Motley Fool Hidden Gems Investing - Did Disney Win or Lose the OpenAI Deal?

Episode Date: December 12, 2025

Disney agreed to let its characters be used in OpenAI’s Sora videos, so is this a visionary move, or is Disney giving away its IP to AI? We discuss media in AI, Oracle’s recent earnings report, and ask what executive would be the dream free agent pickup for some beaten-up stocks. Travis Hoium, Dan Caplinger, and Jon Quast discuss: - Disney’s licensing deal with OpenAI - Oracle’s earnings and AI buildout - Lululemon earnings recap - CEO free agent picks Companies discussed: Nike (NKE), The Trade Desk (TTD), Disney (DIS), Block (XYZ), Oracle (ORCL), Alphabet (GOOG). Host: Travis Hoium Guests: Dan Caplinger, Jon Quast Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

We have a new player in Artificial Intelligence, and it's Disney. Motley Fool Money starts now. Everybody needs money. That's why they call it money. The best things in life are free, but you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. I am Travis Hoyum, joined today by Dan Kaplinger and John Quast. Guys, we have to start with maybe the most fun artificial intelligence story of the year.

We don't have to debate, you know, how many billions of dollars are being spent on chips and stuff like that. But OpenAI and Disney announced that you can now use Sora, their video creation app, and make short videos with 200 Disney characters. This seems like the kind of AI use case that at least our family could have a lot of fun with. So is this the kind of thing that is going to be a big deal in AI? And are you more of a Darth Vader or a Baymax kind of character? What are we going to see in your first Disney-related AI video? So I'll tell you, Travis, I'm embarrassed to admit this, but when I was five years old, I was a ballet dancer and we did a really dubious version of the original Star Wars and I played Obi-Wan Kenobi. So I fully expect somebody to dig back into those archives and figure out a way to bring dance ballet back to life after 50 years.

I feel like we can make this happen. I do think though, it's going to be one of these things. It's going to go viral. You're going to see a whole bunch of stuff. It's going to catch fire for at least a period of time. I don't know how long it's going to last, but I think that probably what you'll see is initial adoption. Everybody's going to try it out. And then maybe somebody's going to start getting ideas for a more lasting trend based on it. Not sure what that looks like right now, but these things iterate really quickly with AI. John, what do you think?

Is this the kind of thing that is going to be good for Disney to be able to have their characters in these AI tools? Or is this a nothing burger? Is it going to be bad? Where is your head at? Yeah, I won't bury the lead here, Travis. I dislike this move for Disney. And the reason is Disney has some of the best

intellectual property in the world. And this feels like it cheapens it to a degree. If you can recall back in 2018, when the movie Ready Player One came out, Steven Spielberg directing, and couldn't get the rights to the Star Wars characters for that movie, Disney would not budge,

even though Spielberg has lots of connections to Lucasfilm and the like. And I think that the reason Disney didn't do it was because it knows the value of its IP and it wants to protect it. It doesn't want to dilute it. It wants to make sure that its IP is very, very valued. And I don't know that this deal really brings that in. For OpenAI, this is a no-brainer.

Of course you want to do this. Of course you want to be the video generation platform that has the Disney IP. That makes a ton of sense. Now, nothing from the press release says the deal is exclusive. So maybe OpenAI isn't the last one to make a deal like this. But if we look at it from a business perspective, one of the things that I find really interesting here is that Disney is investing a billion in OpenAI. So is it going to get a billion dollars back in value? Yeah, we don't know what the licensing fee looks like. Is there actually money flowing back to Disney? So is it, I'll give you a billion, you give me a billion back. So we don't know those details yet. Exactly. Which is another reason why I'm not as enthusiastic with this deal.

but let's say this, let's, let's turn to the positive. What is so interesting to me about this is it says that these user generated videos could stream on Disney plus. Now you think about what, what is this competing with? I think it's competing with YouTube shorts. Shorts don't have to be necessarily great. They just have to be entertaining enough to keep me watching. And is this something that we're going to see on Disney plus, is it going to be big enough that it actually matters. Uh, I don't know, but that's an interesting component of this deal. That is one thing that they clearly have an idea of what they're going to do with Disney plus, but that could be a nothing, complete nothing burger. And we never really see anything out of it. Or

