Chit Chat Stocks - Big Tech Earnings Chaos; Executive Tariff Uncertainty; Spotify Reigns Supreme (ABNB, EVO, + More!)

Episode Date: May 2, 2025

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: (03:18) Microsoft's Performance and Cloud Growth (15:14) Amazon's Earnings and Market Position (24:45) Apple's Challenges and Market Dynamics (33:11) Economic Indicators and Consumer Behavior (35:27) Fast Food Trends and Consumer Choices (37:22) The Impact of Ozempic on Food Spending (39:38) The Future of Starbucks and McDonald's (41:41) Sprouts Farmers Market: A Success Story (43:27) Spotify's Growth and Market Position (54:42) Airbnb vs. Booking Holdings: A Comparative Analysis (01:00:32) Mexican Airports and Travel Trends ***************************************************** JOIN OUR NEWSLETTER AND CHAT COMMUNITY: https://chitchatstocks.substack.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.  ********************************************************************* FinChat.io is The Complete Stock Research Platform for fundamental investors. With its beautiful design and institutional-quality data, FinChat is incredibly powerful and easy to use. Use our LINK and get 15% off any premium plan: ⁠https://finchat.io/chitchat  ********************************************************************* Bluechippers Club is a tight-knit community of stock focused investors. Members share ideas, participate in weekly calls, and compete in portfolio competitions. To join, go to ⁠Blue Chippers and apply! Link: ⁠https://bluechippersclub.com/ ********************************************************************* 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

Welcome to Chit Chat Stocks. On this show, hosts Ryan Henderson and Brett Schaefer analyze businesses and riff on the world of investing. As a quick reminder, Chit Chat Stocks is a CCM Media Group podcast. Anything discussed on Chit Chat Stocks by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. Welcome to Chit Chat Stocks. This is our weekly power hour episode. I'm one of your hosts, Ryan Henderson, and I am joined as always by the one and only Brett Schaefer. On these episodes, we talk all things financial markets, any financial news, earnings, companies we find interesting. Basically, it's an open-ended conversation of anything finance and investing

related. And today we are at the heart of earnings season. So Brett, how is it? This is busy time. It is. Yeah. Big tech this week. Amazon, Apple, just reported right before we are recording this. We'll make sure to talk about those. What was it yesterday? Meta. Microsoft was some pretty blowout numbers. Although I think many people are forgetting that the quarter ends on March 31st And all the tariff chaos, or the majority of it, came in April. So TBD on that front. But yeah, lots of stuff out there. Some stuff I follow on the watch list.

Spotify, we'll talk about some stuff I own. Airbnb, little Mexican airports reported this week. Should be fun. Before we get to our content for this week, we want to talk about Interactive Brokers. They are the professional's gateway to the world's markets. Interactive Brokers offers commissions starting at $0 on U.S. listed stocks and ETFs with low commissions on other products, and there are no added spreads, ticket charges, or account minimums. Clients in over 200 countries and territories trade stocks, options, futures, currencies, bonds, funds, and more on 160 global markets from a single unified platform. Clients earn interest rates of up to 3.83% on instantly available cash and pay margin rates up to 53% lower than the industry.

You can also earn extra income on your lendable shares, and IBKR's powerful, award-winning trading platform helps every level investor succeed from beginner to advanced on mobile, web, and desktop. When placing your money, go with a broker you can trust. Make sure your broker is secure and you can endure through good and bad times. We use IBKR here at Chit Chat Stocks for their best-in-class international coverage, and you can too by heading on over to IBKR.com. Interactive Brokers is a member of SIPC. Okay, we are in the heart of it. I think today might be the busiest day of the quarter, like in terms of total number of companies reporting.

And we've got some of the biggest ones as well. We are recording this on Thursday. We go live on Thursdays at five o'clock Eastern time on YouTube for anyone that's listening. Where do you want to start, Brett? Let's hit the top of the document. microsoft what were the numbers why if i'm going to look at the stock right now i believe it's up close to yeah almost finished up eight percent today what happened yeah i think i mean the biggest thing is that there was good cloud growth um i will say azure um microsoft in general

they kind of restated how they report things last year which does give us a little more clarity on cloud specifically as opposed to just like cloud vaguely like it used to be just intelligent cloud and it was kind of like a lot of different services lumped into one um but now we get a look at azure and other cloud services growth uh which the standout here and now that we have amazon's numbers is actually even more of a standout. Azure and other cloud services grew 35% year over year in constant currency. Amazon Web Services and Google Cloud, and keep in mind, the big thing here is that they accelerated revenue growth. Azure did. During a quarter when Google and Amazon both saw big deceleration. So typically, I think for the most part,

we tend to see all the cloud providers kind of grow in tandem with one another. Historically, that's kind of been the trend is we saw the big dip in Q3 or sorry, in 2023 with both AWS, GCP and Azure. This was probably the starkest difference of a quarter I've seen where we saw a big acceleration from Azure specifically and big declines from Google cloud and AWS. So maybe there's more lumped into the Azure and other services definition than pure cloud storage. But basically, it seems like they were kind of an outperformer in the cloud industry. All the results were pretty good in general. I thought all the big three cloud providers saw pretty strong numbers. But I think what got investors excited was on the conference

