Motley Fool Hidden Gems Investing - New Stock Highs, Supply Chain Woes, and Big Tech Insights

Episode Date: September 24, 2021

Costco ends the fiscal year on a strong note. Nike struggles with global supply chain issues. Adobe posts record revenue. FedEx cuts full-year guidance. Stitch Fix surprises with a quarterly profit. Salesforce and Darden Restaurants hit new all-time highs. And Toast pops 50% on its first day of trading. Emily Flippen and Jason Moser analyze those stories and share two stocks on their radar: Coupang and Compass. Plus, CNBC host Jon Fortt discusses the latest revelations about Facebook, what investors should know about new Amazon CEO Andy Jassy, and WeWork’s upcoming debut in the public markets. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Because we have your number. 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 emily flippen and jason moser good to see you both Hey, Chris. We've got the latest headlines from Wall Street. We've got the latest in big tech with CNBC's John Fort. As always, we've got a couple of stocks on our radar, but we begin with earnings. Costco ended the fiscal year with a bang. Fourth quarter revenue rose 17%. Same-store sales were up more than 9%. Chairs of Costco

up this week and close to a new all-time high, Jason. Yeah. I mean, this is a business that continues to do what we've really come to expect. I mean, it's just resilient, it's customer-centric, and that continues to deliver a loyal and repeat customer base. Net sales, $61.4 billion, up 17.5% from a year ago. Earnings per share, up 20%. And that was on strong traffic numbers. Traffic was up 9.2% worldwide, 8.8% in the U.S. transactions. The basket, that was up as well, 5.8% worldwide, 5.6% in the U.S. And the renewal rates continue, as I said, just to remain very strong, 91.3% for the U.S. and Canada, up just slightly from a quarter ago. And total paid households now stand at $61.7 million.

That's up $1.1 million from just a quarter ago. Margin's holding the line in what we see as a little bit more of an inflationary environment, which is really encouraging. But all in all, like I said, it's just a business that continues to do what we've come to expect. I couldn't help but notice they said they're going to start limiting purchases of paper goods and bottled water. Isn't that why people go to the Costco in the first place, so that they can load up on toilet paper and bottled water and cleaning supplies? Well, perhaps they're just trying to employ some lessons learned from the recent past, right? I 2020, I think, taught us all a lot about a lot of things. I think maybe they're trying to see around

that corner a little bit because there are still some supply chain issues from a global perspective, and it's not just a chip shortage. Everything is essentially on backorder, it feels. It feels like at least they're just trying to see around that corner a little bit. It makes sense, actually. Mixed first quarter results from Nike. Profits were higher than expected, revenue was lower than expected, and Nike lowered its guidance for 2022, saying that the global supply chain is hurting their business more than they originally thought it would. Shares of Nike down 6% on Friday. Emily, I have a hunch we're going to be hearing the phrase global supply chain a lot this earnings season. Well, that's certainly the story for

Nike as it has been for so many businesses this year. Shutdowns in its production facilities, especially in Vietnam led to longer transition times, labor shortages. But what I think is really interesting and what we're seeing the market react to is the fact that they had to pull back guidance so greatly as a result of these changes. They pulled back quarterly and full-year guidance from the low double digits to the mid-single digits. That's a really notable slowdown. What's even more interesting is that unlike some of the other businesses that have been impacted by the supply chain challenges. There weren't a lot of hints from Nike in its most recent quarter, pre this quarter, about how big of a problem this would be. In fact,

management said last quarter that they were optimistic in handling any challenges well. So that's a big change just from June to where we are in late September between what management saw last quarter and what they're expecting for the near future. How concerning is that? Nike is an experienced, mature company. They have been in the global game for a long time. I'm not super concerned because this inventory issue, again, is likely to persist until Vietnam takes a less aggressive approach to curb the spread of COVID. Really, that's anybody's guess. I'm less willing to punish management here for not being more forward-looking with their guidance. I do think what investors should be focused on that the

