Motley Fool Hidden Gems Investing - Tech in 2024: AI and Dividends

Episode Date: March 1, 2024

The AI race heats up with Elon Musk’s lawsuit against OpenAI and Google Gemini’s rough week. And Salesforce joins Meta in the Big Tech dividend club. (00:21) Jason Moser and Matt Argersinger discuss: - Elon Musk’s lawsuit against OpenAI and Sam Altman -.Apple putting an end to Project Titan and its automotive ambitions. - Earnings updates from Axon and Okta, and a new dividend from Salesforce. (19:11) Motley Fool Money’s Deidre Woollard caught up with analyst Karl Thiel about the role of patents in pharmaceuticals, and the dreaded patent cliff looming for roughly 200 big-time drugs over the next decade. (33:06) Jason and Matt break down two stocks on their radar: Palo Alto Networks and eBay. Stocks discussed: TSLA, AAPL, GOOG, GOOGL, AXON, OKTA, CRM, PANW, EBAY. Host: Dylan Lewis Guests: Jason Moser, Matt Argersinger, Deidre Woollard, Karl Thiel Engineers: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

The AI race gets litigious, and tech finds a new word to get investors excited. Motley Fool Money starts now. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Dylan Lewis. Joining me in the studio, Motley Fool senior analysts Matt Argersinger and Jason Moser. Fellas, great to have you both here. Hey, Dylan. We've got earnings updates, a breakdown on the two most dreaded words in

pharmaceuticals, and of course, stocks on our radar. We're going to kick off today focusing on three different updates in the race for AI. First up, this week, Elon Musk filed suit against OpenAI and its leader, Sam Altman. Musk famously helped found OpenAI in 2015 and, Matt, his suit centers on the idea that OpenAI was originally founded to be a nonprofit and mission oriented towards ideally maybe helping AI help humanity. We've seen it pivot now to more of a private enterprise. What are you paying attention to with this case? I think this is a big deal. And I think Musk has a pretty good case. And I would say the implications could be pretty stark for really the whole AI landscape. I mean, if you think about it, OpenAI released ChatGPT

on November 30th, 2022. And I think most analyst investors would probably point to that day as the day that this sort of AI revolution kind of started. Maybe NVIDIA's first quarter results in 2023, another milestone. But clearly, when ChatGPT came out, it was a big deal. And if you just look for a second. At the stock price of Microsoft since that day, since November 30th, 2022, and remember, Microsoft invested $1 billion in OpenAI in 2019 and has been pivoting it to a more commercially viable for-profit platform. Since November 30th, 2022, the share price of Microsoft is up more than 60%. Over that period of time, it's added more than $1 trillion in market cap to its valuation. Now, granted, not all that can be attributed to open AI, but I think a bunch of

it certainly is. I think the excitement around AI and with the idea that Microsoft is now, because of its investment, a leader in this new market, it's a big deal. I think one of the reasons Microsoft trades for 37X earnings today, where something like Alphabet trades for 20X earnings, this disparity there, I think, is because of what investors are ascribing to the value of AI that Microsoft has. And so, just imagine for a second if Musk succeeds in his lawsuit. Suddenly, the commercial implications of Microsoft's investment and OpenAI itself kind of goes away. And so, I just think this has enormous implications, not just for Microsoft or the generative AI industry today, but really for the development and evolution of AI as

we go forward from here. Yeah, the ramifications seem crazy and wild and things we're going to have to figure out over time. I think one of the things that's fascinating about it, too, is we are not legal scholars by any stretch, Matt. But there have been a lot of behind-the-scenes drama with OpenAI. We saw Sam Altman seemingly leave the company and come back in a very short period of time. We may, through the process of discovery in this case, learn a little bit more about what's been going on at OpenAI. Absolutely. More information, more transparency is going to come out of this whole period that we've been only reading the headlines about. Now, we'll get to really understand

