Returns as of 8/29/2021
Returns as of 8/29/2021
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Will Amazon.com‘s (NASDAQ:AMZN) department stores be a hit with shoppers? Who is the next CEO to announce retirement? What’s the next big trend in alcohol sales? In this episode of Motley Fool Money, Maria Gallagher and Jason Moser tackle those questions, as well as the latest earnings from Walmart (NYSE:WMT), Target (NYSE:TGT), Lowe’s (NYSE:LOW), Home Depot (NYSE:HD), Foot Locker (NYSE:FL), Nvidia (NASDAQ:NVDA), Farfetch (NYSE:FTCH), and Robinhood (NASDAQ:HOOD). Plus, they discuss Chipotle‘s (NYSE:CMG) newest menu item, share 11 stock ideas for the return of weddings and two stocks on their radar: Roblox (NYSE:RBLX) and Elastic (NYSE:ESTC).
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on Aug. 20, 2021.
Chris Hill: We’ve got the latest headlines from Wall Street. We’ve got a round of Buy, Sell, and Hold, and as always, we’ve got a couple of stocks on our radar. But we begin this week with a wide range of retail. First up is Target. Second-quarter profits and revenue were higher than expected. Same-store sales rose nearly 9%, and Target raised full-year guidance, and despite all that goodness, Jason, shares of Target down about 3% this week.
Jason Moser: Yeah, down a little bit this week and maybe that’s a little bit of a reflection of where the stock was valued going into the week and perhaps a little bit of uncertainty for the back half of the year just based on the current situation. But I wouldn’t let that take away enthusiasm for what this company is doing. To me, this is one of the premier retailers in the world. I don’t think that’s hyperbole. They stuck with their plan and it is straight-up working. Omnichannel doesn’t even really seem to do them full justice and the numbers really, I think, bear that out. In the second quarter, the comparable sales as comps were up 8.9%, and that was on top of 24.3% a year ago. Clearly, a year ago it accelerated a lot. It’s a difficult comp going into this year, but revenue grew 9.5% from a year ago. As a result, when you look at total sales for the quarter, they’ve grown more than 36% over the last two years alone. That’s, to me, it’s very telling. It shows in both traffic and tickets. Traffic continues to impress me. Traffic grew 12.7% in the quarter, and now tickets did decline. The actual average ticket did decline by just slightly 3.4%. I think that’s to be expected.
We’re not seeing the same sense of urgency on shoppers as we did a year ago. There isn’t the same level of pantry stuffing going on. But I think when you look at the companies from an inventory perspective, inventory’s up 26% from a year ago, so they’re in a really good position, I think here, for the back half of the year. But then going to that plan, going to that omnichannel plan, when you look at the comparable digital sales, those grew 10% for the quarter. Now, that’s on top of 195% growth from a year ago. Again, I think a year ago isn’t necessarily a fair comp, but I think it shows that they’re continuing the trend of growing. But it’s the same-day services, whether it’s in-store pickup, the drive up, the shift acquisition is really proving to be a tremendous one. But drive up has really impressed me and to put it into dollar terms here. Over the last two years, the second quarter sales through drive up alone had increased by nearly $1.4 billion. All along the way they’ve built up this tremendous rewards program. They now have more than 100 million Target circled rewards members now. We know how powerful those loyalty and rewards programs could be. All things considered, I think Target continues to really execute on their plan that they’ve laid out here over the last several years.
Hill: Shares of Walmart were up a bit this week and close to an all-time high. Second-quarter revenue was just over $140 billion. Foot traffic is growing, and so are same-store sales in the U.S., Maria.
