI race. Who’s going to, you know, who's who on the outside is going to create the threat vectors and who on the inside is going to protect you against them?" – Dave Meyer, [03:25]

• Shifting Competitive Edge:

  • The initial “cloud-native” advantage has faded; now, the differentiation comes from proving the superiority of protection and reaction time.
  • "It's not a matter of if you need security, it's how you're going to implement it." – Emily Flippen, [04:40]
  • Palo Alto’s CEO Nikesh Arora: "It's not about how well you protect, it's about how quickly you can find, identify and neutralize the threat.” – [04:59]

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2. Footwear: Fashion, Identity, and Distribution Strategy

[05:53–14:03]

• Shoes as Expression:

  • Shift from pure utility to fashion, lifestyle, and identity—driven especially by younger demographics and the post-pandemic era.
  • "Shoes have basically all kinds of—even athletic shoes have essentially become fashion accessories." – Sanmeet Deo, [06:27]
  • Companies like On Holdings thrive by blending fresh design with performance, targeting both serious and "leisure athletes."

• Brand Moves:

  • On Holdings: Continues to post double-digit growth, seen as both innovative (e.g., their “light spray” technology) and broadly appealing.
  • Crocs: Partners with the NFL, tapping into team fandom and kid-driven demand. Its popularity among younger consumers is seen as an identity statement.
    • "It’s really become a matter of expressing your identity. Fashion, comfort—all wrapped up into one." – Sanmeet Deo, [07:40]
  • Nike: Once favored direct-to-consumer, now revitalizing wholesale partnerships (e.g., with Foot Locker). Recovery will require balancing brand value, innovation, and distribution.

• Innovation vs Reaction:

  • Nike’s recent strategic reversals prompt questions: "At the time that felt like innovation. That felt really inspired. And it’s a little ironic now to see Nike almost walking that decision back.” – Emily Flippen, [11:29]
  • On Holdings is lauded for actual technological innovation, while Crocs’ NFL partnership is debated—is it a trend or trend-chasing?

• Analyst Picks:

  • Both Sanmeet and Dave prefer On Holdings as an investment for its innovation and demographic reach.
    • "I would continue to add on to On because they're just doing some impressive things with innovation and really capturing the market." – Sanmeet Deo, [13:10]
    • "ON has the momentum... There's fashion, and it cuts across all demographics." – Dave Meyer, [13:22]
  • Emily points out Nike’s relative undervaluation and potential for a turnaround for risk-tolerant investors.
    • "There is something nice and stable about knowing that Nike's brand is still retaining value that probably is going underappreciated by the market today." – Emily Flippen, [14:03]

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3. Homebuilders: Affordability Pressures and Industry Fragility

[14:03–19:10]

• Market Sentiment:

  • U.S. homebuilder sentiment at a low, mirroring issues of high rates, low affordability, and consumer hesitation.
  • Builders "throwing in everything but the kitchen sink" to entice buyers—add-ons, rate buy-downs, sometimes (worryingly) straight price cuts.

• Risks for Investors:

  • Margin compression as incentives increase; if price cuts become necessary, profitability is under greater threat.
    • "If those [incentives] aren’t effective and they actually start reducing prices... that’s bad from a margin standpoint." – Dave Meyer, [15:08]
  • Homebuilder activity is a leading indicator; major slowdowns could ripple through employment and the overall economy.

• Affordability Crisis:

  • High home prices persist even if rates come down, shutting out younger buyers.
    • "The affordability of homes just does not seem sustainable... younger people just not buying because they can’t afford to." – Sanmeet Deo, [17:38]

• Industry Resilience:

  • Unlike pre-2008, balance sheets are stronger, with less leverage and smarter capital allocation.
    • "There’s not as much leverage in the system... so there might be a little bit of turbulence, but at some point the prices... could get to a point where they become very attractive." – Dave Meyer, [18:17]

• Innovation Need:

  • Host notes a lack of innovative leadership, warning the industry may be at risk of stagnation unless something fundamentally changes.
    • "They need a little bit of innovation here to prevent their industry from entering some sort of segment down phase on a more permanent basis." – Emily Flippen, [19:10]

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Notable Quotes & Memorable Moments

