Motley Fool Hidden Gems Investing - Breaking Up is Hard to Do: It's Not Me, It's You

Episode Date: June 24, 2025

Novo Nordisk parts ways with Hims & Hers, a financials-related stock to get on your radar and more! Jason Moser and Matt Frankel discuss: - Why Novo Nordisk is parting ways with Hims & Hers. - Waymo and Uber's big Atlanta debut. - What the potential tax deduction on autos could mean for consumers and companies. - Matt has a financials-related stock he thinks is worth a closer look. Tickers mentioned: NVO, HIMS, TSLA, UBER, GOOG, GM, ALLY, RKT Host: Jason Moser Guest: Matt Frankel Engineer: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

Jason Moser. Breaking up is hard to do. You're listening to Motley Fool Money. Welcome to Motley Fool Money. I'm Jason Moser. Joining me today is Motley Fool analyst Matt Frankel. Matt, thanks for being here. Always good to be here. It's been a while, and I'm glad we get to do these more frequently now. Absolutely. Absolutely. On today's show, Novo Nordisk is parting ways with HIMS and HERS. Waymo and Uber make a big debut in Atlanta. Who wins from a proposed tax deduction on auto loans? And we'll also take a closer look at a stock on Matt's radar in the financial space. But before we dive in, let's take a look at a few of the headlines driving the market today.

Markets are up today as investors continue to digest the news coming out of the Middle East. While a ceasefire is still uncertain, the growing possibility of negotiations continues to keep investors at least somewhat optimistic. Despite recent reports, Starbucks clarified it's not currently looking for a full sale of its Chinese operations, though CEO Brian Nickel has confirmed that Starbucks is open to exploring partnerships in the country. And last week, the Fed voted to hold rates steady, though it appears that sentiment could be starting to shift within the committee members. A recent update to the dot plot showed that nine of the 19 officials favored either zero or one cut this year, while eight saw two cuts, and now two others expect

three. On Monday, Novo Nordisk, the producer of the popular weight loss drug Wegovi, announced that it was ending its partnership with virtual healthcare provider HIMS and HERS, and the market didn't like that news at all. Shares of HIMS and HERS fell almost 35% on the day. Matt, Hims and Hers shares have been on a tear recently. It's easy to understand why. The company has grown revenue at about 80% annualized over the last five years. But what does this Novo news signal to you? Just for some background, Novo partnered with Hims and Hers to sell their Wegovi drug, the popular weight loss drug, instead of its own compounded knockoff version, I guess you would say. The idea was, okay, this is an unauthorized

compound. There was a lot of risk that there was going to be a legal battle between the two companies. So they just decided to come together and solve it that way. The partnership only lasted a few months. Generally speaking, by every account, at every step of the purchasing process, Hims and Hers was still pushing people towards its own compounded version at, like I said, every step of the way. And it's easy to see why. They make higher gross margins from their own product than selling Novo Nordisk's version. But that wasn't the agreement. Really, that was what management said in the statement when they described what happened. The real risk isn't that this is going to be a big revenue hit to hims and hers. Like I said, there's higher gross

margins from their own product than selling it to someone else's. The risk now is that a lawsuit's likely coming next if they continue to sell a knockoff version. That's really why I see the stock down as much as it is. It's not that it's going to have 35% lower revenue. It's that there's a lot of legal risk now that they're not partners. Yeah, well, this seems to center around compounded drugs, which, as you said, these are not FDA approved, right? Dave Moore, the EVP of Novo's U.S. operations, said regarding the decision, quote, we expected that the efforts towards compounding personalization would diminish over time. When we didn't see that, we had to make a choice on behalf of patients, end quote. So, I guess the question I have, I mean, the bear

on HIMSS would say they're just out to make a quick buck, and then the bull would say that they are looking out for the patient's best interests in making certain medications more widely available. So, do you feel like, I mean, is this becoming a bigger risk for HIMSS and HERS, at least the perception? I'm not necessarily saying it's the case, but the perception that they're not really looking out for their patients' best interests. Yeah. Honestly, selling a compounded, non-FDA-approved drug just doesn't sound very like something I would want to get involved in in the first place. I think I'd want FDA approval personally, but who am I, right?

