Motley Fool Hidden Gems Investing - It’s Always About the Forecast

Episode Date: May 10, 2024

Relatively strong earnings results from Shopify and Roblox were overshadowed by questions about the outlook for the rest of the year and whether consumers will keep up the online shopping and in-game spending.. (00:21) Ron Gross and Andy Cross discuss: - Disney’s path to streaming profitability, and the warnings from Shopify and Roblox that growth in the back half of 2024 might be a bit lighter. - Trade Desk’s relative strength in a tough earnings environment, and Airbnb bracing for some travel slowdown. - How drinkmaker Celsius continues to find the energy for growth. (19:11) Motley Fool Co-founder David Gardner provides some timeless advice for college grads. (27:27) Ron and Andy break down two stocks on their radar: Toast and Trex. Stocks discussed: DIS, SHOP, RBLX, TTD, ABNB, CELH, TREX, TOST Host: Dylan Lewis Guests: Andy Cross, Ron Gross, David Gardner, Mary Long Engineers: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

Don't you wish you could just hit skip on the worst parts of your life? You know, the same way you can skip an ad? I get it. I'm Siaya and I live in Ice Cove. I've made some questionable decisions that didn't end up the way I planned. And today I'm still figuring it out. Somehow things usually get worse before they get better. Apparently, that's how I roll.

So bundle up and come along for the bumpy ride. Stream a new episode of North of North Tuesdays on CBC Gem. Disney's woes continue, and Shopify and Roblox paint a hazy picture for 2024. This week's Motley Fool Money radio show starts now. 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 Dylan Lewis. Joining me over the airwaves,

Motley Fool senior analysts, Andy Cross and Ron Gross. Fools, great to have you both here. Hey, Dylan. How you doing, Dylan? This week, we've got advice for college grads, stocks on our radar, and some tough reactions to company earnings. We're going to kick off there. Ron, the house of mouse shrinking a little bit this week. Shares of Disney down 9% following earnings. To me, really, the sign of the times for the company was, this is the fourth quarter in a row Disney has posted results below expectations. Don't be a hater, Dylan. This is Disney we're talking about. It had been having a nice rebound this year. It survived Nelson Peltz's proxy fight. We're looking up. But this, as you

say, was a rough week for the stock. There was a lot of good in the earnings report, but also a fair amount that spooked investors. Let's hit the good side first. Management said it is close to making its streaming business profitable. And the streaming unit lost only $18 million in the quarter versus $659 million, for example, this time last year. If you exclude ESPN+, it actually earned a profit of $47 million. So that's positive. CEO Bob Iger said the company is on track to achieve streaming profitability in the final quarter of the fiscal year that ends in September. Disney Plus added more than 6 million customers in the quarter. That beat expectations. Theme parks look pretty solid, up 10% on the revenue side. Operating income was up

12%, but that actually was a little weaker than investors had been expected. Management raised it's full-year guidance for EPS growth of 25% from previously 20%. Now, if we turn to the more concerning side, that traditional TV business that we talk about time after time continues to suffer from declining viewership. It was hurt in the quarter by declining ad revenue. Domestic operating income at ESPN fell 9%. If we look at the theme parks, they're seeing some what they're calling moderation, quote, moderation in this peak post-COVID travel that they had been enjoying. But what really got investors spooked was the guidance for the streaming business, which offset some of the other positive remarks. They said, we're forecasting a loss for

entertainment direct-to-consumer in the third quarter. That is mostly tied to its platform in India, but still. And they said they do not expect to see core subscriber growth at Disney plus in the third quarter, but will return to growth in the fourth quarter. Investors did not like to see that. Sold the stock off at a pretty healthy clip. One of the things that's interesting to me with this is, we have the financial story of streaming and what's going on with the entertainment business. We also have the strategic element of how they are approaching their IP library. We got some updates from management talking a little bit about their content slate and basically saying, when it comes to their Marvel franchise and streaming shows,

