Motley Fool Hidden Gems Investing - Surprising Earnings, Conservative Management

Episode Date: February 24, 2023

There's a lot to analyze in this episode, including revenue to the upside, CEOs waving the caution flag, and Hobbits.  (0:21) Emily Flippen and Jason Moser discuss: - Nvidia's results and place in the AI universe - Block surprising Wall Street with strong 4th-quarter revenue - Mercadolibre's enviable free cash flow - The latest from Walmart, Home Depot, Booking Holdings, Etsy, and Wayfair (19:11) Emily and Jason continue the earnings analysis and discuss: - Warner Bros. Discovery growing subscribers and cutting costs   - The latest from Intuit, Teladoc Health, Domino's Pizza, and Shake Shack  - Their most recent stock purchases - Two stocks on their radar: Adobe and ANSYS Looking for even more stock research and recommendations? Check out the details on our Epic Bundle membership at Epicstart.Fool.com Stocks discussed: NVDA, WMT, SQ, HD, BKNG, ETSY, MELI, W, INTU, TDOC, WBD, DPZ, TWLO, SPOT, NKE, SHAK, ADBE, ANSS Host: Chris Hill Guests: Jason Moser, Emily Flippen Engineer: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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Because we have your number. Please be advised, today's episode contains a brief discussion of hobbits. Motley Fool Money starts now. Everybody needs money. That's why they call it money. The best things in life are free. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Chris Hill. Joining me on the show,

Motley Fool Senior Analysts, Emily Flippen and Jason Moser. Good to see you both. Hey, hey. Hey, morning. We've got the latest headlines from Wall Street. We will dip into the Fool mailbag. And as always, we've got a couple of stocks on our radar, but we begin with a tech company on a hot streak. shares of Nvidia popped on Thursday after the chipmaker's fourth quarter results were better than expected. Year-to-date, Emily, shares of Nvidia are up more than 60%. Is it that good, or was this just a stock that maybe got oversold? Well, a 21% decrease in quarterly revenue and a 55% decrease in earnings per share is apparently enough to warrant that type of reaction, Chris.

No, this isn't a company that is just performing that incredibly, but it is, as you mentioned, coming off of a lower base of expectations as this company has really struggled to keep up post-pandemic growth as a result of massive expansion in their gaming business. As a reminder, this is a company that makes best-in-class GPUs, so gaming has been a consistent source of demand for them. But as it has come down, obviously sales have come down too. In fact, gaming revenue was nearly cut in half over what it was last year for some context behind those numbers. But the big story here is data centers and AI. Data centers are one of the few segments of NVIDIA's GPU business that is still growing. It was up 11% last quarter, 41% for the full year. So still a lot of

growth there. And management spent a lot of time in the call talking about chat GPT and AI. And I know that this is kind of a hyped industry, and we've talked about that on the show in the past, But their processors are vital for any type of machine learning or AI processes that are happening at organizations across the world. So to the extent that there is any increase in demand for these types of programs, NVIDIA is definitely the type of business that we'll appreciate as a result, see an increase in demand, which is part of the reason why the shares are up so much this week. Their NVIDIA A100 is really just the flagship chip for AI, and their GPUs make up the massive

lion's share majority of machine learning markets. Machine learning, AI, it's table stakes in a lot of industries right now, which means NVIDIA is table stakes for a lot of industries. Yeah. Jason, Emily mentioned how there was a lot of talk on the conference call about AI. NVIDIA, they're not the only ones. I mean, pretty much every major tech company on their latest earnings report, so much of the call is dominated by AI. It seems like that's also table stakes in a way that Wall Street wants to hear from these tech companies, what is your plan in this arena? Chris, I have a new routine here at home whenever I get up in the morning. Before I even say good morning to my wife and my kids, I just mutter the words,

