Motley Fool Hidden Gems Investing - Earnings, Earnings, and (You Guessed it) More Earnings

Episode Date: February 19, 2026

Earnings results are flooding in from companies across numerous industries Some look great, some look ok, and some the market didn’t like one bit. Today, we break down earnings results from several consumer companies to see spending trends, the gang gets into a spirited back and forth about insurance company Lemonade, and we try to figure out what spooked the market about Klarna’s results. Tyler Crowe, Matt Frankel, and Jon Quast discuss: - Earnings results from Walmart, Booking Holdings, Etsy, and Ebay - Ebay’s acquisition of Etsy’s Depop business. - The bull and bear case on Lemonade - Klarna’s big stock drop Companies discussed: WMT, BKNG, ETSY, EBAY, AMZN, LMND, PGR, KLAR Host: Tyler Crowe Guests: Matt Frankel, 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

Tyler Crowe It's an earnings extravaganza, this time on Motley Fool Money. Welcome to Motley Fool Money. I'm Tyler Crowe. Today, I'm joined by longtime Fool contributors, Matt Frankel, and John Quast. We're deep into earnings season with really far too many companies to cover in our 20 or so minutes that we do these daily podcasts, but we're going to do our best today with a pretty quick round-robin look at a lot of companies. We'll get into Lemonade and Klarna, who both reported today. But before we do that, we're going to do a quick lightning round with a group of companies that I'm kind of pinning here like the pulse of the consumer.

We're going to look at Walmart, Booking Holdings, Etsy, and eBay. We're going to go as quick as we can. Let's start with Walmart. As the companies want to do, it beat earnings expectations with earnings at $0.74 a share. That doesn't include some equity investment stuff that always makes the bottom line a little wonky. The company offered what most of the time is tepid guidance for the upcoming year, but that's pretty par for the course. It's done conservative guidance, if you will, for many years in the past, and then just raised it over the years and typically exceeds it. Did I miss anything? Was there anything interesting that you guys saw in this one? Yeah, I have a few things to add. Walmart, they've really become a master of omni-channel

commerce, and it's really exceeded even my expectations. I like the company a lot. The CFO specifically called out the speed of the delivery platform as a big driver of their growth. And I can tell you firsthand, Walmart's delivery is fantastic. And it surprises me how efficient it is. But one particular point from the earnings call that I found interesting is that the fastest growing part of Walmart's market share is households with annual income above $100,000, which is a bit of a concern to me that inflation and tariff pressures are really weighing on Americans. And we're seeing those with higher incomes really start to have to cut back. That was one of the signs we saw before the Great Recession in 2008.

It was why Walmart was the top-performing stock out of the 500 in the S&P during that year. It could be a sign of a weakening economy, so that's something that I'm keeping a close eye on. One thing that I want to add here is that, don't look now, but e-commerce penetration for Walmart just hit 23%. That is an all-time high. It's a record for the company.

When we think of these huge marketplaces, these huge platforms with large user bases, I don't think Walmart usually comes to mind, but it is this huge platform with an enormous user base, and this digital business is quite strong. The big takeaway here is that it's leading to operating income growth that is outpacing revenue growth. It's subtle, it's kind of small, but at the scale that Walmart is, it matters. Moving on, shares of Booking Holdings are down about 7.5% as we tape. It beat earnings, it raised its dividend, and it guided for 15% revenue growth for the upcoming quarter. Surely, the market isn't responding negatively to the announcement that it plans to split its stock, right? What am I missing here?

That would be a head-scratcher on all counts, Tyler, if the stock was selling off because it split its stock. Normally, that gets investors excited these days. It's a head-scratcher for me. Well, it's a head-scratcher that they're splitting their stock because CEO has gone on record before saying that's not really something he was interested in doing, but announcing a 25-for-1 stock split. The sell-off for the stock is a head-scratcher for me based on the financials. You look at booking and its growth, really incredibly strong for a business of this size. I thought that guidance was even better than the results that it posted. And it's growing where it wants to grow.

