Chit Chat Stocks - Alphabet's Mega Debt Offering; Oscar Health and Spotify Earnings; Value Play Or Value Trap?

Episode Date: February 13, 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 (03:02) Analyzing Monday.com (11:04) Big Tech and AI: Alphabet's Bond Issuance (21:32) Value Play or Value Trap (36:32) AI Disruption in Consulting (41:13) Earnings Insights: Oscar and Spotify (53:31) The Rise and Fall of Tai Lopez (59:11) Listener Questions and Market Insights ***************************************************** 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.  ********************************************************************* 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

This episode is presented by Interactive Brokers. Interactive Brokers is the best platform for global investors. From their one-of-a-kind market coverage to their best-in-class pricing, IBKR truly has it all. If you're serious about investing, head on over to IBKR.com. Stay tuned for more Interactive Brokers later in this episode. Welcome to Chit Chat Stocks, a podcast that helps you discover 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. this is our weekly power hour episode we do these every thursday usually at 5 p.m eastern time we're

doing this on a wednesday because i had a recording conflict for tomorrow but if you're listening to the podcast players it'll come out come out at the same time anyways but if you're interested and want to ask us questions you can head on over to youtube chit chat stocks and ask us questions as we do these shows live but we talk all things financial markets on these episodes we riff because lately there's been a lot to riff about. Brett's got an interesting bubble watch for this week. We've got earnings reports. We've got some stinky earnings reports as well

for a couple of companies in my portfolio, unfortunately. But we're going to get to all of that. Spotify, Shopify, monday.com. We've got 100-year bonds and plenty more. And I also have a fun game, Brett, that I'm going to play called Value Play or Value Trap. We're going to go quick fire with a number of cheap-looking companies, and I'll get your take. But without further ado, where do we want to start?

Well, Ryan, I guess maybe welcome in everyone. You might have problems in your personal life. The government may have a giant conspiracy going that is going to bring down civilization. But don't worry. The Dow is at 50,000. you may or may not get the reference I'm making there but I think a lot of listeners do and I can tell you after if you don't

people are asking here in the chat already about PayPal we talked about them a bit last week people are asking thoughts on Ackman exiting Nike and Chipotle maybe if we have time we can discuss that but I think Ryan we should begin people were asking last week about Monday.com it's a company you bought and you told me, unfortunately, he said this offline, but it was the quickest 50% drawdown

you've ever experienced. I think people would be interested to see, especially because software is just an extremely hot topic right now. We released this morning for people listening on Friday. This was released Wednesday morning. The other podcast in your feed this week with Drew Cohen from Speedo Research, a comprehensive interview covering Constellation software and it seems that people really really wanted to listen to that episode so i think why don't i start with money.com catching the falling knife what were your thoughts here ryan on the quarter yeah i'd love i wish i could just point to the sas apocalypse or the software mageddon that's happening right now and say everyone's wrong i'm right monday.com's earnings

weren't that bad but that is not the case monday.com reported earnings on monday as they do every quarter i it'd be a lot cooler if they beat earnings and did it on every monday but to wake up what do you think about that as the branding do they do it monday morning yes and it's that's not bad branding i like it i like it yeah i mean that'd be great if i didn't have to wake up to a company down 20 off my monday morning but uh yeah spoiler alert bad report the i told brett this is the quickest stock i've ever owned to drop 50 it's not a huge chunk of my portfolio but it has dropped it's been cut the first shares i purchased were cut in half and so far i've made the mistake of doubling down but they reported earnings on

monday revenue was up 25 operating margins contracted so this was basically the concern for me and they've kind of been on this what looked like a wonderful trajectory of growing revenue growing revenue from existing customers adding new customers and scaling profit margins as they've as they've grown and it's gone from i think like negative 30 operating margins to what was positive four percent this quarter last year now they've contracted non-gap operating margins also contracted so it wasn't just some gap one-time thing and then free cash flow dropped and that's probably the most concerning thing of all was not just that free cash flow margins have gone from 31% in 2024 to 25% in 2025. But their guidance for next year is 20% free cash flow

margins. So I guess what's happening here, it seems to be, I wanted to point my finger and say, well, they're just, they can't stop spending. It's out of control expenses. But I don't know if this is necessarily out-of-control expenses or more of what they have to do as a business to improve. They are trying to move up market in their customer base, which is, it's more competitive. There's other task management solutions that have carved out strong share in the enterprise market. But the customer acquisition costs are much higher, it seems to be the case here. And then on top of that, for a long time, they'd benefited from product-led growth where their customers, it'd be a small, medium-sized business that would adopt money.com,

either the business would grow or they'd add more seats within an organization. and it seems like a lot of that has tapped out in churn was apparently has i think has ticked up for they haven't i don't think they've explicitly said that but among the small and medium-sized business customers churn is higher so customer acquisition costs are rising margins are compressing revenue is growing but it's growing at a slower pace sort of the perfect combination of terrible things to happen for a software company. Now, here's the hard part. The enterprise value to gross profit is at two now. And I've, I found myself like, well, those results sucked, but Hey, it's cheaper now that it's down another 20%. Anytime I start thinking like that,