artificial intelligence. Immediately, it sets these expectations. There's this more glass half full perspective on me and how my day is going to shake out. The excitement is just palpable. It works beyond industries, try it, I promise you, you'll see a difference. In all seriousness, to your point, it is exciting times, no question, to be a tech investor with all of the different things that are going on out there. I think we talked about this on A Motley Fool Money, one of the shows during the week a couple of weeks back, just in regard to AI and where we stand with all of this. I think it's worth everybody just taking a step back, pull back those expectations just

a little bit. We're seeing mentions of artificial intelligence every day all across financial media, but it's still not abundantly clear exactly how this is going to play out, how companies are going to be able to benefit, how ultimately consumers will be able to benefit. No doubt that there will be profound ways that it impacts our lives, but I think it's going to take us a little while to ultimately realize that. I definitely do not blame any of these companies for talking about it, for touting their investments in it. I think it's also worth just remembering. This is still very early days where AI is concerned and so it's going to take some time to really see exactly how this changes the face of technology

in our everyday experience as consumers. To play devil's advocate a little bit though. I mean, AI is already being used on a day-to-day basis for organizations across the globe. In fact, we talked about companies like CrowdStrike, a great example, who has built their entire Falcon platform based off of generative AI and machine learning models, and that helps people and organizations on a day-to-day basis. I do think that the moves NVIDIA is making here, they're partnering with big cloud providers to provide AI as a service, which you can't really acronym without saying something inappropriate. But the idea is here that they can provide access to generative models or supercomputing powers

can actually meet the needs of companies looking to integrate AI and machine learning without them needing to own the GPUs themselves. And to the extent that that becomes widely available, I think it provides a lot of accessibility. So these large corporations that are already incorporating it gives access to smaller organizations to do smaller moves themselves. But you're right, we're still very early. You wouldn't know it from its share price, but Walmart's holiday quarter was a strong one. Fourth quarter profits and revenue came in higher than expected. Same store sales in the U.S. were up more than 8%. But Walmart's guidance for the year ahead had shares down just a little bit this week, Jason.

Yeah, I was a little surprised by that because the guide, at least relative to so many of these other companies we've seen, was actually pretty reasonable, I thought. But it's not surprising to see the company perform so well during the holiday quarter. In an environment where value is becoming more and more valued by the consumer, well, Low prices is what Walmart is all about, and that's certainly working out well for them. When you look at the numbers, total revenue $164 billion, that was up 7.9%, excluding currency effects. U.S. comps up 8.3%, and they continue to bring down those expenses. The operating expenses as a percentage of net sales fell 44 basis points, so they're

maximizing efficiencies, continuing to push traffic through those stores. Really, with Walmart, we don't talk about it enough, I don't think, but it really is grocery. It's such an important driver for this business. They continue to gain share in grocery over the past year. If you look at the grocery health wellness sales, those have a lower margin than general merchandise, but those sales have increased 330 basis points as a portion of their mix. People are buying more stuff in that grocery segment, which I think just really speaks to one of the dynamics we've seen over the last couple of years really is just the higher income households are looking more and more to Walmart to get their groceries, to buy those everyday household items. They're just

seeing it as a valuable option there. It's also playing out on Sam's Club. I really was impressed to see the Sam's Club numbers here with Comps and Sam's Club up 12.6% for the quarter, $21.5 billion in sales for the quarter. They continued to grow that membership-based, membership income growth was better than 7% for the quarter. Ultimately, to that guide, guiding for 2.5% to 3% revenue growth for 2023, given everything we know, I don't think that's all that bad. When you look at the earnings growth there, it's going to moderate. The stock is not what I would call cheap today. I think that 24 times full-year projections likely reflects continued tailwinds from value seekers in those grocery share gains. But I think all in all,

the company performed very well. Signs of life at Block. The company formerly known as Square posted fourth quarter revenue of more than $4.6 billion, higher than Wall Street was expecting, and shares of Block up just a bit after the report, Emily. Signs of life, Chris. Wow. Block didn't go anywhere. I will say the crypto market is certainly responsible for a lot of probably the negative perception this company has amongst investors, retail and Wall Street, because Cash App's dependence upon cryptocurrency. But Square itself and the company is still performing incredibly well. Growth has slowed, but this is one of those companies that has kept up an incredible rate of growth over the long-term.