what's happening. In a way, it's going to hurt Microsoft and opening AI, because all this stuff is going to be out in the open for competitors like Alphabet, maybe Apple down the road, we'll talk about, to understand exactly how they can compete better with this platform. Speaking of Alphabet, also in the news in AI this week, Google's Gemini generative AI tool ran into issues with image and text generation. A lot of headlines this week, as users noted, Gemini declined to produce images depicting people of certain races, struggled to depict certain specific figures correctly, confusing some of the racial and gender identities, also had some controversy with its text generation tool leading to some offensive and problematic

output. Jason, this is a new tool. I think we can zoom in on the Gemini-specific part of the story, but we can talk broadly here about generative AI. Do you feel like some of these headlines and some of the instances that we're seeing out here are just the growing pains that you'd expect to see with the new technology? To an extent, yes. Anytime a new technology like this is introduced, you have to go into it understanding it's going to take a long time to develop. You have to learn, essentially, the true use cases for it and how it's going to make us and society better. You have to expect some growing pains. Now, with that said, I would be concerned. This was a real eye-opener. Some of the stuff that this thing was spitting

that was laughable. I mean, it was really just totally off the wall. And so, we know that a lot of these large language models suffer from hallucinations, right? Spitting out wrong information. And I think with AI, one of the ideas behind it, it's supposed to make our lives more efficient. We can get work done more quickly. Things will be more accurate. We're not quite there yet, right? And we have a society, generally speaking, that's still somewhat skeptical of this. There's Pew Research. I've quoted this several months back. There's Pew Research overall that says that 52% of Americans are more concerned than excited about the increased use of artificial intelligence. Just 10% say they're more excited than concerned. And 36% say they're sort of a

mix of emotions right now. I don't think things like this help people feel more excited. No. No, not at all. So, there is that problem, right, in sort of winning the people over, so to speak. But then for Google, for Alphabet specifically, I think this becomes a bigger issue. I think probably all of us here at this table would agree that Google is seen as the laggard in AI right now, a company that has not quite kept up with the others in the space. There is some reputational risk that comes with this. These types of errors, these types of mistakes, it can run the risk of sending people fleeing and never wanting to come back. Yeah. Jason, this is not the first misstep we've

seen, a fairly high-profile misstep we've seen from Google's AI ambitions. They put out what was a fairly impressive demo of their AI results. I think that was as they were transitioning Bard over to Gemini. We later found out that demo was somewhat faked or edited a little bit so that the experience was cleaner, which led to a lot of controversy. It seems like not only are they a laggard in the space, but I look at the businesses of big tech, and I think they are probably one of the companies that most needs to be getting things right in this zone. It feels that way. And I tell you, it really speaks to, I think, the human element that's involved with all of this. This is all something that is ultimately born from

people building these machines, these models, and letting these models feed off themselves and learn from themselves. The big question that's floating around is Sundar Pichai, the guy to lead this company forward. He's absolutely on the hot seat here. There are questions of Google and Alphabet's culture. Is this something that he can fix? That question, I think, will remain for some time to come. I mean, I really wouldn't be surprised. They went from Bard, rebranded it Gemini. I really feel like they're going to have to rebrand from Gemini. I mean, they really, really tarnished that name Gemini. Because I think for most people now, when they see Gemini, they hear that word, they see that brand, their mind's not going to a good

place. It's just really difficult to get that back. It's not to say they can't, but they were already behind. It's really going to take a lot of work to get back to where they need to be. All right, our final AI-ish story this week. After over a decade of work, Apple is ending its vehicle ambitions. Those working on the company's very secretive Project Titan initiative will be shifted over to Apple's AI division. Jason, this is kind of an AI story. It's also kind of a car story. Why don't we take the car angle here first? Are you surprised that we never got to see an Apple car? Not really. I mean, it always kind of stood out to me as a little bit odd that they would really do that. But then, I mean, it's