But it's also a big cost difference and things like that. I can understand it. Like I said, it's just a real big open question of how much these companies are going to be fighting with each other. But HIMS and HERS, it's not that they're not looking out for people, it's just that they're telling people this is not an FDA-approved product, but you can get it cheaper and things like that. But the general push was toward their own product and away from the real version. Yeah, they seem to be at least somewhat clear on that front. Now, we know valuation always matters. And while HIMS and HERS isn't off the charts expensive, even after this run the stock has had. It does have a pretty rich multiple at around 60 times earnings or so,

even after the sell-off. Does this start looking like an opportunity here, or do you feel like there could be more shoes to drop? Personally, I stay away from heavy legal risk like this. It seems like there's a lot of future growth priced in, even after they're losing this partnership. It seems like a bet on this stock would be betting on that all these weight loss drugs are going to get even more popular and that they're going to be able to successfully continue to sell their own compounded version without any legal intervention. And to me, it's a big risk factor right now. Legal risk is one of the, there's like three things that I won't go near a stock for and big legal risk is one of them. Well, next up, Waitmo and Uber's big debut

in Atlanta. New from Nespresso, blend wellness into your coffee routine with the Coffee Plus range infused with functional benefits choose the coffee you love with added b vitamins like coffee plus b12 to help support immune function and coffee plus b6 to keep your day moving or go with the flow and choose ginseng delight our new double espresso with ginseng extract whatever lies ahead don't change your morning let your morning change you discover coffee plus on espresso.com Matt, I know you all talked a little Tesla on yesterday's show. It seems like Tesla's robo-taxi debut was not met without criticism, and the technology seems far from perfect. But you know what they say, you got to start somewhere, right? Well, on Tuesday, Waymo robo-taxis became

available to Uber users in Atlanta, and they cover approximately 65 square miles around the city. And it should be noted, these Waymo vehicles, they're currently used for Uber passenger rides only, not Uber Eats deliveries. Matt, Uber shares up about 8% on the day, so there's some positive reception there. There's been a lot of conversation about Tesla disrupting Uber and Uber's best days maybe behind it, but it doesn't seem like Uber and Waymo are going away anytime soon. We can get into the Tesla disruption in a little bit if you want to. It's a small-scale rollout. They're starting with a dozen vehicles that are available on the Uber app. It's limited to surface streets. That's another big restriction. They can't go on highways. It's just the latest in

what Waymo is doing. They already have over 1,000 vehicles nationwide on the road. San Francisco, Austin, there's a few other places. They have over 100 in Austin right now selling Uber rides. It is a big step in the right direction. It shows that their rollout is going well. They still aim to launch in D.C. next year, so maybe you'll be able to take a ride. The rollout's going really nicely. Waymo definitely has the first-mover advantage here. And when you think about some of the disasters that have happened with other wannabe robo-taxi services like Uber's own that have had pretty bad incidents, Waymo really hasn't had any to that extent. Uber ran over somebody in 2018. That was a death sentence for GM's cruise

when one of their cars ran over somebody. So, Waymo's doing the rollout, and they're getting it right. Yeah. You mentioned that part about the cost side of it. Yeah, I think Waymo's clocking. It's something like three times as expensive as Tesla's technology. But, I mean, like I said, we did see some criticism of the RoboTaxi rollout. It seems like it's very early days, or I don't know. I mean, maybe you get what you pay for in this case. And I suspect as time goes on, those costs will continue to come down. At one point, Uber looked to partner with Tesla, and Tesla said, no, thanks. Now, what we've seen in the ride-hailing space is, this may not really be a winner-take-all market. I think early days, we kind of thought it might be. But I tell you,

Lyft has shown a lot of resiliency that's hanging in there, and it's actually growing. So, what do you make of this competitive landscape here today? You know, like I said, Weibo has the big first-mover advantage. But don't count Tesla out. Tesla has two big competitive advantages. One is their infrastructure. They have over 60,000 superchargers throughout the country. It wouldn't be that hard to retrofit them to charge cars that don't have drivers. That would be something that's hard to replicate, even for a company as deep-pocketed as Alphabet. They also build their own cars, Tesla does. Waymo's fleet is built by Jaguar right now. It's Jaguar I-PACE cars. They have their own vehicles,

their own infrastructure, it does have cost advantages. I'm not surprised they didn't really want to partner with all that going on. Even in the early days, Cruise said that this could be a multi-trillion dollar market 20 years from now, but when we're all just using self-driving cars, it could be a massive opportunity long-term. You're absolutely right that there's room for multiple winners in this space. It'll be really interesting to evolve. I think the real golden age of this isn't going to happen for another few years. And I'm fine with that. I'm fine with slow rollouts when it's cars without drivers that could hit people.

I'm fine with taking your time and getting it right. Yeah, there's some serious implications that come with this technology. Okay, one last question. I'm going to ask you to choose here, Matt. I've just got to do it. We know Waymo is owned by Alphabet, right? Uber is its own entity. Given the scale of both companies, they certainly have the ability to compete.