call, I think it was Amy Hood, the CFO, it might have been Satya Nadella, I didn't check, said in our ai services while we continue to bring data center capacity online as planned demand is growing a bit faster therefore we now expect to have some ai capacity constraints beyond june that's all you got to say we're capacity constrained and boom stock is up yep the ai boom continues this really seems like an open ai story uh i would guess given the numbers here because we're seeing OpenAI's users, their usage, just the anecdotes around that. We don't have solid numbers, but they seem to have had a good end to 2024 and a great start to 2025. That seems to be about it here. Yeah. And I kind of posed this discussion question

because I was looking at, if you go line by line across Microsoft's business from office 365 for consumers office 365 for commercial uh dynamics 365 linkedin even search and news which is a little it's kind of trivial the only one that did not i think was like their hardware segment and gaming was a little slow but they had pretty good growth across all their categories so my question to you is of the mag 7 all the mag 7 stocks i'm going to put broadcom in there instead of tesla you can call it the mag 8 if you want larger now right so they're i think so yeah is this the most bulletproof of the mag 7 do you think these are the this is the least likely company to get impacted by macro effects

maybe depends what type of macro effects isn't an ai macro effect because if so maybe they get hit the worst from their cloud because AWS has the least exposure to, I think, just AI revenue at the moment. But if we're talking about, in general, bulletproof businesses, I think the cloud segment, obviously, it's a very durable business. I mean, look at how just consistent that segment has grown. Office for commercial users also seems very durable. No one's going to rip and replace that anytime soon, and if people do, it's slow, there's just a lot of friction, switching costs, very, very high switching costs business, but those two businesses I think are good, but everything else about

Microsoft's business, I dislike. I mean, LinkedIn, I don't think is bulletproof. Consumer office, no, gaming is probably a huge black hole, not a huge black hole, but for the size of this company, but it's probably losing a ton of money especially if you include the money they spent on activision blizzard and that's not going to matter because those two that i mentioned that are great businesses are gonna push you know that's those are the two ones that really matter but besides that no yeah it's really a bet on cloud and commercial commercial office um copilot is i would say a total joke um their ai initials like

there okay there's a difference between the open ai partnership and what microsoft is actually deploying themselves in ai and they seem to be well behind any of the competition um there's lots of stories out there that altman and adela are not friendly anymore they apparently i know this was funny but this is what they actually used as their anecdotes apparently they used to text constantly and now they only communicate through formal conference calls between their two companies uh so i think nadella realizes that open ai was a trojan horse and they're going to try to steal a lot of the operating system from them so yeah now i i don't know if it's any more bulletproof than the other businesses there's ai risk here there's ai potential but it's an

uncertain time for all these companies and if the ai boom is continues and it's as big as all these people think there is a huge opportunity for a company like microsoft but there's also a lot of risks yeah i think i might give it to them just looking at the mag 7 and and kind of some of the macro headwinds out there today obviously the tariffs kind of is random through a wrench in it i maybe would have given this to amazon if you asked me a year ago but specifically yeah i agree with you on amazon and microsoft they're not as exposed to consumer advertising or consumer spending where apple doesn't have that much consumer advertising spend but they are big on consumer discretionary purchases so yeah probably agree yeah i mean i just don't know

if microsoft's a bulletproof business no i mean i wouldn't call it a bulletproof stock but i think the place i don't know if there's any any company more integrated in the business world in corporate america than microsoft between azure and office 365 it seems like they're probably one of the most integrated and i'd much rather in terms of stickiness i think it's better to be in the corporate world than the and they you know they serve consumers as well but less cyclicality i guess they're right the consumer side of things i don't think is meaningful to the revenue anymore i'm no expert on the company but that business i don't think it's very good given that a lot of the stuff is given away for free from google now but like if you're someone

that's buying as an individual buying microsoft office i i have some questions for you on what your choices are there's a lot of stuff out there that's free uh but yeah i mean i agree the the stuff within the companies within corporate spending yeah it's rock solid should continue maybe won't grow that much in a downturn but it's much less at least i would think much less cyclical than google advertising spending advertising spending on meta platforms or amazon and apple yeah and you know last week during our power hour i talked about google's I really liked it. There was a lot to like. However, I will say I've kind of – going back to the report, there is one big thing that I kind of soured on and I did not appreciate enough, which was they break out – so they've got the search revenue, which headline number looks good. But they break it out into paid clicks and then cost per click or revenue per click.

Paid clicks only grew 2% year over year. That is the slowest growth in paid clicks I think they've maybe ever reported. And I don't see how there could be any other culprit than searches potentially going elsewhere. That there's some AI kind of cannibalizing some of those searches for them. So that part to me – Yeah, if anyone thought that that wasn't happening at this point, I mean just look at how much Google's internal stuff plus all the competitors are being used today. If anyone thought that wasn't happening, I just think they were being blind. Sure, but when you see search revenue grew 9%, you kind of think search queries and clicks is somewhere close to that.