market's overlooking right now is a slower growth in China. Last quarter was also a weak quarter for China. This quarter was a weak quarter for their Chinese sales. There really wasn't much of an explanation. That's concerning because historically Chinese demand has been really strong, a key growth driver for Nike. This is definitely something to watch over the next few quarters. Adobe's third quarter profits were higher than expected and revenue was a record for for the software giant, but shares of Adobe down 5% this week. Jason, is this valuation? Because it's kind of hard to look at Adobe's results and see any serious cause for concern. I don't know that it's valuation as much as it's just a little bit of language in the call,

and I'll get into that here. There was another strong quarter, like I said, a strong business, strong quarter. But as we've seen with a lot of digital themes here over the past couple of years, management created at least a seed of just hesitation, maybe. They mentioned the word seasonality several times. They're talking about how with the economy reopening, we're seeing activity picking back up, people willing to travel a little bit more. There's lower web traffic as folks travel and get out of the house. That's something that has impacted Adobe's business modestly, and they're calling for the future here over the course of the coming year as a potential headwind. When you have a business like Adobe that's valued at around 45 times free

cash flow, it's not what you would call cheap. Now, it is a dominant business, so it's always been awarded that premium multiple. I don't expect that to change. I think it was a relatively cut and dry week for them here. But the numbers were very impressive. Revenue up 22%, earnings per share up 21% thanks to their digital media segment. And the investments in Document Cloud continue to pay off. That Document Cloud revenue of $493 million was up 31% from a year ago, with their Adobe Sign transactions now up 10 times over the last three years. So, we're seeing a big opportunity that they're capitalizing on beyond just their digital media business.

All things considered, as a shareholder and as one who has recommended the stock before, I feel very good about where they are and where they're headed. Shares of FedEx down more than 10% this week after first quarter profits came in lower than expected. FedEx also cut their earnings guidance for the full fiscal year. Emily, I know there is not one single stock that is a bellwether for the economy, but FedEx is probably on the shortlist of bellwether stocks and this isn't that encouraging. I will say there are some aspects that are impacting this quarter that are outside of FedEx's control, especially related to the labor shortages that we're experiencing. In fact,

we covered FedEx last quarter, at least I did here on Motley Fool Money, and I noticed that they had a great quarter last quarter, record levels of both revenue and profit, but we are still kind of tepid because it was very clear that FedEx would be faced with things like higher labor costs, again, that are very much outside of the business's control. And so, even though they've been largely able to pass these increased costs along to the end consumer, it was clear last quarter that the issues they've had around hiring, the constraints on their logistics networks during one of their busiest years ever, those would likely end up hitting margins. And that's exactly what we saw this quarter. Sales were up 14% year-over-year to

just under $22 billion. Profits, though, actually fell 10% to $4.37 a share. So the core reason, again, that their labor pool is just more expensive and shortages caused less efficiency within its networks. So I think the question investors should be asking themselves is, are these issues short-term? And while management thinks so, I think it's important to remember that changes are likely to happen gradually. And they're headed into peak season, so don't expect these costs to suddenly go away. I was going to say, they also talked about how they are looking to hire 90,000 seasonal workers if labor is part of the challenge here. I know there are some investors who might look at a mature business like FedEx and say,

oh, the stock is down 10%. Maybe it's time to pick up some shares for a little bit cheaper. But it seems like they've also got some headwinds going into the holidays. I don't mean to be overly bearish, because as you mentioned, FedEx is a bellwether stock, right? They've been a pretty consistent performer over the past decade. They pay a dividend. All these things are great, but they are certainly paying up for these peak season workers. And there is a belief among some experts that people are going to go back to shopping in person for holiday season, especially when they're being told that the lead times on their deliveries may be weeks longer than expected. They're paying up for tons of workers,

there may be less demand heading into peak holiday season. All those things, I'm not super favorable, I suppose, for FedEx's prospects over the short-term. Another week, another hot IPO. Details next, 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 to Motley Fool Money, Chris Hill here with Jason Moser and Emily Flippen. On Thursday, Salesforce held its