• "It's not about how well you protect, it's about how quickly you can find, identify and neutralize the threat.” – CEO Nikesh Arora (via Dave Meyer), [04:59]
• "Basically it's an AI race. Who’s going to... create the threat vectors and who... will protect you against them?" – Dave Meyer, [03:25]
• "Shoes have basically all kinds of—even athletic shoes have essentially become fashion accessories." – Sanmeet Deo, [06:27]
• "If you never like Crocs, they're not going away anytime soon... It's a way to express their identity." – Sanmeet Deo, [07:40]
• "ON has the momentum... There's fashion, and it cuts across all demographics." – Dave Meyer, [13:22]
• "The affordability of homes just does not seem sustainable... younger people just not buying because they can’t afford to." – Sanmeet Deo, [17:38]

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Segment Timestamps

• Cybersecurity: 00:05–05:14
• Footwear: 05:53–14:03
• Homebuilders: 14:03–19:10

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Conclusion

This episode ties together the necessity for innovation and adaptation across sectors. Whether defending digital borders, capturing style trends, or navigating economic headwinds, success comes down to evolving with the times—or else risk obsolescence. As Emily sums up:
"One thing is clear, whether you're looking at housing or cybersecurity, your shoes—the industry changes. And if you don't change along with it, you're probably going to die." – Emily Flippen, [19:10]

Transcript

[A]

Today on Motley Fool Money, Palo Alto Networks is bracing investors. Home builders are sweetening deals and footwear brands are rewriting the playbook. I'm Emily Flippen and today I'm joined by analysts Sanmeet deyou and Dave Meyer. And we'll be discussing a few industries and businesses that are being forced to adapt to the changing world around them. To start of course, we have to talk about cybersecurity. Now cybersecurity stocks have been on the front lines of both innovation as well as investor scrutiny. The world has moved increasingly to the cloud and the industry has been forced to reimagine what security looks like in this new world. Palo Alto Networks just dropped its fourth quarter results and based on the headline numbers, it'd be easy to almost forget the checkered history that this company has with this level of innovation. Just last year the business launched a new platform strategy that involved vendor consolidation, even giving away its product for free. Now that obviously spooked investors, but here we are just a handful of quarters later and it seems to be paying off. With business accelerating, Dave, this space has been hot, it's been crowded, but Palo Alto Networks report didn't happen in a vacuum. Fortinet, Checkpoint and even, even legacy players like Cisco have all tried to find their own niche and security with a continued move towards these off premise solutions. How should investors read this quarter?

[B]

I think they should take away that bundling works. If you look at the quarter, sales were up higher than expected, margins are expanding. More and more people are doing what Palo Alto calls platformization. Now we're not going to get into what the details are there, but basically it's folks buying more than one of their products and that's happening, that's actually accelerating and larger businesses, enterprise level businesses are saying, you know what, it's actually great for us to have a one stop shop because that sales to large businesses are increasing at higher rates and the deal sizes are going up. So in a, in a fragmented world, basically Palo Alto's strategy, which they put in place many years ago, to create a platform where you can come and pick what you want, that's really starting to pay off.

[A]

And they were kind of late to that game though. I mean lots of other companies have moved to the same platform esque strategy. They want to be the one stop shop. No longer is it just good enough to be a firewall provider. You have to provide full edge to edge security and Sunmeet. When you look at the industry, do you think this is the industry where you just buy A bucket of companies because the strategy is similar across all of them or is there value in picking the best names?

[C]

Yeah, you know, for someone not as technically inclined as me when it comes to cybersecurity, for me personally, I would rather own maybe like a basket, two to three stocks. Some of the bigger players that I know that you know are, are doing well. Palo Alto has done well for a long time. They're a very impressive CEO, as we've been discussing, you know, offline. But it's an important area that I think with the growing technology needs in AI and cloud computing, all the different technologies that we're using, cybersecurity is definitely an important place to have something in your portfolio.

[B]

Yeah. And along those lines, I think one of the things that we all need to recognize is one is the bad actors are not going away. And in fact, they're innovating very quickly in order to create the threats that companies like Palo Alto and other competitors want to negate. And one of the things that at least if you believe the Palo Alto data, and I don't have any reason not to, is the threat vector along the AI lines, meaning the more we interact with agents, the more opportunities there are to create threat vectors that is actually providing growth on the outside and internally. The company is bringing AI capabilities across all the, all the services on its platform. So basically it's an AI race. Who's going to, you know, who's going to, who's who on the outside is going to create the threat vectors and who on the inside is going to protect you against them? Basically that's built in demand and built in growth for the future. Sad to say, but that's actually how it works.