I think their compound annual growth rate for the last three years and the last five years is north of 50%, so really incredible growth from this business. But you're right in the sense that this business has struggled with profitability. The cryptocurrency is just one aspect of that. Operating expenses in the quarter despite the revenue beat still grew substantially. What I found really interesting is that CEO and founder Jack Dorsey changed his commentary around how they're gauging performance for this company, presumably in response to investor feedback. This is a company that has always gone after what's called the rule of 40, which is they're defining as they want their gross profit growth plus their adjusted EBITDA margins to be north of

40%. There's been a lot of backlash from investors about the fact that these adjusted EBITDA margins don't include stock-based compensation, which has been crazy at Block and Square. They adjusted that and they said, now we're targeting the rule of 40, but we're going to start using instead of adjusted EBITDA, adjusted operating income. That's going to include the stock-based compensation and the depreciation for the business. That was 23% in the most recent quarter, so not that 40% that they're aiming for, but you have to appreciate that they've changed the line here in response to feedback about how they're going to gauge financial performance for this company moving forward. Similar to Walmart,

Home Depot's guidance for 2023 was on the conservative side. Throw in the fact that fourth quarter revenue was the company's first to miss since 2019 and shares of Home Depot down 7% this week, Jason. Yeah, certainly more understandable for me, the near-term concerns with this business versus something like a Walmart. I think management is setting very modest expectations on the assumption that we're going to see flat real economic growth here in consumer spending in 2023. They also expect to see transactions continue to normalize as spending shifts from goods to services, and they're really going to benefit more from the goods than the services, though there is the services dynamic to the

business, no question there. But I don't think this should deter investors wanting to take the longer view here. The numbers, I think, very respectable sales for the quarter, $35.8 billion, it was up 0.3%. We saw overall comps and U.S. comps both down 0.3%. Ultimately, earnings per share grew just under 3% to $3.30 per share. You look at some of the metrics that matter for a business like this, the comp average ticket increased 5.8 percent, so spending did grow. That was offset by a decrease of about 6 percent in transactions. I think something that we always pay attention to with Home Depot is lumber costs. Lumber costs on average were down over 50 percent year-over-year. That hurts that comps number for them and they quantified that to the tune of about

70 basis points. Now, I think it's also worth mentioning that typically that's going to help them on the margin side. In gross margin of 33.3%, it was up seven basis points, a lot of threes in this quarter for Home Depot. I think they're making a very smart investment in their employees. They're going to be increasing annualized compensation by approximately $1 billion for the year. I think that matters because ultimately, the customer experience is where they can really differentiate themselves. I'm not saying it's the same everywhere. You run into some stores where people know what they're doing and you run into some stores where people don't. But I certainly appreciate them investing in that base because ultimately it can be a competitive

advantage. It's good that they recognize that and they're trying to invest in it. But yeah, it does feel like 2023 is going to be a bit of a reset year for Home Depot. We'll probably see that consumer spending continue to shift over the services side. But if you're taking the longer view, this looks like a time where you want to get the stock on your radar. It was a big week for e-commerce companies. Details after the break, so stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here with Emily Flippen and Jason Moser. Before we get to the e-commerce, let's hit travel. Fourth quarter revenue for booking holdings rose 36%. CEO Glenn Fogle says travel demand is high and that what they're seeing at