But when you actually had revenue per click growing 7% and paid clicks only growing 2%, I don't know. That kind of caught me off guard. So maybe it's not quite as bulletproof as I thought initially. i do like all the other businesses in general but google search is not bulletproof i mean look at how many users open ai has look at how many they have that's a lot of users now are they burning a ton of money right now i mean assuredly but they have backers that are giving them tens and tens of billions of dollars so they're going to be a competitor for a long while here our alphabets products rock solid too like is gemini good yeah i have the google one subscription for the storage

and i got a nice little discount um i found the deep research tool nice i've been starting to use it out or starting to use it but their user base is what 10 of open ais if you talk about gemini so they're in a good position and they have the billions of users on google search youtube and whatever to transition people over to these products but right now open ai is winning in uh stealing and getting user adoption are you seeing it anecdotally like among friends colleagues anything are you seeing people use open ai or chat gpt more as like an actual part of their workflow it seems like people are mentioning it more but it's hard to tell i mean i'm not i guess i don't have spyware to look at what people are doing on computers so i think

trusting the data is better um we have a question here from tyler always joining always asking good question thoughts on how well amazon meta and apple are navigating the tariffs given their results and guidances i think that leads into what earnings should we talk about next ryan amazon apple or meta let's talk amazon i think that's probably the most exciting of those three all right well i'll go through the numbers i guess we both kind of loaded some up here And then we can talk about the results. Net sales up 9%, AWS up 17%. What was that Microsoft number? 35. So yeah, I mean, huge difference there. And it seems like Microsoft is really capturing a lot of that AI spending. Operating margin, 11.8% growth versus 10.7% a year ago. And that's probably due to 17.7% growth in advertising and 9.3% growth in subscriptions. As of this writing, Ryan, and I think we're in the middle of the conference call now, so let me do a little double check on here in case they said something.

But yeah, stock's down about 5% after hours. Market cap's around $2 trillion. Are you a buyer here? What did you think of the report? In reference to that question on tariffs, I'd be interested to see what they say on the conference call because these results are pretty much all pre-tariff. So we got to know what's happening in the month of April. And to be honest, April is not going to have much of a tariff impact on consumers anyways

because it takes a month to get ships over from China. So May and June is where you really got to watch out for that. All this stuff, like people are saying, oh, Visa, good numbers. Yeah, I mean, if anything, they got benefited by tariffs by the pull forward. So the numbers like trailing, they can be all good, but it's all about what is happening in the guidance and the trucking numbers and the airline numbers don't look good. But besides that, back to Amazon. Ryan, what did you think of the quarter? Yeah, actually, when I look out across all the earnings I've read this quarter so far, it's been a little boring where the numbers have been good.

Yeah, fine. And then the conference call is just pure uncertainty. Like, everyone's like, we're seeing weak consumer demand. We're not really sure. We don't have that much, like, confidence in our guidance. We've seen a lot of companies pull guidance. And, like, everyone asks tariffs, and every management team's like, we don't know. We don't know what the impact's going to be because –

It's a lot of I don't know, which I think, if we're going to be fair, I think executives should be doing that all the time because they don't know what's going to happen throughout the rest of the year. My favorite is when a company lines up like, oh, we think revenue growth is going to grow from 7.5% to 8% in 2025. It's like, really? Nothing else could affect that this year. I like the alphabet model of never giving out guidance. It makes it easier. But Amazon's quarter was good, I thought. Now, let me get you excited with this quote.

First quote from Andy Jassy. I don't know if you read it, but on the press release, he says, We are pleased with the start to 2025, especially our pace of innovation and progress in continuing to improve customer experiences. Wait for it. From Alexa Plus, our next generation of Alexa that's meaningfully smarter, more capable, and takes action for customers, to another delivery speed record for our Prime members, which is totally legitimate. But we all know how much you love Alexa. Do you appreciate the investment and the resources being poured into that? Oh, yeah. Again, if I was getting a little bit bearish on Microsoft's internal AI tools that

no one is using, I mean, people talk about Alphabet, AI Risk, at least they're trying versus OpenAI. Alexa's nothing. No one's using this, right? What about Rufus? You heard about Rufus? Do you know what this is? Why do I know that name? it's because that is amazon.com or amazon's app the consumer side of things it's your ai tool when shopping on there i i don't think a soul is using rufus it's also a terrible name and uh yeah the numbers are good but despite that they're going to be investing in this stuff they just can't get consumer ai right at all no hey i still use alexa for my grocery list great that's making a lot of money for them must be a huge revenue generator for them

beautiful beautiful yeah i i like this the prime the the daily uh sorry the time spent on shipping i love that that's a kpi for them if that keeps going down more people are going to shop there for their everyday needs yeah i mean it's just it's one of those things that you would have thought like you become desensitized to after them doing this for 10 years but honestly every time i buy something on amazon i'm impressed with the speed it's like yeah and then he goes a week ah my gosh i'm gonna go to the store i have to yeah yeah exactly amazon has honestly for me and i'm sure there's people like more avid shoppers that came across this realization five years ago but it has i'm a big last minute shopper and i have honestly not needed to go to

the store as much because you can get it so quick with amazon now numbers wise i thought it was pretty strong across the board uh aws 17 growth that's coming off the largest base relative to the other uh cloud giants advertising was really strong plus 18 percent and that i maybe this is like anyone that follows amazon might already know this but i think that's probably the biggest profit driver for the business advertising yeah excluding aws no i i would guess it might be right 30 operating margins on aws call it on 128 38 okay so call it maybe 40 billion let's say in operating income advertising revenue does 56 it's lower come on 56 billion in revenue do you do what operating margins do you think they generate on their advertising business

maybe 50 i don't know i don't like it could be like i feel like it's so low cost to well the e-commerce is in the logistics network if that didn't exist right yeah of course i just mean the pure like if you look purely at advertising like what's the development cost to create that ad inventory and have like proper you know the research there's some development expenses i i'd uh i'd compare it seems like it would be like meta right at instagram or facebook so whatever they are at something like 50 it's it's obviously the two biggest profit drivers are advertising and aws which are the probably two seeing those keep growing at 17 18 is a great sign and i think there is a path to 20 operating margins if they actually get cost discipline

