Motley Fool Hidden Gems Investing - Earnings: Big Tech Surprises and Disappointments

Episode Date: July 30, 2021

Amazon has its worst day in over a year after missing expectations. Alphabet hits a new high and announces a $50 billion buyback plan. Apple and Microsoft dip despite reporting huge profits. And McDonald’s serves up a chicken sandwich-fueled surprise. Motley Fool analysts Emily Flippen and Jason Moser discuss those stories and weigh in on the latest earnings from Facebook, PayPal, Shopify, Starbucks, Qualcomm, Twilio, Teladoc Health, Pinterest, and Hasbro. Plus, our analysts share two stocks on their radar: Beyond Meat and Etsy. 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

Chris Hill. Everybody needs money. 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 Emily Flippen. Good to see you both. Hey, Chris. It's earningspalooza. Nearly 1,000 companies reported earnings this week, and we are going to talk about each and every one of them. All right, not all of them, but we will have a couple of stocks on our radar. We're going to start with big tech. Amazon had its worst single day of trading in over a year. Shares of Amazon fell more than 7% on Friday after disappointing second

quarter results came with weak guidance for the current quarter. Emily, I should add that despite Wall Street's disappointment, this was the third quarter in a row that Amazon's revenue was north of $100 billion. Part of the reaction we're seeing today is just because misses like this are really unusual for big tech and Amazon in particular. But I think we can all afford to be a little bit more giving with Amazon here, given the unpredictability of things like shopping online. The rollout of vaccines, for instance, the reopening of the economy, management was put forward with a really tough challenge of trying to figure out, okay, what's guidance going to be for this quarter, but also quarters into the future. Despite the fact that revenue

came in just a little bit under expectations alongside operating profit, earnings still handedly beat. They were up 50% year-over-year to earnings of over $15 a share versus the $12.30 that was expected. There's definitely some strong silver lining for Amazon in this earnings season. I will say, it will be interesting to keep an eye on what happens with Amazon. In particular, it's just its prime business, its e-commerce shopping through the remainder of 2021. Part of their hesitance to give guidance is simply because we don't know what the landscape is going to look like for things like the spread of the Delta variant in the United States, which could materially impact Amazon's future quarters.

Well, and this is going to be a running theme, particularly with the big tech companies, just the idea that guidance is pretty tepid for the second half of 2021. But Emily, to your point, it's for all of the obvious reasons. And Amazon does a great job of monetizing the users it does create. So even though it has tough year-over-year comps, more than 50 million of the 200 million Prime subscribers that they currently have were brought in over the prior 18 months, and these are people that tend to stick around and spend more year-over-year. So, all good news for Amazon for long-term investors. Shares of Alphabet had a new high this week after second quarter profits and revenue came in higher than expected. Jason Moser,

what impressed you the most? Google's ad revenue, the results we saw from YouTube, or the company announcing a $50 billion share buyback plan? Honestly, Chris, I think all of it put together is the most impressive part, and it just goes to show how strong of a business this is. Same size market cap as Amazon, as we were just talking about there, but twice the profitability, interestingly enough. Obviously, different business model, but it just goes to show you the kind of money that Google is making. The stock has been on fire this year, up better than 50%, and it seems clear why these numbers were just terrific, indicative of a business with services in very high demand. When you look at

the numbers that we consolidate revenue of just under $62 billion. That was up 57% excluding currency effects. Costs of revenues, that is something that the business continues to control very well. They grew only 41%. That was primarily driven by traffic acquisition costs. But when you look at everything together with what Google does, Google Search and other advertising revenues up 68% for the quarter. It's understandable that it was a big bounce back from last year given the situation, but that really is strong, 68%. Strong growth in retail, of course, as everything starts coming back online and the economy is opening back up. YouTube advertising revenue is $7 billion. That was up 84% driven primarily

by brand advertising. They noted that connected TV is the fastest-growing consumer service that they have in the U.S., over 120 million people now watching YouTube on TVs every month. and then Google Cloud, which continues to grow, revenue of $4.6 billion for the quarter, that was up 54%. As to the other bets, yes, still losing a ton of money, but the market doesn't hold that against them, Chris. How much do you think regulatory risk played into the decision to have the share buyback plan of $50 billion? Because part of me thinks there are a lot of ways they can spend $50 billion, acquisitions is one of them. But I can see someone in the executive suite arguing, now, acquisitions