Booking Holdings is people continuing to spend on higher-priced hotels. Emily, the pent-up demand that we've been talking about for a while, it seems like it's still there. No kidding. Fogel would be upset with you saying, before we get to e-commerce, let's talk about booking, because booking has been on this multi-year venture to try to turn themselves into a more e-commerce-focused business. The more they're able to actually handle the payments on their platform themselves, the better they have in terms of both bookings and margins. That's actually exactly what we saw in this fourth quarter report. Revenue rose nearly 30%. Gross bookings also rose and beat expectations. But more importantly, 42% of those gross bookings were handled by booking holdings

during the quarter. That's their highest level ever in terms of customers. So that helped expand their margin profile as well. So despite their resurgence and travel, higher prices, all of those things benefiting booking, they're also benefiting from just more and more of those transactions coming onto their platform. Chris Hill Etsy's fourth quarter profits came in higher than expected, but cautious guidance from management kept shares of Etsy from moving higher this week, Jason. Seems like a theme here with the cautious guidance. Jason Moser Yeah, I was going to say, as many companies right now, that is the big point of focus,

it's in guidance. In management, it does remain cautious. They noted they're seeing so far into 2023 as it pertains to consumer spending, they're seeing these shifts and the pressures in the macro environment, it makes them, quote, very cautious, end quote. And so, take that for what it's worth. But the quarter itself, I think, was encouraging. We did see consolidated gross merchandise sales, it was $4 billion, down just slightly. But they set a pretty conservative table for revenue that they easily exceeded their revenue, consolidated revenue, just over $800 billion was up better than 12%. Habitual buyers, I thought, interestingly, those were six or more purchase days and over $200 in spend over the trailing 12 months, those habitual buyers fell 9% year-over-year,

but a lot of that was because of a tough comp. We saw that COVID tailwind fall off this quarter. If you look out over the last three years, you go back to December 31st, 2019, those habitual buyers are up 194%. That's a very encouraging sign that this House of Brands strategy is really working out for Etsy. We're also seeing them monetize the platform better. The take rate continues to improve. Consolidated take rate of 20% was up from 17.1% a year ago. They'll continue to invest in personalization, making it smarter and more catered to what each person is really looking for, which I think is the right call. MercadoLibre continued its hot start to the year. Fourth quarter results were much better than expected and shares of MercadoLibre

ticking up this week. $1.3 billion in free cash flow, Emily, that's a pretty gaudy number. Emily Flippen. Yeah, it must be nice for MercadoLibre. I know a lot of companies who would kill for these types of results. Nobody is really surprised that MercadoLibre is doing as well as they have. 2022 has been so far a record year for them in terms of both revenue, but here's what really grinds my gear. We're coming out with fourth quarter results, and I was really hoping that MercadoLibre would start breaking out the difference between their e-commerce business and their payments business. It's almost like Amazon not breaking out AWS from their own e-commerce business because you have to look at the growth in MercadoLibre's payments

business and then also see the earnings of more than a billion dollars or EBIT of more than a billion dollars and think to yourself, there's probably some correlation there between the expansion in payments and the expansion in their operating income. I wish that we as investors had a lot more color as to what's driving these operating results because if I had to guess, I think it has a lot to do with their consumer loan book. Shares of Wayfair down 25% this week after the online home furnishing company's loss in the fourth quarter was bigger than Wall Street was expecting. Jason, was Wayfair's quarter that bad? No, it wasn't really that bad,

but I do think as with this prevailing narrative, it is all about what's to come. Right now, this is a business that really needs to get its income statement back in order. We saw a lot of the potential of what they could offer here over the last couple of years. But again, pandemic tailwinds, they can only ride those for so long. Management did set a pretty conservative table as well for the quarter. Revenue didn't quite take the hit that they were modeling for. You look at revenue, $3.1 billion, it was down 4.6% from a year ago. They are seeing more pressure on the international side of the business. They noted they're seeing those inflationary pressures start to revert, which is having a positive impact on order volume and that's good. Gross

margin 28.8%, that was up from 27.2% a year ago. The company is still losing money hand over fist though, they got to change that. I think that's really what this all boils down to. They are working on figuring out ways to pass through more cost savings for the business model. They're at around $750 million today. That is something that should continue. Again, I think that you're seeing just a return to normalcy for this business. We're back to square one. It's not to say that the demand isn't there, but they really do need to focus on the financials there and start to exploit the profitability, the potential of this business model. It's the weekend, so after the break, we're going to relax with some pizza and entertainment earnings. Stay right here.