annual Investor Day presentation and raised its revenue guidance for 2022, and Wall Street liked the sound of that. Shares of Salesforce up nearly 10% this week and hitting a new all-time high on Friday, Emily. I'll tell you what, if someone told me that Salesforce is up 10% on raised guidance, I would have assumed that the jump we saw in guidance was much bigger than what we saw in reality. In fact, they did raise guidance in their most recent quarterly report, but they raised it again during their investor day. Previously, they were expecting $26.2 billion to $26.3 billion in terms of revenue. They raised that a whole 0.5 percent, raising it to $26.25 to $26.35 billion. I think if you're just looking at these numbers, a lot of people will say,

wow, that's ridiculous, 10 percent as a result of 0.5 percent increase in terms of guidance. but I don't think it was just because of this earnings guidance. I actually think it was a result of its investor day. They remind investors about the underlying economics and just these huge tailwinds that Salesforce is experiencing that are not expected to go away over the short term. One of the things that stood out to me was a slide that they had updated around six months ago for investors. Six months ago, it had Salesforce's total addressable market at $204 billion. Only six months later today, it is at $248 billion. So the digital transformation that is happening, it's happening at a rate higher than many investors expect. And I think that's

why we're seeing the growth. Do you expect them, and maybe they addressed this in the Investor Day presentation, did they talk at all about acquisitions? I mean, Mark Benioff is someone who likes to buy other businesses. Oh, of course they did. I think you can't have a Salesforce Investor Day, where they don't show off their acquisition prowess. And that's definitely what we're seeing here as well. They finalized their acquisition of Slack on August 1st. That adds a single product to their existing six businesses that are billion-dollar-plus yearly businesses. And unlike most companies that fuel growth through acquisitions, Salesforce, I think, has done a great job of ensuring they make good on their purchase price. So, MuleSoft, Tableau,

exact targets. These are all acquisitions that at the time were called very expensive acquisitions by Salesforce that have actually been accretive for Salesforce shareholders. With that alongside all of their core products growing at double-digit rates, I think Salesforce is definitely taking a little bit of a victory lap here. On Wednesday, Toast went public at $40 a share. Toast is a software company that provides point-of-sale systems for restaurants, and the stock ended its first day up more than 50%. Jason, can I interest you in an unprofitable company that's now worth nearly $30 billion? Jason Moser. Well, maybe the jury will have to reconvene on that one, I think. This is an interesting business,

but it's not one where I feel like you pay any price for it. ToastServes is the restaurant operating system, ultimately, is the way they view their business. They have a number of different revenue streams, some hardware, a lot of software and services. But their general goal is just to connect the restaurant across the entire spectrum of operations, dine-in, take-out, delivery. Addressing the fact that I think the restaurant industry has evolved so much, there are more points of distribution, it's more omnichannel now. I think more moving parts means it's more difficult to manage, so a seamless, consistent operating experience absolutely has its merit. There's something to the business because customers continue to sign up. As of June this

year, they had 47,942 locations on their platform. That's up from 19,891 from just a couple of years ago. When you look at the market opportunity, it is a large and growing one. Restaurants in the United States spent an estimated $25 billion on technology in 2019. It was ultimately less than 3% of total sales. Toast Management sees that growing to $55 billion by 2024. Even just a little bit of that market opportunity can certainly go a long way, but we need to really see if this business has traction, if the tech is as good as they say it is, and that'll take a little bit of time. Chris Hill Shares of Stitch Fix up nearly 20% this week after the online styling service reported a surprise

profit in the fourth quarter. Emily, encouraging results, but I can't help but feel like Stitch Fix is going to be a stronger business when profits are no longer a surprise. Needless to say, I think the question around Stitch Fix has been, how big can this business be and what can their margin profile look like? Stitch Fix has had periods where they have posted somewhat decent margins, I'll use that term loosely, 2-3 percent net income margins and 3-4 percent free cash flow margins, but that was in their best quarter. Their new CEO, Elizabeth Spalding, has really taken Stitch Fix's business in completely new direction. Their founder, Katrina Lake, after she departed, Spalding came in and