Apple. This is one of the most important businesses in the world. They should be trying this stuff. And if they tried it and felt like the juice wasn't worth the squeeze, then I credit them for going ahead and just backing out. Now, the one question I posed earlier in the week, because I think this is an interesting way to look at this. We've seen recently how EVs are under fire. Hybrids are getting a little bit more of the headline share right now. and gas guzzlers are on the rise as well. How does a headline like this make Tesla shareholders feel? How does this make Elon Musk feel? Of course, some would say, hey, this is great. That's one less competitor in the space. The flip side of that is, Apple's looking at that and saying,

hey, maybe this just really isn't worth our time and money because they feel like that EV opportunity is somewhat capped, at least in the near term. I don't know the answer to that. But generally speaking, I think this makes a lot of sense. It just doesn't feel like it was something that was really in Apple's core proficiency. I'm having trouble buying the argument that Apple was too far behind. You're seeing that argument out there. They're too far behind to really design a great EV. Were they too far behind BlackBerry or Nokia when they came out with the iPhone 15, 16 years ago?

I just think they might have looked a little bit at the landscape. Competition from China, in the long run, extremely hard to compete against, with the low-cost manufacturers that they have in that country. It's also, a little bit to Jason's point, the infrastructure out there for EVs is very poor right now. I know this as an EV owner. Try to do a road trip in the winter that's more than four hours. Good luck. I think Apple might have said, we could design a great car, it's just not the right landscape right now.

The environment's not going to fit the quality of the car that we want to bring to the market. Jason, very few companies could afford to spend about a decade and $10 billion on a project that never winds up going anywhere. Was the car part of any of the Apple thesis for you in your head? No, never was. Honestly, $10 billion for a company like that? How much did Zuckerberg spend on Metaverse? He's still spending that. I think we're all still asking questions as to whether that's actually going to be worth it. If you have Apple throwing out the Vision Pro there, which is raising a lot of questions right now, and they follow that up with a car,

then all of a sudden, maybe you've got a disturbing trend where this company that's been changing our lives for so long, now, I mean, maybe they're on this sort of losing streak, and I know they don't want to be on that. So, yeah, it feels like this was the right call. So, you appreciate the discipline there? No question. All right. Coming up after the break, we've got an earnings rundown and a new buzzword in tech. Stay right here. This is Motley Fool Money. you just found out that your sales team is at risk of missing quota don't panic just ask rippling ai since it's built on your real-time people and business data rippling ai can pull metrics from

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your entire organization. That's R-I-P-P-L-I-N-G dot A-I slash F-O-O-L. Sign up for exclusive access today, rippling.ai slash fool. Welcome back to Motley Fool Money. I'm Dylan Lewis, joined in studio by Matt Argersinger and Jason Moser. The beat is on for earnings season. We've got updates from Okta, Axon, and Salesforce to run through. Jason, let's start with Axon. A great week for the company. And might I add, my portfolio shares up 13% after the body camera and taser maker posted earnings. Strong results from the company, and it seems like the good times just continue for Axon. I feel like, well, all three are shareholders here. Absolutely.

I think they're going to be changing their mission from to protect life to protect life and portfolios, because they clearly are doing a very good job at both. This is a company that just continues to fire on all cylinders, they say. Revenue, $432 million. Exceeded their own expectations up close to 29% from a year ago. Really driven by strong demand across all product categories. The cloud software continues to really perform. You look at net revenue retention, 122%. They do such a good job of keeping their customers and upselling, innovating new devices and whatnot. Ultimately, we saw non-GAAP earnings per share $1.12 up from $0.70 a year ago. And annual recurring revenue grew 47% from a year to $697 million.

Again, driven by that Axon Cloud software growth. Jason, the stock is now at all-time high. Shares are up, I think, more than fivefold over the last five years. I've enjoyed that climb. You mentioned the cloud segment, That has been a really big part of what's been pushing this company forward. Do you feel like there's still plenty of growth ahead? I do. Once they get those devices out there, the cloud and services revenue is what keeps their customers locked in there. We saw that revenue growth of 44% for the quarter really just demonstrates that. I think ultimately, they're guiding for 20% plus top-line growth

here for the foreseeable future based on that installed base and the innovations they continue to make on that software side. Along the way, with a couple of little bolt-on acquisitions, they've now raised their total addressable market from $50 billion to $63 billion. With a company that's really just generating a couple of billion dollars of revenue right now, you can see the opportunity that's out there. I just don't think that need for public safety is going to go anywhere anytime soon. Matt, before the break, I teased, we've got a new buzzword in tech. It popped up in Salesforce's quarterly update, and that's dividend! Yes! Salesforce is not a business