You're listening to Motley Fool Money. Chris Hill here with Jason Moser and Emily Flippen, hitting some of the big stories in the investing world this week. Just in time for tax season, shares of Intuit up after second quarter profits and revenue came in higher than expected. The parent company of TurboTax also announced that their chief financial officer is retiring after 20 years with Intuit. I've said before, Emily, it always gets my attention when a CFO leaves, but in this case, it's someone who's been there for a long time, they're promoting from within, so it seems like it's going to be a smooth handoff for Intuit.

Yeah. Famous last words, Chris, you should knock on wood. But if you had to guess, this is the type of handoff that you expect from a company of Intuit size. If you're waiting for a sign to do your taxes, this is your sign. Intuit's reporting, they're feeling pretty good heading into that tax season. They beat expectations in the most recent quarter. But even with the expectations strong around tax season, their guidance is still a bit weaker than the market expected. Part of that or a majority of that is really how Intuit expects business to shape up for Credit Karma. Credit Karma makes a majority of their revenue for referrals, for things like personal loans, auto loans, mortgages. As you may assume by the weakness

in the economy and rising interest rates, consumers don't really want that stuff as much as they did in the past. Credit Karma has had a particularly weak quarter, expected for that to stay weak for this foreseeable future. The good news is that Intuit's bread and butter, which is their small business segment, that's still expected to perform pretty well. They saw revenue rise 20% in the most recent quarter, which is really impressive. My big question mark for the business note though is how CEO Cezanne Ghazari is going to think about the growth within Credit Karma because management reiterated their guidance that they expect Credit Karma to grow 20-25% a year for the long run. That's extremely aggressive growth and it's the same guidance they had out when they

made this acquisition. You have to wonder if that original guidance was created in an economic environment that we're not likely to see for at least the foreseeable future, if not many, many more years to come. I think that guidance for Credit Karma is possibly overly aggressive. If there is weakness in Intuit in the future, it's probably going to stem from having to pull back guidance for Credit Karma as opposed to Intuit's really strong core business that still generates so much cash. They're buying back shares, they're paying a small dividend. That's a strong business. Credit Karma is still this wildcard. Teladoc Health's revenue was higher than expected, but the telehealth company still posted a loss in the fourth quarter

and shares of Teladoc down 10% this week, Jason. Well, as we often say in Investing Chris, it's never a straight line up and companies go through challenging stretches. These guys are putting it to the test to be sure. On a positive note, management did hit the targets they reiterated in an investor conference at the beginning of January. The numbers revenue up 15% to $638 million and adjusted EBITDA up 22% to $94 million. The balance sheet is in good shape, Chris, that's good news. Another massive goodwill write-down this quarter. Honestly, Chris, at this point, this is getting amusing. It is borderline laughable. How much could they have overpaid for Livongo? It is astounding. I just don't know that I'll ever fully be able to get

past that. The only thing that helps, I try to remind myself the BetterHelp acquisition worked out very well. We got to take the good with the bad, I guess. It's interesting they're going to start reporting their business now in two segments. They'll have the Teladoc Health Integrated Care, and that's primarily the B2B distribution channels. The business sold through employers and health plans and providers, and then also the better health side of the business. That's the mental health services that they sell through their direct-to-consumer distribution channels. I think it makes a lot of sense based on what their customers are telling them they want. It's a growing desire, they say, from their clients to shift away from just point solutions

and toward multi-product integrated virtual and digital platforms. That's the North Star, that's what they're trying to build. They are doing that, but they've done that to this point with a growth at all costs mentality, and that's costing big time. It sounds like they're starting to shift away from that, that'll be something you want to keep an eye on here in the coming quarters. It just feels like a lot of opportunity left on the table from a business like this for sure. If this keeps up much longer, this is starting to rival back in the day when Bank of America, just quarter after quarter, would talk about how they're still writing down the countrywide acquisition. It reminded me too of Microsoft

for a time as well. It felt like Microsoft ran into that same problem. It goes to to show you, acquisitions can be great, acquisitions can also be bad. While having that Livongo capability I think is additive to this business, what they paid for it was simply unacceptable and borderline criminal. Warner Brothers Discovery continues to grow its streaming business. Subscribers grew 11% in the fourth quarter, but profits and revenue were not what investors were looking for. CEO David Zaslav continues to talk about how Warner Bros. Discovery is cutting costs, Emily. Let's rewind on this company a little bit. If you aren't familiar with Warner

