Chit Chat Stocks - AI Earnings Blitz (GOOG, AMZN, META); South Korean Stock Bonanza; Is Apple's Mojo Back? $AAPL

Episode Date: May 1, 2026

The Investing Power Hour is live-streamed every Thursday on the Chit Chat Stocks Podcast YouTube channel at 5:00 PM EST. This week we discussed: (00:00) Introduction (02:24) Alphabet's Impressive Performance (09:31) Apple's Revenue Growth and Challenges (15:00) Amazon's Strong Results and Market Position (21:35) Depreciation Trends in Big Tech (24:36) Reddit's Revival and Monetization Potential (29:48) Starbucks' Recovery and Market Strategies (32:55) Earnings Insights: Visa and American Express Growth (36:57) Real Brokerage and Remax Merger Analysis (42:18) Defense Budget and Autonomous Warfare Investments (46:02) Market Reactions to Earnings Reports (57:41) Consumer Trends: Fast Food vs. Grocery Performance (01:01:45) Future Watchlist: Companies to Keep an Eye On ***************************************************** Subscribe to Emerging Moats Research: emergingmoats.com  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  https://www.interactivebrokers.com/  Interactive Brokers is a member of SIPC.  ********************************************************************* Check out Value Spotlight: Stockwriteup.com  ********************************************************************* Fiscal.ai is building the future of financial data. With custom charts, AI-generated research reports, and endless analytical tools, you can get up to speed on any stock around the globe. All for a reasonable price.  Use our LINK and get 15% off any premium plan: ⁠https://fiscal.ai/chitchat  ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

For the past three years, IBKR individual clients averaged 24.3% annually, beating the S&P 500's 23.1%. Lower costs and 170-plus global markets matter. Interactive brokers, member SIPC, visit ibkr.com slash performance. Welcome to Chit Chat Stocks, the podcast that helps you find your next great investment. I'm one of your hosts, Ryan Henderson, and I am joined, as always, by the one and only Brett Schaefer. We are in the heart of it. It's that time of the quarter.

Big tech earnings were this week, actually quite the long day yesterday for anyone following big tech. We had Amazon, Meta, Google, and Microsoft all reporting after hours at the same time. That might be the first time that much market cap has ever aligned on the same day. Unscheduling. Bad planning by IR teams and Wall Street on that one. Yeah. Yeah. I'm thinking maybe those IR teams should work together and break it up a little bit. But we've got a full earnings palooza. We're going to talk a whole bunch of different companies. I mean, this is probably the busiest week of the quarter. We've got Starbucks, Visa,

spotify apple also reported as of i think 30 minutes ago and plenty of others as well so i guess before we get in if you enjoy the show please please please leave us a review it helps a ton brett where do you want to start well i want to tease things with uh next week actually well we'll be recording it next week but the week after both of us are going to be out of the office We're not going to do one of the subbed Power Hours. I will be on vacation. Ryan is going to be in wonderful Toronto, which I'm sure, hey, probably pretty nice in May.

Honestly, I'm sure the weather's going to be great working with Fiscal AI. But we're going to do a special show in lieu of the Investing Power Hour since there's so many Small Cap of the Weeks people recommended. We're going to basically do a full episode of Small Caps of the Week.

I think we'll probably do 10 of them, five minutes each, hour-long episodes. So look for that. not doing a live show in two weeks but yeah right why don't we just kick things out with big tech i made some nice depreciation charts that i think can help with the discussion uh not as bad as i thought but they are increasing for some of their earnings yeah what do we want to start with the best best report or the worst report let's do the best alphabet on the way you're still a shareholder correct i am not it's not a huge position for me i think it's like a three percent position but

i made a great report nonetheless actually of all the big tech stocks i own i think i own the two that were up after earnings unless apple's up i haven't checked but uh alphabet yeah the numbers were honestly remarkable i'll just go through some of the headline numbers and you can stop me wherever you want google search grew 19 year over year i believe that's an acceleration google cloud grew 63 year over year and saw record operating margins as well 33 operating margins the 63 year over year growth in google cloud is probably the standout number from this report i think when with all investors looking at it their backlog their cloud commitments i guess which can obviously you know that can change based on a single order or two if you have the

right customer uh that jumped from 100 or i believe it was 200 million dollars let me pull this number up just yeah it was 240 million dollars in total cloud backlog a quarter ago billion billion yeah yeah sorry 240 billion a quarter ago 460 billion this quarter so they added 200 billion dollars in cloud commitments over the last three months which is pretty astounding and then ripping through the rest of the business subscriptions up 19 youtube ads up 11 google network which is becoming less and less uh really a part of the business uh was down four percent but you go through the conference call and it's pretty clear that the execution on the ai side has been exceptional they've all across the board i think everyone

the term everyone uses is the full stack but anywhere from the chips to the cloud services to the actual ai consumer facing applications of gemini and ai mode answers and everything in between they've just done a really really good job rolling it out And the market share is leaning more and more their way over time. So great quarter across the board. It's up 10% today. Yeah. Quite nice.