are only going to draw more attention. This is a prudent way to spend $50 billion. Well, yeah, I think you're right. I mean, No. 1, this is a cash cow, right? They just made cash hand over fist here quarter after quarter, so that $50 billion is going to be replenished in short order. But I think you're right. I mean, throwing more acquisitions on top of the mix right now would probably be less than ideal. It would probably get them on regulators' radars more than they would care to be. But it doesn't mean we won't see ideas like that down the road. Remember, they are really just now getting the Fitbit acquisition integrated into their business. They have some work to do and some recent

acquisitions there, but yeah, I think what you said makes a lot of sense. Apple's third quarter featured revenue of $81 billion with the services division making up a record $17.5 billion of that. Emily, huge numbers from Apple once again, but CEO Tim Cook did warn that the chip shortage is going to affect sales of the iPhone and the iPad. This was an absolutely incredible quarter for Apple. It does beg the question of, okay, well, we expect some issues with chip shortages in the future, but even this quarter was impacted by chip shortages. There were supply constraints, slow delivery. Can you imagine what this quarter would have looked like if the chip shortage

didn't exist? Right now, it would have been an even more incredible quarter for Apple. As you mentioned, sales were up 36% year-over-year, with iPhone in particular up over 50%, and earnings of $1.30 a share was up 92% year-over-year in terms of net income. A really great quarter. iPhone, in addition to the services segment, is definitely what you can watch here. There there is double-digit growth in iPhone sales in every single market they sold into, and they reached an all-time high in terms of installed base. That's critical because that installed base then goes on to funnel into the services that you mentioned, with services revenue up 33%, 20% of sales coming from services. That's things like Apple TV, the Arcade,

Apple Card, Fitness Plus. All of these things create the really strong and compelling Apple ecosystem that investors have come to know and love. I know that Apple prints money, so whatever money they're spending on Apple TV and the production of shows on Apple TV is almost immaterial. That said, Emily, do you think there comes a point where they need to make Apple TV essentially a standalone hit on its own? Because this is a business that wants profitability in all of its divisions. I don't think they need Apple TV Plus to be the best streaming service in order to succeed, but I certainly think they need to do a better job than they're doing right now. That might include

things like being more acquisitive, but I think they have been hesitant with that because as we just talked about, regulations for these big tech companies have become under an extreme level of scrutiny recently. I don't think they're pushing super hard to make Apple TV the newest and best thing in terms of streaming right now. That's a really competitive space. But I also think that it's on their radar that they need to make a better and more concerted effort in competing in terms of production value and popular TV shows, if that's going to continue to drive service revenue growth. Microsoft's second quarter revenue grew 21%, and once again, the cloud business continues to impress. Azure grew 51%. Jason, this is

a $2 trillion company. I thought growth was supposed to slow down once you got to be that Well, don't tell Satya Nadella, because it seems like he still has his foot on the gas, so to speak. I mean, this steady stalwart here just turned in exactly the kind of quarter we'd expect from one of the most established companies in the world. Another example of big tech having a good year so far, the stock is up almost 30% year-to-date, and that looks poised to continue based on these numbers. To your point there on the revenue growth, strong revenue of $46.2 billion, earnings per share of $2.17. That grew 42% excluding currency effects. Really, strong performance from the key segments there. Intelligent Cloud, that grew 26%

for the quarter. But if you look at the commercial cloud revenue, that itself was up 31% for the quarter. Gross margin for that cloud business expanded four percentage points to 70%. percent. Very encouraging to see. To me, I look at Microsoft and its multiple revenue drivers, it's just a good sign of a business that really is set to do well here in the coming years as we become more digital. If you look at the strength of these different business segments, I mean, over the past three years, gaming, security, and now LinkedIn, those three aspects of the business alone have all surpassed $10 billion in annual revenue each. And that, most recently here with LinkedIn's revenue just passing $10 billion for the first time this fiscal year, that was up