which i don't think they will so maybe 15 is a better ballpark figure i mean look two trillion dollars in market capitalization was the trailing 12 month what 2025 revenue should be what like 700 billion maybe 675 billion let's say 700 billion you get a 10 profit margin on that that's 70 billion okay you add another five percent you get maybe over 100 billion operating income if the margins keep expanding this year that's a pretty fair price seems fairly cheap yeah i don't really i am an owner uh i own like a couple shares of amazon uh it's really small position for me but i don't really know if i'm a buyer here honestly it doesn't seem crazy cheap to me you said it's what two trillion dollar market cap yeah give or take yeah i don't think

i mean i think it's cheaper than apple well who we're about to talk about but alphabet i think it's cheaper yes with more risk but i think it's cheaper okay let me mention a couple things first of all earning season i assume we're going to name this something like earnings palooza We'll figure out a title after, but Earnings Season FinChat is an awesome tool. We use it throughout this episode. If you are looking for a financial data platform, if you track this stuff in Excel or Sheets, I'm telling you, I know I used to think I like tracking it. It gives me a better sense of how the business is doing.

I'm telling you, it is such a time saver to not do that. So I really do recommend at least checking it out. You automatically get two weeks free if you sign up. But right now, if you're listening to this before the end of – what is that? The May 3rd weekend, it's a 25% discount. We're running a spring sale, finchat.io slash chitchat. After that, it will go back to 15%. I'll stop there.

Do we want to talk Apple or do you want to hear this interesting quote from the Kraft Heinz CEO? Let's finish up big tech and then we can get to some other random topics. They came out just now as we were recording. Numbers seemed okay. Pretty good. Net sales up 5% to $95 billion. I guess that's what the expectations game can do to you. It's growing slower than the other magnificent seven companies,

but I thought that they were going to struggle to grow at all in 2025. Operating income was up 6% year over year, so we're actually seeing operating margin expansion. I would think if the tariffs stick around, uh that's not gonna work i think it's gonna move in the opposite direction uh we're looking at geographies they are seeing strong growth from the americas and then non-china asia as well as their services businesses which is the software stuff the subscriptions the app store revenue as well as the default payments from the likes of google search china continues to struggle they

saw a revenue decline once again year over year in the country wearables continue to struggle so watches airpods vision pros not much growth out of their stocks at a pe of 34 seems to be down a little bit after hours but again who knows how it's going to react tomorrow as you're listening to this i look at this and we we just took a look at amazon alphabet and microsoft what what do you own an apple for instead of microsoft alphabet or amazon i continue to be perplexed and they may be running into a huge wall here with these tariffs yeah i wonder if they end up getting some sort of carve out of like tariff oh yeah yeah yeah yeah don't they have a city in china that's like called apple city or something like that oh you mean the foxconn stuff i can't remember

there's some city where they employ like they're moving a lot of those to india but okay yeah yeah i don't really get the appeal here i think services might have crossed 100 billion dollars uh in last 12 month revenue that's possible yeah it was about 26 27 billion so you could be right but yeah i just think they have pressure from all sides like antitrust too there's the antitrust stuff there's i mean we're already seeing slowing iphone revenue prior to any sort of geopolitical or like macro headwinds so just general maturing in that business it's like are they really going to grow the user base that quickly i don't think so i think at this point a lot of the revenue growth from the iphone side of things is going to have

to come from pricing power they have a bit they probably have a bit of that but what gets you what's going to get you excited their upgrade cycles continue to decline so yeah there's a comment here that says that google plans to make gemini the default ai for siri on iphones i did not see that but that does make sense given that again just look at they can't innovate anymore they can make nice products but in ai they are so far behind it's not even funny like it could actually hurt them over the long term ai you mean apple intelligence yeah the vision pro was a flop they don't have anything new and if ai is as important as people claim it is i still don't know it's something that i just like to track i'm not making a bet in my portfolio for or against

ai maybe i am if i'm not investing in some of these cloud companies but it's just something that i don't personally have a viewpoint on it's such a fast-moving market and it could be a bubble could be so big we don't even know but if it is that important apple is going to face competitive pressure i mean is again if this gemini thing as the default ai for siri makes sense is google going to have to pay as much as they used to you know with google search i doubt it i really doubt it and then your phones are going to get year after year after year worse than google pixels worse than samsung phones and speaking of china way worse than the ones in china now that's not going to matter for a long time but on the edges it matters and it matters for your growth rate

and market share gains blue text brett blue text i know that that is a good mode don't get me wrong but it's not something that's going to drive growth from here it's going to drive people to stick around with your product but the people that care about the blue text 20 to 30 to 40 year old people in the united states their upgrade cycles are declining very very quickly i know people that still have iphone what would it 10 9 i mean this is where's the growth coming yeah it's a good question you know someone like i don't know five years ago said apple at this point is basically utility right because the iphone is so critical to people's lives yeah i think at this point it should be valued like one honestly because you're probably