I follow closely. Just looking at the results first, I'm really impressed by the operating leverage in this business. 11% revenue growth turns into 51% operating profit growth. Pretty impressive. Even though top-line growth is expected to slow this fiscal year to 9%, they're still targeting a 45% increase in earnings per share. But you said the word, dividends, which of of course, got me excited. So, yeah, Salesforce is going to pay its first dividend, $0.40 per share per quarter. This, of course, follows in the footsteps of meta platforms. Dividends are apparently the new hotness in Silicon Valley, and I like it. What I don't like, though, guys, is the fact that more often than not, these dividend announcements, these dividend initiations

are in conjunction with, or even second fiddle, really, to big new buybacks. To use Salesforce as an example, they just announced a $10 billion increase in their repurchases. Last year, the company spent $7.6 billion buying back their stock. Guess what happened to Salesforce's diluted share count? It went from $984 million a year ago to $983 million at the end of last quarter. What is that, 0.01% maybe? Slight reduction. Yeah, in the count. Like most big tech and software companies, they're spending billions of dollars just to offset the dilution from new stock issuance. I just think, especially at these valuations today, to be doing these buybacks. I mean, crying out loud, NVIDIA is

doing buybacks. And so, I love the dividend part. I just wish less was being spent on buybacks, more on the dividend. Focus on cost-cutting and taking away a lot of that dilutive share issuance. And yeah, just pay more dividends. Jason, as Matt mentioned, Salesforce following in the footsteps of Meta initiating a dividend. Do you think we might see more big tech companies, maybe companies that hadn't considered dividend policies in the past, start to think twice about that? We've been talking for a while about Alphabet possibly doing something like this. Given their recent missteps, I've got to believe that's probably not the No. 1 priority right now. Alphabet's one with the same thing. They issue so

many shares. The buybacks just are not bringing that countdown like we'd like to see. And to top it all off, no dividend. With a company that generates this kind of cash with that kind of balance sheet, it feels like a great opportunity to do it. It would change the narrative right now, which they could use. We're seeing, obviously, Berkshire Hathaway, same argument, obviously, much, much different company. But it does feel like these big companies are a little bit more under fire right now to return a little bit more to shareholders. All right, we'll wrap our earnings rundown with a look at Okta. Shares up 20% after the security and identity management company reported. This was a business that had some bad news a little

while ago, Jason, but it seems like they've been able to shift the narrative and get back on track. Yeah, this was really a nice bounce-back quarter for the company. They've been dealing with some headwinds here over the last several months. A recent security breach that I'm sure most people know about. It left a few questions out there. But it seems like they've gotten back down brass tacks, starting to win back the trust. My philosophy with these types of companies, it's not if there is some sort of security breach, it's a matter of when, and then it's a matter of how they handle it and what lessons they learn from recovery. Let's hope that they've taken away some good lessons and they've recovered nicely from this.

it seems like, based on the metrics, that things are going in the right direction. Subscription revenue was up 20% to $591 million. Remaining performance obligations grew 13%. The balance sheet remains in terrific shape. Some of the other metrics that grew total customers to 18,950. That's up from 17,600 a year ago. I will say, to be fair, customer acquisition right now, that's something that slowed them down a little bit. Management is tweaking their go-to-market model a little bit. It gives teams a little bit more specific focus on either acquisition or upsell. I think there's an opportunity there based on the model there. There's a 111% in dollar-based net retention rate, down not surprisingly

from 120% a year ago, as enterprises out there continue to be very mindful of their spending. But Okta really is one of those mission-critical style businesses. Once companies start using and then they expand that identity protection portfolio of services, it becomes a little bit more difficult to extract yourself from that. Customers tend to stick with them for a while. That's as a service at its best, right? There you go. We are most of the way through earnings season. We still have some companies coming up. Matt, I'm curious, any surprises or anything you're still looking forward to this season? Not really. Overall, I think it's been a pretty strong earnings season, I have to say.