So you look at how the revenue shakes out across the various segments. Agency revenue was down about 7% for the year. So this is basically where it kind of kicks out the users to its partners so that they and book their travel over there. Merchant revenue for the year was up 25%. That's what Booking really does want. It wants to keep more of its users right there on its platform. It wants to handle more of the transaction. And so this is exactly the kind of quarter that Booking wants to see. It was good growth. It's a head-scratcher that the market didn't like it. And then last week, we got Etsy and eBay. And I'm bundling these together because in addition to both of

the companies reporting earnings earlier, either today or at the end of the close yesterday, eBay announced that it was acquiring Etsy's Depop business. Now, I don't know if the market liked the deal or if the earnings numbers were so good that the Depop handover didn't really matter that much, but both stocks are up considerably as we're taping. So, which one do you think it was that is leading to the market rally? That's a really good question, Tyler. As I have read the headlines, it seems like everyone is calling this a win-win. It's a win for eBay because eBay's thriving and it's going to acquire this higher growth platform in Depop, whereas Etsy's kind of struggling, but it gets to shed a distraction and get some cash. So, it's a win-win,

right? But I think that Etsy is the much bigger winner here, and I'll explain why. So, eBay is acquiring Depop for a little bit more than it's trailing gross merchandise sales. So this isn't Depop's revenue. Rather, this is sales on its platform. Depop takes a cut of that. But Depop, around $1 billion in gross merchandise sales, eBay's acquiring it for a little more than that. For perspective, both eBay and Etsy trade for less than half of their own merchandise sales. So basically, the deal values Depop at double the price of eBay and Etsy if we're valuing it from that perspective, right? Now, to be fair, Depop is growing really fast. The adoption numbers are good here. But if you look at eBay, its stock has gone up in recent years in a big part because

of all the capital it's returning to shareholders. In fact, it returned more than a billion over what its profit was last year. That's actually unsustainable. It had $2 billion in profits that returned $3 billion to shareholders. Now you add on a $1.2 billion acquisition, I think eBay's going to have less money to give back to shareholders here for the near future. Etsy, on the other hand, gets this huge cash infusion. I say it's the bigger winner. I agree with most of what John said, but I'm a little more toward the win-win idea. In most cases, and you guys know this just from following the stock market, in 90% of the time, the company doing the acquiring falls their stock price, and the company selling an asset or selling

themselves gains. But the market reacting positively for both of these companies tells me that this is a good deal for both. In short, investors are happy that eBay is getting Depop, and they're happy that Etsy's getting rid of it. eBay has the financial and business strength to, let's say, nurture a platform that's growing at 60% year-over-year like Depop is, but is not yet profitable. Etsy really doesn't. I do think it is a win-win in a lot of ways for both of these platforms. Let's see. We've got consumer durable spending with Walmart, travel spending, so much more discretionary with booking, and we'll call it eclectic spending, or if you can think of a better way to classify Etsy and eBay spending, go for it.

if you guys want to read the tea leaves of kind of all the things that we saw in the earnings releases, guidance, things like that, were there any takeaways from these results that said anything to you in terms of the pulse of the consumer or like what we can expect in the, in the coming weeks or year when it comes to consumer spending? Well, not necessarily on the consumer spending front, but how about on the business priority front? So, okay. If you rewind the clock five years, ad tech stocks were something that I was extremely bullish on. I saw the whole thesis being that advertising was transitioning from linear advertising to programmatic. That seemed to favor these pure play ad tech companies. And really, they've struggled, most of them.

But you look at digital advertising as a whole, and it's absolutely red hot. You just have to know where to look for it. And so, look at Walmart's advertising business. It grew 46% in its fiscal 2026. Now, some of that was because it acquired Vizio, but still it's growing fast in its own right. eBay ad revenue is now 18% of its total revenue. Booking saw 11% advertising revenue growth in 2025. So these are digital platforms with large user bases. They have scale and they are enjoying this advertising revenue boom. Amazon, you could throw this in here as well. I think this trend is something that is going to continue. Businesses have these bases of users that it can sell this advertising slot to.