Maria Gallagher: Yeah, so Walmart had their highest quarterly revenue ever for a three-month period outside of the holiday season. Like you said, total revenue was about $140 billion up 2.4%. They grew market share in grocery. Their comparable transactions were up 6.1%, led by in-store grocery transactions. Their e-commerce sales were up 6% year over year and 103% if you look at a two-year comp, and they’re expecting global e-commerce sales to reach $75 billion for the year. In addition, same-club sales were up about 7.7% and e-commerce there grew about 27%. In general, their same-store sales gained momentum each month throughout the quarter. Their CFO, Brett Biggs, said that customers flocked to stores for items like luggage, party supplies, apparel and they’re coming as if they’re coming out of hibernation. I think as we get back into school season, as we then get into Halloween, and then it’s Thanksgiving and then it’s Christmas — August starts propelling into fall, and fall is a non-stop time to go shopping for fun things to decorate your house. I see that continuing in the next couple of quarters as well.
Hill: I’m glad you mentioned the school, because Target talked about this, and Walmart also said they’re seeing good numbers already in their back-to-school sales, which is so important for any retailer.
Gallagher: Yeah, and I think that the beauty of places like Walmart and Target is that you go in for one thing and then you leave with 900 things you didn’t want. I think you go in for a school backpack and then all of a sudden you have 30 candles and a whole new wardrobe, and that’s the beauty of these big retailers.
Hill: From general retail to home improvement. Home Depot and Lowe’s both out with second-quarter reports this week, both posting profits that were higher than expected. But while Home Depot did not offer guidance for the full fiscal year, Lowe’s raised their guidance, and that may have been one of the reasons shares of Lowe’s were up 6% this week. Home Depot down just a little bit, Jason.
Moser: Yeah. Well, Maria, I have that same problem of going in with the intention of buying one thing and walking out with 500 whenever I go to Home Depot or a Lowe’s. I guess I’m a mark for these two stores. But it does feel like the underlying story for both businesses. I think both businesses recorded very good quarters. I think the underlying story really is about the pro customer. They did see some pullback in the do-it-yourself demographic there, but the pro customer really stepped up and helped bring the results for both companies. When you look at Home Depot, again, dealing with a difficult comp given last year, but still very respectable numbers. Their sales of $41.1 billion, that was up just over 8% from a year ago. Comp sales were up 4.5%. U.S. comps were up 3.4%. Now, when you look at where margins are going with these companies, there’s still a little bit of a challenge on the gross margin side. They saw gross margin for Home Depot down 80 basis points, and that was based really on inflationary costs, things like lumber and whatnot. But operating expenses remain in check. They’re actually doing a very good job of dealing with this new paradigm on the operating side, so January operating margin was up 20 basis points. That was thanks, I think, to those ticket and transaction numbers. The average ticket grew 11.3% in the face of declining transactions. Transactions actually fell 6%. Again, understandable. There’s not that same feeling of haste or consumers rushing to get into those stores and buy the things that they need. But when you look at the big-ticket customers, again, the big-ticket customers continue to perform very well.
Those transactions over $1,000, that was up 24% compared to a year ago. For me, when you look at what Home Depot is doing, inventories remain in check. The pro customer continued to really bring results which again, those outpaced the do-it-yourself customers. But we see that ebb and flow with Home Depot quarter-in and quarter-out. It’s not really a surprise. In regard to Lowe’s again, good numbers. Sales of $27.6 billion, that was relatively flat from a year ago. During the quarter they saw those comps actually decline 1.6% total and 2.2% for the U.S. Those two-year numbers are obviously painting a little bit of a different picture, though, so that’s encouraging. Again, I think for Lowe’s, the pro customer really performed. They saw the average ticket grow also 11.3%. That offset a declining transaction count rate, declining traffic of 12.9%. A little bit more exaggerated there than what we saw with Home Depot. But gross margin, I think, is a good story there. Gross margin declined only 30 basis points and they saw operating margin, on the other hand, expand 80 basis points. These companies are doing a very good job of handling the cost structures they’ve been handed given the past couple of years. I think in Lowe’s case, you look at CEO Marvin Ellison, it’s just been basically three years since he took the helm there. Stocks up 120% and the numbers are really I think bearing at the stock’s points. He’s got to be feeling really good about what he’s done.