And I usually end up in a worse position six months from now. So I'm wondering, I'm kind of thinking it might be time to not own this company. I was willing to look past sort of their lack of a moat early on, but now it's hard to do so. Well, Ryan, what about, yeah, I do agree that there may be less switching costs than other software providers. That's probably the biggest concern for them as opposed to some of those really, I don't know if I'd call it robust, but just products that people use for many, many hours a day. an Excel, an Adobe, an Autodesk type product. But I maybe would ask you, Brad, don't you have your own rule now of holding something for three years, letting it prove out? Maybe this is one where, and I don't know if it's non-taxable or taxable, I guess I don't have access to your own brokerage account, but if things keep going poorly, it could be the tax loss write-off for the year. You can even get back in at a cheaper price. And maybe I can also add, do you remember our journey with Wix from early 2021 through, I believe, the end of 2022, averaging down about

seven times, taking a nice tax loss, harvest, and then getting back in at the lows, honestly, and riding it to about 100% gain? This maybe is a lesson. We don't need to do that story with money.com even if the outcome would be all right yeah you made it sound a little better when it happens over a two-year period it's a lot it's easier to say that over in 10 seconds than when you experience an 80 percent drawdown over a two-year period yeah this is in my roth So there's no tax loss harvesting. I think you're right. I should hold myself to the anything I buy, I got to hold for three years. I'm probably not going to add to it. I will. Unless something drastically changes, I don't see myself adding. But it is a good point and will hopefully prevent me from overreacting to a single bad quarter. If they can repurchase a lot of stock and clean up that balance sheet – or not clean up the balance sheet.

Excuse me. Clean up the – I believe they also have kind of the SBC bug. Hey, falling stock price is going to benefit you over the long term. That's what you just have to say. But the problem is where people run into trouble. And I'm thinking of companies, for example, we didn't even put this on the docket. Maybe we should include this, a HIMS and HERS update. When you have a company like that, risky business, maybe it hasn't proven profitability.

It's in a little bit of a dynamic period. If you keep doubling down, that can be where you run into some real portfolio concerns. And I think as you mature as an investor, I'm saying this not to you, Ryan, but everyone i'm saying this to myself as well we all kind of go through this you learn that all right you made your bet you maybe double down once maybe another time if you haven't made it a large initial position but if you thought it was cheap when you bought you kind of let it play out and if you have to experience a 50 drawdown so be it yeah that's probably the way to go here businesses businesses have slower quarters too like it's it's an important reminder even in a

world where like software i think a lot of people want linear growth it you don't close as many deals in a certain month all of a sudden especially when you're moving more towards enterprise things can take a little longer there can be lumpiness there can be down months whatever so yeah i think that three-year rule i'm going to stick to it do we want to shift gears to any other earnings reports or do we want to talk 100-year bonds oh i guess we can talk about that the this will lead into maybe the weekly ai slash big tech update because it seems like there's something new on the docket every week with this alphabet did happen this was the i mean it's a classic clickbait headlined The Motley Fool. My, I wouldn't say employer, the company I work for would be all

over this. Everyone, CNBC, Wall Street Journal, everything. They did, yes, proposed issue. I don't know if it closed a 100-year bond, but that was only a small amount for their size. It was about a billion dollars. Now, the real news, I would say, is that here's a quote from CNBC. Alphabet is close to finalizing a global bond issuance in excess of $30 billion, according to two people familiar with the deal, an increase from the $20 billion it raised on Monday. It seems like there was, I think, $100 billion in potential demand for this debt. So there's no, and this shouldn't be surprising because Oracle was able to raise debt recently and their balance sheet and their position within the AI infrastructure race and cloud computing is much, much more precarious

than Alphabet's. So when you look at that, it's just worse. Yeah. It's not a surprise that Alphabet's able to raise money. Now, Amazon is also looking to raise money. But what I think was most interesting is why is Alphabet raising money right now? Because Alphabet has $127 billion in short-term cash on its balance sheet or short-term marketable securities. They have $165 billion in operating cash flow. And that should really cover all of their 2026 CapEx needs, I think $180 to $190 billion in their guide. So what does this mean to me is they seem to think that they will likely need to overspend or outspend operating cash flow for a long time here. I think it also shows how well positioned they are to crowd out startups such as OpenAI,

which is struggling to raise funding that it's been reported for at least all of 2026, I think. And it hasn't happened from what I'm aware. Alphabet's able to raise, what, $30 to $50 billion whenever they want. And sorry for the motorcycle in the background, if anyone can hear that. The thing to raise $30 to $50 billion whenever they want, and OpenAI is going to kind of have to struggle there. And what I'm kind of, I don't know, this isn't a conspiracy theory, but I think this is maybe a theory I have for some of the AI build-out

is that for open AI, the longer these funders make them wait, the better deal they're going to get because they go, well, you're on the option. Amazon, NVIDIA, SoftBank, I mean, there's a few players out there, but if they keep making open AI wait, they can get better terms. And I think that's maybe what's happening here. And you just compare that what Alphabet's been able to do. It pays to have that conservative balance sheet for many, many years. And now in a period where they need to get aggressive, Alphabet can kind of turn that on. And I feel like, again, I know we toot their horn all the time, but compared to all the other companies in big tech, they just time even this type of stuff much, much better than the competition.