It's going. Was it your prediction or was this something? I don't know if it was an official 2026 prediction from you or me. Honestly, I forget about them until we get to the end of the year. But we've talked about them dethroning NVIDIA potentially as the largest company in the world. up 10 percent today, up over 100 percent in the last year. Market cap's four point six trillion dollars. They're closing in quickly. And it is at about five trillion, I believe. Yeah, that may have been my prediction. I don't remember the the other part here

is they saw I mean, the earnings beat was massive because they saw basically 40 billion dollars in earnings this quarter from the mark to market of their long-term investments so their spacex and anthropic investments which remains to be seen what you can really do with that because i don't think google has a whole lot of intention to sell those stakes but as good unless they can dump 100 billion in tesla or spacex stock it's not gonna be meaningful to a business of this market cap no but it it leads to uh leads to massive earnings beats at least on the face the uh their long-term investment portfolio has crossed a hundred billion dollars i would guess 80 of that is comprised of spacex and anthropic pretty much but yeah the results

really are remarkable across the board i mean the google cloud backlog adding 200 billion dollars in backlog or cloud commitments in a single quarter is pretty astounding i believe this may have been touched on in the call i'm not sure i believe a decent chunk of that is tpu purchases as well yeah they're the only business i mean we'll talk about in relation to amazon as Well, we'll maybe try to talk about them together. There's just a lot of companies to talk about this week. But Alphabet is not only the business that can arguably has the most ways to get an ROI on AI investment from a revenue perspective. One, Google Search, Gemini, YouTube, Waymo in the long term.

That's a little bit of an earlier stage. But then Google Cloud itself. But then, like Amazon, who is also doing well, we can talk about, they have made the decade-long commitment and investment into the internal chip business, which is making their infrastructure significantly cheaper compared to Microsoft and Meta. And that's showing up across. You're seeing that become an advantage. I think maybe this was the first quarter we saw that become a true advantage financially. It's showing up in the financial statements for both Amazon and Alphabet versus Microsoft and Meta. Yeah, it's fascinating to think about where we were two years ago, where, I mean, all of these investments in AI, whether it's the infrastructure, whether it's the chips, they were a part of Google two years ago.

i mean they've been a part of google for almost a decade now it's and yet it consensus was ai is going to kill this business now i think maybe the part that no one expected or no one saw coming was how well they executed on the consumer facing side like putting gemini in the right places and making it very accessible and and good as well the yeah good good report across the board the The, I don't know if you saw this or not, total cloud commitments, so the backlog between Amazon, Azure, and Google Cloud, I'm not counting Oracle here, but maybe you could throw them in as well, is currently just under $1.5 trillion. It's now. Half of that's open AI. I would say half of that's probably open AI's commitments.

Yeah, well, you know, I guess the market's pricing and a lot of that's not going to materialize because if there was like a certainty that that revenue is going to show up, these stocks would be higher. Yeah, it's strong report across the board. Do we want to move to Apple who just reported? Well, it's I'm looking at this live. I was pulling it up as you were talking there. let's see they posted quarterly revenue 111 billion dollars up 17 percent year-over-year i guess that is an acceleration they haven't really been growing much um let's see quote here iphone achieved a march quarter revenue record fueled by extraordinary demand they're

never good at giving quantitative data during the quarter services achieved yet another all-time record and we're excited to introduce remarkable new products including the iphone 17e m4 powered ipad air and macbook neo i've heard there's a lot of popularity with the new cheaper macbook with nice processing power. Let's see, $28 billion in operating cash flow. It proves the increase to the dividend. I want to check their geographical exposure. We can toss out a lot of numbers here,

but services revenue up from $20 to $31 billion compared to $26.6 billion a year ago. Products, $80 billion compared to $68.7 billion. And let's see what geographies are driving it. $5 billion growth in America's nominally. Europe added a little over $3 billion. And greater China, I think, maybe has bottomed. It's added $4 billion in the quarter.

So I feel like that's pretty good. You know, their P.E. ratio is tough. Right now, the stock's down after hours. We'll see what happens tomorrow. Never really tell. But I feel like that's slightly better than I would think. you can kind of see that there was some momentum building with the new iPhone and product lineup,

but again, with a company this size, you can't, when people say, wow, this new product is great. Okay, yeah, they're going to sell however tens of millions of them. Again, does that necessarily mean there's going to be growth? I'm not sure.

Maybe we can look at the different categories. iPhone looks to have driven the majority of the growth again i mean it's just a powerhouse like a mac ipad wearables not really grown no yeah single digit revenue growth iphone 22 growth it's amazing honestly i i'd like to look if this was a like last year was some sort of weak quarter because this is a big difference i don't know if there was any timing issues i'd like to look into that if i was an investor services continues to be uh continues to just print money for them i think they're getting close to a hundred billion dollars in annual gross profit from services

which i wonder it honestly this is probably a good chance to plug our uh our friends at fiscal here it may have eclipsed hardware in terms of gross profit let me check we'll see well not quite so 31 billion dollars in product gross profit and 24 billion in services gross profit this quarter uh yeah i think services will be less um lumpy where products you know q4 q1 might be a lot different yeah it's a fine quarter but the stock stock's down after hours expectations are high for a company like this and when you don't have the ai story i just think expectations are going to be tough it's a great business but where's the explosive growth going to come from i'm not sure what would have to happen for you to become an apple shareholder oh i think i'd buy this head

if if i was confident in the buyback program i'd buy them at 13 times earnings right around above it was 10 times right it's not a fast grow look this quarter grew pretty quickly again i don't know if there's any timing issues with that but it seemed like a solid quarter but the last few years they have been an anemic grower compared to other big tech and given the fact that they're still driven by the iphone and there is a limitation on the product revenue you can have there i don't see an avenue for 10 or double digit growth over the long term so with a business like that the only way i feel like i can get an acceptable hurdle rate is if we get a lowish p which probably for them you know 13 times versus their growth rate feels solid i know

buffett bought it like seven times but maybe i'm a little less greedy than him and they have that buyback problem you can get double digit stock returns from that but at 36 times earnings i i think you're going to see bond like returns it's similar to costco same high quality i'd probably buy costco at a slightly higher multiple but it's not that much higher both are super high quality Both have earned the right almost to trade like a bond because of their consistency and durability. And just historically, though, almost always when a company turns into this is a bond by commentators, it just underperforms. It is the signal that you're not going to get good forward returns. Yeah.

