Motley Fool Hidden Gems Investing - Sell in May and Go Away?

Episode Date: May 1, 2020

An additional 4 million Americans file for unemployment as the total number of unemployed tops 30 million. The S&P 500 wraps up its best month since 1987. Amazon reports surging sales and rising costs. Apple sees strength in services. Mastercard and Visa beat expectations. Alphabet gets a boost from YouTube. Microsoft gets a boost from the Cloud. And Facebook rises on strong engagement. Motley Fool analysts Aaron Bush, Andy Cross, and Jason Moser discuss those stories and weigh in on the latest from Atlassian, McDonald’s, Microsoft, Spotify, Starbucks, Teladoc, and Twitter. Aaron talks about the future of gaming. And the guys share three stocks on their radar: Beyond Meat, Medtronic, and Docusign. Learn more about your ad choices. Visit megaphone.fm/adchoices

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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, Jason Moser and Andy Cross. Good to see you as always, gentlemen. Hey, hey. Hey, Chris.

We've got the latest headlines from Wall Street, we've got a few stocks on our radar, and we have a lot of earnings to get to, but we're going to begin once again with the big macro. Nearly 4 million Americans filed for unemployment this week. That brings the total to 30 million unemployed since the pandemic hit America. And yet, Andy Cross, somehow, April was the best month for the S&P 500 since 1987. Yeah, Chris, you really see those headlines, and then you see the stock performance in April, and you just think there's just some disconnect with what investors are seeing. Now, we're still off from the highs. So clearly, the COVID pandemic that is facing all of us continues to have that impact. So we're down

from the highs. But it's been a really nice rebound. Really, the April, which is pretty much across the board, energy was actually the best performing sector in the S&P 500. But clearly, tech and consumer are seeing a nice rebound as well. And you just look at the numbers, Chris, and you look at how each of us is interacting day by day, and I just can't help but think you continue to see this divide between the digital haves and the digital have-nots and the companies that are really reacting well to the pandemic. And as we are using more Zoom and Google solutions and Microsoft solutions, Apple solutions, much more digital solutions, those companies, not just during the pandemic, but also through the pandemic, will continue to do well and thrive. And those that aren't, that are much more tied to the traditional economy, are the ones that look like they're going to be the ones that are going to be long-term dragging behind. But clearly, a lot of excitement in April with the news that's coming out about potentially improving and unlocking economy longer-term. Yeah, I mean, I don't think we've ever really, you know, made the argument that the market

makes a lot of sense in the short run, right? I mean, that's something we talk about all the time, is that these near-term market behaviors aren't always so easy to fully make sense of. And that's why, you know, I think it really supports our argument of always be invested, right, always be investing. I mean, it's just so difficult to try to figure out ways to get in and out of the market. You would think maybe this would be a tumultuous time for the market, but here we are, obviously, it was one heck of a month. And I think part of that really just speaks to the source of all of this, really, when it boils down to it. I mean, there is a finish line

here, right? I mean, at some point, we will have this virus under control, whether that's in the form of treatments or whether that's in the form of vaccine. So, I mean, this isn't something where I think we're looking at ultimately a lost decade. I mean, I've had questions before about the Great Depression versus what's going on now. And I mean, I think, let's remember the causes of the Great Depression, right? There were a number of causes, and it's difficult to really pinpoint one thing there. We know the cause of this, right? And we also know really the ultimate solution of this. And it's just a matter of buying time. And so We've seen that our government is going to get in there and do what it can to provide

the liquidity to buy us as much time as possible, and I think that's something to remember. But ultimately, there is a finish line, that's something to always keep in mind here. I think that's why the market is willing to give this thing a little bit more credit than perhaps we were thinking it might give at the beginning of the year. You know, my comments about the energy market in April aside, we are now looking at a very concentrated market. More than 20% of the S&P's market cap is tied to five companies, five of the largest companies. And you haven't really seen that since you have the dot-com craze of the late 90s and the 2000s. So, you're seeing a concentrated market. And that sometimes is a

little bit scary for investors over the shorter-term, I think. So, I still think there's there's just this uncertainty about how investors and algorithms can react to what is happening in the consumer business and businesses in general. But also, we can't forget all the trillions of dollars that the Federal Reserve is pumping into the economy to keep things humming along. All right, let's get to some earnings, and we're going to start with Amazon. Shares of Amazon down more than 7% on Friday after first quarter sales came in north of $75 billion. But the higher-than-expected sales came with Amazon's statement that it plans to spend all profits from the second quarter responding to the pandemic. And Jason,