I would point to some of the REITs that I tend to talk about on this show, just having done really, really well and still trading for just incredibly low valuations. So, if you're looking for opportunities of stocks that haven't really bounced, you want to check that out. Alright, Matt Argersinger, Jason Moser, fellows, we're going to see you guys a little bit later in the show. Up next, we've got to dive into the world of pharma and patent cliffs. Stay right here. You're listening to Motley Fool Money. Looks away again

Right through my fingers Back into my heart Let's out of reach And it's in the dark Sometimes I think I'm blind Or maybe just bad eyes Because the plot Begins every day

And the pieces of my body Keep crumbling away Welcome back to Motley Fool Money. I'm Dylan Lewis. Over the past few years, the pharma industry has been front and center, bringing incredible innovations to market at warp speed. But if you're interested in buying pharma stocks, there's a lot to learn. In this week's interview segment, Motley Fool Money's Deidre Woollard caught up with analyst Carl Thiel about the role of patents in pharmaceuticals and the dreaded patent cliff looming for roughly 200 big-time drugs over the next decade. In simple terms, as I understand it,

PatentCliff is simply when the value of a drug that a company develops plummets when it goes off patent. But I understand that that's kind of a simplification. So tell us a little bit more about how patents work in the pharmaceutical space. Well, no, I mean, that's not a simplification. That's absolutely what it is. I mean, drugs are protected by patents. In some ways, the drug industry is the poster child for why patents exist, right? They take on, they spend, you know, sometimes well over a billion dollars to develop a drug. It takes, you know, over a decade to do it. And so, in order to take on that risk, they are rewarded with exclusivity. Nobody can compete with that specific drug for a

period of time. That period of time is 20 years. That's how it's been since 1994. It has changed over the decades, but you get 20 years of exclusivity from when you file your patent. And after that, generics can enter. And the benefit for society then is that the price of that drug should plummet. It should become very affordable to everybody. Well, it's interesting because there's examples of like Pfizer and Lipitor is the big example. Like in 2011, the sales fell by over 80%. But is it always a cliff like that where they sell right up until the date and then it just falls off like that?

Well, they will absolutely sell up until the date. they will get every dollar that they can out of the drug while it's exclusive. And then, yeah, is it always a cliff? That's a really, really interesting question. And it's going to become increasingly relevant in the next half decade or so. There's different kinds of drugs out there. And you talked about Lipitor, which is a drug that a lot of people are familiar with. You know, it's a pill. It's what's called in the industry a small molecule, which means that you, you know, it's got a relatively simple chemical structure that should be something that another company can formulate and make essentially exactly the same way as the original company. And so you get

a generic version. Generic Lipitor should be exactly identical to the Lipitor Pfizer made. They should be interchangeable products. And for that reason, when it suddenly becomes available and cheaper, prices tend to plummet. It's not unusual for an innovator drug to lose 80%, 90% of its market share, often quite quickly. I think Lipitor lost 70% of its markets within the first six months. And they were considered quite innovative at the time for all the things they did to protect that market. But that's how it went. What's different is that a lot of drugs these days are biologicals. They're sort of the fruits of the biotech industry. And they are things like monoclonal antibodies and peptide drugs and cell therapies and things that are

very, very difficult to manufacture. And if you look at the chemical structure of them, they're insanely complicated. They're not drugs that you sort of whip up in a chemistry lab. They're drugs that you grow in a vat. And something like a monoclonal antibody is this huge, huge molecule with all these amino acids wrapped up in a certain way. And those amino and amino acids get decorated with little sugars on the outside in a process called glycosylation. The upshot is that you can never guarantee that anyone else can make a product that is identical to that. So that's why when a quote-unquote generic biologic doesn't exist, they're called biosimilars. And they're called biosimilars because they are presumed to be similar to the