Hill: Shares of Foot Locker up nearly 10% on Friday after second-quarter profits and revenue came in higher than expected. Wall Street was also expecting negative same-store sales. Comps were up nearly 7%, Maria.
Gallagher: First of all, did you know that Foot Locker has almost 3,000 stores? Which is just so many more than I realized they had. But their total sales were up 9.5% to $2.2 billion. Their comp-store sales were up about 7%. They had strong results in women’s and kids’ footwear business with broad demand for apparel and accessories and you see that trend continuing as people spend more on athletic footwear and apparel throughout the pandemic and beyond. They also announced a quarterly dividend of $0.30 a share, which is about a 50% increase, and they have two recent acquisitions which are fueling its growth in Asia with Atmos and in a non-mall presence with WSS but still within that same category of shoe sales. They’ve been capitalizing on that growth in athleisure and are attempting to continue that as things get more back to normal, as people have maybe started going back to Foot Locker. They are saying, well, keep coming back, keep coming back.
Hill: Well, it’s interesting, you mentioned all the locations for the namesake brand, but those acquisitions that they made, they do seem smart in part because it’s a way for Foot Locker to diversify away from malls.
Gallagher: Yeah, and growing that demographic, I know they said WSS is used by people in the Latina demographic, Atmos is in Asia and so they’re trying to diversify their customer base as well.
Hill: What’s better than a company announcing a new product? When they use the announcement as a way to take shots at other companies. Details after the brakes, so stay right here. This is Motley Fool Money.
Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Maria Gallagher. Nvidia’s stock is closing in on a new all-time high after second quarter revenue came in higher than expected. Guidance for the current quarter looks good. The only downside this week came when Nvidia told The Financial Times they may not meet the regulatory deadline on last year’s $40 billion acquisition of ARM. It’s a big deal, Jason, and regulators appear to be taking a long, hard look.
Moser: Yeah. I know the big question for Nvidia will revolve around this R&D, and that does make sense. I would encourage investors to not lose sight of the fact that this is still a very strong business, performing quite well on its own. Into that point, revenue for the quarter $6.5 billion, up 68% from a year ago, they noted they set records for total revenue in their gaming datacenter segment and professional visualization segment, and so breaking that down, gaming revenue of $3.1 billion grew 85% from a year ago, up 11% sequentially. Benefiting from very strong laptop demand, which seems pretty reasonable given what we know. The datacenter business, which is another tremendous part of the story, revenue of $2.4 billion, that was up 35% from the year-ago quarter. It’s important to note, Nvidia is a key part of the tech that’s going into these big customers’ Cloud offerings.
When we’re talking about Microsoft and Google and Amazon, Nvidia is a lot of what’s making that stuff work. There’s some stickiness there, so I think that’s really encouraging for investors. The pro visualization segment of the business, clearly the smaller of the three, but still revenue $519 million up 156% from a year ago, benefiting from the changing work landscape. I think a neat part of the story, lookout for Nvidia omniverse, this is an offering, a platform they had. This is going to be a big piece of the development of the metaverse. We’re going to hear more and more about this metaverse here in the coming years from companies like Roblox and whatnot out there doing what they do. To me, I continue to invest in Nvidia inception, which is essentially their acceleration platform for AI start-ups. They’ve got funding of over $60 billion and members in 90 countries on this inception platform and that is really I think promoting strong continuing investments in AI, which is going to be a very big story here over the coming decade, and one, you continue to see more and more throughout the quarters with Nvidia.
Hill: Farfetch, the online luxury fashion platform grew revenue in the second quarter by more than 40%, but shares fell by more than 6% this week. Maria, they’re growing their gross merchandise volume along with their revenue. Is the drop in Farfetch a buying opportunity?
