Motley Fool Hidden Gems Investing - Amazon’s Entertaining Buy, Tesla’s Ford-Tough Competition

Episode Date: May 28, 2021

Amazon buys MGM Studios. Costco slips a bit despite strong earnings. Salesforce rises. And Dick’s Sporting Goods swings higher thanks to strength in its golf business. Motley Fool analysts Ron Gross and Jason Moser discuss those stories and weigh in on the latest from Okta, Ulta Beauty, Autodesk, and Williams-Sonoma. Plus, Ron and Jason share two stocks on their radar: Elastic and Toro. And Reuters automotive reporter Paul Lienert discusses Ford’s new electric F-150, Tesla, Apple, and the future of the auto industry. Looking for more stocks for your radar? Get 50% off our Stock Advisor service just by going to http://RadarStocks.fool.com. Learn more about your ad choices. Visit megaphone.fm/adchoices

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That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Chris Hill. Joining me this week, senior analysts Jason Moser and Ron Gross. Good to see you as always, gentlemen. Howdy. How you doing, Chris?

We've got the latest headlines from Wall Street. We'll get a report on the automotive industry from veteran journalist Paul Leinart. And as always, we've got a couple of stocks on our radar, but we begin with another deal in the media landscape. This week, Amazon bought MGM Studios for $8.5 billion. MGM was founded nearly a century ago, and the studio library includes 17,000 TV shows and more than 4,000 films, including the James Bond and Rocky Balboa franchises. Jason, pretty much everyone thinks that Amazon overpaid for MGM. Let's face it, they need the content and they've got the money. Yes and yes, they do need the content and they do have the money. I agree. It's easy to look at this deal, at least in the near term, and feel

like maybe they overpaid. As much as we love Disney for their vast catalog of IP, this to me as an investment on that same wavelength. And so, what I'm getting at here is that while it looks like today they're paying an awful lot for content that may or may not pan out in the near term, it also does give them, I think, a really long tail of opportunity in taking this content, taking this IP in a number of different directions, right? Backstories, doing all of that stuff that Disney does so well with all of its IP, making new stories out of content that they already have. I I mean, this gives Amazon at least the potential to do that, which I think is encouraging. And then the other side of this deal, it's not like they're going to get access to everything.

I mean, licensing video content is an involved affair, and it's difficult to always connect all the dots. So, while you might not see all of this content immediately making its way to Amazon's distribution, I think that what it does do, giving Amazon ownership of it, even though you may see that content on other channels, it at least gives Amazon the opportunity to monetize it to some extent. So, I just think this requires looking a little bit further out than probably many would like to. Yeah, I think that's where you get into the valuation. When you look at the fact that they don't have total control or ownership over a lot of the content, back from, I think I saw, pre-1986

perhaps, was the date. And 007, James Bond has very tight restrictions on it from two folks who own really control of it. That's where you look at it and say, well, this has been shopped around for a while, Apple, Comcast. Folks looked at this at significantly cheaper prices and passed. So yes, Amazon has the money. Yes, it probably won't matter if they overpaid. But you still want a company, a CEO that has fiscal discipline. I think based on the fact that they don't have total control and total ownership, they appear to have overpaid. Let's get to some earnings and we'll start with Costco. Third quarter profits and revenue came in higher than expected. Same store sales grew nearly 16%, yet shares of Costco basically flat this week. Ron, where is the

respect. You know, I like this report, but it's not perfect. There were certainly some bright spots, and Costco continues to be just a wonderful company, a wonderfully run company, but it wasn't perfect. Revenue was strong, up 21%. As you said, comp sales greater than 15%. E-commerce up 38%. The renewal rates from the membership business, which is basically their whole model, very strong still at 88%. That's actually 0.1% lower, but that's because China kind of kicked into the calculation now, and China is new, and new memberships tend to not renew at the same rates as ones that have been around for a while. There was strength in the non-food business. They saw strength in travel from pent-up demand from COVID as the vaccines roll out, people getting