you could start to see this be a real YouTube competitor. John, I wanted to push back because you know, my reaction was much more positive. And I think one of the ways to at least think about this, and we don't know how all of this is going to end up. I think some of the concerns are are correct. Are creators going to be using content in the way that Disney wants? Maybe not. You kind of lose that control. But if you think about a movie launch like Zootopia, so that just came out, it's been a hit. But if there's suddenly videos of my kids, you know, hanging out with the Zootopia characters, there was a video that was going around with a bunch of, you know, famous movies and somebody doing selfies with them. That's the kind of thing that you could potentially

create. And if you're Disney, that's creating buzz. It's also meaning that you get that buzz instead of someone else. You make the deal first so that your characters are used in these user generated videos. So is that at least a potential upside? And then it's going to be in the details of can OpenAI actually figure out how to contain these characters so that we don't have a bunch of maybe content that Disney doesn't want floating around? Yeah, it's a good question, Travis. Is it the right kind of attention to its brand? Is it the kind of thing,

you can just recall years ago with Star Wars, right? A new Star Wars release comes out. I mean, the fans were just ready to go. It had this incredible following and movies rarely came out. And so it was a big deal when something happened. yes it keeps the characters in the minds of consumers is it the right kind of attention does it actually create long-term excitement or is it just kind of a novelty in the short run

that actually just kind of feels like we're yeah i get what you're saying and i still maintain my original thing i don't like this for disney you know what you mentioned about disney potentially using this content for its own purposes reminds me of what we saw with GoPro early on when it started releasing. That's not a great comparison. Well, that's my point is it's kind of like, look, there was talk at that point that, you know, GoPro was hosting, it was like a cloud-based platform for people to share their videos. I think that some investors in GoPro would kind of hope that that would turn viral and turn into a money stream for GoPro. If Disney is going to do something, And it needs to do a much better job, obviously, than GoPro did on that.

I think the intellectual property of much higher quality, of much higher value, but still, I think it's going to be a slog for it to find ways to monetize this kind of user-generated content enough to justify the potential dilution of that quality by kind of opening up the creative process. Dan, I wanted to bring in the recent deal between Netflix and Warner Brothers Discovery into this, because one of the reasons that I think a lot of people don't necessarily think that's going to get blocked is because the real threat to Netflix and Warner Brothers Discovery is not Disney. it's YouTube. And one of the things on YouTube is if this is going to be user generated content, YouTube is primarily user generated content. Is this sort of a backdoor way for Disney to become relevant on whether it's shorts or, you know, eventually more traditional looking videos, maybe higher production, you know, if they're pulling stuff onto Disney plus, you would think that eventually that's going to be a full screen view. Maybe it's going to be longer than eight seconds so to be a bunch of these pieces clipped together i have to think that disney even though

they're a streamer even though they're a content company they're thinking about youtube too and this is at least a way that they can kind of play in that user-generated game that youtube just dominates today i agree it's a way i think that if it were a big part of their intention in making the move that they would have been more um they would have been louder about making that the point Now, granted, Disney has to always balance because its existing content, its existing content distribution has so much value. They don't want to poach away from that. They want to prevent poaching as much as they can. Obviously, though, that didn't stop them from doing Disney+.

At some point, people were sort of like, why would Disney go the streaming route? They can just keep on doing the limited theater releases and they have pricing power there. But Disney did look forward there. So I do think it's in the realm of possibility that Disney is looking even further forward here with this user-generated content. But I think if that, I guess we'll see, right? Because this is still early on. We'll see how it progresses. They probably don't want to take too big of a stand up front because they don't know how it's going to play out.

But if it plays out well, then they can say, well, yeah, we're going to take this step broader strategy-wise towards more of a direct YouTube competition scenario. I will say this. It will be interesting to see if any of the major owners of intellectual property take a different route. I think that's really where the rubber is going to meet the road here. If everyone, I think the ones to watch would be like Nintendo. Uh, but you've, you've got some of the other players like, uh, is you've got universal, you have the studios that are owned by Netflix. So there's a lot of players here and Disney is at least saying, Hey, we're open for business when it comes to AI. They are. And if they all do it and it's all a bad move, then it's a wash, right? If another player in the industry, such as Nintendo, takes a different

position saying, we're not going to do this, then you're going to have a scenario where one of them is going to be right and one of them is going to be wrong. The other thing to bring into this is the exact same day that this announcement came out, Disney also sent a cease and desist to Google related to Gemini and said, you know what, we got this deal with OpenAI. They're going to theoretically pay us something to use the characters in these videos. So John, is that the approach? Is that going to put kind of these chatbots against each other? Is that the right move to say, you know what, we're protecting our IP and we have to have this framework? Because I have noticed that on Gemini, you can get logos, you can get all kinds of stuff that