original product, but they're not the same. And because of that, the market's just developed a little bit differently. One thing is that you can't just say, look, our chemical is the same as this chemical, so let us sell it. You have to do some level of clinical studies to at least show that the pharmacokinetics and pharmacodynamics, as it's known, are similar to your drug, that your drug acts like the other drug. You have to do some studies. And so what you end up having is much fewer competitors and often not quite as much of a price decrease. And so, that is a big difference with what a patent class. So, biosimilars have been with us since 2009. We're about 15 years into it since the Affordable Care Act first introduced the mechanism. And for a lot of the

history, biosimilars have not caught on all that much. You've tended to have the original innovator still keep a lot of their market. You haven't seen prices come down as much as you expect. But that may be starting to change, and that's going to be critical in the next few years. Interesting. Okay. So, as I understand it, if I'm making a drug like Lipitor and I just want to make a generic, it's relatively easy. But if I want to make a duplicate of a biosimilar, it's much more complicated. Now, do they have to go through, you mentioned the studies, do they have to go through a separate kind of FDA approval, or is it because it's already approved, they don't they can sort of circumvent that process it's it's a truncated process it's it's

much easier than creating a drug from scratch because you're you know it's already been proven that this particular approach will work and that's all been done in clinical trials you can reference the innovator company's data but you do have to do some level of clinical work to prove that your drug is in fact acting like the original one so it is it is a little bit more complicated And part of the reason this is so important is if you look at a list of the top-selling drugs in the world right now, they are dominated by biologics. I mean, a few of them are small molecules, but they are dominated by biologics. So, people talk about a patent cliff. So, there is a big one coming up. Between now and 2030, there's going to be something like 190

blockbuster drugs that are going to lose their exclusivity. And they represent something like $236 billion in sales, I think somebody calculated. So it's enormous, but a lot of them are biologics. And in order for this all kind of to work for society, we need to have the process work, have these biosimilars come along and have them actually be adopted and actually drive down prices for people. That's the idea behind this. So we'll see what will happen. Well, it's interesting because it sounds like with the previous process, with just a single molecule, a single drug, doctors are going to feel confident. They're going to prescribe the generic. Why not? And that's sort of how things work. In this case, do you think that, is there

going to be any concern about those biosimilars? How will that work? Or do we really not know at this point? I don't really think there's... The biosimilars that have been approved, I mean, I think they're faithful. I think they should work just like the innovator drugs. And I think most prescribers are probably comfortable with that. It's always possible that there is some individual out there who has some sensitivity to something. That's not the reason. Here, so I'll tell you something, Deidre. Okay. Humira, top-selling drug in the world, $21 billion in sales in 2023, just had a biosimilar launched. Beginning of 2023, it had a biosimilar launch. Sorry, it peaked sales in 2022. Anyway, Amgen had the first biosimilar on the market. They

launched two versions of it. One was priced at a 55% discount to AbbVie's price for Humira, and the other one was priced at a 5% discount. Which one do you think was more popular? I would assume everyone's going for that 55%. Right. It was the 5% one that tended to be more popular because of the way that these things get paid for. Usually, these drugs go through pharmacy benefit managers, PBMs. PBMs can negotiate a bigger discount if they take the 5% discounted version and then negotiate a big discount on top of that and then pocket part of that. There's a lot of very strange parts of how our healthcare system works. A lot of it was some problem that came up 20 years ago, and somebody solved it by sticking a piece of

chewing gum there, and now there's more wads of gum here and there. It's a very kludgy system that often defies all sorts of logic, but that's one part of it. I think that's a reason. I'm not saying that's the only reason, but that is a reason that biosimilars have been somewhat slow to catch on. You know, often on the face of it, you're like, this isn't even much of a discount. Well, and when we were talking before the show, you mentioned that it may not be just one patent, but that there's all these different patents that can go into a particular drug, which sounds like it makes determining when this clip is a little more complicated. So there's different kinds of patents, yeah. There isn't almost ever a single patent that rules the fate of a major drug.