Let's talk Amazon because – and I will say also when it comes to Apple. you mentioned 13 times earnings as like a potential entry point and everyone whenever you say that and a company trades at 39 or 40 times earnings it sounds impossible like it sounds like oh okay well you know well you're just not gonna you're never gonna own this thing first of all apple has done it before but think about all the quote-unquote wonderful businesses that traded at 40 times earnings in the software space three years ago and what they trade out today it's i think people myself included tend to underestimate the the likelihood that you will get a good entry point at some time like get a low teens earnings multiple for a quality business like companies go

through troughs anyways let's talk amazon amazon results were i thought pretty good across the board. Online stores grew 12 percent. Third-party seller services grew 14 percent. Amazon Web Services, the cloud division, obviously, up 28 percent. Advertising up 24. Subscriptions grew 15 percent. Physical stores up 5 percent. Growth across the board. Nice acceleration. They've been slightly lower across the board, I believe, in all of those categories uh the last couple of years i i think they said the fastest overall growth since kind of the pandemic bubble or pandemic growth engine stopped yeah let me just check real quick here and i will say earning seasons may be one of the best times to have a fiscally i subscription because uh the

numbers are there right away i am seeing an acceleration in every single category except for well physical stores was like flat that doesn't matter small piece we're transitioning to third party third party sellers anyways and oh i mean in physical stores that doesn't even matter no yeah so whole foods is struggling there you go uh i think the standout here was operating margins which uh maybe this is where we can have our discussion around depreciation operating margins hit a record high for amazon i believe it was 13 just over 13 percent in the quarter yeah pulling this up sorry operating margin 13 the funny thing is if you have like if you pull up an operating cash flow versus free cash flow chart they have had i believe the

numbers, $150 billion in operating cash flow over the last 12 months. So $150 billion. Free cash flow, can you guess? Yeah, is it flat? Yeah, negative. It's astounding. You research your investments, you analyze markets, you manage risk, but did you research your broker? For the past three years, IBKR individual clients averaged an annual return of 24.3% compared to 23.1% on the S&P 500. IBKR's lower trading cost, competitive rates, efficient execution, and access to more than 170 global markets helped investors keep more of what they earn and put more capital to work. Over time, the broker you choose matters. Interactive Brokers member SIPC. If you care about performance, find out why the best informed investors choose

interactive brokers at ibkr.com slash performance yeah they're planning on 200 billion this year right and i think they didn't raise the guide even though price increases are going through across the entire chip market because like alphabet they have the internal chip division which they're both touting these revenue figures i think it's a little bit weird to talk about that but they're almost selling it to themselves so you kind of get what i'm saying there where they have the internal chips they're using for the cloud now and again i think compared and we may not even get to meta or microsoft but compared to them where meta is increasing their capex plans microsoft is uh still growing azure at an impressive rate but it hasn't kept accelerating

its revenue growth where amazon and google cloud are accelerating and i think that's only going to continue throughout 2026 and then maybe we can look at the depreciation you know amazon it's always been a high capital intensive business, but we've actually seen them, and I think it's probably because of the e-commerce business as well. Over the last 10 years, they've gone from, I don't know, I need to, I should really expand these charts. I can barely read it. I made them too small. It's, I believe from something like 6% up to 9.3% of depreciation as a percentage of revenue, made them with some custom charts and fiscal day high. If we look at Meta, it has increased significantly coming out of the pandemic, but it hasn't been that bad. They're at about 9.5%

depreciation as a percentage of revenue. But you should think about that as Amazon, historically, capital-intensive business, right? We think about them as the whole infrastructure play for the United States. Meta's depreciation as a percentage of revenue is now equal to Amazon. But if you look at Alphabet's chart, it's the only one that has actually gone down since pre-pandemic. So their scaling of revenue is just insane. And their efficiency for compute is just a sight to behold. Microsoft is actually probably the worst. They're at 11% depreciation as a percentage of revenue.

and i guess it remains to be seen whether these figures will be uh revised um if the useful life of the servers kind of the estimates change there and i think given the fact that capex is probably going to keep growing faster than revenue for most of these businesses i would think in 2026 and maybe the next two years if plans are all uh you know the plans go ahead we're going to see depreciation over the next three to five years consistently rise as a percentage of revenue and you just need that i think investors need to understand that that with that we may see margin compression with these businesses not a significant amount but something to think about especially when they're trading at 40 times earnings now yeah it's