anyone who has watched Jeff Bezos for a while cannot be surprised by this. No, I mean, you can't be surprised at all. This is much of the same here. The retail business continues to impress, 27% growth in revenue, overall revenue excluding currency effects. And I think what we're really seeing, though, beyond the growth in Amazon's business, another word they mentioned in the release and something they talked about in the call, that's the durability of this business. I mean, we're at a point now, like it or not, this is a business that really needs to exist. And I think it goes to show the value in thinking the way that Jeff Bezos does, the way he's always thought about this business in such

long timeframes. That's starting to pay off now far beyond just the growth of the business into the durability of the business, the importance of this business. But if we dig down into the results there, I think one of the encouraging aspects of the business here, we talked a lot about Amazon Web Services, that hit $10 billion in sales for the quarter. They boosted the operating margin there to 30% versus 28.8% a year ago. And just to go back to that point you were noting there earlier, just so we can get some clarification there for listeners, so they understand exactly what was said there in the release, and I'm going to just go ahead and read the quote real quick, so it makes sense. They say in the release, if you're a share owner in Amazon, you may want to

take a seat because we're not thinking small. Under normal circumstances in this coming quarter or two, we'd expect to make some $4 billion or more in operating profit, but these aren't normal circumstances. Instead, we expect to spend the entirety of that $4 billion and perhaps a bit more on COVID-related expenses, getting products to customers and keeping employees safe. Again, the durability of the business allows them to think this way. And as a share owner, you know, listen, I'm not taking a seat. I'm standing up and applauding this move because I really like it. Apple's second quarter profits and revenue came in higher than expected.

And Andy, we can also add Apple to the short list of companies raising their dividend in this environment. Very short list, Chris. It was actually a pretty good result considering that China sales were down 8% during the quarter, announced that, like you mentioned, it's going to increase its dividend by 6% and authorize another $50 billion in share buybacks. Revenues are up 1%, slightly ahead of estimates. It was at $58 billion, down from the $63 billion that they were expecting before the COVID-19 pandemic really started to hit. Product sales were down 4%. That's including a 7% drop

iPhones now less than 50% of total sales versus 53% last quarter. Services continues to be the bright spot for Apple, as we've talked about time and time again, that those revenues were up almost 17% and now make up 23% of the sales versus 20% of the sales last quarter. A really strong January, but then the COVID pandemic started to hit and dent February and March. So overall, a really pretty nice quarter for Apple considering what was happening in China and then what would happen really in February and March of this year. They now have 515 million paid subscriptions across all of their services. That's up by 125 million from a year ago or more than 30% growth. They'll cross that 600 million mark this calendar year, which is what they expected. Wearables, home,

and accessories were at 6.3 billion, Chris. That was up 23%. Really, I think that you look at Apple when you say, wow, yes, they were really hit hard by what happened in China, and they're starting to see some slowdown, but overall, a pretty nice quarter. Well, and we've talked about this before, one of the things that Apple's enormous pile of cash affords it is the patience to see segments like wearables and services pay off, because there was a point in time where those were a tiny fraction of what Apple was doing every quarter in terms of their business. And this latest report, it's roughly $20 billion.

Yeah, it actually continues to be the bright spot for Apple. Now, the iPhone is such a key part to their ecosystem. So when those sales are down overall, there's some concern there. But I think a lot of that was just considering the environment that we're in. And there's maybe some hope that there's a lot of pent-up demand when you look at it over the next 12 to 18 months as we begin to continue to go and shop in those stores that we'll see some bright spots on the iPhone sales. They did flag some challenges with advertising and AppleCare for June, so that's something to watch. Let's move to the war on cash, Visa and MasterCard reporting this week. MasterCard's first quarter profits and revenue came in higher than expected.

Similar story for Visa's second quarter results and, Jason, both stocks up this week. Yeah, I mean, in regard to Visa, this is not just the card that's in your wallet company anymore. They're really focused on this massive new flows segment of the business, this opportunity that they refer to as new flows. And ultimately, this is focusing on everything from business-to-business, and that's big business and small business, person-to-person, business-to-consumer, even government-to-consumer. And particularly now, government-to-consumer, we're finding that to be a bit more relevant these days, but all in all, it totals $185 trillion opportunity of money moving around the world.