Google used to kind of put the clamp down on. It seems like they've really opened up. but that's kind of the other side of this coin is that they make a deal with open AI and then they say, you know what, Google, we don't like what you're doing. So it seems like they're kind of trying to do both things. Well, for sure, because in open AI, it's now an investor. And so it does have a, a vested interest in seeing the success of one versus the other. So there's so much ambiguity here and what's allowed and what's not allowed. IP laws are going to, there's going to be tests over the course of coming quarters and years. So it'll be interesting to see. But yeah, it makes sense that it would send a cease and desist to one when it's an investor

in the other now. When we come back, we're going to stay in artificial intelligence to talk about what we learned from Oracle this week. You're listening to Motley Fool Money. welcome back to motley fool money we did get some earnings this week oracle announced earnings and this was one of the hottest stocks in ai just three months ago that was when the stock jumped about 40 after earnings in september that was after they signed a 300 billion dollar deal with OpenAI, but the stock fell 10% on Thursday and is now down 41% from its peak since that OpenAI deal was announced. So Dan, what is going on here? Yeah, Travis, I think we're starting to see a pattern here. When a big tech company announces an AI investment up front, investors

get excited, they bid up the shares. But then as time goes by and companies actually start paying out the cash for making those investments, investors now start to seem like they're getting a little bit worried. They worry the capital expenditures are high. I mean, the argument for big tech, for investing in big tech companies for years has been their cash cows. They generate huge amounts of free cash flow. They're able to divert some of that towards internal investment, some of it for buybacks and dividends. But now a lot of companies, including oracle they're using all of that cash flow and potentially more just to fund these big artificial intelligence investments and we're early enough in that adoption we don't know how

that's going to pay off when it's going to pay off how much it's going to pay off and i think investors are starting to get impatient by that so we're in by the news sell the reality territory is that instead of by the rumor sell the news you're actually buying the news but then when it when it becomes real, people are going, ah, maybe not. I think you buy the news, you sell the worries, and then whatever the third step is, is when we actually get the reality. Because we have half the reality, money is going out. We don't have the other half. What will AI generate to compensate the companies? John, looking at the report, the market's reaction is always interesting because I didn't think the September news should have necessarily driven the stock 40% higher. I

also didn't think there was a lot of bad things. The things that they said that we should be looking at, like remaining performance obligations, were up significantly in the quarter. So what did you think? Yeah, remaining performance obligations is unlike anything I've ever seen. $523 billion in remaining performance obligations for Oracle. Granted, it's up 438%. A lot of that came from the last quarter, the deal with OpenAI, but still up 15% sequentially. And it's not just deals with open AI that Oracle is making, also deals with NVIDIA and meta platforms. And so this growth on the RPO is absolutely mind-blowing. And then you look at it, it breaks down the numbers. Only 10% of this is expected within the next year, but an additional 30% between years two and three,

you look at that, that's about $160 billion in a two-year span of revenue expected just from the RPO. And for perspective, trailing 12-month revenue is at an all-time high right now at $61 billion. And so maybe two years from now, we could see a $80 billion year for Oracle. I mean, that's substantial growth from a legacy tech company. Dan, one of the challenges with Oracle, as I look at them, they do have a lot of debt, over $100 billion worth of debt. Now you have stock dropping from all-time highs. How do you think about paying for these investments? Because John talked about it. They do have a lot of revenue that's going to be coming in over the next five years if all of these remaining performance obligations are actually served.