Gallagher: I think it could be. I think it’s really this leader and it carved itself out in this online luxury space, which is really a niche. It has 1,300 luxury sellers, three million active customers. Their GMV was up 40% over $1 billion as last quarter with that high take rate of 30%. That revenue increased about 43% to $523 million. They also launched some really cool things on their platform. They have an immersive 3D shopping experience. They have virtual try and capabilities. They launched a kids wear fashion, that’s still very expensive, very luxury. I have a note here that says, “I found a candle I like, and it’s only $120.” It really has this niche in online commerce, but with retail, and when you have those brands, when you have cultivated relationships with those brands, I think that that’s a pretty valuable, intangible growth driver for them.
Hill: Shares of Robinhood falling 15% this week. The trading apps’ first report as a public company came with a warning that trading activity is slowing down. Recent trading is Robinhood’s business. I get why the stock is down.
Moser: Yes. He said it. Maybe they need as many transactions as they can get their hands on. They say they want to become the most trusted and most culturally relevant money app worldwide, and I don’t doubt that, but they are today catering to a market where they’re going to be some big hurdles to clear. The word association. When you say Robinhood, the first couple of words coming in mind are stonks and crypto, and the like, memes. This is just not where you want to be, I think in your first reportable quarter year, but here’s where we are. Crypto revenue grew to $233 million, up from just $5 million a year ago. Options are up 48% to $165 million. You can see, this is a platform that while it may be good at what they do, they are catering to a unique demographic and when you look at that actual demographic, net cumulative funded accounts reached 22.5 million, that’s up 130% from a year-ago. Monthly active users, 21.3 million, that’s up 109% assets under custody reached $102 billion, up 205%. That’s all great. But what it all boils down to is you have an average $4,500 account there. These aren’t big ticket customers and I would imagine the median is actually much lower than that average, this is just aren’t high-value clients today. What’s worse is they’re trading a lot. That can be a recipe for very lumpy business. They’re going to have to figure out a way to reconcile that, but all things considered. It certainly could have been worse.
Hill: On Thursday, Chipotle announced it’s testing a plant-based Teresa alternative in Denver and Indianapolis. The company says this new product will come from, “Ingredients grown on a farm and not a lab.” Maria, I like innovation, but I really like the shade that Chipotle is throwing at Beyond Meat and Impossible Foods.
Gallagher: Yeah. I think the actual even sassier part of the press release was made with ingredients you can pronounce and never frozen. You see both of those Impossible and Beyond in the frozen aisle, and I actually looked at the ingredients for both Beyond Meat and Impossible, and Beyond Meat only has one thing I can’t pronounce, and the ingredients for Impossible Foods, there are a lot of words I can’t pronounce in that ingredient list. I think that what they say that they are ingredients are going to be our Chili Chipotle peppers, tomato paste, crushed garlic, paprika, olive oil, and natural protein source from peas. I think it’s just showing this shifting consumer demand where there are a lot more people who are interested in plant alternatives or they have friends who are vegetarians and they have to have options for friends when they go out to eat. I think that’s just a continued shift in that consumer appetite for these types of foods.
Hill: Well it’s their first plant-based protein new offering since 2014. Once again, Chipotle is taking their time with new offerings.
Gallagher: Yeah, it’ll be interesting to see them testing it out in Denver and Indianapolis. I’d be interested to see how both of those markets react to it and see if they end up rolling it out throughout the country, and what that reception is.
Hill: Amazon has a surprising new business line and hard seltzer may have to make way for the newest trend in alcoholic beverages. Buy, Sell, or Hold is next. Stay right here. You’re listening to Motley Fool Money.
Welcome back to Motley Fool Money, Chris Hill here with Maria Gallagher and Jason Moser. Time for a round of Buy, Sell, or Hold. I’ll spot you up with an idea from the world of business and you tell me that if it were a stock, would you be buying, selling, or holding it? Jason, let’s start with The Wall Street Journal reporting that Amazon is planning to open several large bricks-and-mortar retail locations this fall, starting in California and Ohio. Buy, sell or hold, Amazon department stores.