they are going to slow things down. They are going to be limiting the number of Marvel films to three per year and two Disney plus shows per year. Andy, when you look at that, do you feel like there's an acknowledgement that maybe we overinvested and maybe we stretched some of these franchises a little thin? Oh, it's definitely that. Iger has talked about that. I mean, you can't go from a 650 million loss to an 18 million loss without cutting back some corners here so they stretched way over on the marble side so i continue to think that's a good move for them i mean ron laid out the pros and the cons from the quarter but i think there's just a lot of pros in there uh they can't get it all right the subscreening estimates uh forecast for

that uh for the next coming quarters might be a little bit light but just looking at the free cash flow line continue to improve the earnings per share is going to be up 25 this year they think they continue to make lots of progress in making that streaming business much more profitable and not the sinkhole that it used to be. So I applaud that. I think that's the biggest check box. The theme park business is going to be a little cyclical. And if the consumer is a little bit tight right now, I think we're hearing that kind of across the board from some other companies. So I'm not too surprised by that. But overall, I thought it was a pretty solid quarter to another one that Bob Iger can put behind him. Yeah, you could get 21, pay 21 times for Disney. It's

Disney. That seems okay to me. Plus, you get back a little dividend now that that's back a little bit under 1%. This is a company I've owned for probably two decades, and I have no intention of selling it. I do think maybe we get a little bit of an increase in the dividend and maybe a little bit more in the share buyback, but it's not the worst thing in the world for them to continue to focus on building out that business. But Dylan, you're right on the properties. They got to get that slate right because that's a big driver of all the future value of Disney. Shopify also having a bit of a rough week. The e-commerce in a box company logging its worst day ever, dropping 20% following earnings.

Andy, over the last year and a half, it seemed like Shopify was really battling back from the post-COVID slump. Shares had gone on quite a run. It seemed like the company had kind of gotten itself back on track with the growth story. This earnings report feels a little bit more like a setback. What's the story? Well, it is a little bit. However, just looking at some of the numbers, I mean, the quarter of the gross merchandise value grew 23% versus 15% a year ago. But as you had talked about, some of the profit picture,

I think, has some investors a little bit too concerned. I think it's a little bit of an overkill. That 20% drop was significant. I'm an owner, and I know many listeners are out there too, so that's painful. But if you look at the revenues, we're up 23%, up 29% if you back up the logistics business they sold out. Subscription revenues up 34% versus 21% a year ago. Merchant solutions up 20% versus 31% a year ago. That subscription revenue is higher margin, so it's good to see that than the merchant solutions. That's going to switch a little bit over the next quarter, which is going to impact a little bit of the margins. The monthly recurring revenue got a lot of conversation, Dylan. That was up 32% to $151 million versus just 10% growth a year ago.

They're making progress on that. That was actually a deceleration from last quarter's growth. That monthly revenue, investors want to see continue to grow over time because that is a good forecast of the future growth, obviously. And so if that deceleration happens, they didn't like that. However, the company talked about how it's a little bit of a change and how they're recognizing some of the trials. And they think most of the deceleration is due to that recognition, less about like businesses slowing because they continue to think business is very positive. Gross payment volumes of 32%, gross margin, as I mentioned, improving. Operating expenses, 4% lower. So all the things that Shopify had been doing over the last year or so continue to show

here. It's a little bit with the growth story, as you mentioned, and a little bit of the free cash flow margin not improving as much for the rest of the year. And that has investors a little bit concerned that the growth picture is slowing. I think that's a little exaggeration, and the stock that sold off was a little bit too dramatic in my mind. All right, we're going to stick with big movers. Shareholders of Roblox, knowing exactly how Shopify shareholders are feeling, shares down 20% post-earnings. Ron, on the surface, things look pretty good. A lot of strong user growth and usage numbers coming in. But it seems like what Roblox management is saying is somewhat similar to what we were hearing from Shopify and a little bit from Disney here. We're expecting a

little bit of a slowdown here with the consumer. A slowdown. And when you're priced the way the stock is priced, slowdowns do not go over very well. The stock really did get slammed on this report, a result of a softer outlook for the current quarter that we're in now, worse than analysts had expected. The company lowered their guidance. But the report itself had strong numbers taken in a vacuum, revenue up 20%, bookings up 19%, average daily users up 17%. But you've got to put up even better numbers than that, probably, for a company that is priced this way. A company still losing money. Management lowered their guidance. So, we've got to watch out for how this company is priced. There's a lot of stock-based compensation here. They're only cash flow positive