That's my guess because unless I'm mistaken, I don't think most of these businesses raised their CapEx guide for this year during the quarter. Meta did slightly. Meta did. Okay. Again, that comes back to the cost of they don't have internal chips. My guess for why most of these companies just consistently revised their CapEx guidance up all of last year would probably be a lot of the memory chip stuff. like the membership prices just ballooning and the supply constraints there i think that's maybe something a lot of these companies underestimated going into 2025 i pulled this up because i found

this astounding samsung is expected to be the second most profitable company in the world by 2027 so by next year analysts expect that they will generate i believe it's 230 billion dollars in operating income behind only nvidia is this green stocks are crazy interactive brokers just added fuel to the fire too they launched i know we're just talking to our advertising partners this week but it is related to this they just launched south korea connection so if you're if you're a user like ryan and i are you can directly trade korean stocks for the first time it's actually extremely difficult to buy samsung and sk hynix until recently they're one of two of the largest businesses in the world um i think that's gonna add fuel to the boom slash bubble but

continue right any any other figures no i mean it's sk hynix is i think was expected to be like the sixth most profitable by 2027 as well just both of them are seeing like astounding growth and profits or at least are projected to see astounding growth and they already are same with micron they're all in the same boat this is is this just a memory chip cycle like for the ages or is there any any chance in the world come on there's durability here i mean no way look at micro stock charts or historical price chart look at samsung and sk hynix Or even, I mean, even their revenue. It's like the definition of a cycle if you go back and look at their revenue over the last 20 years, or cyclical.

Just hope that Anthropic and OpenAI get to hundreds of billions in revenue faster than any company ever. It all hinges on that. Let's hope. I don't know. It's kind of a weird, like, I mean, we talked about this on the investing in cyclicals episode that we did. But you're basically stuck if you're Micron or Samsung or SK Hynix's management team. Damned if you do, damned if you don't. Yeah.

You obviously have to invest in capacity expansion. Your customers are begging you for it and committing to it. But when you all do that in tandem, the prices come down. We got a question on Reddit who I believe just released numbers. Do we want to take this one live here? Yeah, well, I'll say the best way maybe to play the South Korean market with these memory players and the stock market going crazy, our little friends at Coupang might be some higher incomes coming through that can spend on e-commerce nonsense. Yeah, we can talk Reddit. Someone said here 50% free cash flow margins.

That's nice. Sure. Maybe I'll do a live demo here and pull up some of the numbers. i i did briefly look at reddit prior to us hitting record here this is it's weird how they've seen just like a complete revival in growth so uh well i guess let me get to the kpis here i'm on the press release page yeah can you see it i'm faster than you i'm faster than our sponsor oh you've got it yeah so okay rest of our average weekly users for the whole world grew 23 percent year over year 33 internationally and 10 in america the average revenue per user up 44 they are i'm

shocked how well they've been able to monetize like the monetization increase has been really strong the i don't know what is your take on the staying power of reddit because on the one hand i think it's kind of like a gross platform sometimes like you can say whatever you want i guess which is there's some looks or the content yeah well yeah uh the content mostly but the other part is this is like the engine behind a lot of ai responses yeah what does that make you that always gives me concern when it says wikipedia and reddit are the the two main sources for things where it's like all right we're getting some deep analysis i mean you can get some interesting insights from red i like using it for research i'm looking at new bank right now

for a research report and it's pretty easy to just go you look up something on google why do brazilians like new bank and then there's some reddit threads where people give some very harsh opinions or strong opinions not necessarily harsh new bank they have a good opinion on but yeah i think you have to ask is it replicable i feel like it'd be pretty difficult to replicate like why would your local sports teams red it's changed to some random platform instead of just sticking there and if they have a good advertising team and someone's not going to blow out the income statement on the operating expense line you're probably going to get some good earnings growth people say that oh this could get disrupted by ai because you can just ask a question to ai

but i think the interactivity of the community is more important for the core users and looking actually what some person's opinion was even if they're all anonymous um is more interesting to people so yeah i feel like it has some staying power yeah and the ai argument is really circular because it's like yeah you don't need reddit you can just ask ai and then the answers are being pulled from reddit it's like well ai needs reddit so yeah no but it always goes back until the yeah until we get ai into robots or that's what they say right full full vision uh reading everything but yeah i don't know free cash flow ret has gone from negative 12 million dollars or i guess 29 million dollars two years ago to 311 million dollars today or in the most

recent quarter free cash flow margins yeah someone someone called it out in the chat basically 50 percent what's our sbc i i believe it's come down i mean this is a business that's been operating for quite a long time i'm seeing sbc 326 million last 12 months versus revenue of 2.5 billion not the worst but that's over 10 percent so look it's about i would guess 20 percent of free cash flow yeah i like to look at more of it as a percentage of revenue though i guess you can look at either i just mean okay if you strip it out free cash flow margins are still probably looking like 40 sure that's fair uh yeah well what's their stock price at what's their market cap at oh ev 25 billion that's yeah it's aggressive they've been on a tear i mean kind of

it's hard not to when you see a social media business growing at the rate they're growing because you can see what happens with the margin inflection true that's true good point all right any other earnings trying to fly through all starbucks brian nickel to starbucks back he might be the man we people in seattle are complaining about his private jet moving to nashville but that may be the right move and he may be worth it it so 3.8 same store transactions growth up they have been declining in transactions i think for several quarters in a row and it seems like the revival is back i've got some i mean yeah how do you have some anecdotes from people in your life well they got back to the bread and butter on the marketing side

just like making the coffee look good you know i think people have seen this where it's literally just you know yeah come to the cafe yes it's nice to hang out here i've i go to starbucks occasionally and just work from there and i am pretty blown away by the volume honestly but obviously that doesn't one one starbucks isn't isn't going to be uh dictating the quarter no i this was same uh average ticket volume or average ticket price grew three percent transactions grew three percent so you've got really strong comp store sales now i think we're probably hitting a point in starbucks evolution where you should expect slower growth from unit account or like store expansion so yeah you got to basically assume that you're getting

slightly higher operating operating income growth than whatever the comp store sales are would be my kind of back in the napkin math there yeah and i'm sharing the comps here it's not like they are comparing to a terrible quarter last year was negative one percent which actually in q would I'm in Q3 in the calendar. It's September 2024. Or am I looking at the right one? Yeah, negative 1%. Yeah, September 2024 is negative 7%.