back to traveling. There was pressure from supply delays, higher freight costs, chip shortages. I think we're going to see that consistently as we have been across retailers, as well as inflationary pressure. We're going to see that's going to be a common theme. Items containing paper, plastic, metal, these things are seeing price increases, relatively significant price increases. Management says that although gross margins were a bit weak, inflation did not have big impact on gross margins yet. Let's keep an eye on that. Adjusted income up 20%, that's strong. They're beginning a phased return of food sampling. I think we like this. The food courts are coming back. They are optimistic about sustained demand for their higher margin items,

jewelry, home furnishings. They showed some confidence by raising the dividend 12% back in April. Costco continues to operate very well. It's just things are not perfect and investors at 36 times earnings want to see something a little bit more robust to get excited about the stock. First quarter profits and revenue came in higher than expected for Salesforce.com. The business software giant also issued higher guidance than Wall Street was expecting. Shares of Salesforce up more than 6% on Friday, Jason. Yeah, strong quarter. Salesforce is a funny one because it's this massive market leader in customer relationship management, that CRM market that we talked about. But when

you try to pinpoint exactly what Salesforce does, it's difficult to do it. That's precisely what makes it so darn strong though. It's in a line of work with a lot of moving parts. Salesforce does a lot of things really well, but understanding what CRM is, I think, helps. CRM is about data. It's systems that compile data from different communication channels, including a company's website, telephone, email, live chat, marketing materials, and even social media. It ultimately allows businesses to learn more about their target audiences and how to cater to their needs. That's what Salesforce does really well. It's just difficult to really fully understand how they do it. But it's a collection of a lot of really great tools and acquisitions. I mean,

they've acquired MuleSoft a long way, Tableau, now Slack, which should close later on in this quarter. So, all things put together, the sum of the parts here is really impressive. And that translates into the numbers. I mean, revenue of close to $6 billion, that was up 20%, excluding currency effects. Operating cash flow, $3.23 billion, up 74% from a year ago. They raised revenue guidance, like you mentioned, to $26 billion for the year. They are gunning for $50 billion in revenue for fiscal 2026. And the scary part is, I totally don't believe that they can get there. So, when you put all of that together with its market-leading position, I mean, it's

a company right now that's valued at around 37 times free cash flow. That, to me, seems totally reasonable for such a dominant business. it's one that investors really, really should keep on their radar. Shares of Dick's Sporting Goods up nearly 20% this week, after same-store sales in the first quarter doubled expectations and profits tripled expectations, Ron. Whatever CEO Lauren Hobart and her team are doing at Dick's Sporting Goods appears to be working quite well. This is a true blowout quarter. As you said, the metrics are just wild. Net sales up 119% percent from last year's first quarter. And they also included a metric from two years ago

to help people understand the impacts of COVID, which a lot of retailers are doing now. And I like that. So if you look back at 2019, sales are up 52 percent compared to 2019. So, you know, really, really strong, even when you kind of remove the impact of COVID. Same-store sales up 115% as the anniversary of the majority of store closures. Let's take that into account when we see these crazy high numbers. Last year was not a normal year, as we all know. E-commerce up 14%. That's grown from 13% of net sales in the first quarter of 2019 to 20% now. I think we'll continue to see that ramp up. Strong consumer demand across golf, outdoor activities, home fitness, activewear. They saw a rebound in their team sports business as

youth sports gets back to business. They admitted, agreed that they benefited from stimulus checks, as many retailers have. Gross margins widened, and as you said, earnings per share just skyrocketed up 511% from the first quarter of 2019, and was actually higher than all of 2019. Really strong, focused on tech, omni-business, omni-channel distribution, introducing Dick's House of Sport in Rochester, New York. That's their first one. Focusing on the golf galaxy business as they see renewed strength in golf, raise their earnings per share guidance for 2021. This is a really, really strong quarter. Yeah. Not to add to the pressure on them, Ron, but you have to figure with summer camps