But they got to pay for them. They have to build the data centers. They have to buy the GPUs. They have to get them all running. And that is upfront investment that thus far they paid for primarily with debt issuing 18 billion dollars in september and probably more coming in the near future yeah it's funny we used to look at tech raising debt as just kind of for fun because they've had huge amounts of cash on their balance sheets still and it was a way for them to keep cash overseas in a lot of ways the rates were just so low too that it just made sense for them to keep that cash and like you say some of the some of the international trading type stuff did play a role there. But now I think that AI is testing the limits. And it's testing the limits in many

places in the credit markets. It's making investors really rethink the relationships between different asset classes within the capital structure. We saw Oracle's credit default swap rates rise to 1.41 percentage points. It's not super high. It's not a big number in the absolute scale, but it is the highest for Oracle since the financial crisis in 2009. Oracle so far still has an investment grade debt rating, but at triple B with a negative outlook from S&P, it's kind of on the fringe of where you start to worry, is it going to lose its investment grade status? Is it going to turn into a junk bond? Their cost of capital could rise quite a bit. So what happens in. If the cost of capital, which is sort of this, it's not a number that you can necessarily

look at. You can look at what that costs, what the interest rate is. But when you think about cost of capital and what the future for Oracle looks like, what are the implications of that cost of capital going up or going down? The question is how quickly AI can pay off with actual positive cash flow to help Oracle and other companies maintain this debt. If the cash flow comes in quickly enough, then it should be fine and Oracle should be able to maintain, refinance this debt at reasonable terms. But if the cash flow is slow, Oracle is going to have a hard time convincing bond investors, hey, you should let us get a little bit further extended. That's where it hits. It's not going to be necessarily a quick near-term thing.

It starts to come into play when it comes time to refinance this debt. So is this sort of a frog boiling in water kind of situation where we look back and we go, oh my gosh, the stock is down, the debt costs are up. Yeah, we have a bunch of remaining performance obligations, but that once 15% return on invested capital, now my capital costs have gone up and now we may even be underwater. I mean, I've seen that with, going back to the solar days, SunEdison fell into that category. It's a slow boil until something breaks. And And when something breaks, everybody's going to look at everybody else and say, oh, boy, that's starting to show cracks as well. When we come back, we are going to play free agency with some CEOs.

You're listening to Motley Fool Money. When you're a midsize business, you need every competitive advantage you can get. Like an AI solution that works for you, not against you. S.A.P. Grow is built with A.I. embedded at its core, working across every system, and it's ready to go from day one so you can hit the ground running. Bring it with S.A.P. Grow, A.I. cloud ERP for any size business. Welcome back to Motley Fool Money. We like to have a little fun on the Friday show. So I'm taking a page out of Bill Simmons book.

Instead of doing a trade machine for executives with an investing theme, I want to do a little free agency. I'm going to give you a company that could use a little bit of a boost. I want to give you, I want you to give me an executive that you want to join them as a free agent. And then what are you going to offer them to convince them to come to the company? So we're going to start with Nike. I think Nike maybe lost its way a little bit over the past five years or so. Dan, if they're going to be recruiting a new ceo anybody in the world who do you want and what are you going to give them to get convince them to come to nike travis i think that we need someone an individual who has his feet in the sports world but also has executive prowess has a little bit of shine

i'm going with mark cuban here oh well known well known the shark is definitely somebody that i think could add some spice to Nike's business and you know his experience with the Dallas Mavericks he's a savvy he understands how the sports industry works I just think he's a natural choice to push Nike forward John who would you like as Nike CEO well let me be clear up front I'd actually hate to see Nike make a trade I'm not overly bullish about Nike from here but I do think it made a great move in bringing back Elliott Hill. If you are a brand that consumers kind of, it's kind of fallen out of favor a little bit with, bring in somebody who absolutely loves your brand. And Elliott Hill really does, I believe, love Nike and it's somewhat inspiring

reading and listening to him talk. But if we have to make a move here, how about Shaquille O'Neal? He's a Hall of Fame athlete. He's a good businessman. And, you know, he signed deals with other athletic apparel companies in the past. So you might need to offer him a good pay package, but bring him into the Nike family and let him cook. And I think he just brings that name recognition, but he's also a good businessman. Shaq has a fascinating investing history. We should talk about him at some point. It made what he called an accidental investment in Google in 1999. Uh, so what a great accident. Yeah. He's, he's phenomenal investor. Uh, like you said, executive, he knows the sports world. I like either of those. What are you offering? I want

to ask that Dan first. What are you offering to Mark Cuban? Mark sold off his majority stake in the Dallas Mavs. I think Nike should just buy it back and give it to him. That, that seems like, so he regrets it so much. He would go to Nike to get it back. There you go. John, what are you giving Shaq to convince him to come to Nike? Hey, he's just going to, he's going to want to have control of the company, especially when it comes to inspiring the next generation of athletes. And you're just going to have to give them a good pay package. He's got enough money, but yeah, I assume they would have, he would take a little more cash for, for moving out to Oregon. Let's talk about the trade desk, trade decks, desk stock. Their drawdown is