I think one key takeaway from all three of these is that consumers are a little under pressure. I already mentioned with Walmart that Walmart's gaining market share, not just in the higher income brackets, but throughout the spectrum. That's a little bit concerning that consumers are having to cut back. I know I didn't weigh in with booking, but even with strong guidance. They're predicting travel demand to fall a little bit year over year, which I think that just shows that whether or not it was great guidance for booking, it shows that people are a little squeezed and being a little more discretionary about that kind of spending. And then with Etsy and eBay, the fact that the used clothing retail

platform is such a desirable asset, it's growing so fast, it shows that consumers are looking for ways to maybe save a little money. And both of these, eBay especially, is where people go to save some money compared to buying it full retail. So I think that's a big takeaway is that consumers are feeling under pressure right now. I think the consumer under pressure is some foreshadowing when we get into the Klarna discussion later. But after the break, we're going to do a deeper dive into Lemonade. Lemonade, it is perhaps the most polarizing insurance company to ever be traded on the public market. It reported earnings before the opening bell. And look, I'm not going to hide anything here. I kind of struggle with this company, specifically struggle with the optimistic

view of it. I'm probably going a little mask off here and admit that I'm not very bullish on this company to start. So I want maybe one or both of you guys, Charmin, to, as you see it, walk me through the quarter and convince me why the story is working. All right. And I get it, Tyler. To be fair, I'm going to use words like stock-based compensation and adjusted metrics that are probably going to trigger you a little bit. But I'm a shareholder, and I struggle with Lemonade's business model from time to time and its long-term viability. It does things differently than other insurance companies, targeting a specific loss ratio instead of worrying about investment income and things like that. But the numbers are rapidly moving

in the right direction. Growth is accelerating. In-force premiums grew by 31% year over year. That's something that legacy insurers would love to have. The company is just shy of 3 million customers, and I remember it crossed the one million threshold just a few years ago. This was the ninth consecutive quarter of an accelerating growth rate and the ninth consecutive quarter of improving loss ratios. All the major business areas, specifically Lemonade Car, that's the one I was looking at, posted loss ratios well below the company's 75% target. Here's where it gets a little more fun. Lemonade is now profitable on an adjusted free cash flow basis. It's moving towards profitability and some metrics Tyler actually

has some faith in. It is rolling out some innovative products. I love the idea of 50% lower insurance rates when your car is in full self-driving mode. That's just one example. I'd love to see them get their stock-based comp under control. $75 million expected in 2026 is high. That's up from $60 million a year ago. There's at least a little bit more justification for it now than when the company was really losing money hand over fist, but it's still a problem. Again, I'm not the most optimistic on this company. And there's some incongruencies I see with some of the things you're talking about. Top line growth, great. Enforced premium growth, great. Declining loss ratios, meaning that it's doing a better job of underwriting

premiums, great. But all of that said, overhead costs continue to climb. I know it says operating expenses are flat, but that excludes customer acquisition costs. It seems like all this fabulous growth that they're talking about doesn't come from organic growth or anything like that. It comes because they're spending a boatload of money to acquire their customers. So much of all that is still leading to gap losses and needs to continually sell stock to offset retained losses. Insurance, no matter if it's AI powered or some new digital native platform that takes out all of the legacy stuff, it's still a balance sheet game. And today, it has less equity in the business than it did when it IPO'd. I've yet to see a quarterly earnings report where it showed

assign to gap profitability, taking out all those expenses that are adjusted. How does that correct itself? What am I missing? Why am I wrong here? Well, there you go using terms like gap profitability. Lemonade doesn't like to mention that too much in its earnings report. You're right. It hasn't really talked about that profitability yet. Where I would push back a little bit is what you said about acquisition costs. Right now, Lemonade has clearly shifted its focus to Lemonade Car, the auto insurance, which is a much higher-priced form of insurance than what it's traditionally pushed, which is renter's insurance. Higher acquisition costs are natural. The average auto insurance policy is roughly 10 times what the average renter's

insurance policy is. If you're going to acquire a customer that's 10 times more valuable to you, it makes sense that you would spend a little bit of money. But yes, if you wanted to have a consistently profitable insurance company, Lemonade could get there in two to three years. It could happen. But for the time being, a company like Progressive might be a better fit if that's what you're looking for. When it comes to the debate of the financials of an insurance company, I will trust Matt and Tyler to provide much more important commentary than I. But let me put this out there from just a layperson's perspective. I think that if you're listening to this and you say, I'm not sure about Lemonade's financials, one thing that I would look at is its net promoter

score. And I don't know how recent this is, but at one point it was 70. And if you know how the net promoter score works, that is incredibly high. The insurance industry as a whole kind of averages in the negative when it comes to net promoter score. And so I don't think that this is a company, maybe you look at it today and you were like, the numbers don't attract me so much. Gap Profits do make a difference to me. I am more interested in Progressive. But I don't think this is a company that you should take off of your watch list entirely, because it does seem like its customers really do love it. It has $3 million now, almost, and it's growing fast. I think that at the very least, you keep it on the watch list