if we back out a billion dollars worth of stock-based comp. So, while a lot of my colleagues really like this stock, it's very hard for me to get my head around from a valuation perspective. Oof, Ron, you hit it right on the head with the stock-based compensation. I hate to see that. I they would really try to get that under control to drive actual real earnings growth. That's been one of my criticisms of them. April and May, they saw daily active users and US and Canadian bookings back above that 20% mark deal. And that's the magic line for Roblox. They got to stay above that 20% mark. They see that at their older than 13 cohorts, age 13 cohorts growing above that level. They got to get there. There was some encouraging at the end of May or the end of April

and into May, but they're being very cautious for the rest of the year that that growth is going to be a little bit harder to come by. And that's really gotten the concerns from the investing community. One of the things I was curious about with this report and the management team is this is a business that is relatively new to the guidance game. I think they only started providing guidance a quarter or two ago. And how are you as investors looking at the commentary you're getting from management, the expectations you're coming from management, knowing that it's something that's, that's relatively new in terms of a disclosure for them. Yeah. I, I, I, I like that they're being more open and disclosing. They talked about their advertising business, not being

material, but they're making lots of investments, including that partnership with Pubmatic and a real world test with Walmart. I'd like to see all that, but that's not going to be anything happening this year until, until next year at the best. They're still working through these kind of these metrics around daily active users and bookings. And now we're seeing bookings grow faster than the usage numbers and the growth numbers. And you want to see that the other way around because eventually those bookings will catch up. So they still have some work to do to be to be transparent and to be a little bit more accurate and clear. And right now they're taking a very cautious approach for the next quarter or two. All right, coming up after the break,

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That's r-i-p-p-l-i-n-g dot a-i slash f-o-o-l. Sign up for exclusive access today, rippling.ai slash fool. Welcome back to Motley Fool Money. I'm Dylan Lewis, joined on air by Andy Cross and Ron Gross. The earnings beat continues. We have updates from Airbnb, Celsius, and Trade Desk. We'll kick off with TTD. Andy, we had some big moves in our first segment.

More of a muted market response to Trade Desk's results. Company revenue rose to just under $500 million, showing some strong growth this quarter. Seemed like, in a lot of ways, a business-as-usual quarter for Trade Desk. Yeah, Dylan, a business-as-usual, but there's a lot of change going on in the advertised market, if you believe the Trade Desk, and I do. There's a big strategic shift towards connected television in a cookie-less world that they've been investing for and preparing for for the last few years. As you mentioned, strong revenue growth, up 28% year-over-year.

That's an acceleration from the 21% a year ago. Profitability, they had their operating cash flow, their operating profit at $162 million. That was a margin of 33% versus 28% a year ago. Connected TV remains the fastest growing channel for the trade desk. It's contributing significantly to the company's growth and they're really excited around some of the partnerships like with Roku that could lead to opening up significant CTV, connected TV inventory. The retail medium, that's the advertising through retail channels that continues to see strong momentum we're hearing that from the likes of amazon and others and that's a big growth opportunity for the trade desk international expansion all good their uid 2.0 initiative in this cookie list world is an

investment they're very positive on they're using ai to invest in kokai that's their platform from ai continue to make all the right investments and trade desk is just leading the way when it comes to connected television and advertising tech andy last segment we were talking about several companies, painting a little bit of a down picture for 2024 and the rest of the year. I kind of would have expected that to materialize in some of the advertising commentary from the trade desk, but that doesn't seem to be the case. It's not, Dylan. I think we're hearing a lot of positive commentary finally coming from some of the ad tech companies and we're seeing in some of the results from the likes of Meta and Amazon and others. When you look at what all the spend

going on in advertising, especially when it comes to things like connected television, and like I said before, Trade Desk is innovating. Now, they're really doing a lot into the AI world, which is helping their clients get more and more efficient. I love those kinds of investments. We're going to stick with companies in the red. Airbnb down 7% this week after reporting earnings that, on the surface, Ron, didn't look too bad. Agreed. Some good things to like about this report. The stock did get smacked, still up 8% for the year. It had been having a nice year. gave a little back as a result of this report. But as we said, some good metrics here. Revenue up 18%. That's actually better than expected. Gross bookings rose 12%. And that was driven by