And that's really where Visa and MasterCard are also headed with their networks. And I think it's important to really stress the value of that network there, they're facilitating the movement of this money. But when we look at Visa, revenue was up 8% for the quarter, excluding currency effects. They now have 3.5 billion cards issued in total. They did withdraw guidance simply because it's too nebulous at this point, but again, it's not just consumer payments. It's everything from consumers to business to governments.

The long-term tailwinds, though, you do have to love, I mean, money continues to move around. Looking at some specific relationships, they renewed their relationship with Square. I think it's really important for people to recognize that Visa and Square, these are two businesses that like each other, their success, you know, that begets success both ways. And you're seeing value play out in this Visa Direct platform, which is ultimately leveraging that network to get money pretty much anywhere fast at this point. I did think it was interesting, the disparity in the share repurchase philosophy between the two companies, MasterCard, they're sort of diplomatically suspending at this point,

that will be temporary in nature, but Visa, really, they're kind of putting their foot on the gas, they bought back 17.8 million shares for around $3.2 billion for the core, they have a plan to buy back over $9 billion in stock this fiscal year, that absolutely remains unchanged, because they don't see this COVID-19 crisis as something that is fundamentally challenging to the long-term nature of the business. Money still has to get from point A to point B, and I think they're really showing the value in that network there. I suspect they'll be set up for many, many good years to come. Shares of Alphabet up this week after first quarter revenue came in higher than expected. Andy, this seems like one of those situations

where the comments from leadership is what drove the stock more than the results. Yeah, Chris, I think expectations were pretty muted because there's been talks from the CEO and from the company about hiring freezes and pullback in some of the spendings. But overall, pretty nice. Revenue is up 13%. Operating income down a little bit. You account for the $1.7 billion European Commission fine from last year. But like you mentioned, the commentary is really what's important. Performance was strong during the first two months of the quarter, but then in March, it really pulled back.

Sundar Pichai, the CEO, talked about a tale of two quarters, so that strong beginning, really tough at the end. Ruth Porat, she's very conservative. I really like what she's brought, a lot of discipline to the financial picture. She's the CFO. She talked about, we anticipate a second quarter that will be a difficult one for the advertising business. A lot of excitement around search with COVID terms, but they don't know how much that will

monetize. Still a very well-run company. 100 million students now and educators are using Google Classrooms. That's double just from what they saw at the beginning of March. So when I talked about those digital halves, Google and Alphabet continue to be the space. YouTube advertising, another bright spot, up 33% in the quarter, Chris. Coming up, earnings palooza rolls on. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here with Andy Cross and Aaron Bush, who is tagging in for Jason Moser. Aaron, real quick before we get to Facebook's latest results, how are you thinking about the disconnect between what's happening in the market and what's happening in the economy?

yeah i think what the guy said earlier i mostly agree with i think we just see a confluence of lots of different factors right now the market is forward thinking the mix of what companies have like become a larger percentage of the markets or a smaller percentage that has changed the trillions in dollars in stimulus helps people still need a place to put their money and obviously things are still playing out and it's going to get better for some worse than others but the disconnect is real. But I think over time, we'll start to see things connect back in a more logical way. You know, Facebook's first quarter results seemed a lot like alphabets. You know, the ad revenue fell in March. It sort of stabilized in April. And that stock's up nearly 10% this

week. Yeah. I mean, on the consumption layer, things are holding up really well. They have 2.6 billion monthly active users over 1.7 billion coming daily. So the Facebook platforms are more relevant than ever. Now, on the business front, results held up pretty well. Revenue was up 17%, record-free cash flow. Obviously, some of that came before the worst of the economic crisis hit. But still, this is a business that has held up really well. And I think a lot of it, you can point to some patterns where brand advertising has fallen off, but Facebook has a really strong direct response advertising business where people pay, or companies pay for specific consumer responses.

And so a lot of companies have filled those voids when ad prices have fallen. Lots of stronger companies like e-commerce companies or gaming companies have really stepped up and have started spending more. And Mark Zuckerberg has been pretty clear in saying that he still sees pretty major opportunities. Facebook is continuing to hire.