27%. And what's even more impressive with LinkedIn, that growth is accelerating. And I just didn't realize that LinkedIn was still so relevant, but that was a really shrewd acquisition five years ago. Revenue there has almost tripled since the acquisition, and that growth is still accelerating, which is just really impressive. And then you can't forget about Teams, of course, and for all of the attention that Zoom gets these days. Microsoft is really capitalizing on this move to hybrid work. Teams closing in on 250 million monthly active users, nearly 80 million monthly active Teams phone users. We've talked a lot about Zoom Phone. Hey, Microsoft has a phone offering too. So they're doing a lot to leverage that platform. I suspect this is going to be a business

that continues to shine here over the next several years. Let me go back to LinkedIn for a second, because you used a word that, to my recollection, absolutely nobody used at the time of the acquisition, and that is shrewd. There were a lot of questions about Microsoft buying LinkedIn, even though they had plenty of cash on hand to do so. This is one of those things that looks shrewd in hindsight, but at the time, it was a little bit more of a leap of faith that Nadella and his team knew what they were doing, wasn't it? I think you're right, and I think we said as much on a number of our shows here at the time. But I think what it goes to show you, and this is why we harp on this a lot when we talk about competitive advantages, you look at the networks

that these businesses have. I mean, it just goes to speak to the network and how valuable that network can be. When you have a large network of users, as Microsoft does, you can take these acquisitions, these properties, something like LinkedIn, you can make it your own, but you can plug it into this massive network just immediately. You see businesses like Facebook doing the same thing in social networking. It really just speaks to the value in that massive network. Speaking of Facebook, coming up after the break, we've got more on the social network, as well as the latest on the war on cash. Stay right here, you're listening to Motley Fool Money. Chris Hill. Welcome back to Motley Fool Money. Chris Hill here with Emily Flippen and Jason

Moser. Facebook's second quarter report proved once again, for anyone who may have forgotten, that Facebook is really good at selling advertising. Revenue came in at $29 billion. Emily, we talk about companies that have pricing power. Facebook is doing this by charging more for ads and businesses appear very willing to pay. Facebook has some of the highest pull-through rates for advertisers, especially here in the United States, which makes it a really compelling place for advertisers to invest their money regardless of things like number of active users, because the users who are active are really active. It leads to a really high average revenue per user,

ARPU. It was over $10 in this most recent quarter, which again, is industry leading. But they grew revenue 56% year-over-year to just under $30 billion, really just because of this ad revenue. I will say though that year-over-year increase is largely because of this pandemic bounceback. We saw advertisers being hesitant to spend money around this time last year because of the pandemic. Clearly, they're coming back to platforms, Facebook's platforms, which include Instagram being one of them. Earnings were also better than expected. What will be really critical to watch though is not just ad revenue, because that's what Zuckerberg would have you believe is legacy Facebook. What will be interesting to watch is how Facebook executes on this long-term growth

strategy that they're calling a focus on the metaverse, which is really just this, we'll call it a fourth place if Starbucks has the third place, a fourth place where people can spend their time in a digital world where they're doing things like buying subscriptions, buying services, and Facebook hopes to be integrated throughout all aspects of this metaverse, their investment in Oculus obviously being critical in making this a reality. For anyone who has read the book or seen the movie Ready Player One, it's easy to imagine what Zuckerberg has in mind here. Easy to imagine in your fantasy future reality, hard for at least someone like me to imagine in my everyday life. I'm not sure if I'm going to be spending the majority of my life

in the metaverse over the next five to 10 years, but if Facebook has anything to say about it, they're certainly going to try. PayPal's second quarter report featured profits higher than expected and total payment volume up 40%. Despite that, Jason, shares of PayPal fell 10% this week. The stock was at an all-time high last week, so the drop in some ways is not all that surprising. No, it's not. It's been on a real tear. There are some signs that there might be a couple of headwinds here in the back half of the year, but nothing substantial. I would say if investing is all about the future, and we know that it is, then I think we can break the PayPal thesis really down into two words at this point,

Chris, it's Super App. That's management's focus. It sure seems like a grand vision with a lot of potential, but that is what they refer to it in the call as a Super App. Over the next several months, they're going to be ramping out this PayPal Super App in the U.S. with a number of different products and services that span payments, consumer financial services, commerce, shopping tools. They'll have features like high-yield savings, early access to direct deposit funds, buy now, pay later, improved bill pay functionality. This is a place for consumers to get all of their finances taken care of. It's going to be interesting to see how that's received. But the business itself today, as you noted, continues to really work. Total payment volume