Yeah, I wouldn't be surprised if we saw a lot of other big tech companies do this as well. it sounds like amazon already is looking for it but microsoft maybe too i'm not that familiar with microsoft's balance sheet but you've got a it's a decent time to raise interest rate wise like i mean they're getting fairly attractive rates relative to what they would have gotten a year ago but on top of it it's kind of i got a feeling everyone's going to raise their capex guides even further i think it is sort of a capex arms race at the moment which to me why not have the extra 30 billion dollars in the balance sheet especially if you can raise 100 year bonds and that long of duration so i like the move makes sense i suspect microsoft will be following suit

the other part here is if they are making more and more venture bets venture type bets that kind of stuff which we have seen like these equity investments it's not just their capex that you want to look at relative to their cash flow right there could be other forms of cash outflows so yeah i i think it's a good move on google's part and i would not be surprised if other big tech companies were following suit here. Yep. I'd say nothing else to add. You had a little thought about CapEx guidance. Anything after digesting it, we kind of did it live last week. Any other final thoughts there, Ryan? Well, it just feels like the market's souring on the CapEx guidance a little bit, obviously, because the companies reported really good

results and sort of the only flaw you could point to was the capex guidance and the stock sold off so that kind of tells you investors have soured on some of the capex plans but i i just feel like there's a big disconnect right now between wall street and big tech and And like the people running these big tech companies, the people in these finance departments are not dumb. In fact, a lot of the brightest finance people in the world, they, I think they know why they're spending it. Now, maybe there could be demand changes that surprise them and might not hit their

forecasts but my gut tells me that if they are clamoring to spend as much as they can on compute they know the returns they're generating so now it is a lot of money being spent but i do think wall street it's kind of weird how they changed their mind on this like it felt like they were sort of excited about it for about a year and then big tech's like yeah we are too let's double down wall street's like well we're not we're not quite that excited uh yeah i mean look the and again we can't we're not going to spend a ton of time on this because we talk about it all the time but the problem would be amazon is at negative cash flow right or it's going to be in 2026 they're spending 200 billion dollars in capex and if the customers and anthropic open ai

what have you don't show up well then you have overbuilt and that's what people are starting to get concerned about i don't know what's going to happen but it this could be the time where they start overbuilding who knows it also could be 2027 or 2028 no i'm not sure if you're a regular listener to chit chat stocks then you've probably heard us talk about interactive brokers here are three reasons why we think interactive brokers is better than any other brokerage platform Number one, they've got it all. Stocks, bonds, ETFs, options, crypto, you name it. 170 markets, 36 countries, 28 currencies. Number two, they've got best in class pricing. They have zero commissions on US listed stocks and ETFs and offer margin rates up to 54% lower than the industry.

Number three, you can ditch the separate high yield cash account. Interactive Brokers offers up to 3.14% interest on instantly available cash held in your investment account. Head on over to ibkr.com rate subject to change margin involves risk restrictions apply interactive brokers is a member of sipc they unless i'm wrong here they have a good history of uh reaping the benefits of big capex cycles even if it takes a little time like they overbuilt during covet a bit that's what people said they were able to manage through that and ultimately they ended up filling that capacity unless i'm mistaken now that was geared more towards the e-commerce business but oh yeah that's fair that's fair but if they do overbuild it will look ugly for a few years

i i know there's still a long-term cloud growth um yeah and each business is different i mean you could say that google cloud's in a much better position but you're probably right but here's the thing that the uncertainty especially where these stocks trade well if you have a couple of down years of revenue growth just falls off a cliff yeah i mean they're overvalued today so that's probably what a lot of people are digesting amazon of all the big tech companies seems to keep investors the most irritated like they tend to seem the most uncertain it feels like like whenever they start earning they're like whoa you know let's let's pull back and start investing more we can't we can't show too nice of margins yeah the well

their operating earnings are at record highs but free cash flow yes the interest i think the most frustrating thing has to be the fact that they're still let's say ai is just the total future and first off alexa was supposed to be the future of ai 10 years ago total bust you're still spending money on that you're spending money on project kuiper you're spending money on god's note god knows what and what are you like you're risking not having the funds to compete truly with alphabet i just think that would be frustrating when you could have a lot more ways to sell fun i do own some shares of amazon i own shares of google as well i they're not massive positions but i'm comfortable owning them here i think

the the one thing that kind of keeps me not so worried is that their core businesses are some of the widest moats on earth and should continue to grow uh both for google search both for uh amazon e-commerce aws google cloud you name it but let's shift gears here i want to play a game is now an okay time to play value player value player value this is a game designed to make me look stupid in a year but i i will be willing to play uh you haven't shown me the names but i guess i guess you have them maybe on your own on your own little screen there i do yeah let's do it yeah basically i just have to say value player value trap no explanation just gut check a little context might be nice the well okay okay that's fine okay i'm going to name

a company and you have to guess whether or not that company outperforms the s&p 500 over the next five years these are all companies with low face multiples okay and we can talk through some of the valuations if we want as well but the number one here first one for me paypal value trap underperforms what do you think what i probably agree and this has been hotly debated for the last i'd call it three or four years basically the entire drawdown it's felt like a value play when there seems to just be continuous deterioration under the hood and the ceo departure you can't you cannot overlook that stuff like a ceo tends to leave for a reason and it's not just because the board thinks his performance