9.5% increase in nights and experiences booked. Number of active listings in the first quarter grew 15%. Supply has continued to grow at a double-digit pace across all regions. Obviously, we need supply to continue to come in strong in addition to demand. Profit, $264 million. That's up from $117 million, so making good headway there. Now, the disappointment was in the future guidance as, let's face it, it always seems to be. Specifically, revenue was light. The reasons given were what management called, quote, significant sequential headwind. Timing of the Easter holiday, inclusion of Leap Day in Q1, and the impact of foreign exchange rate changes. I think we're seeing some just general weakness. I think we saw it when Marriott reported as well.

Not that surprising. They did reiterate 2024 guidance, though, so nothing too dramatic going on. They expect the Paris Olympics, the Euro Cup in Germany to help in the third quarter. So we'll see if that comes true. Ron, when we were talking Disney earlier, it seemed like there was a pent-up demand for travel, and in their case, the amusement parks, that really helped the business about a year ago, and that we are now lapping that. Maybe some of that demand has been satisfied. Is it a similar story here with pent-up travel, just starting to moderate a little bit for Airbnb? I think that's fair. I do think we saw that in others as well. Marriott, for example, international remains really strong, but their

U.S. seems to be, I think the word was, cooling. We're seeing that across the board in some of these travel-related companies. Love a euphemism. Cooling. Always great. We cannot be all down this week. We're going to wrap with a positive earnings story. Shares of beverage maker Celsius feeling the energy this week, up 15%. Andy, if I'm not mistaken, you're feeling the energy a little bit this week, sipping some Celsius as we tape. Yes, that is true. Having a little bit of Celsius as we're going to tape this. The emerging energy and fitness beverage company that is continuing to take and grow the market for energy and fitness beverages showed off the profit scale in the business as it continues to grow and take that

share. Gross profits up 60% and earnings per share more than doubled on revenue growth of 37%. Now, the revenue growth was a little bit maybe shy, and there's some concerns about some of the inventory issues with their key partner. Pepsi is their biggest distributor, handles about two thirds of the distribution here in the United States and well, in North America. So some concerns, some de-stocking, meaning that a year ago they ramped up some of the stocking and into the fourth quarter. And now they're not building out those inventories as much. And maybe that's going to slow a little bit of the growth. I think that all kind of washes out overall. They have a very strong partnership with Pepsi as its largest distributor. Dylan, they represented, Celsius

represented 47% of all growth of the category during the quarter. That's up from 31% last year and up from 22% the year before. So the energy and fitness health beverage market is continuing to grow and really celsius is the big driver of that gross margins moved up 7.4 percentage points 740 basis points to 51.2 percent now mostly on lower freight and raw material costs they don't think that's a trend that they can like bake into their forecast and they're not so they still think they're going to be lower than that but still very very impressive they're going to have a little bit higher promotional period during the summer that's their big period so and that obviously helped operating margins. They have 3,000 now branded coolers with Pepsi partnership,

and they're continuing to build that out. So, Celsius really, everything is going quite well for Celsius, and clearly it's showed in the stock over the past year and a half. This is one of those companies where if you don't know them, I would say take a stroll down the drink aisle at your supermarket and find them because they are continuing to grow. They are continuing to show up. And that is advice if you are in the United States. One of the things I wanted to tap into with this is 95% of the revenue for Celsius coming from the US of A. How are you thinking about the international opportunity for them? Yeah, it's huge. It's actually great. When you think about the international expansion,