reaching $311 billion for the quarter. They are operating on a $1.5 trillion run rate, if you can believe that now, annualized, which is really impressive to think about the money that goes for all their properties. But more than 400 million active accounts now, revenue for the quarter is $6.24 billion. That was up 17% excluding currency effects. I'm sorry, I said $1.5 trillion, I meant $1.25 trillion run right there on the total payment volume. But they are calling for 52-55 million net new active accounts to be added in fiscal 2021. We hear about eBay and the dissolution of that relationship there. eBay exited the quarter at just under 4% of PayPal's total volume, and that really should creep down to 2.5% by the end of this year. I think weaning

themselves off of that eBay relationship, there are some headwinds in the near-term that's going to impact profitability margins a little bit, but it's all for the greater good. They're not going to have to depend on that relationship anymore. Then Venmo continues to get it done. Total payment volume, they're up 58% year-over-year with 76 million active accounts now. Just like PayPal, shares of Shopify hit an all-time high last week. Second quarter profits came in higher than expected. Just like PayPal, shares of Shopify down this week. Emily, this is valuation, right? It's a bit of valuation, but I do think there's this pandemic confusion that investors haven't quite figured out how to

navigate with businesses like Shopify, they're still growing handily. Revenue in the quarter was up 57% to over $1.12 billion. That growth was really driven by subscription solutions, which is up another 70% year-over-year. These are on top of already really impressive numbers, but it is a material slowdown from where it was in 2020 simply because people aren't spending as much time online as they were around this time last year. Investors maybe aren't prepared for the slowdown in growth in both revenue and gross merchandise value that will happen with businesses like Shopify, like PayPal. But what they should be focused on are those two-year growth rate numbers, which is still extremely impressive for both of these businesses.

Is it safe to assume that Shopify is one of those stocks that is never going to look cheap? Shopify, in my opinion, has never looked cheap unless you happen to buy it at $30 a share. But the deeper integrations for merchants will be critical for growth in the future. So, The growth rate from here is challenging, I will admit it, but they've done a great job in executing to this point. Up next, we've got restaurants, semiconductors, and cloud computing. This isn't one of those other financial shows. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here with Emily Flippen and Jason Moser as earningspalooza rolls on. The highlight of

McDonald's second quarter report was the new crispy chicken sandwich, which helped drive profits and revenue higher than expected. Jason, I know people have strong opinions about crispy chicken sandwiches. I know you are one of them. But I think we said on this show that when McDonald's was getting ready to launch this, it didn't need to be the best sandwich out there, it just needed to be good enough. You look at these results, it seems like it is. Chris, when you lead with the crispy chicken sandwich, the problem is now that takes my mind off the game here. I'm thinking about how badly I want a crispy chicken sandwich, but I will try to power through this. I am wondering if we need to change

their name to McDonald's.com because this is a digital company, Chris. It's unbelievable to see the investments they've made in such a short period of time and the success that they have Reap. Believe this or not, they have the most downloaded QSR app in the United States today. They just launched their new loyalty program, the My McDonald's Rewards program here in the U.S. They have 22 million active My McDonald's users and over 12 million people enrolled in that new loyalty program already. This is all leading to digital system-wide sales growth across the top six markets. Those digital system-wide sales have now reached almost $8 billion just in the first half of 2021, that's up 70% from a year ago. You can see these investments in digital really

paying off. Global comps as the economy opens back up, global comps up 40.5%. Even more encouragingly though, up 6.9% on a two-year basis. Given the previous year there, that's a good sign there. But earnings per share, $2.37, very respectable there. Management did note on the call regarding inflation that they're seeing very muted inflation impacts right now. So they're not leaping automatically towards this more inflationary environment next year, but they are prepared if it happens because over the past year, they've been able to pass along about 6% increases in pricing over the past year between food and labor costs. So it feels like they're in a very good place here for the coming year. Shares of Starbucks down a bit this week,

despite the fact that third quarter profits came in higher than expected. Same-store sales were 10% higher than two years ago. Emily, you look at where the stock is, I'm not surprised it's down a little bit, but there really was a lot to like in this quarter. I'll tell you what, Chris, you ruined my lead-in, which is going to be that same-store sales are up 73% year-over-year. What's the market doing? But to your point, it's only a 10% increase over the two-year basis because of what a weird year 2020 was for Starbucks. And to your point, despite beating both in terms of revenue and earnings in a pretty substantial manner, I think there's still some pessimism about input costs into Starbucks' business.