So you would have thought that global comps, which are at about 6% this quarter, the highest since 2023, you would have thought it was an easy comp, but it actually wasn't. So two-year stack, not that bad. What this tells me, because Chipotle, on the flip side, has struggled. What this tells me is if a CEO jump ship goes to another company in the same, I guess, category, that is a signal, big-time signal. Different than Tim Cook? He's just retiring? Well, retirement's different, I would guess. A little better.

I mean, obviously, when a CEO leaves, it's never great, but jumping ship is probably worse in the same industry. You know what Tim Cook has been buying, though? A whole lot of buys on Nike. And never invest in apparel. I'm keeping the rule. It's done me well. It's done me well. No, it's the right choice.

Okay, last one I'll touch on because I know we've talked a whole lot of earnings here. Visa saw its highest transaction volume growth in four years. Nice. Same with American Express. I don't know if we talked about them last week. I think we did, actually. think briefly because they reported day of but this is unbelievable i thought stable coins were destroying card networks for good yeah well it looks like whatever risk people had for these

traditional non-crypto fintech businesses which you know these is i guess the og fintech or the remittance stuff with the immigration crackdown we've seen remittly i think jumps 60 percent in the last three months there's been i'm guessing everyone in the professional world is seeing the data that this was a lot of news and not noise yeah i i they're gonna keep chugging along it's it's easy to paint the bear case when you go oh we're gonna eliminate these card fees forever but we'll see i mean that's been the argument every year i don't i don't see it in the numbers yet, and highly impressive quarter by Visa. And they're kind of embracing some of these new categories. They're kind of one of the businesses, just to pull back the

curtain a little bit, we can't read every earnings report fully, or I can't read every conference call or shareholder letter fully. There's probably a couple of, a dozen that I read over the course of a month. But out of the ones we might talk about on the show, Visa is a company I like, but i just kind of want to see the headline numbers i'll look for kind of three key kpis or something like that but for them i did notice that they are saying they're seeing nice growth from embracing the stablecoin industry for transactions so i think they are less at risk than a capital one or american express who are earning a lot on those those interchange fees as well as other banks but yeah either way when we talk about them being extremely wide moat

i think this proves it can you guess how much payment volume or transaction volume visa mastercard and american express have processed over the last 12 months all right i think i can get this are we doing total or is it just because there's a difference between like their bill business versus total transaction volume total okay i think visa is about 16 trillion amex is about two master card is going to be a little smaller than visas so let's combine this to 33 trillion 33 trillion is that good you're in the ballpark yeah they just crossed 30 trillion dollars in payments volume over the last year it i feel like it's groundhog day with some of these where it's like yes transaction volume sees fantastic growth and we talk about stable coins and it

feels like we've been talking about stable coins or crypto disintermediating like traditional commerce for a decade and we're still in the same place like we are the world still sees it as uh an investment not a not a token for transactions yeah yeah i'll wait maybe next quarter maybe next quarter i think it's funny that uh the companies like start adopting it but they don't really like they don't lean that into it they're just like every time there's a bear thesis on them they're like we have a bnb strategy yeah it's like the companies that are like you know like everyone's saying oh service now they're getting destroyed by ai it's like we are the ai company we have ai revenue we define it as this

random thing but it's ai revenue yeah yeah i get that spotify sure let's talk we can talk spotify what how about first maybe something non-earnings we have many questions on this real brokerage is merging with remax holdings remax people know that brand the it's the hot air balloon right blue and red correct it was actually the first time i've seen the real brokerage in the wall street journal so pretty big pretty big announcement here they are merging with remax uh remax their business model is basically franchising that brand for real estate teams under the remax brand so they're not taking on like i don't believe and i haven't looked deeply into the business yet but i don't believe they're taking on a bunch of like office debt or something

like that or they're bringing on a bunch you know it's a franchising business the deal is a little complicated. It's a mix of cash and stock, mainly stock. And it depends where the real brokerage and REMAX are trading, or where the real brokerage is trading, really, because it's kind of an exchange of shares. So based on where the real brokerage stock is trading right now, the combined businesses would have a market cap of roughly $752 million because the new business is going to have existing real brokerage shareholders own 59% of it. So I'm just taking the current real brokerage market cap and dividing it by 0.59. Now, if we go to enterprise value, I know this is tough for the podcast. Maybe, Adam, there's a little debt there.