opening up, the potential for fall sports returning to normal. You got to believe that that the next few months present a good opportunity for them as well. I think this continues and the stock is not expensive at, I want to say like 11 or 12 times earnings right here. And if they continue to put up these numbers and they continue with strong omni-channel, I think this is a good one to look at. Coming up after the break, we've got cybersecurity, we've got furniture retail, and we've got cosmetics. This isn't your father's business show. This is Motley Fool Money. Chris Hill here with Jason Moser and Ron Gross. Okta's results in the first quarter

took a backseat to the announcements the company made. The cybersecurity business said their loss for the current quarter is going to be bigger than originally thought, and that CFO Michael Curry is leaving immediately. Jason, they named an interim CFO while they look for a replacement, but the one-two punch of guidance and Curry leaving had shares of Okta down nearly 10% this week. Yeah. I mean, I do understand the market's reaction. It was a good quarter. There are some questions, of course, that come up when the CFO of a year steps down after a major acquisition. Just not really a good look. But with that said, I do see actually tremendous opportunity for this business in the coming years. And if you consider the trends that

are really driving Okta's business today, it's the deployment of cloud and hybrid. It is digital transformation, it is the adoption of Zero Trust security. Zero Trust is something we're going to hear more and more about here in the coming years. The Biden administration, for example, issuing an executive order here recently in regard to our national cybersecurity posture, ultimately saying that Zero Trust is going to be a requirement for government agencies, for one. We've seen Zero Trust all over other organizations as well. That's just going to be something that continues to be more and more important. I think it's tailwinds for Okta's business that will, I think, help them recover from this okay. If you look at the numbers,

the revenue for the quarter up 37% over the year and subscription revenue up 38%. This is primarily a subscription business too, which is great. To me, again, you look at the dollar-based net retention rate there, it remains strong in the 120% range. That Auth0 deal just closed. Perhaps it was just time for the CFO to move on. I don't know there, there wasn't a whole lot of light shed on the call. But again, given the tailwinds and the importance of cybersecurity, I think that Okta is doing a lot of things to remain relevant in that space. With the stock value today, it's 35 times sales. It's like all of these other high flyers. But again, I think this is a business, I think they're doing something that really matters here,

so it's certainly one to keep on the radar for investors. First quarter profits for Ulta Beauty were more than double what Wall Street was expecting. The cosmetics retailer also raised guidance for the full fiscal year. Shares of Ulta up nearly 10% this week, Ron. Yeah, last quarter with Mary Dillon, the CFO, she leaves behind a very strong company that put put up a really nice quarter, beating expectations. Sales up 65% driven by the reopening of the economy, of course, consumer confidence. Again, government stimulus checks, as we'll see across retail. Comp sales up 66%, driven by a 52% increase in transactions and an almost 9% increase in the average ticket. We'll come back down to earth and compare numbers to fiscal

2019. We saw the sales increase 11% over 2019, and comp store sales increased 7% over 2019. Still strong, obviously not as strong as when you compare it to the pandemic months. Mid-teen growth in e-commerce, on top of last year's 100% growth. You have sales penetration now in the mid-20%-ish of sales. Growth in operating margins widened significantly. they've increased loyalty members by 1.7 million members in the first quarter. That's 2% lower than the first quarter of last year, but 5% higher than Q4. The member base continues to recover from the pandemic, and I think we'll see that and we'll get back to growth mode. They're on track to open the first Ulta Beauty shops at Target later this summer. Net income

$230 million versus a loss this time last year, and they're repurchasing stock. New CEO takes over. Dave Kimball, former Chief Merchandising Officer, company increased guidance, and I think this bodes well for at least the next several quarters, if not the next couple of years. On last week's show, Andy Cross' radar stock was Autodesk. The design engineering software company came out with first-quarter results on Thursday. Jason, shares of Autodesk up a bit this week. What stood out in their report for you? Yeah. This is just a really strong business that's poised to become even stronger, I think particularly with the tailwinds of this massive infrastructure spending that's currently

being deliberated here in D.C. We're talking about tailwinds with a company like Okta. I mean, there are tailwinds here with a company like Autodesk, too. And when you look at what they're trying to build, it's a very comprehensive offering. And I think that's something that's really working well for them. And just look at construction, for example, the architecture, engineering, and construction side of the business. I mean, they have this vision to connect all of the phases of construction with end-to-end cloud-based solutions that essentially take it from the planning and design to the construction operations and maintenance. To that end, the architecture, engineering, and construction segment grew