They're continuing to spend in order to capture opportunity, both in attracting more users, improving their core platforms, adding more products and making sure that Facebook is doing its part to help the world battle this ongoing pandemic. So Facebook, it still is a pretty noisy business and it still will get a lot of criticism, but there still is a lot of reason to be bullish when you kind of look under the covers and see how strong this business is performing. Let's move to food and beverage. Andy McDonald's first quarter, same sort of thing. Results were good early in the quarter, fell off as COVID-19 hit. And I'm just struck by the fact that this

is a global restaurant. More than half of McDonald's international restaurants are closed right now. Chris, you got that right when you talk about the two different kind of quarters. In January and February, global comps were up 7.2% and they finished down 3.4% versus a growth of 5.4% last quarter. Global comps are down 22% in March. So, you can really see the impact. Chris Kepzinski, the CEO, relatively new CEO, talked about January and February sales doing really well. But then we saw this with the restaurant closures, limited operations, and what they call dramatic changes in customer behavior, leading them to withdraw their 2020 guidance and really cut their CapEx spending looking forward. Operating cash flow will be

much lower for the year. So they continue to do what you have to do when you're running that kind store and it's a $100 billion market cap company, huge company, 40,000 stores, but obviously it's a tough go in the face of this pandemic. Aaron, Starbucks, their global same-store sales were down 10% in the second quarter. And Kevin Johnson, the CEO, he's working to open every store in America by early June. And I don't want to gloss over the earnings report, but this is going to be interesting to watch. Yeah, it definitely will be interesting to watch. My hunch is that the numbers were bad this quarter. Next quarter will get even worse.

But this really is the type of situation where, similar to McDonald's, you can't extrapolate what's going on right now too much. As a long-term investor, you still need to kind of go back to the basics and recognize Starbucks has a great brand. When times normalize, it will reaccelerate new store openings, openings of existing stores. It still has pricing power. It has a great digital presence. So all of these factors, it sucks in the short term, but in the long run, all of those same factors still exist and point to Starbucks being a business that can turn itself around pretty well, especially compared to 99% of other restaurant-type companies out there. More headlines after the break, so stay right here. You're listening to Motley Fool Money.

Welcome back to Motley Fool Money. Chris Hill here with Aaron Bush, and Jason Moser is back tagging in for Andy Cross, who will be here later in the show. Shares at Twitter down a bit, despite good results in the first quarter, Jason, I mean, it seems like this was a little bit of the reverse of what we saw with Google and Facebook. Twitter executives definitely not saying that the worst is behind them, in part because live events. Live events help drive engagement on Twitter, and the executives at Twitter were pretty upfront about the impact they're feeling there. Yeah, I mean, it was a mixed bag, I think it's fair to say. It certainly feels like Twitter has the opportunity here to meaningfully grow its audience as it's being seen,

I think, as a source of information right now, as opposed to really entertainment. Though there is a lot of entertaining stuff out there right now, Chris. I think the real question, though, is can they keep that audience? And we're going to have to just wait and see there. But in regard to the numbers that monetizable daily active user number reached 166 million for the quarter, that was up 24% from a year ago. That marks the fifth consecutive quarter of double-digit growth there, so that's good. Revenue of $808 million represented 3% growth, that wasn't bad, they had a pretty good quarter, but they really did show the impact of coronavirus. From March 11th until March 31st, total advertising revenue actually declined about 27%.

And I don't think they're really out of the woods there yet. They are going to have some capital expenditures ramping up here in the year as their aim to build a data center is going to be pushed back a little bit due to supply chain constraints there. So, they're going to be spending a little bit more money. And of course, guidance is still somewhat nebulous as well. The balance sheet remains a point of strength, they have $7.7 billion in cash and short-term investments there. So, they're going to be buying back some shares. And again, it seems like they keep on recording these mixed bag quarters. I think it's just a matter of finding out, can they really grow that audience and keep the audience and then meaningfully monetize that audience? They just

continue to have trouble doing that on a sustainable basis, but this is certainly a point of time where they have that opportunity as it's being seen as a platform of information, and right now that's valuable. First quarter revenue for Spotify rose 22% and Spotify now has 130 million paid subscribers. Aaron, really seems like there's a lot to like in this quarter. Yeah, I think so. I'm pretty impressed with what Spotify is putting up right now. To be clear, though, I don't think that Spotify is a fantastic business yet,

but I think it's doing a lot of solid work that will make it a much better business in the future. So, right, as you mentioned, they continue to amass a ton of active users and then convert them into paying subscribers. So they now have 286 monthly active users, 130 million of those are now paying. And even though there's a lot of competition out there, it's pretty clear to me that Spotify is the one who, one, is innovating the most, and two, is becoming the aggregator of all audio in general.