they're now in gyms in the UK and Ireland. So, Celsius has a lot of business tied to gyms. That's how they got their start. And they're rolling out in Australia, New Zealand, and France later this year. So, the international market has a really big opportunity for Celsius. Is this whole category just about branding? Is there anything different or proprietary or unique about the different brands? Yeah, very quickly. If you open up a Celsius can, which I have here, and just look at the ingredients, they're much different than what you may find in the others. And they built their brand and they're all there. They're basically the existence around the fitness market and the fitness world. So that's the big difference than compared to the other

energy companies in the space. Most importantly, though, Andy, how does it taste? Yeah, it tastes not bad i'm not a huge energy drink it doesn't give you wings i got these for research i got these for research and now i'm just kind of like tasting some we appreciate you going out into the field thank you andy cross ron gross guys we're gonna see you guys a little bit later in the show up next we've got foolish advice for college grads stay right here you're listening to motley full money Welcome back to Motley Fool Money. I'm Dylan Lewis.

It's earnings season, but it's also graduation season. Around the country, students are donning their caps and gowns. And so this week, we went into the vault for foolish advice for college grads. My colleague, Mary Long, got some timeless guidance from Motley Fool co-founder David Gardner about the merits of time traveling, advice for his past self, and a general reminder that if you're collecting a diploma this year, you're part of the smartest generation ever born. Wherever you are as you graduate, ask yourself, where are the bleeding edges of new technology

in our society, in our culture? And it almost doesn't matter what job you do. I would get to a company that's working in that space. So for example, genomics, that's an exciting area. I'm an English major, but I would be telling myself, just go answer phones over there at the genomics company, or if you're a product manager, project manager, those kinds of experiences can be taken to any one of a whole bunch of different organizations. So I would really focus on where is the future and be there today. If you're trying to get to the future, would you give yourself any stock advice? Or is that insider trading if you go back to talk to your younger self? I think, first of all, that it should not be considered insider trading. I

definitely would give myself a few stock tips. And let's be clear, time travel clearly has not been invented because no one's been passing through our time as far as I can tell or any other time. And if it was invented in the future, we'd know it by now. When you're starting out in a job and in your career, you're young and ambitious. What's the difference between being a rule breaker and more of a bridge burner? Well, first of all, a bridge burner to me implies that you are just thinking mainly about your own career. And if things don't work, you're just going to burn that bridge and move on. And I hope you wouldn't burn the people that you leave behind you. I think even if in our early jobs, we don't stay very long as we get to know ourselves and

what the world wants from us, I hope we're building good relationships with people all the way through. But I think part of being a rule breaker is that you are realizing it's not about you. It's actually about the rules that are being broken. It's about what's happening in our society in a good way that you can contribute to. So I know a lot of people, especially younger people we're hearing, have not been as positive, understandably. We had our college interrupted by COVID. Not as bright-eyed and bushy-tailed as maybe graduates of the past, but that's very temporary. And I think more than anything, the key to happiness and thriving is when you feel like you are aligned with a purpose in the organization for profit or not for profit that you're working

for that fits who you are, that you're excited to get out of bed each day to go to work. That's such a good indicator. It's no secret that you're a diehard optimist. What's your advice to someone who's graduated or is about to graduate and they're feeling down and out? Maybe it's because they're struggling to find a job or they kind of know where they want to be, but are afraid that that job might be replaced by chat GPT, or they're just scared of kind of leaving the structure of academia? Well, I have two thoughts for anybody who is feeling a little down and out. The first is, if that's tied to loneliness, and I could easily understand that. In fact, the Surgeon General said earlier this month that there's an epidemic in America. It's not cigarettes anymore.

It's not three packs a day. That was an earlier era. It's loneliness. And so if you are down and out, that might well be part of how you're feeling. And what I would say to you then is, let's make sure we're getting out and connecting and building friendships. It helps a lot if you do have a job and you meet somebody who cares about you at work, your boss or somebody older than you, really value those relationships and look for those relationships. But of course, your friends from college or making friends at work, making an effort, even if you're in a hybrid or remote work situation, to get to know people. Even if you're working at a hybrid company, you can still have coffee with people. You can still go out to happy hours. So I think loneliness

is a big problem right now. And I really just think the antidote is obvious. Spend more time with others face to face. On the other hand, if it's not loneliness, it's just a sense of not knowing what you want to do. I would say that this is the smartest generation ever born. And part of how smart younger people are these days is they're so caring about what they want to spend their lives on. And the degree of angst felt by many in terms of what job you take and what that says about who you are or how you're spending the precious time we have on this earth I think there's one aspect of it that can be a little bit overweening, that we might be overthinking things sometimes. And, you know, just get out there, get your feet wet, get active, and again, meet people.