Moser: Well, Chris, I think I’ve been pretty clear through the years here that I like going to physical retail. I like that physical retail experience about as much as I like filing my taxes at the end of the year. It’s just not something I’m gunning for as the consumer. To me, the advent of e-commerce and the convenience that it’s offered has just been one of the most profound developments in my lifetime, particularly as a parent. I’m sure you feel the same way. My first inclination here is to say sell. I say this as an Amazon shareholder, and a very happy one at that. I’ve owned those shares for a long time and I don’t have any reason to want to unload them. This isn’t making me want to unload them, but I do have to ask the question, is this something that the world is really clamoring for? Is this something that people want? I’m not really sure that it is. Now that said, I could also see this as being perhaps some investment in fulfillment in disguise. Maybe this is just something where they’re like, “Hey, you know what we’re going to test and learn, and we’re going to see if there’s something there.” Maybe it’s not your traditional retail experience, maybe it serves some other purpose. We saw with the Fire Phone, it was pretty clear from the start, that wasn’t to me, the greatest investment in the world, but they did learn from it. That’s one thing that Amazon is really good at doing, is trying things and learning from them whether they succeed or fail. But I got to say sell here, man, I’m not feeling it.
Hill: Maria, what about you?
Gallagher: I’m going to with sell too. I think the best part about going to these big stores is browsing. I don’t think that you want to go to Amazon to browse, because what you buy on Amazon are things you just need and you need them fast and you need them in the next hour today. I don’t think you’re going to walk into Amazon, a big warehouse and just browse and find the types of paper towels you want. I don’t know how enjoyable of a store experience it will be. Also, I just find it ironic that they’ve put all of these places out of business to then create stores from their ashes.
Hill: I’m going to hold, but I will say it’s very odd to say the phrase “Amazon department store” out loud. Last month, Disney’s Black Widow took in $80 million in its opening weekend, making it No. 1 for the year so far. Maria, buy, sell or hold, that opening weekend record, standing for the rest of the year. I will just add that we’ve got a couple of more big Marvel movies coming later in the year, along with the next James Bond movie and the Top Gun sequel.
Gallagher: I’m going to say sell, I think that they have two new Marvels coming out; you have Spider-Man, you have Shang-Chi, you have a new Wes Anderson movie coming out that I didn’t realize that has a pretty stacked cast, that has, like, Timothee Chalamet, Elisabeth Moss, Frances McDormand. There are kids movies coming out. I think that there’s just bound to be another big blockbuster ahead.
Hill: Jason, what about you?
Moser: Yeah, that’s a tremendous performance in a volatile time, I’m going to sell. I think when you look at the schedule of movies that are getting ready to come out, there are just too many opportunities to beat that number. A lot of good movies that you guys quoted there, the one that I think is actually going to really beat it though, and I don’t know, this is just what I think, but Halloween Kills is coming out this year. People have been really looking forward to this sequel. Halloween, a very, very powerful franchise through the years. What the hell, Michael Myers can’t die. These movies can go on forever. They tell an amazing story that sometimes borders on the absurd, but yet people just continue to flock to this movie story. To me, Halloween Kills is going to be the one that takes us over-the-top. If for some reason I’m wrong, which certainly could be the case, listen, Venom. Venom, Let There Be Carnage, just on the title alone. I’m not the biggest going-to-the-movie guy, I’m a little bit more of a let’s-watch-it-in-the-living-room guy, but I could see Venom pulling that off as well. Then finally, I just can’t wait for The Many Saints of Newark, I’m a tremendous Sopranos fan. I feel like it’s one of the best shows ever made, but even I’m most likely going to stream that on video when it comes out.