isn't good like typically i think the ceo wants out as well that he was there for what six months uh i'm not sure i don't follow the business that closely here's what i know and i've known for a few years now is there's no reason the legacy paypal company needs to exist there's no reason or they've had an advantage with venmo they seem to be doing okay with it now by actually adding features that can monetize their customer base but they totally dropped the ball on that even if gmv is growing it doesn't matter if i'm sending money to my parents it's not monetizable and they can claim they have high volume growth with gmb on braintree but they're just trying to severely underprice competitors like adjian

or stripe when they can't get process volume uh what's that like uh what's that figure the percentage of transactions that actually close i forget what that is but approval rate is good yeah whatever that is it's just they're not as good as adjunct or stripe so where were they going to win and then the core business is just going to get eaten by apple paying credit cards and there's just no reason for that to exist cross-border transactions you're getting eaten by wise remitly even other solutions out there so yeah total value trap to me it's been a value trap it looks cheap i just don't see why this company needs to exist it's actually yeah so i misspoke too the paypal ceo was there for two years before stepping down the

and you see this a lot with value cheap looking companies is where it's good company bad company and you've got like a real cash generative company that used to be great and now it's kind of in free fall and then you've got other good looking companies under the hood where like i'm thinking like the core paypal checkout button that was a great business but now it's being eroded by competition when you have a good company bad company scenario i used to i used to like those setups and then i realized cash flow deteriorates really quickly because the emerging companies don't replace that cash flow for a long time so you get these persistent earnings headwinds year after year and there's actually no certainty that a venmo or a brain tree is ever going to

replace that cash cow and you got to invest into it so it's i've made this mistake a number of times but yeah i would say paypal for me goes in the value trap camp could be wrong on that The second one here, maybe we won't spend quite as much time on this one, Adobe. Value play. It's cheap now. I actually just looked at them today for Motley Fool, so 12 times EBIT, give or take. Like, I think with the way the business is, you know, even if they face a little bit of competitive risk from Figma, Canva, and some potential boogeyman in AI, there's still the

potential for them to add more AI features for their customers, raise prices. And I think even if, like, unlike PayPal, where you say, who needs this business in modern day you still need an adobe type product but you're just worried that a cloud-based solution or a point solution is going to come after them and unlike paypal i think they have a much wider moat and if that moat's attacked that's you know they're going through a moat test right now it hasn't shown up in the numbers yet but for a company that's quote-unquote under threat looking to buy back stock their financials look better it's trading at a very similar price and i think they can buy back a lot of shares is paypal might look a little cheaper but i i just like adobe

i don't i don't own it though so i don't love it but i would lean value play and i know what you're gonna say ryan because you own it right yeah i do and i've been just going over going back over some of the numbers and if you just uh if if there was no narrative out there and you only judged a company based on financial performance like trailing it it would have a very different multiple but obviously you know you value a company for the future i was looking since like the cloud transition i think return on invested capital has averaged around 30 to 40 percent on an annual basis the numbers look pretty good but obviously things would change if ai started to steal their customers let's move on to the third one here lululemon

oh this has been a psychological long yeah you picked some good ones i'm going to say value play but i still haven't owned it i honestly uh i like something like crocs more i don't know it's hard to articulate but lululemon the management team is just off and yes didn't you know that they're getting a shake up here they're gonna buy back a lot of stock but that competitive market it's tough uh lean value play i think the stock could could be up three or four x in a couple years or it could be down 50 if they turn into a total just can't get that brand back yeah yeah i really don't know i'm totally on the fence here like anecdotally it doesn't seem to have the same sort of consumer mind share uh as it used to i think

those other athleisure type brands aloe etc um have certainly gained popularity with at least people i know it looks like to paint some positive for lululemon it seems like from what i've seen and i'm not one shopping for this stuff all the time that the lululemon's viewers of the war sorry the aloes and the viewers of the world are more heavily discounting than lululemon so they're trying to just win customers but i feel like the gross margins or the the operating margins on some of these product uh on these purchases are probably not great and is not something it's not sustainable um curious if you think the same yes but even a perch even a discounted purchase at viore is a purchase not going to lululemon

and that's what makes the industry tough yes for sure retail i just my i find it so hard to sell in retail outlets yeah apparel can't be better yeah okay next one this is sort of a two companies in one but it's sort of a pair trade molson coors and constellation brands the beer the popular beer companies in america i think value play people drink beer they're going to uh our seahawks are having a super bowl parade right now it seems to be sponsored by beer as it always is people are going crazy maybe they'll get an uplift there no that's that's not important enough and the stocks are trading at least i can check uh live here on our friends at fiscal ai i believe at least molson coors is trading at a fairly cheap

price and i would be much more given market share yeah it doesn't change that much it's not as stable as cigarettes but or soda but market share seems to be fairly stable in beer and even if usage is declining slightly you should be able to outpace inflation a little bit um it says molson coors is ev to ebit is negative six so they must have done a write-down let's look at maybe cash flow free cash flow 14 that's not terrible it looks cheaper constellation brands i'm doing research report on them now for an episode upcoming uh yeah tease here value play in my opinion and there are some advantages it's not quite as insulated like you said as like the cigarette uh business where you couldn't really market products so there wasn't as much competition

but with beers there are production advantages to being the large-scale producer you can produce at a much lower cost um if you've got distribution yeah like you go to a random bar like most of the time someone's gonna go all right what are you drinking and you go uh give me a course light uh give me a corona right can i go give me something i know something you know it's comfortable you might try something new at the store or something if something gives it to you but yeah it's familiarity i think should help these companies and make them value place yeah there's a big misnomer around volume growth for these businesses like constellations growing volume every year for a decade until this last year so yeah we'll we'll get to that in my research