said, hey, I know that we're known for being a clothing delivery box service, but I want to change that. In fact, I want to launch something or rename something, I should say, known as Freestyle. It's their direct buy system that's being opened up to the public. It used to be that you couldn't buy things on Stitch Fix's website unless you were a customer and even then limited inventory. But Spalding has taken it and said, hey, we want shoppers to come directly to Stitch Fix without having to get fixes in the mail and be able to make purchases, no longer limiting themselves to just being a retail box business, but being a key destination for what they call personalized styling and shopping. This is a big deviation, and I will say it puts them

in the crosshairs of some really competitive online retailers that have decades of experience in this space. We were talking before the show though. It seems like Stitch Fix, there is still room for improvement, but it feels like it is at least a mature enough business that it's not going away. There was a point in time where you could look at Stitch Fix and say, I don't know if they're going to make it. Now I look at it and I think more in terms of like, okay, they're going to make it, but just how big can they get? The way you put it before we started recording was that this business certainly has a floor and I completely agree with that. But you also mentioned this business probably has a ceiling, and I personally don't like to

buy businesses that have a ceiling, even if there is a floor. And I agree, Stitch Fix has a floor in the terms that it's not going to go away permanently, but I do still wonder how they're going to compete in the world of online retail. I will say, I appreciate the fact that they are shifting focus away from stylists and onto algorithms. Not that the stylists were bad at their jobs by any means, but there was a deviation in terms of strategy. Stitch Fix didn't know what it was. Was the secret sauce the stylists or was the secret sauce the algorithms? Now we know they're going all in on the algorithms. And if those pay off, then maybe that ceiling is higher than what I imagine it to be. Darden Restaurants is the parent company of Olive Garden, Longhorn

Steakhouse, and other restaurant chains. Strong first quarter profits and increased guidance for the full fiscal year drove the stock to a new all-time high this week. Jason, we love to talk about Olive Garden, but Darden's fine dining division, led by the Capitol Grill, that deserves the MVP award for this quarter. Yeah. Really, I think you're hitting on the beauty of the business is the number of brands it has under that umbrella that covers all sorts of different price points. That just results in another strong performance. Sales up 51% from a year ago for obvious reasons. But if you compare it to 2019, sales were still up 10%, which I find impressive. To me, it indicates the strategy that management has been employing over these past couple

of years and taking share in markets where other restaurants, unfortunately, have had to shut down. It's working. It's giving them a greater footprint, and that plays into the competitive advantage in this business and scale. A big theme of the call was inflation. Stronger unit performance coupled with some supply chain constraints resulted in a lot more spot purchasing, and that ultimately resulted in some higher than expected inflation. management is being very sensitive as to how they approach prices. They're going to continue to price below inflation and more importantly, or more notably, at least below their competition. Again, they see their scale, their data, and their analytics as an advantage that allows them to do

this. And I like it. To me, it's just the quintessential long-term thinking that's playing out pretty well for them. All right. Jason Moser, Emily Flippen, we will see a little bit later in the show. Coming up after the break, CNBC's John Fort weighs in on the latest from Facebook, Amazon, and WeWork's upcoming debut in the public markets. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. For more than 20 years, John Ford has covered Silicon Valley from startups to the biggest companies in the tech industry. He is the co-host of CNBC's daily show, Tech Check, and he joins me now. John, thanks so

much for being here. Yeah, thanks for having me, Chris. There are a bunch of things I want to get to, but I want to start with Facebook. The Wall Street Journal recently published a series of stories based on internal documents at Facebook, and among the headlines, for those that didn't see it, that high-profile users were being exempted from the rules, the toll that Instagram is taking on teenagers' mental health, And that Facebook executives were fully aware of the negative effects of its platform. And one of my reactions when I was reading these stories was, I feel like I've seen this movie before. The movie where seemingly damaging information comes out about Facebook's business.

And you know that for most of its public life as a company, people have bet against Facebook and they've largely lost. So, I guess my first question for you is, when you look at these stories and these revelations, how legitimately damaging do you think this is for Facebook? Damaging in the sense that it's more damaging than Cambridge Analytica or more damaging the stuff that's happened before? Or what are we talking about? Damaging to the point that it takes a material effect on the stock, that activist investors start to raise hell, or that legitimate changes happen at the business as a result of this?