Bros. Discovery, we can forgive that because this company, the history of acquisitions that led to this strange combination of businesses is really something that could take an entire podcast on its own. But really this company, as we know today, was born in early 2022 as a combination of AT&T's Warner Media plus Discovery Communications. You can think about all the different streaming and content platforms they own, so HBO, CNN, Discovery, HGTV, Food Network. That's this weird combination that now exists under the Warner Brothers Discovery brand. Their recent focus has obviously, as you mentioned, Chris, been focused on monetizing its streaming services, HBO Max and Discovery+. That's especially important as the ad cable

market has just been incredibly soft. There's a little bit of a backdrop heading into fourth quarter earnings, but as you mentioned, revenue did miss expectations by about 3%, coming at a hair over $11 billion in the quarter, but those losses just kept blooming. They have impairment charges and stemming from that 2022 combination that's been weighing on the bottom line for this business. It doesn't help that they're also weak in terms of studio. They're coming up against the backdrop of last year, they released Dune. Great year for them previously, nothing really coming out this year. Things aren't great for Warner Brothers in this most recent quarter, but all the focus has just been on what are they going to do with these two streaming

services. Apparently, the solution that management has settled on is, we should just combine HBO Max and Disney+. You do have to wonder about the consumer that is going to subscribe to both Discovery Plus and HBO Max, because out of their nearly 100 million subscribers, management expects there's only about four million current subscribers that own both. If you're a subscriber to HBO, and suddenly you're being told that your price is increasing because they're giving you the food network and HGTV, you might naturally be a little bit irritated. I'm interested to see how consumers respond to this switch as it comes up over, I think spring 2023 is when they're targeting the switch. It could be a good thing for them in terms of boosting subscriber growth,

but they could also see some consumer pushback. It almost seems like the clock is ticking just a little bit in terms of when you think forward maybe 12 months or so, if they have not meaningfully grown their streaming businesses or done the cost-cutting job that they want to, we're going to hear more talk of acquisition, meaning Warner Brothers Discovery as an acquisition Target. But the case you just laid out, Emily, I wonder who wants to buy everything they own. I can see wanting the intellectual property under the HBO Max umbrella. It's hard to imagine paying up for Discovery Plus at this point. Yeah, you have to wonder if they're just going to reinvent cable here, adding on stuff that people don't want for the sake of charging

a little bit more. It's a bit laughable. But in the near term, they did talk about relaunching Lord of the Rings, essentially signing a deal to make more Lord of the Rings movies. Excuse me. Yeah, Lord of the Rings, Lord of the Rings films. I mean, this is going to be something that I think is going to get some possibly negative pushback from a very loyal fan base, if not done correctly. Now, they are very good at The Last of Us. That's had great feedback. But if they mess up Lord of the Rings, wow, that could be bad. Yeah, the Hobbit nerds, they're going to have their knives out or whatever weapons Hobbits carry. Send all emails, dude.