Hill: Let me add a couple of more numbers for anyone wondering, how bad is it from movie theaters out there. Two years ago, obviously 2020 was a wash. But in 2019, the No. 1 opening weekend at the box office was Avengers: Endgame. $357 million, the $80 million opening weekend that Black Widow had this year, that would not have been in the top 10 opening weekend finishes in 2019. A rough road ahead from movie theaters. I’d say this is someone who enjoys going to the movies. Jason, one of the big headlines from the first half of this year was Jeff Bezos announcing his retirement as CEO of Amazon. Buy, sell or hold, another big name CEO announcing their retirement before the end of the year.
Moser: Well, I was going to go with Johnson & Johnson, Chris, that would seem like we can drive that one. That was news that came out after we had already started kicking around this idea, just the timing was amazing. Yes, I do want to sign up for your clairvoyant investing service by the way. I think I am going to go a little bit outside the top 20 largest companies, but I’m going to pull one that we’re all very familiar with and I’m sorry, Matt Greer, this is not targeted at you. I think it’s totally plausible that Craig Jelinek at Costco decides to go ahead and hang it up by the end of this year. It’s not for anything other than the fact that he’s been doing this for a long time and he’s done a really good job. He’s got nothing to prove. He’s coming up on 70 years old, he’s been with the company since 1984, he’s been the CEO since 2012, he held the COO position, he has just such a tremendous track record with this business. It’s not the most difficult business in the world to understand. It all boils down to just making sure that they take care of their members and that’s what they’ve just done for so long so well. I think that Craig Jelinek could absolutely be on the table as one we will see hanging it up here by the end of the year.
Hill: Maria, what about you?
Gallagher: I think there is probably going to be another one. I would say maybe Jamie Dimon at JPMorgan. I think he’s 65, he’s been the CEO for over 15 years, he’s had heart problems in the past, he’s openly talked about his succession plan, so that would be my guess as I think that might happen before the end of the year.
Hill: That sounds like a couple of buys right there from both of you. It’s interesting because those are two CEOs that if you’re shareholders of those companies and you both touched on this, you can feel really good that the succession plan is in place. It’s tough to plan and execute a really strong succession when it comes to CEOs, but Jim Sinegal did a brilliant job tapping Craig Jelinek, and I’m sure whenever Jelinek decides to step aside, he’ll have his successor in place, Jamie Dimon, yeah. Jamie Dimon is the smartest guy on Wall Street, so yeah, he’s got that plan.
Moser: I’d love to get your opinions on us too, because the wildcard that came to my head, this is probably going to get a couple of gripes here, don’t at me, but Elon Musk. This is nothing against Musk, but I think he’s publicly stated more than once that his goal isn’t really to be CEO of Tesla or a company. He’s got a lot going on. At some point or another, I think most of us are at least expecting him to go ahead and step down as that CEO of Tesla to go focus on other things. Maybe just really give his whole attention to SpaceX. But yeah, it makes me wonder if Musk isn’t trying to set the stage for him to be able to saunter off and go do other things. I don’t know, what do you guys see?
Gallagher: I think the stock movement announcing Elon Musk move would be much more dramatic than either a Costco or a JPMorgan change, just because so much of the hopes and dreams of Tesla is tied up in the hopes and dreams of what Elon Musk specifically can do. I think that that would lead to pretty volatile movements for Tesla if that happened.
Hill: I don’t remember what happened to shares of Costco when Jim Sinegal announced that he was stepping down. But I do remember that, and this is typical with Jim Sinegal, that it was part of their earnings press release and it was not the headline. It was the 10th thing in the press release. It was like “Oh and by the way, the co-founder and long time CEO is stepping down.” Last one, Maria. In the past eight years, exports of Japanese sake have nearly tripled and now Wink, which is the big online wine membership club, has started offering sake for the first time. Buy, sell or hold, sake becoming the new hard seltzer.
Gallagher: I’m going to hold because I don’t think I have enough knowledge of what’s sake tastes like to know how it can function within, I think the beauty of hard seltzers that it just doesn’t taste like anything, which is why a lot of people like it and bringing it to picnics and bringing it to outings and stuff. But I do think it’s pretty interesting so they are saying that the sake market’s growing about 5% to reach $10.4 billion in 2026. In comparison, the whiskey market is about $57 billion and the beer market is about $600 billion. But beer is the most common consumed drink after tea and water. I think it’d be hard to ever compare it to beer. But I do think it’s growing pretty quickly, quicker than I would have asked that.