You know, when a company realizes that it has a successful drug on their hand, they're going to do everything they can to protect it. And so, the sort of the rock of Gibraltar is what's called the composition of matter patent, which is the patent that says, we've invented this chemical, it never existed before, you know, this is plainly our invention, and that's the patent. And those are very seldom would anybody even try to get around that patent. You just wait for it to run out. But there are lots of other ways to patent a drug and to try to extend that life a little bit. Yeah, so you'll often find that in what's called the FDA Orange Book, which collects all these things, there can be hundreds of patents on a single product.

And so there will be an argument. So when a drug actually goes generic, so for instance, the drug Eloquus is one that's coming up. This is a drug that's an anticoagulant drug. It's used for things like AFib and stuff like that. I believe their original patent expired in 2023, but they got it extended by the patent office because you can do that in certain circumstances. That's one strategy you can use. They got it extended because you can argue that we filed it, but you took too long to issue it, we lost time there. Or you can say, FDA took too long to review the drug, we lost time there. So you can sometimes argue with the patent office to extend it. They extended it to 2026.

But then you start this legal battle in which you say, look, that's that patent, but we have a whole bunch of other patents that we think protected out to X date. And you start fighting it out in court. And usually what will happen is the generic manufacturers will settle and they'll come to some date where they say, okay, we all agree you can launch on this date. That way, we don't really have to determine whether these other patents are going to be enough to protect it or not. And with Eloquence, that happens to be April of 2028, which is when generics will launch. But you can argue that that's five years too late. Interesting. My mother takes Eloquence, so I'm particularly interested in that one.

So, you mentioned that that's one way to sort of extend the patent cliff. And it seems like there's other strategies. I know one of the things like some companies, they don't want to be in an area where there's going to be a lot of that generic competition. So they focus on certain diseases, maybe with a smaller market. Some of them, they try to put out like another drug almost to piggyback so that they don't lose that, you know, lose that revenue. What other kinds of strategies do you see in play there? Ideally, what a company tries to do is it has a drug that works for a certain disease and they try to make a better one. And then everybody will switch to that, hopefully, because it's just a better drug. I would say a company like Gilead

Sciences, for instance, which is very much the leader in HIV treatment, has made its name in many ways about both improving drugs effectiveness, but also just improving the convenience. So that's one thing you might do is like, hey, you probably don't want to take a pill three times a day. You know, we've come up with a way to have just once a day pill. And that's, you know, and sometimes you can say, well, look, is the difference between some of these convenience factors such that, you know, this one should really be priced at, you know, 50 times this other one? But in fact, most people are, if you have insurance, you're often insulated from that. And if you don't, you're often sort of caught out by it.

So it's a very complex and interesting situation. But certainly, yeah, coming up with different ways of delivering drugs, coming up with next generation versions that work better or that maybe have fewer side effects, things like that are all, you know, certainly legitimate strategies to try to keep your leadership in an area. Motley Fool Money listeners, want more industry dives like this one? Let us know what you want to hear by shooting us a note at radio at fool.com. Coming up next, Matt Argersinger and Jason Moser return with a couple stocks on their radar.

Stay right here. You're listening to Motley Fool Money. As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Dylan Lewis, joined again by Matt Argersinger and Jason Moser. We're going to get over to our radar stocks in a minute, but first, it was an up-and-down week for surge pricing and restaurant chain Wendy's. The company announced plans to test dynamic pricing, which was met with swift blowback. They later clarified they would not be using the surge pricing we might be familiar with,

with Uber and some of the other ride-hailing companies, when demand is high, but instead might test offering discounts during slower times of the day for customers. Jason, do you think we'll see more businesses play with dynamic pricing? Probably. We probably will. They're clearly not the only company that's done that. We see ride-sharing, I think, is one that stands out, where surge pricing can really play into the model. It feels to me like with restaurants, particularly fast food restaurants, it's probably not the best idea. It just seems to add a level of complexity that creates a bad experience for everyone, from the employee to the customer. You're talking about Baconator arbitrage.

I might be willing to bet most people out there don't even know what I mean when I say that. But the fact of the matter, it makes for a less than optimal experience for everyone. When it comes to restaurants, there are just a million substitutes out there. My Uber shows up and I have to get somewhere, I'm kind of stuck, I have to take the ride, unless I want to wait another 30 minutes for a Lyft. And they're going to do the same thing to me, right? But with restaurants, I mean, you know, that's a little bit of a different story. You can just go across the street to the McDonald's or the Burger King and maybe get that free coffee. I guess if you're a customer who values his or her time, I think it makes sense.