Podcasts at fool.com. We can take it. Domino's Pizza closed its fiscal year on a down note. Fourth quarter revenue and same-store sales came in lower than expected, and shares of Domino's down more than 10% this week. Jason, it is close to a three-year low. Well, the overly hospitable environment for Domino's and pizza delivery in general, it's starting to normalize. That's definitely playing out on this business here. We're seeing that in the guidance as well. With that said, given Domino's position, the competitive position in the space, its size and its expanding menu, this pullback probably does represent an opportunity for shareholders who are taking that longer view. They may be down 25% of the last year,

but Domino's is not going anywhere. Global retail sales, 5.2% for the quarter. U.S. same store sales up just under 1%. International same store sales up as well. They're adding stores. They grew the store base, 361 stores for the quarter. Ultimately, earnings per share of 4.2%, that was up 4.2% to $4.43 for the quarter. They do continue to gain market share as the greater QSR, the quick service restaurant pizza market has grown by about 10% over the past years. But seeing an interesting little play here off the delivery and the pickup side of the business now. Carryout now comprises approximately half of the orders in about 40% of sales in the U.S. You go back just a few years and those numbers were closer

to 45% and 33%. They're seeing a lot of pressure in delivery, and that's partly due to people going back to restaurants, it's partly due to inflation. From that perspective, it's not just a Domino's specific problem. We're seeing delivery as a challenging dynamic across the space, but it is, again, large company with tremendous resources there, boosting the dividend by 10%. The longer-term guide now just taking a slightly more conservative They're talking about global retail sales growth in a range of 4% to 8% now, down from 6% to 10%. Then store account, they're guiding for a range of 5% to 7% down from 6% to 8%. Modest, but it's enough for investors to feel like maybe they want to sit on the sidelines and wait this

one out a bit. After the break, we've got stocks that we bought and stocks on our radar. 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 Emily Flippen and Jason Moser. Our e-mail address is podcasts at fool.com. Got a question from Diane in Arizona who writes, I know you have trading restrictions at The Motley Fool, but to the extent that you can talk about it, what is the last stock you bought and why did you buy it? Jason, let me start with you.

We used to do this bit on Industry Focus. It was great. We would solicit from listeners, ask them why stock they bought and why, and we would just get endless replies. I love seeing these tables turned. I had to double-check this, but I did look back and it looks like in November, right after Twilio had reported earnings and the stock cratered, closed somewhere around $42 and change. I tweeted out shortly after I was able to talk about it that I had added to my Twilio position. What I said, I said I rounded out my Twilio position this week during the day of carnage after his report. Clearly, some near-term challenges for the business, but they're self-inflicted, completely fixable, and management is quite aware. It's

a good business with good products and services, and I'm more patient than you." You fast forward to today, and I think we've actually seen this play out pretty well. Management very aware of these self-inflicted challenges, and now we've seen a far more clear path to ultimate profitability. They've set some targets there on stock-based compensation. They've set some targets there on operating profit for the year and beyond. Obviously, some really big house cleaning going on there, cutting 10% from their workforce, and then another 17%, not much longer after. All things considered, it feels like that was maybe a bit of an opportunistic purchase at a time where pessimism was pretty high.

Emily, what about you? Yeah, I feel like mine is unexciting because it happened so long ago. I'm going to find a way to sneak into every episode I do of Motley Fool Money that I'm buying a house. All of my savings have been not going into the market, unfortunately, even though it's been an amazing time to buy. But the The last stock I bought, I believe, was Spotify. The ticker is SPOT, as expected. I really think Spotify is one of those companies that is just horribly misunderstood. There's a lot of negativity around the investments they've made into podcasting and the fact that their ad-based revenue streams have been incredibly weak, and that's totally warranted. But I

think this is a company that can expand their gross profit much faster than the market expects. Their investments into podcasting have made them the No. 1 podcasting platform very shortly after its launch, an industry where they were a decade behind the launch of Apple Podcasts. So, they know what they're doing in terms of getting listeners, engagement is incredibly high, really sticky premium subscribers, and to the extent that they're able to turn around their ad revenue when the ad market is better than it is today, and that's impacting everybody, that I think Spotify could be one of those companies that comes out and truly becomes like a titan, a behemoth of industry in music streaming, audiobooks, podcasts, you name it.