report all right let's go maybe two more here match group now there was just like a random tweet from a guy that uh that seemed to bring down the stock which i thought was kind of funny but i don't think it's actually affected the business i haven't looked at their earnings closely but it seemed to be much of the same uh tinder is still declining hinge is still ascendant cash flow is okay but consolidated figures it's not going much of anywhere and none of the emerging bets are working

their international business isn't working although it's probably benefiting from the declining US dollar so I will say I'm going to say value trap it feels like the drop box situation

we were in a couple years ago where you kind of go eh, they're buying back a lot of stock, they're levered up, you know, the cash flow should be durable. But if there are user subscription and revenue headwinds, you just, you want to look somewhere else. You're just going to be, unless you have just a superb capital allocator at them, it's going to be an uphill battle and you'd rather own something else. I mean, for example, this is a company I just did a research report on, but look at someone like Match Group compared to Wix, they have grown revenue pretty much every year for a decade. And there was a little bit of a bullwhip effect during the COVID pandemic. But why would you go from something that looks like

a secular grower, market share taker, consistent revenue growth to something that you go, I mean, are they going to grow revenue? Okay. It's seven times cashflow. All right. They're buying back a lot of stock, but it's just why play a hard game like that. It's kind of a picking up pennies in front of the steamroller however eventually if hinge keeps growing and they keep buying back stock it'll work at least for a little bit yeah this is a perfect example of one of the companies i got burned on that was a good company bad company situation where tinder was shrinking every year in terms of users and hinge was growing and it's easy to point to hinge and say well once hinge is a bigger business people are going to be underestimating what it can earn yeah but for the

next five years cash flow is going to go nowhere because the tinder uh declines are not more than offset by the hinge increases so uh yeah it's interesting and we're finally seeing i think this is something you don't know as just like an individual user or something or even as an investor you're we're finally seeing the full crazy dynamic of how like lopsided or the winner takes all if i can put it that way these marketplaces can be which makes it very very difficult to have durable users because one side of the aisle the men like 80 of your users just get really upset and leave which if those are supposed to be your paying customers it's very very hard to keep them around okay the last two here again sort of a pair trade although they're

not technically the same but whatever uh gartner and accenture oh no i don't know i have no clue about these businesses i i don't know why gartner needs to exist i'm gonna go value trap uh i think A, maybe it's my bias because I'm not a fan of the consulting businesses. I think they waste a lot of shareholder money and just line the employees' pockets and the partners' pockets. But I feel like AI is at risk of disrupting these businesses more than a lot of other software services out there because when I think of what I use AI for, it is a consultant.

I was doing research for Philip Morris International and I was thinking, oh, well, what is I wanted to use like a little anecdote for the newsletter on emerging modes, a little marketing. Philip Morris International quarterly update will be out Friday morning for people listening on the podcast that will be out as you're listening to this. But I was thinking, OK, well, I want an anecdote in this story about how, you know, their market share has developed within, say, an emerging market. So I just asked Gemini, hey, can you tell me what Marlboro's market share has developed within India over the last few decades? And it can give me a lot of sources on that. And that's something that traditionally, like going through Google search or going through all these websites would be difficult to find. It can do that for me quickly. And this is what, if you were a business, you would pay consultants to do.

Am I wrong about that? No, I think you're right. And there's kind of a funny anecdote this week where KPMG was apparently publicly – they were demanding that their auditor, Grant Thornton, slash fees because AI was making their auditing work faster and cheaper. And it's kind of like people were sending the memes of like the same guy like stabbing himself in the back basically. Yeah. Yeah. because kpmg if you think about a lot of what they're some of the consultant work is like whether it's creating slide decks creating spreadsheets whatever it is for the company

that you're contracted with we've seen it with claude i guess uh with all these claude demos where you can as claude's co-pilot to create the deck that you want and have it done quickly If it's way cheaper for you, if you think it's cheaper at APMG for the auditor, you are inviting your customers to ask for contract reductions as well. From these consulting firms, I'd say start, if you work there, start making contingency plans. I'm not someone that is, I'm in a job that, well, part of my job, the other job, writing, is definitely a risk of AI disruption, especially because, as people are probably well known, the Molly Fool is one of the biggest SEO players out there. so like that that is definitely affecting their business this is not saying that consulting is the only business affected but that feels like if you work at one of these companies i i would be worried sorry if anyone works there i'm sorry but that's just my honest truth i i don't know

what to break the bad news to you but all right value play value trap i can't even remember what i said but lululemon i think it's a trap well for all ones are value plays adobe molson coors and lululemon you're gonna have your tight leggings your beer for the tailgate and you're gonna have your video generation right or marketing i can't even remember what adobe does sometimes yeah and And then you called Match Group, Gartner, and PayPal the value trap bucket. There were some other ones on this list, but – You're going to outsource your consulting to AI. You're going to meet the love of your life in person, and you are going to pay with Apple Pay.

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And if you want to upgrade, our link will get you 15% off any paid plan. Again, that's fiscal.ai.chitchat. The link will be in the show notes. That's the future we're living in. I don't know about the match group case there, but the other ones could be some reality there. I do want to talk Spotify and Oscar earnings, and then we can do some fun stories and maybe let us know questions at the end if we have time. What do you want to do first?