16% for the quarter. That was the top performer, and it's the biggest part of the business, so it matters. They grew the top line overall, 11% excluding currency effects. Operating margin was flat, earnings per share up 20% from a year ago. Subscription revenue, again, just a lovely subscription business model here, that's 96% of total revenue. That's just reliable too, which is really nice. For fiscal 22, they raised full-year revenue guidance up to a range of $4.3 billion to $4.385 billion. Shares today valued at around 60X full-year earnings. Listen, we've got a cash flow positive and profitable business. Yeah, let's be happy with that. It's not valued at 60X sales. This

is times earnings. I would encourage investors to focus on that. As a shareholder myself, I remain very pleased with what Autodesk is doing and I think it's only going to become a more relevant business here in the coming years. Shares of Williams-Sonoma up 4% this week after a monster first quarter report. Profits came in 300% higher than a year ago. Same-store sales were up 40%. They raised guidance. Ron, is it possible shares of Williams-Sonoma should have been up more this week? Perhaps, because they crushed estimates. I mean, left them in the dust. I don't know what the analysts were thinking when they put forth their estimates, but they were way,

way off. You hit some of the highlights. Forty percent comp growth, strength across all brands, which is important because sometimes we see weakness in some of their brands. Obviously, reopening Accelerate across the country is helping all of the brands. We can go through them, West Elm up 50 percent, Pottery Barn 41 percent, Williams-Sonoma 35, and Pottery Barn Kids and up almost 28%. They have a couple of emerging brands, Rejuvenation and Mark & Graham combined. Those delivered comp growth of over 35%, and the global business was up over 81%, now approximating about $100 million business. Gross and operating margins widened really significantly. That's where we saw that compound into that huge adjusted earnings per share growth of almost

300% that you noted. As you said, they raised full-year outlook from mid to high single-digit revenue growth to low double-digit to mid-teen revenue growth and year-over-year operating margin expansion, which again, both those things will compound to strong earnings per share growth. They intend to close 25% of their stores over the next five years as e-commerce continues to ramp. The stock looks pretty good at only 15 times earnings. All right. Ron Gross, Jason Moser, guys, we'll see you later in the show. The automotive industry is next, so stay tuned. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Between the unveiling of its new electric

truck and announcements made at its Investor Day event earlier this week, Ford Motor is the talk of the automotive industry. Here to share insights on that, as well as the latest with Tesla, self-driving cars and more, is veteran journalist Paul Leinart. He covers Automotive Tech, Innovation, Strategy, and Finance for Thomson Reuters. Paul, thanks so much for being here. Chris, it's been a while since we talked. Glad to chat. A lot to catch up on. I want to get to the new F-150 in a minute, but Ford Motor made a lot of announcements at the event they had on Wednesday. They're investing $30 billion in electric vehicles over the next four years. They expect by 2030, they're going to be somewhere in the neighborhood

of 40% of their sales are going to be electric vehicles. I know you were covering the event. What is the biggest headline coming out of the event in terms of your thinking? Probably the biggest headline that I've seen involves either the $30 billion that it plans to spend through 2025 on electrifying its vehicles, or that 40% of its global vehicle sales by 2030 will be EV. And by the way, that includes 100% in Europe, which it's already committed to. I think maybe a more important headline that I didn't see very many places was Ford CEO Jim Farley refocusing and intensely focusing the company on the commercial vehicle market

And Ford, I wouldn't say owns that market, but boy, they have a stranglehold on it right now. And that was part of its strategy with the electric F-150 was to aim it at commercial customers who are already heavy-duty buyers of the standard F-150, including some pretty fancy versions of it. You and I have talked over the years about the leaders in this industry, CEOs like obviously Elon Musk and Mary Barra, Alan Mulally. What is your take on Jim Farley? What should people know about him? Because I've just started to read a little bit about him. He seems like a very focused person. I've known Jim for a long time. I've known Jim since he was a young product planner at Toyota. He is a really smart guy.