Looked at the balance sheet. I think net debt for REMAX is about $300 million. Again, haven't looked closely, but let's ballpark enterprise value to a billion, give or take. now when we talk about the combined business they already say they're doing 160 million in adjusted earnings i think the big question is why are they merging when the real brokerage is kind of disrupting this traditional model i think the question or the answer they would give is you immediately get 180 000 agents the real real uh from real max which the real brokerage only has i think in the low 30s 100 000 of these are in north america but they also have a large international presence with franchising models with the brand for local real estate agents

across the globe. I think there are many, many countries. And then you have all these agents coming on board, which are still going to be under the REMAX brand, but you can have them use the real brokerage software, mortgage, real wallet, all that stuff. It's a really easy upsell to all these people, they would argue. They can still utilize REMAX as the front end brand and you just acquired a bunch of agents on the cheap uh remax's stock was in a 90 is in wasn't a 90 percent drawdown before the acquisition uh i mean what could go wrong you know maybe remax not wanting to become powered by real software you know the agents there they could have competing franchisees with independent real real brokerage sellers that kind of you know it's under the same

company, but you're competing as a real estate agent for customers. And you're technically the same business. It's a bit strange. And it's a widespread global business. And real is only North America and Canada. Maybe they're stretching their focus too thin, especially as they're in this hyper growth phase. There's a lot of moving parts. Ryan, did you look at this at all? And I'm not. I can just see it by brief opinion. I like it. Feels like a very cheap price for these real estate agents but look the market's going to be in wait and see mode and i hope it doesn't affect the real brokerages growth trajectory but you know it feels like a reasonable price like there's we're not acquiring this at a huge multiple to earnings yeah i did not see this uh until you

talked about it don't have much of an opinion i do think i mean remax maybe it's just the area where we grew up but it's pretty recognizable brand so maybe it was global they got in south america it uh i mean i feel like the more agents real brokerage can get on their platform the better and if they have to pay up to acquire those like is it cheaper to acquire them through remax or to go out and get them one by one honestly with the marketing spend that this might be a cheaper price like you're you're more than 5x in your agent count and they're paying basically a little less than their current market cap it is a merger yeah and yes it's franchise revenue but there's probably ways to merge

everything together over time especially when it's not necessarily a direct competitor it's kind of like a software for a brokerage where you can still use the remax brand but if it's powered by the real brokerage and like they say their software is better than everyone else uh which we've seen we've given their hyper growth that i i think you know there's good evidence it is maybe maybe it'll work out um we'll see yeah yeah i mean by the way it's uh it's something eventful which sometimes for small caps you get nothing eventful for several years so it's true that's true but with any merger you know the market never liked it so stocks down a bit i think any investor should be as expected okay do we want to talk uh this

dow budget i saw you had a lot of notes this was on the docket last week and i wanted to talk about it this week is something that's not uh well it's related to people they a lot of people interested in things like kraken robotics andrew going public palantir of course even though i think we both think that's at extreme valuation just the defense and space stuff and autonomous warfare and there just seems to be a super cycle here uh the is you said dow is now not the department of defense it's the department of war uh this is their new budget for autonomous warfare again this is not going to be something like earnings covered on cnbc or something like that but I thought this was a nice niche that I think a lot of listeners would be interested in looking

at stocks like Kraken Robotics that could, you know, eventually, I think, trade a reasonable price. So we have clear examples of how drone tech dominance will be required to maintain globalization with the Iran war. There's also space connectivity and things like that. the current defense budget proposal for 2027 is $1.5 trillion, with $70 billion to be proposed to autonomy and drone defense. I assume that's both defensive capabilities and offensive capabilities. And they have made a new division for procurement called the Defense Autonomous Warfare Group, acronym DOG, which I think is quite funny. And the spending increase for this division is 24,000%. So they're trying to not only, you know, the overall budget is increasing by 24,000%.

The $70 billion is a jump. I don't know what the exact figure is, but they're trying to rapidly get these capabilities into the hands of the U.S. military. And I think there's going to be just a huge benefit for the companies. I know Andral is private, but again, Kraken Robotics, rocket lab um is more space uh there's companies like kratos there's companies like it just all across the board a lot of them right now i don't see many buying opportunities you see extreme sales multiple but like always there's eventually going to be a washout and i would think just looking at a lot of these companies there's going to still be that defense budget there last thing i'll say on the item here quote this budget requests over 75 billion dollars to ensure

american space superiority this is a quote from their press uh announcement this includes 31 space launches 13 billion dollars to develop and field missile warning and tracking capabilities to gps satellites and their supporting infrastructure 5.9 billion dollars for satellite communication 7.7 billion dollars for airborne moving target indication capabilities that's a mouthful and 3.1 billion dollars investment in our next generation space data network there's just so much budgetary proposals for this it's going to be i think a growth engine for for the next few decades yeah i don't really see a place to invest here personally like at the moment it seems like all these things have been bid up and well maybe a tease we're grabbing lou whiteman on next week

red wire is not that expensive i don't know the business will but no i mean i the a lot of businesses will benefit from the increased budget it's just kind of finding which ones are actually trading at realistic multiples uh but yeah i kind of shrug my shoulders when it comes to the defense sector because it seems like people only get interested in times of war which is simultaneously like the worst time to get interested because the stocks are already owned by that time or seem to be bid up where do we want to go next brett we've got spotify did you see uh michael burry is buying sprouts farmer's market i did say they were see they were up uh congrats to any i'm not a shareholder at the moment what did i rotate it out for i think mercado libre

i don't know you know i believe mercado libre will be better over the long term but yeah michael burry he's learning from chit chat stocks it's funny to see like when when burry buys paypal i think like uh who cares like i don't really listen to that guy anymore anyways like what's the big deal but when he buys something i own i'm like see i told you it's cheap like yeah we were on this first we we looked at it first what did i didn't even look at the quarter yet let's pull up the comp sales that are really all that matters yeah wow expectations must have been pretty low it's negative two percent yeah i think the guidance was generally all right here i'm pulling up the numbers real quick um what was it comp sales minus two yeah i mean the year