Yeah, you kind of started to touch on this just in pushing the idea of meeting people, even in a virtual first world. But beyond like friendships at work, how would you suggest someone go, like a young person go about finding a mentor in the virtual first world? Well, I think that for me, a lot of it is either going to come from new relationships that you have. And virtual first still means real second, I think. I prefer virtual second and real first. I think that's going to be the healthiest version of me and for most people. But if you do find yourself in a truly a virtual first environment, then you either have two choices finding a mentor. The first is finding somebody new in that virtual or real environment.

But the second is, if you're somewhere around 21 years of age, you have 21 years of relationships that you've built up. I bet there are already people, school teachers, someone from church, somebody from a past summer job, parents, friends, uncles, aunts. There are lots of opportunities for us to get to spend time, if you feel that you want to, with somebody who has some wisdom for you. And I would say, try to seek out people who have a genuine interest in you. That's easy to assume from family members or from past coaches, let's say. But if you're talking about new relationships, make sure that this is somebody that you trust is really thinking about your best version of yourself. That's easier said than done, but I think that's really important.

The best mentors are going to be people who really want the best for us on our terms, not on theirs. Any parting advice for someone who's just recently graduated? You know, one other bit of advice that occurs to me is my experience with my first job. And that is I quit it within about four months of getting it. And in a lot of ways, as sort of the oldest child in my family and the classic duty-bound elder child, I thought, you know, this is not what I should be doing. You shouldn't be taking a job and then not even nailing down your first year at that company. That's not going to look good on your resume. The punchline is I had to help start a company instead of getting hired by anybody else's at that point. But I will say it

was one of the best decisions I've ever made. After four months, I just let my employer know it didn't feel like it was for me. I didn't really like the office culture very much. I didn't talk about that with them. But I just realized it was a creatively deadening job. And I sometimes ask myself, had I decided I should give it the old college try and stay there a minimum of two years, et cetera, I might have missed ever helping start the Motley Fool. If David didn't leave his first job, I wouldn't have mine. So for fools everywhere, I'm happy things didn't work out with that first job out of school, and he went on to start the Motley Fool. We're heading to break, but stick around. Up next on Motley Fool Money, we've got stocks on our radar.

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 anything based solely on what you hear. I'm Dylan Lewis, joined again by Andy Cross and Ron Gross. We've got radar stocks coming up in a minute, but first, a little buy-sell hold. I've got a couple of stories to round out the week. Andy and Ron, I want your take. First one up, it's going to get a little bit more expensive to get into the judgment-free zone. Planet Fitness raising the cost of its legendarily cheap classic membership from $10 to $15 for new members this summer. Andy, buy, sell, hold the price hike for Planet Fitness.

I wonder if that's because they're putting all the Celsiuses into Planet Fitness now. I don't know if Celsius actually is in Planet Fitness. So yeah, I mean, I think it's a good move. Costs are definitely going up. Now, the question is whether their clients are going to be able to continue to afford that and willing to pay that. That's been kind of iconic at 10 bucks, and they talk about that. So yeah, definitely a change. But if they're making some investments, And if you just look at it on a percentage basis, Dylan, if my math is right, that's a huge percentage increase from $10. I think it's about a 50% increase.

I think that math, I think that's how it works out. Almost exactly. Almost exactly. Rounded to the nearest dollar. Ron, buy, sell, hold the price hike. And I want to say, I think this is one where they are right there with Costco in terms of the hot dog being the same price. So now Costco might be the last vestige of pricing permanence.