Hill: I don’t know Jason, it really seems like an opportunity for a business like Diageo or Constellation Brands to add a sake brand to their portfolio. What do you think? Is this a buy, sell or hold?
Moser: As far as it being the new hard seltzer, I’m going to sell that. I don’t know that we have quite the same market opportunity in existence for sale. But I will say, as someone who has enjoyed the beverage before, it has a unique taste. It’s not for everyone, it’s not for every occasion. But to Maria’s point, we have seen a lot of growth here recently and there are currently around 20 or so sake breweries around the country versus just I think around five, maybe a decade ago. It is starting to grow in popularity. What you’re seeing now is brewers infusing sake with different fruit flavors, or even carbonating it or using hops in their brewing. I know that sounds crazy, but it is different. It’s something that strikes me a little bit. It’s a little bit Dogfish Head-esque. That’s what Dogfish Head has always been known for. It’s off-center and that’s the whole point of their brews. You could certainly see these folks taking sake and experimenting with it and trying new things. I think that alone will peak a lot of folks’ interest there. How sustainable it is, how sticky it is. I’m still on the fence about that one. As far as it being a seltzer though, I think I’d sell that concept.
Hill: I can’t decide which I’m less interested in, carbonated sake or Maria’s $120 candle.
Gallagher: The candle is cute. I’ll send it to you and then you can decide.
Hill: Up next, we’ve got a couple of thoughts on the business of weddings and a couple of stocks on our radar. Stay right here. This is Motley Fool Money.
Welcome back to Motley Fool Money, Chris Hill here with Maria Gallagher and Jason Moser. Our email address is firstname.lastname@example.org. We got an email from Eric B. He writes, “I’ve been a fan of the show over the last few years and you’ve truly helped me become a better investor.” Thanks, Eric. That’s why we do what we do. He goes on to ask, “What is the best way to get exposure to the wedding market/industry. With so many weddings postponed last year due to the pandemic, I’d expect a surge in demand later this year assuming we get a hold of the Delta variant and can resume reopening the economy. Are there any ETFs or stocks that would be good exposure to that industry?” Great question, Eric. Maria, you were saying during our production meeting earlier today that you have a bunch of weddings coming up.
Gallagher: Yeah, I’m at the age where a lot of people I know are planning to get married, about to get married, getting married soon. I think I would think about it in a couple of different ways. First is, where are they planning? The natural place to start thinking about planning a wedding, especially as more and more of them are in 2022, 2023, because all of these venues are booked up as the place to go is Pinterest. There’s over 38 million Pinterest boards specifically dedicated to weddings. Then you start thinking where are they registering places like Target and Wayfair for more affordable options, places like Restoration Hardware for more high-end stuff if they’re furnishing an apartment. Then how are they budgeting? How are they styling their wedding? Is it low key? Is it DIY? That’s a lot of people in my life. You’re looking at Etsy for ideas of things like bachelorette party favors, or ways to ask for bridesmaids or ways to decorate your wedding and make it special but in a more of an affordable way. Then lastly, it’s just where are you shopping? Where people buy dresses, where people buy suits to attend. Anthropologie’s owned by Urban Outfitters. I just recently bought a maid of honor dress from Anthropologie. My sister bought her wedding dress from Anthropologie. I think that if you look at it from all of these different angles about how people spend their time going to weddings, where people are spending their money when you’re thinking about weddings. That’s how I start thinking about that.
Hill: Wow. That’s a six-stock basket for the comeback in weddings. What do you think, Jason?
Moser: Well, you know what all of this involves, Chris? It involves spending money. Am I right?