going to get utility like growth so it yeah i maybe we are like not the tech forward apple fans and maybe the brand is better than we perceive no the brand is it was if there was a huge price increase i i'm not afraid to switch operating systems yeah we also have a steady girlfriend and ryan i don't know if people would switch but i think they would delay upgrades true yeah i think where it's like okay well i have the iphone 13 or 14 it's not any different than these new ones if i cared about the tech and i didn't care about that ecosystem stuff i can move over to stuff that actually has the advanced tech pixels samsung's whatever but if you don't necessarily if you only care about having apple quote-unquote you can just not upgrade yeah uh what do you say we take

a temperature check on this market because apple is i don't know there isn't that much to talk about except for them kind of being behind the ball it seems like i will say that gemini stuff i've maybe it's just because i'm used to siri but i never use voice assistant on my phones like never yeah i make sure to disable it okay maybe if we're becoming such an anti-social society or something that people start using this in public but don't don't use it in public it's disrespectful it's it's it's it's not i would never do that just type it on your phone never do that around people i've seen people do it at the gym like what are you doing this is insanity okay temperature check on this market i mentioned

it earlier but most of the commentary has been pretty similar this quarter for management teams where it's basically every call something along the lines of consumers are being cautious we'll see what happens our business is great though they all they always mention like we're just focused on like serving customers like we're you know it could impact us in theory but it would hurt our competitors worse anyway i found this quote from the craft heinz ceo which is kind of random because i never read their reports and i have zero interest in investing in them but he said consumer sentiment has reached has reached its second lowest point in the last 70 years maybe for their products do you agree with that uh that cannot be true you think it's

worse than 1974 or 1982 that doesn't pass the smell test whatsoever worse than the gfc i doubt it 2009 also does not pass the smell test i think kraft heinz though is just something you don't touch have you seen the news with the new obzempic stuff like it's coming on all the telehealth um providers it works they're eli lily might have an oral pill coming down the line which one of the big headwinds for adoption of the glp ones is the fact that you have to inject it and people don't like that i mean i personally wouldn't like that craft heinz is not the barometer of the economy no it's not the barometer of the economy it's also online shopping has really hurt these brands i don't why would i have loyalty to sugar tomatoes

i'm 28 years old i'm not five i think yeah sure that's fair the i i think we're seeing a lot of companies especially consumer-focused companies And I saw it especially in the restaurant space that are producing bad results and using tariffs as the scapegoat, which is funny because it's like they're saying, oh, consumers are cautious because of tariffs. Look at Visa and MasterCard. No one cared about tariffs during the quarter that you are reporting for. Visa, MasterCard, and Amex. What? I don't remember MasterCard.

Maybe MasterCard's even better. Visa's 9%. Amex, 7%. And what was MasterCard? I'm sure right around Visa. MasterCard was 9% as well. Yeah. That's suspending.

You know where that's going? Guess what? Guess who has had the best comp sales of any company I have seen so far? All right. Taco Bell. I don't know if they just had a really bad last year, or maybe they're just such a value for consumers. Yeah, I don't know if that's a good barometer of the health of the economy. I want to be honest.

If people are going to Taco Bell more, that's pretty cheap stuff. McDonald's, rough comps. Starbucks, rough comps. You pick your restaurant here. I think we're seeing rough comps. Chipotle was flat. Actually, I think it was negative. Technically, it was like negative 0.4% comp sales.

Taco Bell. The Chipotle to Taco Bell trade down is alive and well. Exactly. McDonald's isn't cheap anymore. I think there's companies out there, and Starbucks has different issues. Maybe I'm thinking more of just Seattle only, but the fact that you have drug addicts just in your store, that's not going to help with your brand. But McDonald's took too much on price. They did.

I think, yeah, I think that's fair. I mean, when McDonald's is the same price as a Portillo's, that's part of my thesis and doesn't, you know, for owning the stock, it's not the entire thing. But when a Portillo's or even a Chipotle, I guess they had a bad quarter. Some other companies have their Chick-fil-A's. When they are the same price as McDonald's, I think more and more people are going to go to those options as opposed to McDonald's. because that's not the everyday low price provider anymore yeah they talked a lot about trying to be like the value brand again that they were like i think they even talked about you know maybe taking price a little bit too much last quarter um but i haven't seen any big changes like average

ticket i think still continues to grow so it seems they've done all this like it's mostly reducing promotions across their their locations and ultimately that that drives up average ticket which yeah when you're a consumer and you're thinking hmm i spent 20 the last couple times i went to mcdonald's maybe i will just go to chipotle also or in this case talk about ozempic ozempic ozempic we are i think we're at the point where these products are being under what's the little cycle the gartner hype cycle we're kind of going through the trough where people are forgetting about it even though it keeps growing and if these oral again i'll mention the if you can take it in a pill it's gonna be it's gonna grow like crazy um and mcdonald's has to be

hurting because of that i mean just look at the data that they provide the studies that have been done show that you're spending on potato chips you're spending on candy and you're spending on fast food dropped by like 30 percent yeah i mean come on you can't look at that invest in these companies starbucks talking about them minus two percent comp comp transactions so transactions declined two percent across the company the it doesn't sound that bad considering that last quarter i think it was like minus six they even got to minus eight at one point but this is lapping a year ago when they were having minus six percent comp transactions so it's you know technically getting worse although the trend is getting a little better

i still have some belief that brian nickel can turn this around i mean i think you got to give them more time especially if you're a shareholder but i really think the focus they put on digital ruined a lot of the customer experience yeah i think nickel's a great ceo his track record is fantastic about taco bell and chipotle but i don't care about this stock it's similar to mcdonald's like it's so what kind of returns am i going to get owning this thing okay if it works what 2x 3x over 10 years that's good but you'd rather own luck and coffee right yeah that's actually your question at this point i mean it's okay for any context for some context for listeners who do not know what luck and coffee is luck and coffee is this like i think it's a relatively new concept