absolutely crazy. 73% from its high. John, I want to start with you. If you were picking a new CEO, getting a free agent, who are you attracting to the trade desk? Well, my idea, it's a little late for it. I would say Rick Smith. This is the former technology officer at Sentinel One. He's now the new CEO of Okta. He just made that move over. But let me explain what I'm talking about here. I believe that digital advertising is being changed for better or for worse by AI. And really, I'm not sure that the trade desk fully understands where it's at and where it needs to go. I think that you need to bring in an AI expert and somebody with technology experience. And Sentinel One, you know, I don't really like it in the cybersecurity space, but I will admit that it

is a leader in artificial intelligence. And so I think that's the kind of person that you need to bring in, somebody who understands what AI is all about and who can really form a technology roadmap. Dan? Yeah. I think Jeff Green has already been thinking about this, and I think it was part of the motivation for bringing on Chief Strategy Officer Samantha Jacobson. I think that Jacobson is an obvious choice to be the next CEO at the Trade Desk. She won Adweek's Digital Technology Executive of the Year Award in 2022 when she joined the Trade Desk. She has previous experience at Oracle.

She's been able to work with tech giants to help advance the Trade Desk's Unified ID 2.0 initiative. She's made smart strategic investments. And I think really, Jeff Green as CEO needs to make a move that inspires confidence. Trade Desk has had a bunch of other executives, including recently CFO Laura Schenkein, leave the company. And so promoting from within, I think makes a lot of sense. Jeff's got plenty of shares. He can afford to give Jacobson whatever compensation package she needs to take the deal. All right. Those are some pretty realistic picks. So let's go a little bit off the deep end here. Disney does need a new CEO. Bob Iger is on his way out. Is it by the end of the year? It's pretty soon. So they need to decide who their CEO is

going to be. It sounds like they're going to go in-house. But if they were not going to go in-house and they were going to make a big, splashy move. Dan, who do you want at Disney? So all we're talking about in media these days seems to be Netflix and its acquisitions and its subscribers. And so Disney, I think, should make a big move and poach co-CEO Greg Peters from Netflix

to be Disney's next CEO. Let's face it. We've been talking about Netflix because of the Warner Brothers deal. But who's been getting all the press? I don't know about you. All I've been seeing is Ted Sarandos, the other co-CEO, look, Peter's just kind of the tech guy. Sarandos is the media guy. Is that

right? Yeah. But you know what? I still think Peter should be stepping into the limelight and there's no better way to do it than by joining a potential arc arch rival. I just think that just makes total sense. John, who do you want at Disney? How about Jeffrey Katzenberg? So this guy, he led all of disney's big hits in the 80s and 90s he left in unceremoniously and started dreamworks and i gotta be honest i think that dreamworks is the better family entertainment business right now what is the argument for that shrek well come on this is kung fu panda how to train a dragon these are these are perfect trilogies you can tell how old your kids are if you're still talking about kung fu panda exactly look you need someone who who understands good storytelling and i think

that disney's forgotten this i don't think that this is realistic i don't know if anything disney can offer would convince him to come back to the company it would probably be a lot more than money it would probably mean creative control over the direction of the company so dan did not answer this question dan i want to know what are you giving greg peters to leave netflix and go to Disney? I think we need the usual stock and options awards, but Hey, why don't we have some fun with it? We'll give them season passes to Disney world. We'll throw in a streaming subscription to max just to, you know, give him a little bit of what he might be missing out on. If Peters is really hardcore and it tries to strike a really hard deal, then maybe Disney is just going to

have to promise to toss in its own hostile bid for Warner brothers discovery. We'll, we'll see how that works out. Why not? There we go. All right. I w this one, this one I think is fun because square, probably square block. I just, I'm going to go back to these original names. They probably do need a new CEO, even if management there doesn't want to admit it. But John, if you were going to get a new CEO at square, who would it be? Every single suggestion I'm making here is entirely unrealistic, but how about Elon Musk? let me explain may not be unrealistic i think he's ceo of about 12 companies at this point right i mean what's one more let me let me say why i i've been a shareholder of block for a long time i