As Jason was just talking about McDonald's and some of the trends that play into the cost and pricing structure for mature industries like this, those same things apply for Starbucks, and labor costs will be critical to watch with Starbucks. We've seen a lot of pushback about the potential for increase in labor costs for a lot of these businesses. Starbucks is very labor-intensive despite their digital sales. The big question here moving forward is, the prices of their summer drinks, those iced drinks, tend to be higher than the hot ones. Over the next quarter, it'll be really interesting to see if they can sell more of these pricier summer drinks to make up for the input costs and the potential for rising inflation. Yeah. I'm not surprised given the

weather here in the United States, given the season, I'm not surprised that cold beverages made up the majority of beverages sold. I am a little surprised that it was basically 75%. And this is coming from someone who obviously is only a hot coffee drinker, and I've never had any of their cold beverages. But as a shareholder, I appreciate the people who are buying them. Well, that's where you've gone wrong, Chris. You need to try the iced coffee. The iced coffee is a summer favorite, but not just in the U.S. I will say a lot of demand does come internationally, especially for iced drinks. China is one of them. And the guidance for China, they pulled back significantly over this quarter because of this uncertainty around COVID. So

it's not just you who's not drinking enough iced drinks. It's a worldwide phenomenon here. Qualcomm's third quarter revenue was 63% higher than a year ago and shares of the tech giant up a little bit this week. Jason, we've talked about a lot of companies that are struggling with the chip shortage. Qualcomm does not appear to be one of them. No, no, they don't. I think that while it is probably a snoozer for a lot of folks out there, I think that Qualcomm remains a great way to get steady income exposure to chip space from a market leader with plenty of catalysts on the horizon. In regard to one of those catalysts, Chris, a little fun fact here, the term 5G was mentioned 34 times this quarter's

earnings call. For a guy like me that focuses on 5G, that was pretty cool to see, particularly as I recommended the stock. But the numbers were very strong. To your point there, revenue of $8 billion up 63%, saw strong performance in the chip business there, $6.5 billion revenue with operating profit of $1.8 billion, but it's the licensing side of the business that really impacts that bottom line. Revenue of $1.5 billion resulted in operating profit of $1.05 billion. But strength across all main drivers for the business, handset revenue up 57%, radio frequency revenue up 114%, automotive up 83%, and Internet of Things up 83% as well. In regard to the chip shortage, That is something going into the call. That was probably the big question for me.

Management did offer some clarity there. They find themselves in a great position. They believe that supply will improve materially by the end of the year. Part of that is because of multi-sourcing initiatives that they've undertaken. And then second for them, they continue to see and build out more on the capacity side. So again, just a really strong, steady business, particularly in a time of some volatility with the chip space. Chris Hill. Just since it sounds like you went through the Qualcomm conference call through the transcript, did the phrase crispy chicken sandwich appear at all, or was it just 5G? I don't know how I'm going to make it through the rest of this show if you keep saying that,

but again, I'm going to try to power through for the dozens of listeners. Shares of Twilio falling more than 7% this week after the cloud computing company's second quarter report. Twilio is in growth mode, so they're losing money. But you tell me, Emily, they seem to be moving in the right direction, particularly when you look at how they are growing the international business. We definitely saw a good quarter from Twilio this quarter, but I will say, unlike some of the businesses that we've talked about to this point, I think the expectations for Twilio to have a good quarter were already there as a communications platform provider. Their services don't go away just because

the pandemic slows down. In fact, digital channels are even more important now than they ever were before. That's given Twilio the opportunity to expand from just things like communication to actually software and data on things like customer services and integration. They're guiding for really strong revenue growth this year, 50% to 52%. But that's a material slowdown from where they were right now. This most recent quarter, their revenue of $670 million was 67% year-over-year growth, but they nearly doubled the loss they experienced at the same time last year. It'll be interesting to watch how they attempt to move that bottom line as they grow. For the time being, I think the market is giving them

some forgiveness, sacrificing the bottom line in exchange for the top line growth, but it'll be critical to watch. This is about a $65 billion company. When you look out over the next five to 10 years, what is a reasonable expectation for Twilio's growth? It's going to entirely depend as you mentioned, on two things. That's international expansion, for which their acquisitions have given them a lot of opportunity for, as well as their dollar-based net retention rates. They had a dollar-based net retention rate of 135% in the most recent quarter, which is industry-leading. In terms of how much market opportunity they can really get, it's