My story is similar to yours, Jason. It was when Nike took a hit last fall after their quarterly report showed inventories on the rise. Nike was a stock I had on my watchlist for a long time, and it was one of those situations where once it was cleared, I thought, oh, okay, here's the opportunity. Keep the e-mails coming. Thank you, Diane. Podcasts at fool.com is the e-mail address. Real quick before radar stalks, next week Shake Shack is turning 10 of its locations in major cities into fine dining establishments. Complete with white tablecloths, gold utensils, and wine glasses, these Shake Shacks will feature a fixed price menu and table service. I am all for the experimentation, Emily, but I have

no idea what Shake Shack's endgame is here. I have to say I was really excited. the fake truffle taste, the truffle oil, I am all about it. So I saw this and I was like, this is great advertisement for their kind of new upscale line of truffle-based burgers. I'm all for it. But then it hit me. I was like, wait, didn't we do this before? Wasn't this a thing like five years ago? Is Shake Shack just five years behind a truffle trend? Because I feel like if you're going to launch something premium, you know, truffle was cool a half decade ago. What's the new premium thing? I don't think it's truffle. Jason, can you see a date night in your future next week checking one of these out, maybe the one in D.C.?

No, no, not at all, Chris. I honestly can't. Nope. Not even going to go any further with it. All right. Let's get to the stocks on our radar. Our man behind the glass, Rick Engdahl, is going to hit you with a question. Jason, you're up first. What are you looking at this week? Yeah, another earnings report this week. ANSYS, ticker is A-N-S-S for those unfamiliar. ANSYS is a simulation software and services company. They serve in markets including aerospace and defense, automotive, electronics, energy, healthcare, even sports, Chris. I mean, they run the gamut. But the value proposition is simple. Simulation software is helping companies

get things done more effectively, more efficiently, saving time and money, and everybody can get behind that these days. But revenue up 10%, excluding currency impacts, earnings per share of $3.09 compared to $2.81 from a year ago. They achieved over $2 billion in annual contract value in 2022, which actually exceeds the target that they set from back in 2019. That's just a good sign to see when management is able to hit their targets that they set. They're calling for 12% annualized growth in that annual contract value through 2025, so the growth looks poised to continue. The good news is this is not a growth at all cost company. They're very methodical, just one of those sleepy little slow growers that you can keep in your

portfolio, which incidentally, Chris, I do. I keep it in my portfolio personally and I've recommended the stock. I encourage investors to give it a look. Rick, question about ANSYS? What would you like to have simulated? Artificial intelligence. Does that do it? AI. Everybody's got to receive that well, right? AI, everybody's excited now. Everybody's excited about AI. Emily Flippen, what's on your radar this week? Adobe is on my radar for a lot less positive reason than Jason's ANSYS. Adobe got reports out this week that the Department of Justice is looking into Adobe to block its $20 billion acquisition of design competitor Figma. As a reminder, the announcement of this

acquisition earlier last year resulted in the largest drop over a decade for Adobe shareholders. Not only was it made at a lofty valuation above 50 times annualized recurring revenue, but it's also a big departure from Adobe's long-term strategy of making these smaller token acquisitions. I think Figma is an interesting company, but I'm hoping that the DOJ blocks this because I think the acquisition was too expensive and too much of a strategy deviation for Adobe. Rick, question about Adobe? Speaking of AI, I'm an Adobe user and I see all these tools coming into the Adobe software now, using AI to make my job easier, which I know is just a precursor to eliminating

my job altogether. My question is, once that happens and people like me are no longer necessary, who's left to subscribe to Adobe products? I don't know. Hey, you and me both, Rick. What happens to my job when AI comes and takes it over? I don't know. I guess we'll both be begging. What do you want to add to your watch list, Rick? I don't know. I already own Adobe, so I will just keep an eye on it and I'll take that simulated Adobe company over there. Ansys, Rick. Ansys. Ansys. I knew it started with an A.

That's going to do it for this week's Motley Fool Money radio show. The show is mixed by Rick Engdahl. I'm Chris Hill. Thanks for listening. We'll see you next time.