He knows cars inside out. He knows the car business inside out. He's a big thinker. I will tell you, because I've had a running discussion with a friend of mine who's in the venture capital business the last couple of days about Ford, about Farley in particular. My friend was talking about Jim Hackett, who is Farley's immediate predecessor. And I will tell you, as much as I admire Jim Hackett and like some of his thinking, I think he found it difficult to articulate a plan or a vision or a strategy for Ford in the wake of

Alan Mulally, who did such a wonderful job of all of those things. And I think with Jim Farley, Ford Motor Company now has a guy who has a vision, he's got a strategy, and he can articulate those. And guess what? Wall Street loves it right now. Ford stock has shot up this week. And to frame that $30 billion that it's spending on electrification, its market cap is approaching $60 billion. So Ford is talking essentially over the next four to five years, spending about half the value of the entire company on EVs. Earlier this month, they unveiled the F-150 Lightning, an all-electric truck. It's going to hit the road next spring. They got more than 40,000 reservations for this thing in less than two days. What do you think of the truck

and what does this do for Ford's business? You know what, Chris, they were real clever on a couple of fronts. They made the Lightning look an awful lot like the existing F-150, which has been America's best-selling vehicle for more than three decades. So that's not a dumb thing. Number two, it didn't do it from the ground up. At first, you had to wonder, gee, why didn't they do that? Well, there was one huge reason, two huge reasons. One, it was a lot less expensive, but two, it gets them into the market a lot quicker. The Chevy Silverado EV, for instance, probably won't hit the street for maybe six to nine months after the Lightning does. When are you going to get your hands on one of these things?

I want to know what it feels like to be behind the wheel, because I think the challenge with something like this is, as you said, this is an incredibly popular vehicle that they are modeling this after, and the people that they are hoping are going to buy it are going to make the obvious comparison to the existing F-150. It has a lot to live up to, doesn't it? Well, it does, and particularly with the work truck market. These are people who depend on these trucks for their jobs. It's a whole different market from, say, the market that GM is aiming the Hummer EV at, and at a price that's considerably less than the Hummer EV is going to come in at. These are fussy people. Ford knows what they need because it has an ongoing and

very successful commercial vehicle business. So it's equipped the Lightning with the sorts of things that work truck owners might want. We were laughing the other day when we were counting the number of power outlets on the Lightning. I want to say there were 10 or 11 of them. And a friend the mindset, oh my gosh, power outlets, it's going to be the new cupholders. For all of the success that Tesla has had over the past decade, I think it's fair to say that the unveiling they had last year with their truck didn't go as well as they would have liked. um what do you think they are thinking as they watch uh the f-150 lightning um you know get the attention that it's getting um and and what is your take on the state of tesla these days

um boy the tesla and elon musk are the source of constant conversation at my place both at home and at work. I have a great deal of admiration and respect for Elon Musk and for his company. They have been in the vanguard pretty much for the last 10 years, the vanguard of vehicle electrification. I think they're still there with some of the advanced battery work they're doing. Elon blew people away with the Cybertruck. I'm anxious to see what the production version looks like and get in it and get a feel for it. There was a lot of teasing, and you know how irreverent Elon can be on various subjects. There was a lot of teasing for it a year ago. I give him credit this week. He sent out what sounded like a very sincere congratulatory message to Ford for putting