[C]

Cyber threats are a grow growth industry. So you know, you can't invest in the cyber threat companies, so you got to, got to invest in the ones that are protecting against those things and they got to be growing too.

[A]

And I think the edge that existed with these cloud native platforms has increasingly gone away because even the legacy players have kind of gotten out here. The cat's out of the bag. They've all made the adjustments. So now it's a matter of proving that you have a product that is simply superior to that of your competitors. It's not a matter of if you need security, it's how you're going to implement it.

[B]

And I will say this, the one thing that CEO Aurora Nikesh Arora said was it's not about how well you protect, it's about how quickly you can find, identify and neutralize the threat. That's actually the thing that they're being measured on now.

[A]

Up next, we're moving from firewalls to footwear. Shoes are having their own moment with brands stepping into new partnerships, styles, and even new markets. Stick with us. Are you ready for this?

[B]

Eenie Meenie A hulu original streaming August 22, eenie meenie. There's a casino job in just a few days.

[C]

$3 million.

[B]

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[A]

Let's get this money. Can we think this through for a second? Yeah.

[B]

Cause that's your strong suit, thinking things through. Eeny Meenie A Hulu Original rated R. Streaming August 22 streaming on Hulu and Hulu on Disney.

[A]

The shoe industry has seen its own landscape change pretty dramatically in the last few years. Gone are the days of sneakers dominating the market. Things like identities, partnerships and performance are all taking the spotl. New brands like on holdings have taken market share. They just posted yet another quarter of double digit growth. And at the same time, Crocs is teaming up with the NFL ahead of earnings season. And Nike is seeking to claw its way back towards growth through a renewed relationship with Foot Locker. Sun meets the whole shoe game feels like it's shifting here. What do these moves tell us about how consumers view the industry and who could be the ultimate winner?

[C]

Yeah, you know, shoes have basically all kinds of, even athletic shoes have essentially become fashion accessories. I mean, you know, you used to be, back in the day, we, we'd, you know, buy a shoe for running, buy a shoe for basketball, buy a shoe for utility purposes, whatever we needed for walking. Now the shoes are being used for sometimes all of those things, but mostly for fashion, mostly for casual wear. You know, the pandemic really shifted things where, where we're using shoes for a lifestyle approach and a company like on has really taken that and you know, making very fresh, clean, authentic designs that like are really resonating with younger people. And also the athletes, but also the leisure athletes, the people that might be using them for dual purposes where they might be running with them or might, they might be walking with them. And then you have also like the shoe companies like Crocs that ugly as in when it comes to Crocs. So you know, they, they, if, if you never like Crocs, they're not going away anytime soon because if you, if you have kids, you know, all the kids are wearing Crocs. They have multiple pairs. You can add gibbus to them, you can do all kinds. It. It's a way to express their identity, especially for kids and younger people that you haven't had in other shoes. And, and now with Crocs recently signing with the NFL to kind of have a partnership with them, to be able to have your own favorite team, Crocs with their own favorite, like with your own jibbitz for those teams, it's. It's really become a matter of expressing your identity. Fashion, comfort all wrapped up into one. Now. Nike has been a very, very popular brand for a very long time. The dominant brand when it comes to athletic parole shoes, running shoes is what they kind of grew up on. And they were always fashionable as well. You know, you have your Jordans that now are actually being used even more in like fashion sense of just basketball. But they kind of lost their way. You know, they. They weren't as they didn't keep up with some of the trends and the kind of cool styles, they shifted a little too hard into the direct to consumer channel. Going, going away from some of their wholesale partnerships with Foot Locker and, and other and other companies. Now they're getting back to that, you know, because they did, they did struggle with sales and margins and then they're also at risk with tariffs and whatnot. But they're making a comeback. They're strengthening their partnerships again, focusing on what they need to do with their wholesale channels as well as their direct channels and freshening up their identity and their portfolio of shoes.

[B]

I'm actually surprised Crocs didn't do this a while ago.

[C]

Yeah.