finally sold because i can't for the life of me figure out what this company wants to be and what it wants to do i feel like it's trying to do everything and nothing at the same time maybe there's a story here that i'm just not getting and i think the business needs a better storyteller There's somebody who needs to articulate the vision better. And nobody inspires with a vision better than Elon Musk. Nobody can tell a bigger long-term vision than Elon Musk. And that's what this company needs. It needs someone who's going to articulate where it's going. So he wants a trillion dollars from Tesla. What does Square have to offer? Yeah. I mean, maybe it's just as simple. He does want to get more into financial services. So maybe

it's just as simple as, hey, you can be CEO of the company, and we'll let you integrate it into all of your other companies. Yeah, he does seem to want to do this kind of stuff with X. So oddly enough, that sounds fairly rational. Dan, who do you think should be the next CEO of Square? So boy, fintech, such a crowded industry, so much regulation, so much intricate interplay with the financial system that made me think who's going to be looking for a job in the next few months who could lead a company like block like square and i'm thinking federal reserve chair jerome powell looks like not quite as exciting as elon musk when he when he puts out uh twitter posts i tell you i mean you know there's no way powell is going to be ceo of 12 different companies so square would

have Powell's entire attention. I think it'd bring new perspective. It'd certainly be a nice change of pace for Powell. It'd be interesting with Block paying so much attention to blockchain and trying to figure out how to take advantage of cryptocurrency digital asset trends. You know, hey, maybe the right incentive package to get the Fed chair to make the move. Block just makes a newly minted stable coin. They even call it Fed. They'll go to take the ticker FED. They'll give him the right to make essentially shadow central bank monetary policy decisions. Let him kind of continue his old job and see if he can stick it to whoever the new Fed chair happens to be after he's gone. I kind of like all these moves, to be honest. Disney is

one that I would love to see actually take a big swing instead of going the conservative route. But I don't think that Greg Peters is probably on his way to Disney, even though I do love that idea. And Shaq, Shaq, I want more Shaq in my life. So love that one too, John. When we come back, we are going to catch up on Lulu Lemon's earnings and get to stocks on our radar. You're listening to Motley Fool Money. Today is going to be the day that they're going to throw it back to you.

By now, you should have somehow realized what you got to do. I don't believe that anybody feels the way I do. 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 all personal finance content follows the motley fool's editorial standards and is not approved by advertisers advertisements are sponsored content and provided for informational purposes only to see our full advertising disclosure please check out our show notes One of the other big earnings reports we got this week was Lululemon. This is a company that,

like Nike, a little bit down and out, but a lot of people think it could make a comeback. So Dan, what did we learn from Lululemon this week? I think the most important thing we learned from Lululemon is that investors are kind of tired of CEO Calvin McDonald. McDonald announced that he would be stepping down. The stock immediately moved higher. You know, the results, I mean, kind of middling at best. I mean, sales did rebound, although all the growth came internationally. Comparable sales were still down in the North American market. Earnings topped estimates by quite a bit, but they were still down 10% year over year. But investors still, I think that they just want any sign of improvement. And the fact that the

company dedicated another billion dollars towards future stock buybacks. That never hurts to create a positive impression on investors, for sure. Yeah. I mean, I've been on record here the last several quarters saying that Lululemon's financial results haven't been as bad as the market was making it out to be. In the same way, I wouldn't say that these financial results were surprisingly better than expected. I'd say it was pretty much about the same as what we've been seeing. And And what you said, Dan, we have good growth internationally. We have struggling U.S. same-store sales. We have some profit margins that are under pressure because of tariffs, but still solid profits there, over 20% operating margins. So these results really weren't material deterioration

or improvement, in my opinion. It's a lot more of the same. Therefore, since the financial results are pretty much the same as they've been, I agree with Dan, investors appear to be celebrating the CEO change. And I'm not sure that's as good of a thing as investors think. I don't know if the CEO was the problem here. But there is one big thing, though, from the press release, as you mentioned, Dan, the billion-dollar share repurchase increase on their authorization. This doesn't have to be a crazy growth company to be a good return for investors here. It's a very cheap stock. And just by putting up solid results, modest growth, good profit margins, and returning capital to shareholders, this could eventually be something that does a lot better for investors