Imagine, like, you're looking at your screen, you know, Starbucks might be an example. I get my morning and afternoon coffee at 2 o'clock. I see that there's high demand right now. The prices are high. I'm going to hold off a bit. Maybe get my coffee at 3 o'clock and watch the app. Oh, prices are going down. I'm buying my latte. I think there's something to it. As an economics major, I love it. Supply and demand, it really works. But from a customer experience, certain markets, I don't know that it creates the optimal experience. Their goal is to keep people coming back. Yeah, we'll see. Burger futures may be in our future. All right, let's get over to stocks on our radar. Our man behind the glass,

Dan Boyd, is going to hit you with a question. Matt, you're up first. What are you looking at? I am looking at eBay, ticker E-B-A-Y. A lot of investors presume that you have to have revenue growth for an investment to really work out. But I think there are cases like eBay where you simply get smart, shareholder-friendly capital allocation, things can work out. I mean, no one's stealing like eBay's growth. I mean, if you look at their most recent quarter, revenue was up just 2%, gross merchandise volume up just 2%. But gap earnings up 13.8%. And a big reason for that is buybacks. eBay made $1.6 billion in share purchases over the past year. And unlike Salesforce, they actually reduced their share count by almost 5%.

Over the last five years, eBay has reduced its share count by over 40%. And they raised their dividend, again, by 8%. And the stock price got a nice bump. And I think if eBay can just keep sales steady, keep its massive network of buyers and sellers, and keep allocating capital in shareholder-friendly ways, I think that it's an investment that could really work out. I'm a shareholder. Dan, a question about eBay.

So, Matty, you're a known comic book collector. I am. Do you ever use eBay? I use eBay all the time, Dan, buying and selling. I'm a big power user. It probably makes me biased. That's kind of the heyday of eBay in the 90s and early 2000s, collectibles. That was the market for it. All right, Jason, what's on your radar this week? Yeah, I've been digging a little bit more into Palo Alto Networks, ticker P-A-N-W. Palo Alto is a cybersecurity company focused on delivering value in four fundamental areas. It's network

security, cloud security, security operations, and then threat intelligence and security consulting. They really are one of the cybersecurity companies that offers the whole kit and caboodle, as they say. Now, I think it's interesting with the company. They recently reported earnings. The stock got shellacked. Management pulled back on guidance for the year. They cited in the call, I quote, spending fatigue. It's kind of like investments pricing, right? It's just spending fatigue. That raised some eyebrows. Again, it's not new news that enterprise customers are being more mindful of their spending. Cybersecurity is in a little bit of a different bucket, though, because that really is a non-negotiable. You have to have

it this day and age. It's a very competitive space. It was interesting to me also to see Zscaler's call, a competitor to a degree of Palo Alto, Zscaler pushing back on that spending fatigue comment, noting they're not really seeing such spending fatigue. And yet, Zscaler's stock just got pummeled on that earnings release as well. So, it could be a little bit of a downtime for these cybersecurity companies right now. And Palo Alto, $100 billion market cap company, one that's very important in the space. So, learning a little bit more about it and if it's got a spot in one of my services. Dan, a question about Palo Alto Networks. Yeah, Jason, what is Palo Alto Networks doing being headquartered in Santa Clara?

It is confusing, isn't it, Dan? We really need to straighten them out. I'd imagine it has something to do with taxes or some sort of little sweetener that a county or city gave them. Dan, which one's going on your list this week? I'm a big user of eBay, too. I love buying motorcycle parts from them. With Palo Alto being headquartered in a place that isn't Palo Alto, I don't know if I can accept that kind of inconsistency, Dylan. Dan doesn't like misrepresentation. All right, that's going to do it for this week's Motley Fool Money Radio Show. The show's mixed by Dan. I'm Dylan Lewis. Thanks for listening. We'll see you next time.