I'm not so sure. Because a lot of what is coming out about Facebook and Instagram, even WhatsApp, there were some stories not related to this in particular, but about the privacy within WhatsApp, perhaps not being as private as many would like to believe. So much of what's happening within Facebook is happening within society, right? These issues of body image among teens and what do you do about that bullying, et cetera. It's a Facebook thing, certainly. It's also an internet thing. It's also a societal thing. These issues of people in power or people with celebrity getting away with stuff that everybody else can't get away with. Well, yes, that happens on Facebook. That also seems to happen everywhere else. We hold Facebook

more accountable because of its power, because of its wealth, because it's a controlled company where Mark Zuckerberg gets to call the shots. And it was sold to us by Mark Zuckerberg and others as, well, here you can be safe and here you can be around real people and here it's curated. And yet they seem to wrestle with the same problems that broader society does. And in many cases, they're more acute on Facebook's properties. Some of the journals reporting shows that some of their fixes, like when they tried to orient people toward interacting more with friends and family, ended up creating an even bigger problem, which sort of reminds you like when you try to fix an ecosystem by getting rid of what you think is an invasive species or

something that shouldn't be there, and you end up tipping the whole thing into chaos. It's like we're dealing with a living thing here in Facebook. And so, is it a cautionary tale? Do things need to be done? Yes. But is Facebook going to get taken down as a result of it? I've got my doubts. Are you surprised that, you know, just in this calendar year, we've seen Tim Cook be pretty pointed in his comments about Facebook, and most recently, Mark Benioff from Salesforce. I mean, I think we're used to seeing CEOs go at one another a little bit more when they're in the same industry. The fact that the CEOs of Apple and Salesforce have gone out of their way to make these comments, that's not the norm. It's not. It's not. I mean, Apple does have

a fundamental, I think, philosophical difference from Facebook, and that has to do with advertising and private information. They just have different approaches to how they think about technology and how it intersects with society. Benioff, I mean, yes, while Salesforce is an enterprise software company, it seems to play very separately from what Facebook does. He also bought Time Magazine, which is in broad consumer communications. He was interested in buying Twitter, remember, which is a more direct competitor of Facebook. So he might think of himself and his efforts more broadly than we do when we think about just Salesforce. But I mean, I do think his comment from years ago when he compared Facebook in particular to cigarettes rings a bit different

now that we hear about this research, see it into the psychological effects, the social effects on people of, say, Instagram and how teens, they want to use it less, but they don't want to go cold turkey, et cetera. And I think we're not a society that's used to creating laws, regulations necessarily around behavioral stuff as much as around medical stuff and physical stuff. This is brand new territory at a time when there's a lot of disagreement around how much people's freedom to do dumb things should be limited. Don't wear a mask. Wear a mask. Don't get vaccinated. Get vaccinated. If we can't agree on that stuff, how are we going to tell people to get off Instagram. Let's move on to Amazon, because when the

new CEO, Andy Jassy, did his first broadcast television interview, he did it with you. You sat down with Jassy recently. It's not the first time you've interviewed him. I know you've talked with him a number of times over the years. Let me start with this. What is something Amazon shareholders should know about the new CEO? I think people should know that he clearly has Jeff Bezos' confidence. And I don't mean that in the sort of serve at the pleasure of the president manner that it's often used. When I talk to CEOs, I very often note a pronounced difference between a founder and what a founder is willing to say and what a hired CEO is willing to say. Very often, founders will just say whatever the heck they want because they know that they're not going to get, either because it's a controlled company or because the board is full of people who they put there.