Let's do Oscar since I guess you were talking a lot in that one. People are asking about this. It's a company I've covered. I do have a free introductory research report when emerging notes was not paywalled back from the summer. I say that still would be relevant, although some of the numbers have changed. and I will be covering this company in depth throughout the next few years or at least as long as I own it. I should say disclosure, I haven't read the conference call yet. It came out,

I think, yesterday morning. Let's go through some of the numbers. Their medical loss ratio is elevated to 95% in Q4. It's pretty ugly, but expected. Again, when they're on the Affordable Care Act marketplace, you can't replace price plans until the following calendar year. But if your medical cost as an insurer are skyrocketing unexpectedly, as happened to all of these companies in 2025, well, your medical loss ratio is going to get worse. And this led to a $330 million operating loss, something they can manage, and hopefully it turns around in 2026. And I do expect that to turn around, but you never want that. However, on a positive note, their SG&A expense ratio keeps falling. And for any listener that doesn't know the basics of what it leads to

profitability for an insurance company. You have your revenue, which is, let's say, 100% or $1 on the dollar, and that's your premiums coming in. Your medical loss ratio is going to be what you are giving out as claims each time period. And then you have your operating expenses, which is your SG&A expense ratio. So if your operating expense ratio plus your medical loss ratio is below 100%, you're generating positive earnings. Now, their SG&A ratio keeps declining, which is good because as they scale and hopefully their medical loss ratio gets better in 2026 as they reprice, that will lead to more operating leverage and operating margin expansion. So what did they go for for 2026? $19 billion in 2026 revenue at the high end, which is much

higher than I thought. I should say there was wild, it was pretty uncertain what was going to occur here. We didn't really know. I'm sure someone could have gone into a really deep dive and tried to find info and all this stuff, but I was pleasantly surprised. I thought that the fact that the subsidies were going away was going to lead to customer declines and then they could reprice to kind of maintain revenue. But it seems like things are much better on the revenue perspective than I thought because they're growing pricing by average by about 30%. And it seems like at the same time, even though subsidies are going away, they might be expecting customer count to grow or at least be stable, which would be much better than I thought.

And on that $19 billion in revenue, which as an insurer is not really that important, they're expecting $450 million in earnings from operations at the high end. Now, this is about a 2% operating margin. And if margins can keep expanding over the next few years, I mean, And as an insurer, they should probably be able to get a 5% operating margin at better scale. And you add in some interest income, because remember, they have float. We likely get to one, I think, pretty easily $1 billion in net income. The current market is $3.6 billion.

Now, are there risks? Sure. Is this guaranteed to happen? No. But that feels like a good setup to me. And I like the quarter, mainly from the guide. And I think the stock remains cheap. Yeah, I like the earnings figures there. If you're right, it seems like a lot of value here. I mean, market cap of $3.6 billion, potentially $450 million in earnings this year.

what do you see like this isn't an industry i'm super familiar with how do they grow customers from here just be the low-cost provider in their states uh they don't need to be low-cost provider i i think the cost in the aca marketplace is a little bit of a commodity now they are expanding to new states they're not in every state yet they're going to slowly expand to new states in counties. It's not maybe just a state level. It can be a little more granular. But really the reason they can get more customers is they just have a product that is easy to use. It's not legacy. It's not

I mean, it's just easy to deal with. They have all these tools. For example, they have for all their customers, free telehealth. You can consult a doctor if you need to immediately call someone. This is included. You don't have some stupid Teladoc partnership that doesn't work. You have to create an account.

You don't even know how things are reimbursed. It's just easy. It makes sense. They're building out all these other things. It may seem like, oh, the ACA marketplace is a commodity. You have limited profitability. You have all these plans.

But once you understand that the rest of these other companies just have such high levels of tech debt, And Oscar seems to be in a good position and they have proven they can keep gaining market share. And they're only at a couple million customers. As the ACA marketplace keeps growing and as they move into these, as well as these, it's called ICHRA, ICHRA plans, which is individual contributions from your employer. So instead of the employer saying, we're paying for your health insurance, you have this plan. they give you money in a health savings account and you basically act like you're on the ACA

marketplace or something fairly similar. So that gives more flexibility to the individual instead of paying for this very restricted plan. Within the employer space, you can actually pay for what you need. For example, if you need eye stuff, if you need whatever individual healthcare stuff you might need, it just makes everything better. So yeah, there's a lot of reasons. And I think You kind of look at some of these companies and you go, well, they just kept getting market share. This is Wix as another example. They keep getting market share. They have a decade of gaining market share.

They don't have that high of market share. So why would we not expect market share gains to continue? That's about it. Yeah, I think Wix is a great example of that. Let's talk Spotify real quick. and then i want to talk about the latest in the world of ponzi schemes but spotify old flame of ours i don't know if you still own shares i do not i do but okay numbers looked all right so um revenue grew seven percent in constant currency which isn't great but or sorry revenue

grew seven percent in reported currency uh it actually grew 13 percent on a constant currency basis which well they report in euro right the euro is appreciated a lot right so yeah it's quite the swing uh so it's kind of been a headwind yeah gross profit up 10 they actually reported their highest gross margins ever uh has there been a repricing with the labels do you know yeah they said on the call actually funny enough read the conference call last night and they said that with basically they expected with their latest round of price increases that uh revenue would outpace uh variable costs so that i think implies they're able to get a little more margin out of the latest negotiations with the price increases which is nice and also

more ad supported margins are back to positive they're like 20 percent now as they've gone to self-serve now we'll say anecdotally their self-serve has improved quite a bit might not be a big business but what do you mean it's probably more probably like the what we use you know like allowing podcasts or musicians to earn it's just they built it from the ground up instead of a, how should I say it, like utilizing all these partners. They built the self-serve advertising from the ground up two years ago.