They threw out a couple of interesting stats. 70% of users who churn out come back within 45 days. I thought that was impressive. And then podcast listening has also been a bright spot, which is also more profitable for them. It's growing. And 70% of new podcasts that are put on Spotify are made on Anchor, which Spotify purchased last year. So from a strategy standpoint and a user standpoint, things are looking really strong. Revenue growth of 22% is good.

It's not as strong as user growth due to heavy free trials. But I think that there is reason to think that it can go steadily high like this for a few more years. They also expect to be free cash flow positive for the year. And even though music isn't that profitable of a business to be in, if they're successful in aggregating all of audio as a whole, the room for profitability goes much higher. So even though Spotify isn't a perfect business today, I like what I'm seeing them do right now. And I think that they're setting the groundwork to be a much better business in the future.

On a related note, I'll just add that anyone on Spotify can get all five of the Motley Fools podcasts as part of their offering there. so check that out if you're on the Spotify. Let's go back to big tech. Microsoft shares up a bit this week after third quarter profits and revenue came in higher than expected. And Jason, I feel like we say this every quarter, the Azure Cloud business just continuing to get it done. It really is, you're right. I think similar to what we were talking about with Amazon earlier, what's so impressive with Microsoft at this point in the game, it's the durability of this business. The fact that it is so important and it plays such a big

role in everything that we do. They talked about it on the call, this realization of the digital economy. They're seeing essentially two years of digitization being pulled forward into two months due to conditions on the ground. And I think the continued efforts on the part of Satya Nadella to continue to invest in that cloud business, it's clearly paying off. I mean, if you look at the overall results, $35 billion in revenue, up 15% from a year ago. Even more impressive, that operating income number grew 25%, that brought it down to the bottom line, 23% growth in earnings per share. But back to the cloud business, that intelligent cloud segment of the business revenue of $12.3 billion, it was up 29% thanks to that Azure revenue growth of 61%. So, yeah, you said

it there, the Azure platform continues to get it done. And I tell you, on a separate note there, you could see in the call, this really does seem like a moment for Microsoft Teams. I mean, it does seem like in a world driven by headlines of Slack and Zoom, Microsoft Teams is starting to step up their game. And you're seeing some really impressive numbers beyond just those user numbers, but just the partnerships that they're forming, the educational institutions that are depending on that platform, the NFL, big companies like Accenture and Pfizer and SAP. It's not going to be the biggest revenue driver, but again, I think it goes back to the durability of this business, the need for this business, and I think this was another quarter that

really re-emphasized that. You know, I'm reminded of the fact that one of the reasons Bill Gates was so successful in leading Microsoft in the 80s and 90s was his willingness to abandon projects that had a lot of sunk costs, a lot of resource hours thrown at them. Microsoft would invest one, two years in a given initiative, and then if Gates felt like it wasn't working, they'd walk away from it. They would just drop it and move on to something else. Teams does not seem like one of those things. It really feels like Microsoft is going to stick with Teams for a while. Yeah, I tend to agree. And just as someone who's fiddled around with Teams before, I think it's a really great platform. I found a lot of use out

And honestly, I wish we'd use it here more at Fool HQ, but we are where we are today and that's just fine. I do like the bets they're making on that side of the business, though, for sure. You know, Aaron, one of the things Microsoft talked about with this latest quarter was more engagement with Xbox, not surprising, as everyone is trapped inside their home. No one knows more about the gaming industry that I know than you. Where are we right now with the gaming industry? because it seems like every time I read something about it, people are talking about how the

holidays at the end of this year are the key to everything. Is that really the case? I think the holidays will be important because Microsoft's new Xbox system, Sony's new PlayStation system are coming out this holiday season. So there is a lot of hype around that, but I don't think it's as revolutionary as a lot of people think that it is. It definitely is a big deal for the gaming community from like a business perspective um i think other things perhaps are more important i mean with the consoles specifically we will see demand for sure like it'll benefit these companies it might benefit some retailers it's not the type of thing that's going to save a game stop which i've ranted on about before um but it will be

beneficial but i also wonder just if there's high unemployment if these console prices are much higher than than in past generations will it lead to like a similar explosion out of the gate i'm not sure um but also i mean i think it's important to put two other things in perspective one is that mobile gaming is a much bigger deal than it used to be it's the biggest and fastest growing category of gaming so that's not something that is strictly reliant on the holiday season like a new console launch is and so big parts of of the gaming industry are humming along just fine And then second, I think in a normal year, the holiday season is more important, but this is not a normal year at all. And we've seen pretty tremendous results and crazy stats around how video game engagement, both in terms of people playing games and watching other people play games, is higher than it's ever been by far.