I think you've made that very clear. there. How do you view the picture going forward for Alphabet and Uber? Does one of those two stand out as a better investing opportunity today, say, looking five years out? I like Alphabet as the investment opportunity. It's essentially trading a value stock at this point when you think forward earnings and things like that. The market's not even putting any value on the pre-revenue parts of its business like Waymo. That's on Google and Google Cloud, essentially. And so, I mean, you're essentially getting the Waymo business for free when you buy Alphabet. I mean, nothing against Uber, but I'm a value

investor at heart, and Alphabet really seems like the way to go. All right. Well, next up, more on the proposed tax deduction on auto loans, and we'll take a closer look at a stock on Matt's radar. New from Nespresso. Blend wellness into your coffee routine with the Coffee Plus range, infused with functional benefits choose the coffee you love with added b vitamins like coffee plus b12 to help support immune function and coffee plus b6 to keep your day moving or go with the flow and choose ginseng delight our new double espresso with ginseng extract whatever lies ahead don't change your morning let your morning change you discover coffee plus on espresso.com Matt, House and Senate Republicans are looking at the idea of a $10,000 tax deduction

on auto loan interest as part of the quote-unquote big, beautiful bill that's being debated in Washington. But when you dig into it, it almost seems like it doesn't really have much of an impact on consumers at all. So, can you just quickly go over the nuts and bolts of this proposal? Yeah. I mean, as somebody who no longer has a car payment, I'm opposed to it. but seriously. They're proposing that up to $10,000 in auto loan interest per year would be deductible, and that's an above-the-line deduction, so anyone could take it even if they don't itemize. Now, the average car buyer would not get that much. Unless you have a really expensive car, think like a $130,000 or $150,000 vehicle, you're probably not paying $1,000 a year

in interest. The average new car buyer pays about $3,000 in interest initially per year. And based on the average marginal tax rate, that's about $500 in tax savings. So it's not nothing. But the $10,000 headline doesn't tell the whole story. Phases out over certain income levels. So even rich people who can buy $150,000 cars probably wouldn't qualify. In order to qualify, a couple things need to be true. Most importantly, the cars need to get their final assembly in the United States. Doesn't necessarily mean the parts need to be made here. Doesn't mean the company needs to be based here. For example, some BMWs are built in South Carolina where I live, but the car needs to have its final assembly in the United States. And keep in mind that this

could just offset auto tariffs. Right now, there's a 25% tariff on even parts that come from other places that is hurting a lot of vehicles that are built in the United States. This is more of an offset, I think, than a big benefit, but there's a lot of investing implications of it. Okay, well, let's get to that. If there are investing implications, if this does make it through, who do you feel like could be the potential winners? Automakers that build cars in the United States and auto lenders. Two that I own, General Motors. We know that they build some of their cars in Mexico and Canada. they're moving more and more of their production to the United States in response to tariffs.

Who doesn't want a tax deduction? People see $5,000 a year tax deduction if you buy a new Chevy Suburban. That could be an incentive to go to the dealership if you've been putting it off. Auto lenders like Ally Financial is one that I own. It's the largest bank that just specializes in auto lending. You can see a lot of people rush to buy new cars if this becomes a law. Quickly to wrap up, we thought we'd go back to our roots and dig into a stock in the financial space that have our attention today, that has your attention. What's a stock in the financial space? We're talking banks, insurance, fintech, whatever. What's a stock in this space that you're looking a little bit more closely at these days?

This is like a combination of real estate and financial, and it's Rocket Companies, RKT. Oh, I love it. Because I'm going to be a shareholder. I'm a big Redfin shareholder. Redfin shareholders have just approved Rocket's buyout of the company. It's an all-stock acquisition, so I'm going to get Rocket stock in exchange for my Redfin shares. I'm about to be a shareholder of that. I like this acquisition. I love what Rocket's trying to do, build the all-in-one housing platform. They're very innovative. Today, for example, they just announced that they're creating what they call bridge loans that allows people who have a home to sell to make an all-cash offer, or not an all-cash, but a nice offer on a new

house that doesn't have a closing contingency. Really innovative product. I like their acquisition of Redfin because it really takes away the worst parts of Redfin, specifically its balance sheet and the fact that it's losing money. The product itself is very great, very technological. But yeah, so I love this acquisition. They're also acquiring Mr. Cooper, a big mortgage servicer. They're really doing the best job in the market of becoming the all-in-one real estate platform. And Rocket's a company I've had my eye on for a while, and this is really bringing it into my spotlight. We'll leave it there. Matt Franklin, thanks again so much for being here today. Thanks for having me.

As always, people on the program may have interests in the stocks they talk about, and Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. Advertisements or sponsored content are provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. I'm Jason Moser. Thanks for listening. We'll see you tomorrow.