before was 12 positive 12 so tough comp yeah and i love the thing i like the most is jack sinclair the ceo is just the most like plain spoken person i you know how every single ceo when you open the press release it's like some i don't know hyper bullish quote as like the very first thing in the press release record numbers yeah yeah here's jack sinclair's quote this the first quarter played out largely as we expected that's it it's like okay yeah no no positive surprise no negative surprise the i think he's on the federal reserve of san francisco too maybe he rotated out yeah comp store sales declined just under two percent they're guiding for anywhere from negative one to positive one percent comp sales for the full year so basically flat

which given last year's sort of accelerated growth seems good the gross margins and the operating margins for this business continue to defy gravity honestly for a for a store that is selling groceries they i think have probably three or four times the operating margins of other grocers because they're not a discount grocer they they sell something or they provide an experience that people think is different so that that's probably the one thing that created and for anyone that hasn't followed the sprouts farmers market story basically during covid they traded at was it six times cash flow at its cheapest operating cash flow sure yeah something like that the concern was because they saw a big boost everyone was shopping at the grocery store

because they couldn't go out to restaurants anymore and the concern was these operating margins aren't going to last because operating margins had expanded to five or six percent i and part of me thought yeah okay maybe they come down a bit they've held up and this has been a much more durable uh yeah brett's pulling up what do you have their gross margins gross margin yeah it's it's been a little weak the last few quarters I think because the comp sales are below inflation at the moment, but since the pandemic, it's been up into the right generally, kind of in the mid-30s to now approaching 40%. Yeah, 39% gross margins for a grocery business is really good. the i they are guiding for 40 new stores a year they've got or this year they've got what is it

i think around 500 stores today so potentially just under 10 store growth you're i think they there's a recipe for mid single digit comp sales it's trading at roughly like 13 times earnings 12 13 times trailing earnings i think you make well i guess that was before the 17 bump today but i think you make pretty good returns from here honestly what's nice about them is for some reason they trade anti with any growth stocks or the ai trade so anytime ai stocks nasdaq that stuff is up for the day they're down and then if they're that stuff's down sprouse is up it's like a counter trade that philip morris maybe it's philip morris is more of the the dollar index but yeah so if you want some counterweight to your portfolio sprouts

farmers market that's the way to go maybe altria as well i don't know if you saw where they at did they report they reported the you know they're 73 that's nice yeah this i mean this is closer to a bond really you're getting basically i would guess six percent per share earnings growth annually from here you're gonna get i mean you get more that's what they're that's what they're guiding for i mean well i guess maybe this with the repurchases they're less um what attractive now it yeah i guess it it all kind of depends on the valuation but the i mean the reality is you're probably going to have consistent i would guess three to four percent volume declines in cigarette business so there remains to be seen what they could do with the non-smoking products

on which is their oral nicotine their zin competitor seeing really strong growth at a time when zin is not seeing such strong growth in the united states so kind of a market share taker i guess how do you think this industry shakes out if you had to if you had to pin it market share wise in five years from now do you think it's is in than everyone else or is this a little more balanced i'm gonna do a lame answer for the podcast and say i do not know and i don't think ultra group is priced here now where you kind of get that call option for free i feel like yeah Like you said, you look at these earnings powers, the forward returns aren't going to be that great. Pouches is a very uncertain market at the moment, United States and globally, where you look at the most attractive area, and we may have talked about this earlier this quarter, is the heat not burn and kind of the moat characteristics around that business where Icos dominates, huge amount of market share, well over $10 billion in revenue today, fantastic unit economics. That is where I would have confidence in them sticking around in Europe

and Japan and a few other markets. Pouches, vaping is – well, pouches are less of a crapshoot than vaping, but I'm getting kind of in that uncertain zone. All right. I have a trivia question for you. From January 1st, 2021, what is the total return annualized for Altru Group, Ben? Total return. Very important there. Not price percentage change. I will go... Are you talking annualized or just total over that whole time?

Annualized. I would guess you got 120% returns. No, annualized. Oh, sorry. Annualized? 12. That might be high. Now that I say it, it's high. 20. 20. Really? I mean, it was trading at... dividends it was trading at like a 10 dividend yield around that time right yeah the stock price let's look what the stock price was 40 so almost a double then you were starting at a dividend yield

of eight percent and the dividends grown so you reinvest there yeah pretty good bit of a bumpy ride along the way if i'm not mistaken the there was a point there where uh i mean kind of everyone went below 40 never was never gone above 60 until like last quarter i thought i remember the stocks trading off on heightened volume declines but maybe zoom out doesn't look so bad volatility for them is never that bad were there any earnings reports this quarter that surprised you positively oh that is a good question spotify's margin look good but maybe talk about that after i think visa for sure um yeah we have a comment here from guest andrew marshall says what stock are you telling me to buy any personalized financial advice anyone who listens to the

show knows that at the front and end of the show we uh have the disclaimer no financial advice so if we talk about anything uh yeah do your own due diligence i appreciate the joke there uh i'd say visa i mean that revenue growth was fantastic there is some i believe currency there but so far yeah they seem good volumes are strong amex was also strong same category really like they're accelerating their build business which is their payment volume pretty pretty impressed what about you visa yeah visa is probably out there i mean i don't know big techs we've already talked about at google was obviously a good quarter starbucks was positive uh more positive than i would have expected the i'm trying to think through the other ones there