and keep an eye on Lemonade, because it seems to be doing something that its customers actually love. I just may be the grumpy guy in the corner who just complains about Lemonade for the rest of time, but I do appreciate Matt going a little Ronald Reagan on me and being like, there you go with that gap profitability again. Speaking of profitability and somewhat lack of it, after the break, we're going to talk about Klarna's earnings. With so many earnings stories coming out this week, and actually all of these things happened today, we're going to actually forego our normal stocks on our radar so we can keep going with a lot of the market news today. We're left with Klarna as the last one because the market did not like what it saw this quarter.

Shares are down 26% as we tape. Top line numbers look good, but one thing that can't make 38% revenue growth look good is when transaction costs rise by 53%. For the full year, it ended up posting a 79 cent per share loss after a profit in 2024. The thing that popped out to me was the rising reserves for credit losses. I'm going to see if there was anything else from you guys in a second here. But just to keep that in perspective, this is not credit losses on its revenue. This is on its gross merchandise volumes, which is considerably higher than total revenue. So it can actually take out a pretty big bite. Aside from that, was there anything else that popped out to you guys that might be contributing to the sell-off?

Yeah. The short version is that the market hates higher risk, and there's higher perceived risk with Klarna than there was before. But there were a few concerning items, just to name a couple. Average revenue per customer was flat year over year. Despite the company really leaning into deepening relationships and getting repeat customers and engaging its customers more, you would expect that number to be going up. The rising reserves for credit losses are a concern. They come with the shifting loan mix. I'm a Klarna shareholder, and the reason I own shares is for buy now, pay later. I love the business dynamics of that part of the business. But they're shifting more toward a banking product focus. Their long-term financing

product is called Fair Financing, their debit card product versus traditional buy now, pay later. So in a way, it's a good problem to have. Fair financing is growing fast, but it does add an element of risk. Their CEO said in the earnings release that banking products, including that financing in the Klarna card will be the key drivers of growth going forward, which might be concerning investors. Buy Now, Pay Later has generally better economics. It has much lower loss requirements to really short-term loans and things like that, and greater predictability. The Klarna's fair financing, their gross merchandise volume increased by 165% year-over-year in the quarter. Their number of banking customers has more than doubled. It could be that the banking

side of the business is just simply growing too fast for comfort. You know, when it comes to buy now, pay later, I'm not a user myself, and it's tempting to just kind of wave my hands at a company like Klarna. But the more I think about it, the more I do think that the world is headed in this direction. I think it is headed in the direction of Klarna's services that it offers. You look at three-year revenue has doubled for Klarna, and its operating expenses have dropped by 8% during that time. That is so hard for me to dismiss blindly and just say, I don't like this business. That is so huge. I can't dismiss a business that has doubled over the last three years. Even though I do struggle with the financials a little bit, but it reminds me

a little bit of the delivery platforms just a few years ago. There was a time that I just didn't see a path to free cashflow positivity for platforms like DoorDash or Lyft. And yet they were the ones that were building big platforms, the adoption trends were in its favor. And then they eventually did turn the corner with the cash flow and everything else. They flipped a switch one day. If you're a buy now, pay later investor, perhaps a Klarna investor, you're feeling the pain a little bit today. But I think that if you're invested in this space, you have to be quite encouraged with the long-term investment trends, the adoption trends, they do appear to be in your favor. Yeah, the idea of flooding the zone with a slightly less profitable product so everybody adopts it and then kind of turn on the profitability through, you know, changes in fee structures.

It is a compelling idea. And certainly you look at companies like DoorDash, like Uber and things like that, and it has worked out so far. So certainly an interesting way to think about this buy now, pay later space as we go on. And hopefully they just don't become banks eventually over time. That is all the time we have for today. Matt, John, thanks for sharing your thoughts. As always, people on the program may have interests 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 Motley Fool editorial standards and is not approved

by advertisers. Advertisements are sponsored content and provide for informational purposes only. To see our full advertising disclosure, please check out our show notes. Thanks to Producer Dan Boyd and the rest of the Motley Fool team. For Matt, John, and myself, thanks for listening, and we'll chat again soon.