I'm a buy, not a sell here. I think, even though it is 50%, it's a reasonable hike after 26 years. I do think most of the client base, if not all the client base, will be able to swing it. It is still a relatively good deal. But this is where we'll find out what kind of pricing power they have. I think it's going to work out for them. I don't think it's dramatic enough to anger anybody or to make it a stretch for anyone, but time will tell. For what it's worth, the market slightly cheering this one. Shares up 3% on the news. So, you know, I think like cautiously optimistic about the price hikes.

All right, our next buy, sell, hold. If you are a fan of Sriracha, you might want to stock up. Reports out that the manufacturer needs to stop production for several months because their pepper supply is too green and it would be affecting the color of their iconic sauce. Andy, buy, sell, hold Sriracha as the best condiment on the market. Oh, I'm going to sell that. I mean, I've never been a big Sriracha fan. We got a bottle of it in the refrigerator.

We never really use it. I love hot sauce, but I don't really consider Sriracha that kind of a hot sauce. I think there are better brands out there. So, I mean, if it goes away for a few months, it's not going to hurt me, but maybe some other people will be hurt, but I'm calling that a sell. For what it's worth, I'm a Cholula guy when it comes to hot sauce and a ketchup or a Chick-fil-A sauce guy when it comes to pure condiments. Ron, what about you? Cholula, for sure. I think of Sriracha as being different, more of a condiment,

ketchup-y kind of a thing. This has happened before, and it created this great buzz. We're talking about it right here. I wonder if there's a little bit of happiness behind the buzz it creates and allows them to charge more, too. A while back, you had to pay $100 for a bottle on eBay if you really wanted it. It'll be interesting to see if other manufacturers of similar condiments take the same tact and have trouble, or are they going to gain a little market share for the time being? If the actual brand name Sriracha that we're mostly used to, the iconic rooster on the bottle, I believe, I think it's going to all be fine. We can buy this. You know, it is interesting. You are seeing a lot of these raw material costs. Cocoa

going into chocolate and talking this about Hershey's, you know, it does impact how companies do think about their pricing. So you can't fault the makers of Sriracha for thinking about this. If the lack of peppers is leading to increasing costs for them to try to get some of that money back, we are seeing that more and more with some CPG companies. And I gotta be honest, I love seeing a company insist on quality and maintaining what they are trying to do, even at the expense of availability. I think it's always worth it. Our final story for buy, sell, hold, selling a little bit more focused on the big picture. Fresh jobs data out, showing first-time applications for unemployment benefits are up this week to the highest level in almost

a year. Pair that with April job additions coming in a little bit below expectations. Ron, buy, sell, hold, the strong labor market we've been seeing for the past few years. I'm okay with this, so I'm still buying. It's a game of be careful what you wish for. The Fed has been trying to slow the economy. The labor market has been persistently strong, and people were saying interest rates will never come down as long as the labor market remains this strong. So here we are with some cracks in the labor market. And everybody's now, of course, worried about recession. So it's, you know, soft landings are hard to manipulate and maneuver through. I think we still got a shot at it. Andy, what do you think?

Uncle Jay Powell from the Fed has basically said they're trying to slow the labor market. And that's a big. So for them, any kind of like small increase like them, like this is a win. I do think we're going to see some further cracks over the next year and a half. We're just going to have to with some of the slowing economic activity. But hopefully it's done in a way that doesn't disrupt complete consumer activity. That's a big thing we've got to watch. So as you guys are seeing headlines related to this, not hitting the panic meter necessarily. This is somewhat within the bounds of what you guys are expecting to see.

And could lead to lower interest rates down the road, which the markets would probably applaud. All right, let's get over to stocks on our radar. our man behind the glass, Dan Boyd, is going to hit you with a question. Andy, you're up first. What are you looking at this week? Well, as I'm looking at Trex, symbol T-R-E-X, the number one seller of eco-friendly composite outdoor decks, maybe you all have it in the back of your house, is back with an outstanding recent quarter that included revenue growth of more than 50%. And the market remains really attractive with some 50 million US decks or so beyond the age of replacement. According to the company, it has great relationships with the contractors