going to entirely depend on how many more customers they integrate, especially those outside of the United States, and how well they're able to monetize them. Chris Hill. Coming up after the break, we've got a couple more earnings reports and a couple of stocks on our radar, so 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 Motley Fool Money. Chris Hill here with Jason Moser and Emily Flippen. Teladoc Health's

second quarter loss was bigger than expected, but the telemedicine company raised guidance for the full fiscal year, and shares of Teladoc were basically flat for the week. Jason, you and I were talking about this before the show, the immediate reaction from the market to this report was negative. The stock fell more than 10%, and then it steadily climbed back up to finish the week basically flat. Do you read anything into that? Perhaps there is some uncertainty there in regard to management's whole-person virtual care strategy. That's one thing I come back to here, because this is about building out a comprehensive suite of offerings and services geared towards serving all of the

patient's needs. This isn't just visiting your doctor via a video chat app on your phone. Now, to be sure, that's a very big investment they're making in whole-person virtual care. But the signs are, at least, that it's working. And so, maybe the market is coming around to that and realizing that it is. And when you look at the numbers, to me, as clear as day, visits up 28% year-over-year. Organic revenue was up 41% year-over-year. Growth in Livongo members, that was up 45%. They grow revenue per member per month. That was up 142% from a year ago. But remember,

we're incorporating Livongo now, so sequentially, it was up 10.2%, still very encouraging. Utilization continues to grow, meaning that people are actually using the platform. Even after we get back to reopening, they're not seeing telemedicine as just a solution for pandemic times, so to speak. They're seeing their primary 360 primary care offering, that pipeline is filling up, they raised guidance, inked a deal with the fifth-largest health insurer in the U.S. Just a lot of reasons, I think, to be optimistic with what they're doing. They're going to ramp up some investments here in the back half of the year, and that's going to continue to be the story. But to your point there on the profitability side, I will say,

while they may have had a loss that was greater than Wall Street's expectations, their results were all well within the guidance that they set. I think that's important for investors to remember is, this is a management team that keeps on hitting the targets that they set for themselves. That, to me, is more important than the arbitrary short-term Wall Street targets that are set seemingly in a black box sometimes. Shares of Pinterest fell nearly 20% on Friday. There were some positive signs in Pinterest's second quarter report, but monthly active users were 5% lower than a year ago, and the company did not offer guidance on MAUs for the current quarter, and that appeared to be

one of the main drivers, if not the main driver, of sending the stock down, Emily. Is it just that bad? Is there that much pessimism on their users? Because the rest of the report looked pretty good. Let me tell you why this was an amazing quarter for Pinterest, for which people are focusing on entirely the wrong thing for this business. The fear with Pinterest as an investment and a thesis, I should say, for Pinterest as an investment has always been, can they monetize their huge user base at a rate that's even a fraction of that monetization that other big social media companies, Facebook being one of them, can achieve? In this quarter, they unequivocally answered that question and it is a solid yes. Their average revenue

per user was $1.32 per user. That's critical because that was up 27% quarter-over-quarter or 89% year-over-year. The ARPU for the U.S. more than doubled to $5 a user, which is really amazing and incomparable to that of, again, even Facebook. They haven't even begun to get into the monetization of their international users. At $0.36 per user, that may sound really low, but that also doubled year-over-year. The thesis for Pinterest was never, oh man, can they raise their over 400 million monthly active users to 500 million? That was never the problem that Pinterest sought out to seek. The issue has always been, can they monetize those users effectively? In this quarter, we saw big advertisers flood back into the

Pinterest platform, which was the concern last quarter. It's funny to see the market getting so caught up with a tiny miss in terms of users, and only domestic users, by the way, missed these expectations, and domestic users, when in reality, they executed strongly on every other aspect this quarter. So, shares down around 20%. Sounds like you think this is a buying opportunity. I certainly do. And if I wasn't talking about it on today's podcast and have all these trading restrictions, I would certainly be interested in expanding my already existing position. I will say, I mean, Pinterest does have challenges ahead of it. The big focus is always going to be on mobile users in particular, because those are

the ones that are able to monetize better, and whether or not they can actually appeal to that shopping integration with Shopify to get people to make purchases on their platform. So, I by no means mean to present this as the single best buy. There's no doubt that Pinterest will succeed. But I do mean to reiterate that if Pinterest doesn't succeed, it's not going to be because they didn't have enough users. It's going to be because they didn't monetize those users accurately. And this monetization from this quarter is very strong. Hasbro's second quarter profits came in solidly higher than expected. TV production is up, demand for board games is up, and shares of Hasbro up 10% this week, Jason.