The board's not going to get rid of them. They can say what they want. Elon Musk is a great example of that. He clearly doesn't care what anybody thinks about what he says. Whereas a hired CEO, he's going to be more circumspect and blah, blah, blah. What struck me about interviewing Andy Jassy, and I think I first talked to him back in 2015 or 2016, I'm not sure what year it was, back when his title was SVP over Amazon Web Services, he spoke with authority, not just about AWS, the cloud business, but about Amazon

in general. And he wasn't looking over his shoulder metaphorically as he did it. I thought, well, that's interesting. He's a guy who served as effectively Bezos' chief of staff for a couple of years during the time when he also worked on what became Amazon Web Services. The bond between the two seems so firm that Jassy is confident in leading the huge part of Amazon that he led for a long time and all of Amazon now without having to do a double-take. And so, that is significant for those who wonder how much does he understand the organization? Is Amazon going to miss a step? Is Amazon going to

continue to be bold? Of course, Bezos is still around as executive chairman. It's not like he's left entirely. But I think the mind meld between these two guys is significant. That's interesting because, and I'm glad you mentioned Bezos is still around, because I think for a lot of people who look at businesses, look at the public markets, you don't have to go too far back in history to see examples of CEOs handing off the keys to the corner office, moving to the chairman role, and pretty soon, whether it's Bob Iger at Disney or Howard Schultz at Starbucks, they are back in the mix. That's true. I think it's also really difficult to measure CEO performance.

For example, one of the most cited recent examples of a not-so-great CEO transition, or maybe even a not-so-great CEO tenure on Wall Street is Steve Ballmer of Microsoft. People say, say, oh, look what Ballmer did, look at what the stock did during Ballmer. Well, also look at the convenient moment when Bill Gates handed over the reins to Steve Ballmer right before the market imploded. That's a convenient time to stop the clock on your own tenure and to start it on someone else's. Then Gates didn't really leave. He was chief software architect and chairman during many of those years. So it's not like he left and then came back years later and turned the lights on and the kids had trashed the place. He was sitting in on those meetings where they

designed the Zune. So come on. Also, even though the stock didn't do much during that period, Satya Nadella was working there building server and tools on what became the cloud business. Microsoft built an enterprise business. Their revenue and profit went up significantly during the time. It's not as if today's Microsoft just emerged from nothing. I think judging CEO tenure is tough. That's got to be in mind, too, when you look at these transitions. Don't just look at the stock price. Also, look at some of the less tangibles. Look at the businesses that are being built and the research that's being done. It was about this time two years ago that we all got to watch in real-time the implosion of WeWork as it was preparing to go public. The IPO did not

happen, but next month, WeWork is going public via SPAC. Is there reason for optimism that WeWork is going to have a happy life as a public company? I'm going to say there is. do tell. The WeWork, a big part of the problem with WeWork and the WeWork IPO in the beginning is that it was overhyped and highly valued. And it was just, it was based on this optimistic scenario that people were going to keep working in a particular way, like in offices, you know, forever into the future. Right. Also, there were some cultural issues, certainly Adam Newman, in his leadership, et cetera. You can't overlook that. That's a polite way of putting that. I'm being polite today, right? Well, look at what's changed. Newman got a big payout,

but he's gone, right? Look at who's running this SPAC. That is how we work as coming public. It's Vivek Ranadive, right? He's no crazy pot smoking in a private jet tequila shot kind of guy. This is a name we know. Also, some of the companies backing this are commercial real estate names. I think the valuation ballpark was around $9 billion, which is way lower than was being talked about before. This is a company, an idea that was being hyped along with Uber when Uber was being talked about as $100 billion market cap. It's fallen short of that. WeWork is being valued way less. They have the opportunity now, after having dealt with some of the debt issues and some of the kind of reality checks to, in a post-pandemic world, provide a service

for flexible office space, things like that, that people actually need. So there probably is a price at which WeWork makes sense. And I don't know what price that is, but the way it's going public now, it's going to be a lot closer to that price than it would have been a couple of years ago when they were initially talking about an IPO. Last thing, and then I'll let you go. The big technology companies take up a lot of the oxygen for all of the obvious reasons, but you're someone who's been in this industry for more than 20 years. What is currently on your radar right now, somewhere in the technology business spectrum that maybe isn't getting a lot of attention, but it's a part of the industry that