It kind of killed their advertising business for a little bit, but now it has much better margins and it's going to develop, I think, much more sustainable growth as they make it easy for someone like us to go, hey, you just click a button, you have two ads embedded at the 52 minute mark

and we're going to take a cut of it. You're going to take a larger cut. It's going to be just like, they essentially finally ripped the cord off and built something equivalent to youtube which i think would be nice but it's still really not that relevant to the business today yeah i was gonna say looking back i drastically overestimated what they were going to be able to earn in advertising revenue relative to their subscription business alphabet and meta are just so much better that's where the dollars go it's the truth yeah the operating income grew 47

percent year-over-year they actually we've seen just pure operating margin expansion over the last two years and then subscribers uh growing 10 monthly active users in total up 11 this is a fine quarter but i'm just not drawn to this business at the current prices it it seems expensive for me and this i feel like people are under maybe i'm wrong here but i i think spotify more of a mature business than people give credit for i mean 700 million monthly active users i don't think they're going to be reaching facebook level usage so maybe maybe there's more pricing power than i'm thinking but yeah i mean look they execute on the audiobooks and they execute on maybe some more podcast stuff they maybe will be able to raise prices even more

make it a bundle they've talked about the super tier i don't know if that's worked with the labels because they kept delaying that maybe negotiations are going poorly with that but hey on the conference call ryan they said we're at three percent of the globe something i think three percent of the globe is a paying subscriber and they go why not ten percent that's kind of what they said that's fair if you price it correctly um i don't know if a hundred percent of the internet using world is going to be paying for a music streaming service but even if it's 50 percent or 40 percent and you say within that there's going to be spotify youtube music apple music and maybe a couple of others in international markets could they get to 10 in the global

population sure sure that feels like a bit of a reach but there's probably still room to grow i'd say they got to execute though because youtube is um they're smart they discount they bundle and they're gonna have to execute that's for sure yeah i mean like let's say it does go well they execute they triple their users which would be pretty incredible it's at a price to sales today of like six i think the likelihood that you see material margin expansion from here like there i find it pretty unlikely that they're going to double operating margins over the next five to ten years yeah it seems like that would be pretty hard to do yeah it's not a great price especially when it's not a wide moat business i'd maybe you

know give my framework considered emerging moat potentially but it's not there is execution i love their management team i think it's fantastic but yeah the stock's not dirt cheap all right let's talk ponzi schemes what is your bubble watch for this week as people who spend time on twitter have you heard of this guy ty lopez he's been apparently he's big on twitter slash x you've seen this you've seen this guy i have not like five to ten years ago he used to run a ton of these like youtube ads for like i'm gonna teach you how to get rich in five days and it's like he would just be it would just be him like walking around his mansion this is he was like a very he was one of the like first uh maybe not the first but felt like one of the big

youtube like get rich quick influencers out there all right well it seemed like a terrible guy by the way sorry i'll say it now uh spoiler alert he seemed like a scam artist from the beginning yeah and unfortunately he scammed a lot of people okay here's the headline from the wall street journal he vowed to revive radio shack and pier one imports investors say they were swindles his name is ty lopez here's a quote the college dropout had made a name for himself on social media by offering get rich quick advice and self-help courses as ryan mentioned he urged his followers to invest in a new company he had started that was scooping up distressed retailers on the cheap, Radio Shack, Pier 1 Imports, Dress Barn, Sporting Goods, Linen

and Things, with a promise to turn them into e-commerce winners. I got to say, even if this wasn't a scam, why are you investing in this? He used a lot of social media marketing. Lopez was able to convince investors he had a total of $230 million. dollars i will say some people are just good at raising money you got to give props to the guy that is difficult to do some people are good at raising money now don't be a scam artist golden age of fraud let's not do that be a legitimate person but man that's a good skill yeah not only did he raise 230 million dollars he raised it for a bad idea that i mean that really

is quite the promotional activity yeah here's another quote on his podcast the ty lopez show And in a social media post, Lopez, who is 48, hasn't addressed the company's collapse and the heavy losses incurred by his investors. The day after the SEC filed his suit, Lopez posted on X, never doomed, no matter how horrible the situation. Don't ever think you're doomed unless you are dead. All defeat is psychological. When he's in the Southern District of New York prison, I wonder what he's going to be thinking then. Now, it was really a sad story because the marketing materials they provided investors with lacking any detailed financial information. That's red flag number one. And they promised a 20% return. That is red flag number two. That is

classic scam artist behavior is promising a specific return number because that's how with their Ponzi scheme, they say, all right, well, this is what I need to allocate. And then this is what I need to bring in to pay out these existing investors. There's some very sad quotes from the article uh some of here's a quote some of lopez's investors said in interviews that they believed in the brands he was buying in his message and was reassured by the monthly payments they were collecting nelson rowe of new iberia louisiana an 82 year old real retired real estate broker who invested three hundred thousand dollars said lopez seemed credible the story sounded so good they had all these brands well that's tough there was another screenshot here which was from an investor