Who doesn't like toys, right, Chris? It does feel like, though, interest. I mean, Hasbro has really changed over the years. It's not just Mr. Potato Head anymore. It is a digital, physical combination toy company there. That's really working out for them, because it feels like the Wizards of the Coast and the digital gaming segment was the real story for the quarter. But even more so, it was a strong performance all the way around. There are signs also that this is a business that is going to be able to cope with a potentially more than transitory inflationary environment. I'll get to that in a second. But in regard to the numbers themselves, revenue up 54%. Small tailwind from currency effects, but really, again,

strong performance across all major lines. Consumer products revenue up 33%. The Wizards of the Coast and digital gaming segment revenue, that more than doubled. Entertainment segment, you were just talking about that there, that revenue was up 47%. And encouragingly, while the cost of sales increased in dollars on higher revenue, it actually declined as a percentage of revenue, favoring that mix of the wizard side of the business there. You can see those investments in digital continue to pay off. To that point on inflation, management did note on the call that in regard to margins, freight and input costs are significantly higher this year than last. Ocean freight costs, they are projecting to be more than four times higher

than this year versus last year. That's something that has led the business to pass through some price increases. They are going to be passing through some price increases here during the third quarter that should be fully realized by the all-important holiday fourth quarter where demand is highest. Given that, it certainly is understandable the market's enthusiasm this week on the call. All things considered, yeah, Hasbro feels like it's putting itself in a very good place here for the back half of the year. Let's get to the stocks on our radar. Our man behind the glass, Rick Engdahl, is going to hit you with a question. Emily Flippen, you're up first. What are you looking at this

week? Emily Flippen. I'm looking at Beyond Meat, the ticker is BYND. I'm keeping it on my radar because they're expected to report earnings next week on August 5th. I'm really excited to see what they say. They managed to grow sales nearly 40% in 2020, despite having its restaurant and food service business essentially turned off, and they were able to get more retail customers. That's impressive given the fact that Beyond Meat has a really high repurchase rate for retail customers of over 55%. So I'm excited to see what their results look like with their food service channel somewhat turned back on in the next quarter. Rick, question about Beyond Meat?

Yeah, I've tried to grill Beyond Meat burgers and have not been successful. I have ordered them in restaurants and found them delicious. So I'm mixed on Beyond Meat. What I have not had the opportunity to try yet is anything in the realm of lab-grown meat. And I'm wondering what that competition looks like. If it takes off and it's indistinguishable from meat, then does Beyond jump into that market? What's going on? This is actually my biggest concern with Beyond Meat, because their CEO and founder, Ethan Brown, is not interested in getting into lab-grown meat, at least hasn't expressed that interest. So, if that does take off, it can certainly threaten Beyond Meat.

Jason Moser, what are you looking at? Yeah, keeping an eye on Etsy this coming week. Ticker is ETSY. Earnings come out on August 4th. This really is a business we talked a lot about performing well during the stay-at-home economy. This is a business you expect to perform well beyond all this pandemic stuff. I think you pay attention to sellers and buyers in the network because this really is ultimately, at the end of the day, it's a network business. You see the language in their calls now. I'm going to be interested to see the language in the call regarding all of these additional properties because remember, they have Reverb, they have Depop and they just acquired Elo7. They are bringing a number of different e-commerce

brands under that Etsy umbrella, which I think could be a very wise strategy at the end of the day. Because when you're talking about big-time players where e-commerce is getting done, Etsy is absolutely one of the companies at the top of the list. Rick, question about Etsy? What is the market? Oh, wait, sorry, wrong podcast. When I go to Amazon, they know everything about my deepest desires of what I I want to buy right now. Not so Etsy. When I go to Etsy, they have really no clue who I am and what I want. Do they have some room for growth there in that area? They do. I think you'll see more of that as repeat purchases occur and also the

investments in Etsy ads and Etsy payments, I think will give them clues as to shoppers' behavior as well. What do you want to add to your watch list, Rick? Once again, just like last week, I own both of these already, so I'm a little happier with Etsy at the moment. Well, there you go. Fair enough. Emily Flippen, Jason Moser, we're out of time. Thanks for being here. Thank you. Thanks, Chris. Thanks, everyone, for listening. We'll see you next week.