Moser: Of course I’m right. It involves spending money. How’s that money being spent? Say it with me kids, war on cash. You have to love all of these companies in this new fintech space, whether it’s PayPal or Square. Look at the stalwarts like Visa, Mastercard, American Express. However, this money is being spent, look toward those types of businesses as well because that money is moving from point A to point B. That always to me, represents a great way to capitalize on any long-term market opportunity.
Hill: Thanks again for the question, Eric, and keep emails coming into email@example.com. Let’s get to the stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Maria Gallagher, you’re up first. What are you looking at this week?
Gallagher: This week is Roblox. They just recently announced earnings. Their revenue was up 127%; bookings were up 35%; their daily active users were up 29%. Their hours engaged were 9.7 billion, which is up about 13%. I think what is really interesting with Roblox is how many people are there, how are they expanding that demographic to that above 13, continuing to expand internationally, and how are people spending their money on that platform? Digging into those numbers a little bit and understanding how people are spending their time and their money on Roblox is going to be really interesting.
Hill: The ticker symbol?
Hill: Dan, question about Roblox?
Dan Boyd: You know what, Chris, we talk about Roblox so much on this show. I have a confession. I don’t really know what this company does, and at this point, I’m a little afraid to ask.
Gallagher: They created the metaverse. It’s like new Sims, but it’s all online. You go in, you have an avatar, you interact with other avatars and you play games. It’s like the Sims, but you don’t have to buy their CDD.
Boyd: Does the Roblox metaverse have that funny language that Sims speak?
Gallagher: I don’t have a Roblox metaverse, but I think maybe. You just spend more money on Roblox because it’s all online as opposed to buying the Sims game.
Hill: Jason Moser, what are you looking at?
Moser: Taking a look at Elastic; ticker is ESTC. Elastic is a company that offers to customers the tools to perform search, analysis, and visualization of all of this data that is out there to help businesses achieve the best outcomes possible. They will be reporting earnings next Wednesday after the market closes. There’s been just a mediocre year to date. The stock is up a little bit but when they just wrapped up their fiscal year here recently, they did so with over 15,000 total subscription customers and more than 730 clients with annual contract values above $100,000. Approximately 93% of Elastic’s revenue was tied to subscriptions. As customers get larger, so does their relationship with Elastic. In fact, more than 45% of customers with at least $1 million in annual contract value subscribed to all three of the company’s primary solutions. That tells us that maybe there’s some network effects to play here. There’s some switching costs and some stickiness there to the business. I’ll be interested to see what they have to say on Wednesday.
Hill: Dan, question about Elastic?
Boyd: Yes. Jason, I’ve got to ding you here, because Elastic was brought to the table within, I want to say, the last month and a half. Aren’t there other stocks we can talk about, Jason?
Boyd: I know that you’re always talking about the War on Cash. You’re always talking about your different technology stocks. Come on, Jason. Let’s get a new stock in here.
Moser: Listen, man, I’m not after hearts and minds here, Dan. I’m just trying to make people money, and that’s what we’re doing here with Elastic, so I encourage you to keep an eye on this report next Wednesday. We’ll take it from there. How about we cover it in next Friday’s show? We’ll see how things look.
Hill: Interesting choice you got to make here, Dan. One you want to add to your watchlist?
Dan Boyd: I’m going to go with Roblox, but it’s because when I was in high school, a friend of mine had the Sims, and he made a character for me in the Sims and then his dad in the Sims locked me in the bathroom and I died. So that was a somewhat formative experience for me, and I’m just going to go with Roblox.
Hill: What a dark way to end the show. We’re out of time. Maria Gallagher, Jason Moser, thanks for being here. Thanks for listening, everyone. We’ll see you next week.
Discounted offers are only available to new members. Stock Advisor will renew at the then current list price. Stock Advisor list price is $199 per year.
Stock Advisor launched in February of 2002. Returns as of 08/29/2021.
Making the world smarter, happier, and richer.
Market data powered by Xignite.