and for anyone that's uh i know we made a lot of dating references this episode anyone that's in the modern world and now these old dudes might not be be dating these days you should have known it was over when he's seeing these tech messages because if you see the screenshot here his investor said on december 27th why can't you respond to my question not cool lopez said hey this week later we'll have more updates the guy responded okay but is my five hundred thousand dollars safe lopez didn't respond then on february 6th the guy sends him a question mark and responds february 8th double question mark and then i think a couple days later exclamation point question mark look this is like when the woman says uh after the third date had a great

time and then you know you follow up the next day later or something hey i'd like to see you again and then if you don't get a response for a day you just know like in this situation things are not going well for you yeah it feels like this this seems like a guy who is uh taking advantage of a lot of people for like 10 years he's kind of built a business off of it uh but maybe this will be hopefully the cautionary tale that gets published for people to stop falling for these kind of things the other one no ryan ryan it's the golden thing i find funny all the time it happens all the time It happens daily.

It does, yeah. Chow ZZ was just talking with Chamath on a viral podcast. I think my favorite thing is when something like this is going on and people just go about their – whoever the scam artist is just goes about their day like it's not happening. like this guy the ty lopez show that he recorded his latest episode and just had had nothing to do with the uh allegations so here's the funniest thing this is what they said the last episode was on january 13th and it was about why 90 of businesses fail ironic is he trying to tell us something justice all right any uh let's take some listener questions here rapid fire so far are you buying the dip let's check the price i haven't

checked i haven't checked i kind of know the business roughly so we can look at what the share price is trading at i will say these questions come i usually do one of these plus some other conversations within the substack chat uh it's called the emerging boat substack but if you subscribe for free you can just join the chat room on substack it's pretty fun we have a lot of fun conversations and people tossing out a lot of ideas actually one clbpt that i wanted to talk about this episode but we'll save for a small cap of the week in the future so far is that 20 a share it's down a bit um i'd say i'm interested but not definitely not buying i would i don't know why it's falling and it's trading at 2.6 times book value roe is

very, very good. Well, I think it will be very, very good and it's going to show up very, very strongly, but yeah, I'd say a little lower. I'd be interested in buying. Okay. When I sell my business, I want the best tax and investment advice. I want to help my kids and I want to give back to the community. Ooh, then it's the vacation of a lifetime. I wonder if my head of office has a forever setting. An IG private wealth advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IGPrivateWealth.com.

You've got to try breakfast at A&W. You've got to try breakfast at A&W. And what better way than with a delicious Pret organic coffee? Starting at just $1 all day, every day, now until December 31st. You gotta try breakfast at A&W. At participating A&W locations in Ontario. Yeah, I like SoFi. I like Anthony Noto as well.

It seems like kind of the best run neobank out there at the moment. the last time i visited it i remember having some questions about them sort of getting into a new lending category uh i believe the like just not having that much time under their belt in personal lending which is like the bulk of their new volume so right give a little discount to there could potentially be some stuff yeah but as far as like a consumer app goes i think it's exceptionally well run how about this one lift this i have heard is actually potentially a value play i got one more i think they're buying back like 10 of their shares

why why would do you think Waymo is going to kill Uber I think Uber has a better ecosystem you kind of get what I mean if Waymo won't kill I think Lyft could

have problems for other reasons but I don't think Waymo is going to kill Uber and if it doesn't kill Uber I don't think Waymo would kill Lyft maybe maybe that's a longer discussion to have I'd be a little more concerned but

yeah the stock looks cheap that's for sure alright we have another one Team Atlassian basically they said Team is better down more than the rest of software anecdotally Look, the Motley Fool uses Atlassian software. Do I get frustrated that I have to learn about it all the time?

Sure, but there's a lot of switching costs with that. And EV to free cash flow right now, probably about SBC, is $17. EV to gross profit is $4.7. Pretty cheap, yeah. They buy back a lot of stock. Things could work. they are the biggest abusers of stock-based compensation of like the big software stocks out there it there's theirs is insane like there's a lot of companies that issue stock-based

compensation and use it as a tool for talent retention i don't know if i've seen anyone at the scale of atlassian have issues so much in stock and then i i saw they came out this quarter and were like our stock's way too cheap get ready for us to get aggressive on the buyback basically and i think they're still net diluters and they've bought back they've spent a lot of their cash flow on buybacks let me let me double check and make sure i'm checking shares outstanding right now total shares outstanding quarterly uh one second i can uh i can raise grew it grew yeah well yeah well i think they banned it has grown yeah didn't they say they banned executives from selling shares, something like that, we're halting it. Oh yeah, well, your stock's cheap.

I guess let's just stop. Look, this is a good follow-up someone had on the Constellation Software episode too, where you have people, even Constellation, they're not diluting, but you have people say, take your bonus and buy stock. Well, if someone bought 50% higher, or God forbid, 80% higher, and then your stock goes down, they're going to say, look, you want me around i need a lot more stock so it can get really tough when you're on that spc treadmill all right i think that's going to do it thank you everyone for tuning into this episode 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 in this podcast once again thank you for tuning in and we will see you next time.