you're interested in, you're curious about both where it is and where it's going over the next few years? I think vertical integration in the cloud and data centers and just how these business models are playing out. So let me, that's a lot of buzzwords. So let me try to make some sense of that. The mega scale, as I call them, cloud providers, the likes of Amazon, Microsoft, and Google Cloud, are architecting, in essence, these massive computers that they are allowing other people to use for computing cycles as platforms, et cetera. They've got artificial intelligence applications and platforms and resources that they're letting other companies use. And part of what they're doing at the same time is saying, we don't want off-the-shelf

servers. We don't want off-the-shelf server chips for running our clouds. Since we have this whole architected system that we're running, we want to be able to make tweaks based on what we want our system to do down to the way server chips are designed. You see Amazon going out and doing stuff with ARM chips in servers for a lot of their data center work in AWS. That's part of that customization and what I would say is a vertical model that that's happening. That's interesting because it requires semiconductor companies to do a whole different thing than they used to do. In the old days, Intel would say, you know, you can have any chip you want as long as it's x86 on this list, right? Here's what you can have. But now, a lot of these

customers are saying, well, that's nice that you have a list, but here's what I want a chip to do. So who's got the skills, who's got the capability in the semiconductor universe to be able to make those customizations and to do that for large providers? So that's one line of it. Another thing that's happening between these cloud giants is as they try to grow from here and catch up with AWS, and as AWS tries to stay in the lead, they're focusing in on industries and how do they serve specific industries, particularly with artificial intelligence applications and use cases. And to me, this is similar to what we've seen happen in other stages in enterprise technology, like when Oracle did a hostile takeover of PeopleSoft. That was an industry-specific HR application,

and Oracle saw early on, okay, we're going into a period of consolidation. Let's figure out how we can take the most important either industry-specific or function-specific applications and own those and grow through that. That's starting to happen in the cloud right now. I think we'll begin to see whether Google or Microsoft can do that in a way that's better or more effective than Amazon has. If they catch up to Amazon on the top line when it comes to cloud, or if they can even, even if they can't catch up on the top line, if they can provide services and software that are so high value that they're more profitable, right? Then they could end up winning in different sorts of ways. So there are these strategic dynamics playing out

both in the hardware and semiconductor side and on the software and strategy and go to market side. And there are a lot, a lot of companies, you know, in the mid market and smaller who are to be affected by how they position themselves. You want to know what's going on in the world of technology, check out Tech Check on CNBC every weekday at 11 a.m. Eastern. John Ford, thank you so much for your time. Thanks, Chris. Radar stocks after the break, so stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here once again with Emily Flippen and Jason Moser. We've got two minutes for radar stocks. Dan Boyd is going to hit you with a question.

Emily, you're up first. What are you looking at? I'm looking at Coupang. The ticker is CPNG. They're a Korean e-commerce giant that has been hammered since going public as a result of their increasing bottom line losses. But I'm convinced investors are looking at the wrong metric. I think there's early signs of free cash flow scalability in Coupang's business model that's being undervalued right now. Dan, question about Coupang? Emily, how much is your stance on Coupang just contrarianism. Is it really contrary? I didn't even realize that. I am a contrarian at heart, so I'll happily take that stance if that's what it is. Jason Moser, what are you looking at? Yeah, digging more into Compass, ticker C-O-M-P. This is a founder-led business in the real estate

technology space, providing the tools to help agents do their jobs better. Co-founder and CEO Robert Refkin owns about 6% of the company. Still a big stake held by SoftBank as well, but management sees an addressable market in the U.S. of $180 billion. And this thing has more than doubled revenue from 2019 to $5.5 billion in sales over the last 12 months. Feels like one worth keeping an eye on. Dan, question about Compass? Yeah, certainly. Real estate's very hot right now, Jason. If it starts to cool off, is this going to affect Compass's bottom line? Typically, I think they're going to be pretty immune to this because real estate's fairly strong, and those are tools that they're going

to need in the ebbs and flows of the real estate market. What do you want to add to your watchlist, Dan? I got to say, I'm curious, Chris. I'm going to go with Coupang. The contrarianism didn't throw you off. Not this time. All right. Emily Flippen, Jason Moser, thanks so much for being here. Thanks, Chris. That's going to do it for this week's show. The show is mixed by Dan Boyd. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.

We'll be right back.