Esports is legitimizing at a faster pace than I think anybody could have expected. we're seeing records broken for like digital unit sales of games so there's there's a lot going on right now that is exciting that has nothing to do with the consoles coming up which are exciting in their own way but the the industry is a lot bigger than than just xbox's new console coming out last thing before we move on we've certainly seen it in the entertainment industry that movie production television production being halted for all the obvious reasons is this affecting video game production for companies like Activision, Blizzard, Take-Two, and the rest, or are they basically proceeding? It definitely is affecting them. On the consumption layer,

again, with what users are doing, it's hitting record highs. But these companies are having to figure out what every single other company in the world is having to figure out, how to work remotely, how to ship results when everybody isn't working with each other the same way. We already have seen some game delays. We'll probably see some more. But I'm optimistic that this is something that companies will figure out, and this won't stay an issue forever. First quarter revenue for Teladoc came in higher than expected. Shares of the telehealth company down this week, but Jason, even with the drop, Teladoc has doubled in 2020.

Yeah, it's certainly been a very good year for the business, and I think that's for obvious reasons. It was a good quarter. We kind of knew that already with their pre-announce a little while back, but for me, it was really the full year guidance that tells the real story and put a little context around that. Previously, management had targeted a range of $695 million to $710 million in revenue for 2020. The most recent street average had bumped that number to $737 million. As of this release now, management now sees a range of $800 million to $825 million in revenue for the year. That's pretty much all organic growth at this point. I think it's safe to say that we have now bought into the merits of telemedicine as a part of our overall healthcare

system. But if we look at the numbers for the quarter, total U.S. paid members grew 61%, visit fee-only members grew 89%, total visits almost fully doubled from a year ago. The acquisition of this InTouch Health business will also help diversify the revenue stream in their customer bases. They ultimately start working on supporting hospital customers looking to establish or expand their telemedicine offerings. They foresee U.S.-paid members at the end of the year of at least 50 million members, that'd be 36% growth from a year ago. Again, visit-fee-only access, which is a nice way to get your foot in the door, that'll be around 20 million individuals. And they're calling for total

visits of 8-9 million, which would be total visit growth of around 90% to 100% over the prior year. So, the numbers are all telling a tale here. I think it's important to note, all of this guidance. This is all forecast based on no resurgence of the virus here in the back half of the year. Now, of course, we hope there is no resurgence, but the point is that it's a fairly conservative forecast in that regard. And so I think it all just leads us back to this notion that Teladoc Health is one company out there certainly benefiting from this idea that telemedicine can be a nice value add to our overall healthcare system here, not only nationally, but really globally. And I think that's where Teladoc Health shines. It is a comprehensive

and global network, and it's continuing to grow like gangbusters. Atlassian, the enterprise cloud software company, out with third quarter results on Thursday afternoon. Aaron, when I think of Atlassian and the way that they developed collaboration software, this also seems like an environment where Atlassian would do even better. yeah i mean maybe surprisingly it was a pretty boring quarter for atlassian which in today's world is a pretty great thing um they they sell collaboration workflow software which which is as relevant as it ever has been i don't necessarily think it's more relevant or less relevant now that people are working remotely but it still is a critical function to the way people work in the

vast majority of industries and the company's low touch marketing uh where no one has to interact with a sales rep to get onboarded and ramped up with their products and services, that is perfectly suited for today's environment in particular. So this is a company that doesn't have too much to worry about, and it shows in the results. The company added over 6,000 new customers this quarter. Revenue rose 33%, and that was driven primarily by a 47% increase in subscription revenue. The company is still spitting out free cash flow, which kind of goes back to that low touch marketing model that's just a lower cost for the business to run. They have $2 billion in cash. They're still hiring. So this is a business where things are still going well. If there is