and professional builders. 95% of the decks it makes are from recycled materials, and 95% of their decks come from recycled materials, and 100% of those products are made in the U.S. They have great relationships to be able to manage the recycled material. They have recycling centers that help take plastic bags and all different kinds of junk and turn it into some of these composite decks. The company and the stock goes through these cycles as building activity goes, But with more of us staying in our houses longer, remodels continue to be an attractive market for Trex. The returns on capital for this business are north of 20%, with really an outstanding margin profile. The stock sells for around 40 times earnings for a company that I think can

grow probably in the 10% to 15% range for the next few years. The stock's around 88%. I think if it dips into the low 80s, 70s, then I think it gets really attractive. Dan, a question about Trex? Not really a question, Dylan. More of a comment. More of a pair of comments, let's be honest. One, I have a Trex porch, a nice screened-in porch in my backyard. It is pretty fantastic. I'm a fan. Thank you. I'm a customer of Trex. Not a shareholder yet, but definitely a customer. Also, Trex is a Virginia company based in Winchester, Virginia. And as a native Virginian, ooh, Andy, you know I like that. Yeah, and Brian Fairbanks, who's the CEO, and we've had come speak at the full he's very humble i think and just continues to run that business and like

i said it goes through these cycles but right now coming out of a very rough 2022 and 2023 things are looking brighter for trex you know i will say i have a wood deck and having just pressure washed and resealed that wood deck i really really wish it was a trex deck and unfortunately the deck is too new to make that change so i'm just living with that but if you're in a position where you can make that change. Much easier maintenance, maybe worth the upfront cost to go with Trex. All right, Ron, what are you looking at? What's on your radar this week? I think Andy follows this one a little bit, too. I'm looking at Toast, T-O-A-S-T. Helps restaurant owners simplify their business. Its software platform provides help with digital

orders, delivery, menu management, point-of-sale operations, scheduling, marketing. It's a full service application. It's good for sit-down restaurants, takeouts, drive-through delivery. They sell hardware, which includes point-of-sale systems, self-ordering kiosks, handheld order-taking tablets. They sell those at a loss. They make money by selling software subscriptions and financial technology solutions, where they take a small slice of every transaction that they help facilitate. Results earlier this week were pretty strong, 6,000 net new locations in the first quarter. Annualized recurring run rate that they keep an ion called ARR in their lingo, up 32%. They're making progress on getting to profitability. The

net loss was only, I say only, $83 million for the quarter. Adjusted EBITDA was positive at $57 million. If you recall back in the 2021, September 2021 is when they went public, $40 a share. Stock surged by 50% on the first day. Stock stands only now at $27, so down from the IPO and certainly that first day. It has a $15 billion market cap. Hard to model this one since it's still very, very new, but they are doing well. They're on the right track and they're putting up strong results. Dan, a question or perhaps a comment on Toast? This one's interesting because the people who interact with it most aren't really the customers, I guess, as restaurants are the customers of Toast. But as somebody who, you know, makes online orders, I'm kind of forced to interact with Toast

on, you know, maybe not the regular, but every now and again. The stock chart does not look very good, Ron. When you zoom out to the max, it looks pretty painful, but you're right in that it is a young company. I feel like ordering online is not going anywhere and it might be better to get in on the ground floor or maybe here on the first floor. But I don't know. This one seems like from a customer, from a consumer standpoint, it seems like I'm forced to deal with toast, not necessarily want to. The company probably went out at a valuation that was a little bit elevated, which you can't fault them for going out at the valuation as high as they can get it. But that was probably some expectations built in there. And so it's come back down to earth,

more reasonable price. More reasonable price. Dan, does that sound interesting for putting it on your watch list? Or are you thinking Trex? I mean, honestly, it does sound interesting. However, I'm going to go with my home state and with the product they already own, and let's go, Trex. Can't argue with that. And since we have a couple extra seconds, Dan, favorite condiment, is it sriracha or is it something else? Oh, man, sriracha is pretty good, but I like a spicy mayo. Sriracha is an ingredient in spicy mayo if you want it to be. Dan Boyd, thanks for weighing in on our radar stocks.

Andy, Ron, thanks for bringing them. That's going to do it for this week's Mountain Full Money radio show. I'm Bill Nuis. Thanks for listening. We'll see you next time. We'll be right back.