in china probably started within i think the last 15 years where it's very focused on like grab and go type of coffee and they had apparently super fraudulent numbers like five years ago and they got exposed for it by i think it might have been muddy waters yeah but they were like they were just way smaller than that people thought like they were actually profitable but just way smaller yeah they were lying about how many transactions they had by like they were saying they had like double the transactions that they did um but they're still around and apparently growing really quickly and actually on the last conference call brian nickel came out and said like i did not realize how how much the competition had

developed in china and that it's a very different competitive landscape than he initially anticipated so maybe there's some legitimacy there maybe luck and coffee as much of a joke as it kind of is because they're kind of considered a fraud if they have if there has been a turnaround in ethics at that company and you're willing to invest in china it could be worth the worth a look maybe yeah no let's say we don't let's say we don't know like all the executives this week you know what food company ryan is doing well our favorite psychological long sprouts farmers market 11.7 percent comp store sales growth in q1 19 sales growth operating margin expansion and more uh more sherry purchases and plans to expand throughout new york

all the way kind of doing that i know the rust belt might not be the best term people don't like that but the states from new york uh through to illinois so chicago is coming soon uh i guess over the next five years rock solid company i wonder what the stock's doing today i think it might have been down but that's just because it had been up so much oh actually no is that 172 yeah just a great company ryan i believe we started buying this around 17 i think this would be close to our first theoretical 10 bagger yeah that's that's sad hopefully i can have a real one someday yeah it yeah those are really good results i took a peek at them on the you know we talked about the big fast food chain struggling maybe because of

the impact of ozempic this might be on the opposite side of things maybe they're a beneficiary And the operating margin expansion is really impressive. When we initially got into Sprouts Farmer's Market, we're talking about it, that was kind of one of the biggest points of contention is pretty much everyone thought the margins weren't sustainable, that they had been elevated due to COVID and some of the increased shopping that happened and cooking in as opposed to going out during that timeframe. And they have proven that the margin expansion and the superior margins are sustainable for context they generate about – I think it's just over 6% operating margins versus the typical grocer at around 2% to 3%. So significantly more profitable because they cater to different individuals and they sell different goods. yeah you're negotiating with a random farm in colorado not coca-cola you can get better pricing i will be interested to see how this concept does during a recession because given their their whole part of their value is sort of like the trader joe's where we're going to have very good prices

for you and the price differentiation between them and a whole foods or the whole foods equivalents ones that you have in cities across the country is much higher so i wonder if there will be trade down and that will benefit them but time will tell do you want to talk about another psychological long ryan maybe we have some advertisers we have to talk about too but i want to talk about spotify stocks at what 600 maybe maybe not seems to be doing quite well yeah 600 i don't know you you you have the numbers for spotify so go through those and if we have another advertiser maybe maybe time to hit that as well yeah let's talk about blue chippers club first We've mentioned it on the show a number of times, but Blue Chippers Club was started by two friends of ours with the goal of building a tight-knit community of stock-focused investors.

Inside this community, everyone gets to share and break down their portfolios, pitch stocks, receive feedback, and can participate in weekly calls. I really do like these weekly calls. And I think it's a – if you like listening to our podcast where we're kind of bouncing ideas off of one another, it's similar. You get the chance to bounce ideas off of other investors, hear ideas from them, give feedback. I just think there's a lot of value in a community like that. So if you're interested in signing up, go ahead, head on over to bluechippersclub.com and hit apply. The link will be in the description. That's bluechippersclub.com.

All right, Spotify numbers. Pretty solid cord all around. There wasn't anything in particular that stood out to me. they beat on subscribers i think they added the estimate was three million they added five million um they surpassed revenue and earnings estimates they social charges weighed them down which is kind of a thing you don't see a lot with american companies because it's uh mostly a european thing but i believe it's like sort of like i know what i know what it is if the stock price goes up they just have to bank that on employee compensation for what's going to happen so it's a non-cash

charge and it shouldn't fluctuate with the stock price really yeah related to the stock-based comp so they're accounting for it almost at a mark to market right uh i was on mute there uh yeah i think somewhat i don't know the exact details but i just know that there's a correlation between if the stock price is going up it's going to be hit it's a non-cash charge it's just a different way to account for stock-based compensation expense i really don't to keep it less complicated i kind of just look at gross and operating margin and don't even worry about it since it's a pretty small figure free cash flow over the last 12 months is 2.8 billion dollars i believe euros actually i think which maybe that's becoming a

bigger difference than it has been in the past um maybe it'll actually i haven't really kept up with the currency translation there, but for context, they were doing $200 million in free cashflow, I believe three years ago. So they've seen just rapid margin expansion. I'll kind of give the floor to you. I didn't think anything really stood out here. Solid progress. At this point, they just continue to grow the business in a pretty impressive fashion and and the number ultimately the number that matters is users and i think we've seen that they have the ability to focus on profitability when they want now it seems like maybe it's kind of become religion for danielek and that he's really got