[B]

Because if you think about it, it's going to be hard to, let's say, have a Crocs specifically for an individual athlete. But across a league, like, I have to wonder if this was in the works and maybe, you know, got bogged down in negotiations or something. But you know, think about, think about it this way. What if they did it with the NBA? Because you could imagine, you know, players on the sidelines. Maybe you're out, maybe, you know, maybe you're taking a break. Maybe during warm up. Like you come out with your Crocs and you are supporting the team. Like I, I'm a little surprised that wasn't done earlier. And I will also say this. I take a little bit of umbrage against what you said about footwear and fashion. It's always been here. I mean, they've always tried to create a fashion piece of it. But that said, it is amazing how, how many different types of lifestyles that shoes are becoming a part of. For example, my daughter's in residency. She cannot live without her Oofos, which are Crocs competitors as well as her Hokas. The. It is amazing in the medical world how being on your feet all day, something. And we'll. I think we'll all in agreement here. The Hoka is an ugly shoe. There is nothing fashion conscious about that. But it performs well, it does what those people need and they're willing to pay for it. And I will say this one last thing. I've had an argument with our, with our colleague Seth Jason, who's a huge runner and he keeps telling me, I, I can't believe, you know, why do people like ON Holdings? Why do people like on shoes? I never see them out on the trail when I run and I'm like, dude, you're like running 100 miles at a time. Like, like, you know. And finally he said the other day I saw my first pair out in the wild and I'm like, great, that's awesome that, that those types of athletes are looking for them. Because I will say here in Pauly's island, amongst the older crowd of which I am slowly getting there, on, on shoes are everywhere. Like everybody wears them around. And I think it's because there's a little bit of fashion, a little bit of comfort, and that's the name of the game. Like, you got to figure, if you're a shoe company, you got to figure out how to address all those things in one product in order to meet the demand of your demographic.

[A]

Well, for me, it comes down to what actually is innovation versus reaction. And I rewind to just a handful of years ago when Nike made their decision to largely pull out of third party retailers and go straight direct to consumer with the intention of protecting their brand image to prevent themselves from becoming the next, you know, Under Armour, for instance. And at the time that felt like innovation. That felt really inspired. And it's a little ironic now to see Nike almost walking that decision back. Not that direct to consumer isn't important to them, but they're realizing that distribution was always part of their value chain. And at this moment, their market share is being eaten by companies like on holdings that for whatever reason, whether that be brand prestige or performance, seems to be rising in levels of popularity. And I do think that on has pushed forward an actual real innovation with technology. Right. Their light spray, which could localize distribution, is something really interesting. And so for me, when I look at a business like Crocs kind of tying this all full Circle. I cannot for the life of me understand whether or not this deal is innovation or reaction. I mean, I think licensing is smart for Crocs, but it's always been on the fattier side of shoes. And there's some part of me that can't feel like we're just pre 2008, right before the Crocs crash.

[C]

Well, you know, you got to think of the kids because they love their sports teams. They, they want to represent those. And so, you know, my son has some Texas Longhorns, Crocs. And so I'm sure they, I'm sure they had to strike up a deal with some of the, the big universities like that to have those.

[A]

So putting you both on the spot here unexpectedly, if you have to choose between adding on holdings, Crocs or Nike, or let's also add Foot Locker in there as well to your portfolio today. Is there one that's standing out to you?

[C]

Well, I'll go first. I currently own ON holdings, so I would, I would continue to add on to on because they're just doing some impressive things with innovation and really capturing the market.

[B]

I, I agree. I like On. I, I think the challenge for Nike and we're seeing them throw their weight around a little bit with the, with getting back into the prominent displays at Foot Locker. That's. That, in my opinion, that comes from the direct relationship that they have, strong relationship that they have with Dick's Sporting Goods. But they have, you know, they still have a long road to hoe. And I think right now ON has the momentum they have that not only performance, but it's a, there's, there's fashion, and it cuts across all demographics. And what I mean is from the youngest to the oldest, they're selling their shoes across that, that entire range of ages.