that truck out on the street. It's going to be really interesting. I suspect the audience for the Cybertruck is completely and totally different from the audience for the F-150 Lightning. So, this is a space where there can be more than one winner, it sounds like. You know, for now, the space has been pretty rock solid. It's worth several million vehicles a year in the United States. The F-150 alone sells somewhere around 900,000 vehicles a year. there is likely room for more and particularly for different and the cyber trick is surely different not just in looks but the fact that it's all electric so we will see i think the the market for electric pure electric pickups whether we're talking the lightning the hummer the cyber truck

is untapped um none of the companies knows everybody's being a little cautious maybe Tesla less so than the other guys. So, we're going to see how many buyers are actually out there and how soon the market gets saturated, if in fact it does get saturated. Earlier this week, the New York Times had a piece entitled, The Costly Pursuit of Self-Driving Cars. And I'm curious where you think we are right now with self-driving cars, because you and I have been talking for nearly a decade. And it seems like, I don't want to say we're as far as we've ever been away from self-driving cars, but, you know, we're, well, we're nearly a decade into this conversation. And you look at a business like Waymo, you know, you got the people from

Google working on this and they're still having the types of problems that nearly a decade to go, we thought we'd be further than we are in this process. Correct on all points, Chris. And I might point out, Google probably has dropped something like $10 billion just in its own pursuit of self-driving cars. I have a little bit different take on this. If you're talking about passenger cars only, and whether it's robo-taxis or self-driving cars that you and I might one day be able to buy. That is still probably as far away from reality as it was two or three years ago. I would say we're realizing we're probably 90% of the way there, and the last 10% is insane. It's going to be ridiculously expensive. It's

going to take a ridiculous amount of time, way longer than anybody thought. The flip side of that, and this is something that we learned, I think, during the pandemic, is that perhaps the real market or the more immediate market is for self-driving trucks. And I'm thinking specifically commercial delivery vehicles. So anything from small shuttles that we've seen occasionally around to big over-the-road trucks. I am beginning to believe that self-driving trucks are going to hit the highways in increasing numbers long before we see many robo-taxis on the road. Do you know why? I forgot the biggest reason is because they're revenue generators, probably bigger revenue generators than robo-taxis. That's as good a reason as any

to put your emphasis on where the money can be made. The biggest company out there is Apple, and they've got the deepest pockets. And Apple has blown hot and cold when it comes to the automotive industry. There are times over the past decade where it really seemed like they were working furiously behind the scenes to develop their version of a vehicle. And then you don't hear anything for six months, 12 months. is apple going to enter the automotive market in the next five years i'll answer that without trying to sound snide they are in the in the automotive market right now but in a different way i think that you're talking about and the question is whether they really will do the car

that has been designed and shelved and redesigned and still does not have a green light as far as we know. We've talked to people who have worked for Apple. We've talked to people who have bid on various Apple projects involving the Apple car. So we have a good deal of intel out there about it and what they're thinking and how they're thinking. And the current thinking has been a smallish electric car that's self-driving. And Apple's assembled a pretty formidable team with talent in all these various areas, including batteries and self-driving software and technology sensors. They're getting close to being ready to go if and when Tim Cook ever decides to push that button. And they know full well simply from watching the experiences of Google and General

Motors and Volkswagen and others just how expensive a proposition is. Money isn't necessarily the object here. And I think Apple's long game, Tim Cook's long game is not to sell cars, but it's to leverage the data it thinks it can get from those cars. And I think here's the rub. I think there's a good argument to be made that Apple can make perhaps nearly as much data, excuse me, nearly as much money from the data it's already begun harvesting from the devices we take into cars. and now it's beginning to get itself embedded in dashboards. So if Apple can do more deals with more car companies to get itself more deeply embedded in dashboards, does it really need to do a car to make the kind of money it's made, for instance, off iPhone apps? Yeah, they make money

on iPhones, but man, do they make a lot of money on the apps too, don't they? They sure do. Last thing, and then I'll let you go. I know you've been focused on Ford Motor this week because of their event. But what's one more thing in the automotive world that you're keeping your eyes on throughout 2021? Man, I'm so glad you asked me that, Chris. I am captivated by the work that's going on, much of it behind the scenes, and a lot of it in the auto industry on aerial vehicles, electric vertical takeoff and landing vehicles, planes, if you will, that are neither a conventional aircraft nor a helicopter, but these things are being looked at for everything from hauling passengers to hauling cargo. It's going to be fun