anything different to note, though, about this quarter, it's that Atlassian is offering up free cloud-based solutions to a bunch of new companies or those who are trying to transition away from on-premise work. That free component won't go on forever. And there is a short-term cost to it. But that represents the type of long-term thinking that I like to see in the companies that I own. So Atlassian is doing good. And that type of effort that they're putting in to help companies will build loyalty over time. So all in all, I mean, Atlassian, they're doing exactly what anyone, any investor would want to see from them as a shareholder. There's a chance that growth slows a little bit as companies are slower to make, you know, types of big decisions around

tools, purchasing decisions. Right now, they're focused on other things. But looking out longer term, absolutely nothing has changed about this business. Atlassian has a bunch of different types of software in their portfolio. Is there one in particular that really helps drive business more so than the others? I think Jira, which is kind of like a workflow tool, is their biggest and most important. It was their first product that they made. But really what drives Atlassian is obviously bringing people into those products, but they also have a really good approach to knowing when to build something new, when to buy something new, and when to partner with someone. Like they shut down some of their services in exchange for equity and Slack. They

decided not to compete with Zoom and partner with Zoom. So they're really good at kind of that holistic strategy. And I think that sets them up really well for when you think about them building like a dominant software enterprise over the next decade. Coming up, we'll give you an inside look at the stocks on our radar. 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

the whole crew, Andy Cross, Aaron Bush, and Jason Moser. Time to get to the stocks on our radar, and our man, Dan Boyd, is going to hit you with a question. Andy, you're up first. What are you looking at this week? Chris, I'm looking at Beyond Meat. Tyson Chairman John Tyson warned this week that the food supply chain is breaking with millions of pounds of beef being lost from slaughterhouses closing and processing facilities closing. So, I'm taking a look at Beyond Meat, the maker of plant-based meat substitutes. It's very popular beyond burger. Personally, I'm a fan of the beyond sausages, but it sells these plant burgers and meats in grocery stores like Whole Foods. It reports earnings next week, has partnerships with McDonald's, Dunkin' Donuts.

It will start offering its beyond beef in China for the first time through its partnership with Starbucks. It's a $6 billion market cap, one of the hottest IPOs of the year, and the stock's down to below 100 from 235 last year. Founder and CEO Ethan Brown owns 2.5%. So I'm really interested to see what they are talking about with the food supply chain issues that we've been hearing about

for the past couple of months in the face of the COVID pandemic. And the ticker? B-Y-N-D. Dan, question about Beyond Meat? Sure, Chris. Andy, let's fast forward to November real quick. Thanksgiving's coming up.

are you buying a Beyond Meat turkey? Well, since my family doesn't really eat a whole lot of meat, if they had a Beyond Meat turkey, knowing my fan for the Beyond Meat burger and the sausage, I would definitely take a look at it. Jason Moser, what are you looking at? Yeah, taking a look at Medtronic, ticker MDT. They're a big fan of healthcare and immersive technology and Medtronic. It's kind of like a peanut butter and jelly sandwich there, Chris. that's firing on both cylinders. It's a global medical device company with a long history of innovation. You probably saw on the news recently, they actually made the design and code for its portable ventilator available for all to use in the face of the COVID-19 crisis, which I just

thought was really, really nice to see. But they have more than 80 extended reality projects underway across the company, from their diabetes division, also even using extended reality programs to help train the best way to insert glucose sensors. So, this is just a company I think is really doing a lot of cool stuff looking forward to earnings later this month dan question about medtronic all right jason if you can augment one of your senses what are you going with and why oh augment one of my senses and i feel like i'd have to augment my hearing because i love music so much and you can just feel it aaron bush we got less than a minute what are you looking at i'm going with docusign ticker docu so there's been a lot of discussion about companies like

Zoom and Teladoc lately, but DocuSign is another company that in my mind is just so obviously a more important part of the digital future. It was important before the pandemic hit, but it's accelerating what's going on with the e-signature business. And what's great about DocuSign is that like Zoom, it is the verb. It is the word for e-signatures. Two, it has a massive runway left. And then three, it has some good optionality. So it's a $19 billion business, but it's still a lot smaller than the Atlassian Zooms and Adobe's of the world. Dan? Aaron, this week we talked on our podcast about DocuSign getting bought by Adobe.

What are your thoughts? Still interested if they do? I think they're almost too big, but maybe worth a shot. What are you adding to your watch list, Dan? I'm going with my man J-Mo and Medtronic. That's three in a row, baby. Hey, now. All right, thanks for being here, guys.

We're out of time. I'm Chris Hill. Thanks for listening. We'll see you next week. Thanks for watching!