his eye on the ball maybe he has all this whole time but you really saw it last year and we're seeing it into the start of this year as well i guess first of all any thoughts on the quarter but second off discussion question we i think we both sold spotify following or we never bought back in like so when we shut down the fund transferred some money started buying things again we never bought back into spotify if we did if you had bought then which i think the stock was around 170 or 180 dollars i think it would have been higher but still okay significantly lower than today do you think you would still own it today yeah i think so given the runway for growth um there's just a long runway for this company to reinvest in hopefully some get to get to a

billion not a billion not just a billion maus but maybe a billion paying users now that's pretty audacious goal but yeah there's room for this business to grow and grow and grow and i like the management team, founder-led. So yeah, I think I would still own it. It's one of those where you have to look at, okay, is this a low growth business that's trading at, would it be at this point, 40 times earnings? Or is it someone that can double, triple, quadruple the revenue over the next five years? If it's the latter, then I like it better. But speaking on the quarter, most, I think, important thing is looking at marketing expenses where they i think declined or didn't even grow but they're still able to add and compound those

uh mau acquisitions new subscribers stuff like that so the efficiency there would make me happy and besides that nothing nothing too crazy seems steady as she goes yeah i don't know if i'd still own it here seems really expensive i just don't see like we've seen great margin expansion i think we're at what just north of 10 operating margins yeah correct 15 maybe is is achievable oh yeah oh yeah definitely i mean they're still getting a major hit one from advertising so they figure that out which that's one that's been kicked the can's been kicked down the road what do you got here market cap 124 billion dollars

what's the revenue uh i guess i should have that pulled up on finch hat do you know off the top of your head ryan i don't well let's say they can back into it 10 percent yeah let's say it gets a 30 billion in revenue sometime soon and you can get 15 margins that's four and a half billion dollars in earnings so let's round that up to about five at some point within the next five to ten years give or take um that's what 20 to 30 times earnings versus the current market cap so 20 to 30 times five year out it seems expensive to me yeah it's expensive I think they have such a long runway to grow is what would probably keep me around from maybe trimming but not taking out the whole thing because if this is a company that market cap is $100 billion today, this is something I think can get to $500, $600 billion market cap eventually, which is I don't think crazy to assume. you probably don't want to cut off that right tail as opposed to something that

you know it's not growing that much why would i keep it around true yeah i think you do get when you have a advantaged business that has great brand value with customers and huge runway for reinvestment selling it early tends to be the wrong decision i think if you really got a lot of upside here from the stock in the next call it 10 years my guess is that it would come from some sort of renegotiated deal with the labels where where you get higher gross margins because i there i mean there's still the ceiling on gross margins currently ryan i had to break it to you but i think that's already happened and they're about to launch the super tier i heard rumors of it but i did not realize that it was official well they don't they don't announce it they

always say we're in good relationship it's never been better yeah it's expensive am i buying here ryan no but but psychological long still well yeah the the spotify bears i guess we're not correct um we didn't end up making too much money on it probably net losing a little bit at least but the people that said at under a hundred dollars that it was going to zero i just think that you weren't looking at the business correctly we have a question here good afternoon chit chat bros from john gallagos i think he's on blue chippers as well my my correct yeah yeah uh so a lot of listeners on over there anything on the berkshire pilgrimage went in the last two years and lots of fun and just signed up for finch effort 25 savings hey

love that that helps us gives us a little kickback as well and we appreciate the people doing that now is the time we've seen lots of people uh using that link on the berkshire meeting unfortunately neither of us will be there but we've had some people reach out so maybe hit us up on twitter and we can connect some people if need be um i know there will be some people that have been on the show before or or that run some podcasts that we work with that will be there so if you want to meet them um that'd be great if you're something that's going by yourself and haven't really met people in real life but besides that i don't think you're going to need our help um there's so many people there you can find really anyone to talk to go

walk into any restaurant or brewery there's plenty downtown in omaha and you'll run into plenty of anonymous fin twitter accounts and uh suit jackets uh sport coats you know yeah i mean the city is berkshire shareholders for the most part this weekend it's yep i i do want to go again i it's probably not i'm probably not the person that will go every year i know a lot of shareholders love it they go every year that's probably not me but it is it's definitely a fun chance to connect with the like-minded people yeah we need our consumer balance sheets to get a little higher i heard though someone said that the easiest way to go is actually on the amtrak just giving those flights like you fly to a nearby city hit the train but yeah hopefully it'll be a fun meeting

yeah definitely the meeting itself i wouldn't say is that enjoyable but it's everything around the meeting um all right we got a lot of other earnings we want to hit ryan before we get out of here maybe evolution stocks down a bunch a lot of people asked us to talk about this one airbnb we got to talk airbnb okay the travel economy slowdown yeah it is happening for booking an airbnb i don't know that's a slowdown is it well i mean it is a slow it's a slowdown in growth fair okay pretty significant slowdown as well i think it's about half the growth rate that they were generating a quarter ago but it's slightly lumpy the booking holdings grew their bookings seven seven point two percent which is also it's a

slowdown just like airbnb and you're probably going to see kind of like the cloud providers at this point i think you'll see generally similar trends in bookings growth for the two brands But Airbnb grew their bookings 6.9%, slightly slower. So I wanted to run this idea by you. Question, I guess. And I asked this last time. Why own Airbnb instead of booking holdings here? And my answer would be the same.