to see where GM and Toyota and other companies go with that and how soon they put them on the market. It's one more reason I like talking to you, Paul, is you managed to say all that without using the phrase flying cars. I was waiting for you. If you want to know more about the automotive industry, it's pretty simple, read Paul Leinart's stuff. Paul, it's been a busy week for you, so I appreciate the time. Thanks for being here. You're too kind. Thank you, Chris. Take care. Good to talk. Up next, Jason Moser and Ron Gross return with a couple of stocks on their radar. Stay right here. You're listening to Motley Fool Money.

As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here once again with Jason Moser and Ron Gross. Before we get to the radar stocks, a reminder, as always, if you're looking for more stock ideas, more recommendations, check out Stock Advisor, it is the flagship service here at The Motley Fool. You get stock recommendations every month, Best Buys Now, and a lot more. Just go to RadarStocks.Fool.com, that's RadarStocks.Fool.com, you get a 50% discount, not because it's Memorial Day weekend, it's not one of those sales,

It's just because you're one of our dozens of listeners. That's why. Jason Moser, you're up first. What are you looking at this week? Jason Moser. Yeah, digging into a new one for me. The company is called Elastic, ticker is ESTC. They provide software and services that enable users, or in this case, businesses, to search through structured and unstructured data, just to try to come up with what all that data ultimately means. Search for consumers, yeah, Google's got that nailed. The search for businesses, it's a little bit of a different value proposition there, and that's what Elastic is focused on. Very nice subscription model that accounts for better than 90% of their revenue. Just recorded recently 13,800 subscription

customers. That is compared to 5,000 in 2018. That tells me that maybe they're doing something right. They see a total addressable market at $78 billion today for a company that generated $500 million in trailing 12-month revenue. Seems like there may be some opportunity on the horizon for the company and therefore investors. Dan Boyd, our man behind the glass, you got a question about Elastic? You know what? Not really a question, Chris. More of a comment here. So Jason's a smart guy, and he brings great stocks to the show every week, week in, week out. You can depend on him. This Elastic company, probably a great company. But when I hear the word Elastic, I don't think about software as a service, all right? I

think about, I don't know, gym shorts, socks, you know, not software as a service. I'm right there with you, dad. You got to dig a little bit deeper. Sounds like an implicit questioning of the brand. Ron Gross, what are you looking at this week? I'm looking at the Toro Company, TTC. Recent recommendation in our total income service, they design and manufacture professional and residential landscaping equipment. They're a leader in the residential professional landscaping market, solid track record growth, and market outperformance. They're making acquisitions, interestingly, in robotics and AI. They're tapping into the opportunity to shift the industry toward autonomous systems.

Near-term tailwinds include 5G infrastructure investments. That should bolster sales of equipment. They've increased their dividend for the last 17 years. We like that at total income. current yield is just under one percent dan question about toro absolutely uh well not really a question more of a comment again sorry everyone so last year i had to buy a new uh lawnmower because my old one had broken and i went to consumer reports to look at what the best lawnmower company is and toro was ranked as the highest uh for like a couple years in a row also but then i did a little more research and i realized that toro on their push mowers uses Honda Motors. So I cut out a couple hundred dollars from my purchase and just bought a Honda

instead with the same motor. Maybe not the same je ne sais quoi of Toro, but a couple extra hundred dollars cheaper and the same grass cutting power. A shrewd purchase, Dan. I can't argue with good shopping. What do you want to add to your watch list, Dan? You know what, Chris? Just because I saved a couple hundred dollars doesn't mean it's not a good company. I'm going with Toro. Nice. Jason Moser, Ryan Gross, guys, thanks for being here. Thank you. That's going to do it for this week's Motley Fool Money. The show is mixed by Dan Boyd, our producer is Mac Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.