[A]

I'm inclined to agree with you both, but for the sake of playing devil's advocate, I do feel like I need to point out how cheap Nike looks on a relative basis if they're able to kind of craft this turnaround that I think management is leaning towards and distribution is a part of that. But I do think this is a brand that has not lost its attractiveness. And so while ON might be the up and coming, exciting new player today, there is something nice and stable about knowing that Nike's brand is still retaining value that probably is going underappreciated by the market today. Up next, we're moving over to housing, an industry that, unlike shoes, is hitting a speed bump. We'll see you after the break. A Report out from Reuters yesterday noted that US Homebuilder sentiment has dropped to its lowest level in nearly three years. Higher interest rates, lower affordability and consumer hesitation seem to all be weighing on the sector. Dave, we've seen builders like throw in everything but the kitchen sink, try to motivate buyers. After years of it being a seller's market, it seems like buyers now have the cards. But confidence is still sinking. Affordability is at all time lows. What should investors make of this?

[B]

I actually think investors should, there's a lot to be made of this. Not only should we think about individually about the sector, the home building sector, if they're still throwing everything out at it, right, which means typically they don't lower price. That's one place having bought a few new homes, that's one place that they don't negotiate, but they will give you add ons, they will give you rate buy downs and things like that. And if those don't aren't effective and they actually start reducing prices, which some anecdotal data might suggest that they are, that that's bad from a margin standpoint because you're already trying to say, hey, in order to get this sale, I'm willing to squeeze margins and now I'm willing to squeeze margins even further. So I would say there's a little bit of caution in the sector itself. So be, as an investor, be wary. Make sure that you are looking at the, the highest quality builders. One one that comes to mind is Dream Finder Homes. The ticker symbol is dfh. They do a good job of making sure that the markets that they build in are solid and they've been able to translate that into, you know, good performance stock notwithstanding. Right now the other thing we need to be a little bit careful about is the overall economy because if these home builders slow down, they are actually, they employ a lot of people within the economy. So if we see them slow down and they start laying off people, that makes the job numbers difficult. You know, who knows what can happen from there. So there's a, there's a lot to be tied into this number, this homebuilder sentiment number, because it's really a leading indicator of not only the industry that they play in, but the economy overall.

[A]

This is one of those industries that, you know, I rewind back to just a few years ago and I would say the same thing then that I'm saying today, which is that whenever I see sentiment like this really low for industries or businesses that have really in my opinion like long term need to exist. Right. The need for housing in the United States. To me, I think to myself, okay, well this is a short term headwind, long term opportunity. But it's still been a really tough few years for home builders, even despite the fact that I think the skepticism has been around. And of course a lot of that has to do with interest rates. But Sun Meat, I mean, when you look at this industry, what stands out to you? Because for me, I view opportunity, but at the same time, I've viewed opportunity for years now and it has not manifested into shareholder returns.

[C]

Yeah. And the thing that sticks in my mind because I do think a lot about the consumer is just the affordability. The affordability of homes just does not seem sustainable. It's just gotten too expensive. And even if you lower rates, your interest rate will be low, but you're still paying that on a very, very high mortgage. And those housing prices, especially in high demand areas, are not really coming. There's younger people just not buying because they can't afford to coming out of college or coming out of business schools or graduate schools and they can't buy what's going to get them to be able to buy. So that affordability thing always sticks in my head of how does that problem get solved?

[B]

The one good thing is that a lot of the home builders, their balance sheets are much, much stronger than when we had the housing crisis. There's not as much leverage in the system, there's not as much leverage on their balance sheets. They're doing a good job of spending capital wisely, trying to have capital asset, asset light businesses where they don't necessarily own the land but they have rights to it and things like that. So there might be a little bit of turbulence here, but at some point the prices of these home builders could get to a point where they become very attractive, even if there's again some volatility in the sector overall. And I give a lot of management's credit for playing the game differently based on what happened in the 2005, 2006, 2007 timeframe.

[A]

I'm not sure who will be the innovative leader here in housing. But one thing is clear to me based off this conversation, they need a little bit of innovation here to prevent their industry from entering some sort of segment down phase here on a more permanent basis. But one thing is clear, whether you're looking at housing or cybersecurity, your shoes, the industry changes. And if you don't change along with it, you're probably going to die. Dave, Sammy, thank you both so much for joining.

[B]

Thank you.

[C]

Thank you.

[A]

As always. People on the program may have interest in the stocks they talk about. And the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows the Multi fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provide for informational purposes. To see our full advertising disclosure, please check out our show notes. For Sammy Deo, Dave Meyer, and the entire Motley fool money team. I'm Emily Flippin. We'll see you tomorrow.