were a few restaurants that held up relatively well yum brands taco bell for some reason has been resilient i guess i think it's the ultra discounters right we're moving down there's the price war so they're probably going to benefit because they're already so cheap chilies for some reason has seen some revival i don't know well i've done work on this especially i write some articles from the motley fool on this the fact that fast casual and mcdonald's and some of the other brands got so close to what a sit-down chain was at where the price of chilies or applebee's versus a mcdonald's or chipotle wasn't that much different they have been able to market that pretty well they have a good management team in there and someone goes hey

is just a much better value proposition to go to Chili's versus somewhere else because they haven't taken that price. Good on the Chili's team. The other thing that stood out to me was, for some reason, Oreo eaters do not care about GLP-1s. Mondelez, the big candy maker, strong organic growth. I was in big resistance to Oreos. They're putting some in there.

It must be. I was just generally surprised how the candy and really cheap fast food brands were able to hold up well, while the fast casual has been just decimated. And some of the other CPG, yeah, not good either. Yeah. I'm going to take Andrew's question here and rephrase it, since obviously we are not giving personalized financial advice. what would you say is highest on your watch list top three right now after this earnings season i guess we're in the middle of it but top three companies on your watch list well yeah a lot of these may not have reported yet i'll say new bank the i'm doing a report for them for anyone listening to the podcast it'll be out as of this as you're listening to this it It should be out around the same time on Friday morning.

I don't know what the earnings will be, but yeah, definitely something I'm looking at closely. Nintendo, memory stuff's hurting them bad, but I believe they'll get through it, and the earnings hit is overblown. We'll see what they report on that. Usually, they'll probably be vague as usual, so probably won't get any help,

but I think next few years, it's just a fantastic buying opportunity, end looking at the existing portfolio on the watch list would be the airport operators once again they are kind of down a little bit while oil is up and some flight cancellation news i feel like we're getting back to that 11 times 12 times you've done or even less where you can kind of get some really really uh attractive looking returns but um yeah that's about it did you see I'll go ahead and give mine real quick. One company that's kind of, I would say, more on my radar than my watch list, but one I want to do more work on is Figma. They've just been wrecked since the IPO. They are down, I think, 85%. Just by them and Adobe, right? Can't go wrong.

well yeah that's my only my only concern is i don't know if i want to touch any more software but they are now trading i believe at like let me pull up the exact numbers so i don't mess this up so remember adobe was it three years ago tried to buy figma for 20 billion dollars now it's maybe worth more in sort of the adobe complex and under their hood than on their own But today, can you guess the market cap of Figma? No clue. I have no bearing on this business. Well, enterprise value, $7.6 billion.

So it's now trading 65% below where Adobe wanted to buy them three years ago, which at first I would say, yeah, well, maybe this was best for Adobe that it got blocked by regulators. but uh they've been hurting too so it's not like they're in that much better of a position so figma's up there uber i guess is high on my watch list did you see this week that they are launching hotel bookings on their app yeah i'm not sure that's gonna work but we'll see no i'm with you they like to launch a lot of stuff yeah i mean yeah they do test a ton of stuff and then the last one i'll say is i guess probably adian or i've i've teased it before msci i think that'll be my next research report yep that's coming out in the next couple of weeks i forget the exact schedule but we have some fun ones for everyone uh ryan i know ryan has to go for work i believe

But let me close things out here. Let's see. We had a couple of questions. Someone asked if we were applying to J.P. Morgan's equities division. No further comments on that. Ryan may know or not know what I'm talking about there. Some of the listeners may know what we're talking about. There was a big story about OpenAI missing revenue, internal revenue targets.

We talked very bullishly on the big tech companies. I'd say maybe that could throw some, what is it saying, water on the fire there? Is that correct? But maybe that'll temper expectations a bit. I feel like we almost made it through an episode without talking about OpenAI, but then I actually thought about the big tech earnings and we mentioned them a number of times.

So, yeah, well, Sam Altman, shocking. Oh, we didn't talk about it. The Musk versus Altman. Maybe it's something. Yes, maybe when the trial concludes, I'm confused. I haven't followed this. There's too much to do in my work life to follow this. Have you followed this at all?

I'll read it at some point when we finish. Not really, but I saw that they are putting – He's on the stand, right? Saatchi Nadella is supposed to testify. Great. This could be an episode of TV. That's nice. And the last thing, again, appreciate the listening question from the Substack chat.

Someone said there is a new IPO of a company called Bullish. The ticker is BLSH. Are you buying? Well, that's a sign of the times. So, yeah, I appreciate that. And everyone, join the Substack chat. Link is in the show notes there. Sign up to Emerging Modes.

Ryan, anything else? No, I'd say bullish. BLSH, that ticker, is maybe a non-starter for me, honestly. But maybe it could be memed. I think that's going to do it, though. Thank you, everyone, for tuning in. We want to remind listeners that Brett and I are not financial advisors. Anything we say or discuss here on this podcast is not formal advice or recommendation.

We may buy, sell, or hold any of the securities discussed on this podcast. Thank you again. We'll see you next time. I finally had a light bulb moment about a stock we've all heard about growing at 18% a year and a 15 PE. I shared this insight in a special deep dive report to subscribers of my research service Value Spotlight. The report is called A Generational Moment, Reigniting Human Connections Through a Tangible Network of Intangible Assets. Chit chat listeners can get a discount to my research at stockwriteup.com. That's stock, W-R-I-T-E-U-P.com.