from here. Yeah. Just to put some numbers to that, even after the bounce in the stock, the price earnings multiple on a trailing basis is about $13. On a forward basis, it's about $15. John, is this the kind of company that maybe it's not going to be the growth machine that it was for the last, gosh, more than a decade. But at that price, the expectations are if you can grow single digits and have decent margins, it's fine. And some of the overall trends of maybe yoga isn't the hot thing that it once was. Maybe people are moving more towards... I have shares of Ahn. They're growing 30%. It seems like there's just a shift in the market. And this happens in fashion and athletics. But it's maybe not that

bad if you're getting that kind of a deal. And the stock is very different than paying 40 times earnings. You're right. The big thing, you do need to be a long-term investor with a company like this, right? I mean, we're talking about slowly compounding some returns over maybe a five-year plus period. And if you are holding a company for the long-term, which we all here at The Motley Fool believe that you should be, really what happens with the business fundamentals is really important. Is this a dying brand or is this a brand that's taking a breather? That's the question that you need to answer. In my view, Lululemon is just a brand taking a breather. It's not a brand that's in material decline. I think that some of the things like the net promoter

score bear this out, but that's a good scenario. If it's a solid brand, everything's fine and it's just taking a breather right now, hold it for the long-term patiently and chances are your returns will be pretty good because it is at such a good price today. Travis, I'm a shareholder. I think that it's a good business, but I do think it's going to take time. There's been a lot of time movement in the consumer goods space. John mentioned Elliott Hill at Nike. We've had Brian Nickel at Starbucks. These recoveries are super slow. I'll just note, Chip Wilson did weigh in with deep concerns about the lack of succession planning that Lululemon had preparing for this. So I think that it's a hold. I'm not sure I'd recommend buying at this point, though.

We'd like to end the show with each analyst providing a stock on their radar, along with some comments and questions from Dan Boyd behind the glass. John, you're up first. What's on your radar this week? Yeah, on my radar this week is Sprout Farmer Market. This is ticker symbol SFM. And this is a grocery store chain. It's down about 50% from its high in 2025. But really interesting, it's sustaining double-digit growth on the top line, fewer than 500 locations, but it's been opening up new locations, new stores, and that's providing a lot of revenue growth. Same store sales are up as well. But you have this situation where it's a very profitable business as well.

Return on invested capital has averaged 11% over the last 10 years. Right now, it's at an all-time high at 17%. Just to put that simply, it means that as they're investing in new stores, this is adding to the profits of the company. And so, this company, this stock has dropped down to just 15 times its earnings with the drop. It repurchases shares. It's reduced its outstanding share count by about a third over the last 10 years. So, a very simple path from here for double-digit earnings growth, and it's good at this price. Dan Boyd, what do you think about Sprouts Farmer's Market. John, I will say that this is a very attractive stock and you did a great job pitching it. But my big question is, can this market compete with Whole Foods? Yes, I think it

can. I definitely think that it can. I think that there are people who definitely like the Sprouts Farmer's model and there are a lot of similarities to Whole Foods. I think it's just maybe a slightly different demographic, but I think it can compete. I'm looking at their website and I'm getting hungry already. Dan Kaplinger, what's on your radar this week? Dan Boyd, let me pitch to you Dollar Tree, ticker DLTR. This dollar store giant did a great job. Its stock performed really well during 2022's bear market, but then it fell sharply during the bull market over the past few years. Couldn't keep up the strong business momentum. Now it's bounced back. It's done a good job fighting against tariff-related pressures, and consumers are now under pressure once again

from inflation-persistent high prices. That's why I'm liking Dollar Tree right now. Dan Boyd, what do you think about Dollar Tree? Well, one thing about Dollar Tree that I do like is it is a Virginia-based company. And as a fellow Virginian, I appreciate that for Dollar Tree. But yeah, Kavler, I think we've got a situation where things are getting expensive and Dollar Tree is keeping those prices down, I think it might be a good buy right now. All right. Which one is going on your watch list, Dan Boyd, Dollar Tree or Sprouts Farmer's Market? Honestly, this is a tough one because while I do like John's pitch and the numbers he was saying for Sprouts Farmer's Market, I do think Dollar Tree is like the leader in the space. So I'm going to go Dollar Tree.

John, I'll throw you a bone and put... I'm interested in Sprouts. I think you made a good pitch there. So I get to look at that one a little bit more. We are out of time. Thanks for listening to The Motley Fool Money. We'll see you here tomorrow.