It's because Airbnb is purposely making their stays cheaper. And room nights are growing faster. Airbnb's room nights are growing faster percentage basis. them booking and Airbnb is still not globally available. And they have not, which they're about to this month, launch new products outside of the core experience. So when we have, and I was just pulling up the letter, I'm seeing, I think 20% plus growth in Brazil, Latin America as a whole is at, I think 20% ish growth, Asian Pacific, 15% growth. I think when you have that included in there as context also when they're about to launch these new products

also when they are purposely trying to make it more affordable on airbnb uh which is going to hurt i think you know it's going to hurt booking's growth in the short run but is taking care of their customers over the long term to build up that brand yeah i would still argue owning airbnb is better than booking here and when it founder-led i think you can't discount that Yeah. Airbnb just passes the gut check. It really does. The user experience to founder, owner, operator, even if the results right now are slightly worse than booking holdings, I think it's one of those where it feels like it has a much more promising future. and i can't put my finger on exactly why maybe it is like you talked about the lack of international exposure so far or the ability to grow abroad but we'll see it was a little bit of a it seems like there's kind of a travel headwind and some concerns around consumer spending travel overall

yeah yeah although i did see now this leads into the mexican airports which Well, we should talk quickly before we get out of here. Evolution and Mexican Airport, Grupo Airport, Tario del Norte, OMAB, because people specifically asked us to talk about them. But this was a, I think, confirmation from Airbnb that this Canadian travel boycott is actually has some legs. uh quote for instance nights booked by canadian guests to destinations in mexico increased 27 year-over-year in march additionally global year-over-year nights booked from canadian guests in march was higher than in q4 2024 so that is in relation to canadians skipping vacations in the united states and they're going to other countries such as mexico yeah music for yours music too for the mexican airport shareholders yeah exactly uh do we want to do evolution or omab first well i mean how much did you did you read the evolution report

i didn't read it uh i mean i skimmed it this was i think the gist revenue and earnings were flat because of what they called regulatory upkeep. I think they were forced to do because they were unlicensed operators for their casino games that were shut off due to a United Kingdom investigation. They're still launching new games. They hope some of these players come back. And the stock collapsed. Well, collapsed is always a tough word to use.

It dropped 20%, I think. The stock now trades an EV to EBIT below 10, Ryan. We think they might be decent capital allocators. What do you think is now finally the time to take the leap and own evolution? I've always had a bad feeling about evolution. I don't know what it is, but there's something there that I don't like. And I can't tell what it is because I like the business. The economics are fantastic, and it's a promising industry.

promising in the sense of like dollar volume will grow i'm promising for their dollars maybe it's like maybe i finally have some morals in my investing and this is where i draw the line that i don't like the idea of spend to online casinos growing so much but there's just something about it where i i kind of get the ick the investment well the true online casinos are crypto i've seen that uh it's quite terrible yeah this one seems cheap i feel like it worked really well from here but it's probably it probably will yeah i agree yeah all right before we get out of here someone specifically wanted to talk about the oh man bernie says the northern central airport in mexico so i can go through these quickly before we get out of here uh revenue

is up 15.6 compared to 9.1 traffic growth 18 operating income growth commercial revenue per passenger of 12.5% year over year. And remember that the new contract negotiated with the Mexican government is not coming until 2026. So that will not be reflected in the earnings yet. And the stock is still around 10 times earnings. There are, and this is not my opinion on whether this is good or bad, should say fair warning since this is a very politicized issue. There are fairly rich Mexicans for, you know, compared to the average Mexican population coming back to Mexico from the United States plus international travel skipping the United States can help with their traffic growth. The longer that tariffs stay around on China, the longer it is good for

companies to invest in manufacturing in Monterey, their most important airport. I think all positive right now. Now, there could be some headwinds eventually, but this is a great business, I would argue, and one that will get through any sort of downturn at the moment. It seems all positive, up, up, up. Yeah, it seems from what I see online, I haven't been abroad since all this tariff news, but it seems like there's kind of a general disdain for the US at the moment from a lot of countries globally.

And if people do, if that impacts their travel decisions, this is a company that benefits. If you're thinking about going to the US, you want to adjust it slightly. mexico you can get the great beach vacation and all that and or you can get a nice city vacation for about 10 of the price ryan how would you like that that's more my style yeah i guess if you love the sights of monterey that's that's an option too yeah i guess yeah their their portfolio not uh yeah i guess isn't isn't the best but the other one uh pacifico guadalajara cabo

So maybe not Tijuana, but it's – I mean all the Mexican airports, everything that's happened over the last few months, they're a big beneficiary I imagine. Yeah, or at least they're not going to be hurt yet. Now, if the global economy goes into a depression, well, all bets are off. But so far, so good. Yeah. We'll be having very different discussions. and there'll be other problems beyond your OMAP investment. Yeah, exactly, exactly.

All right. I think that's it, Ryan. We might be going on. I don't even have the timer in front of me, but I'm looking at the clock. Anything else before we get out of here? I think that's going to do it. Thank you, everyone, for tuning in.

We missed the bubble watch this week, but there was so much news to get to. Maybe we'll save it for next week. Anthony Pompliano has a SPAC. BlockFi guy has a SPAC. And I think it's just, yeah, it was good. That was going to do it. Thank you everyone for tuning in.

Thank you for everyone that added some comments in the chat. We want to remind everyone that Brett and I are not financial advisors. Anything we say or discuss on this podcast is not formal advice or a recommendation. We may buy, sell, or hold any of the securities discussed on these episodes. So please do your own work. Thank you all for tuning in and we'll see you next time. Thanks for watching!