Motley Fool Hidden Gems Investing - The Race to $1 Trillion

Episode Date: November 3, 2017

Apple posts blowout earnings, pushing its market cap closer to the $1 trillion mark. Facebook shares record profits and plans to spend more on security. Starbucks closes the books on its online store and Tazo Tea. Ron Gross, Jason Moser and Matt Argersinger analyze the latest from MercadoLibre, Tesla, Under Armour, Activision Blizzard and more, and share a few stocks on their radar. Plus, Chris talks about the battle for the living room with NYU Professor Scott Galloway, author of The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google. To check out the latest from Motley Fool Wealth Management just go to http://Personal.Fool.com. Learn more about your ad choices. Visit megaphone.fm/adchoices

Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Chris Hill, and joining me in studio this week from Million Dollar Portfolio, Jason Moser and Matt Argesinger, and from Total Income, Ron Gross. Good to see you as always, gentlemen. It's earningspalooza. We've got the latest headlines from Wall Street, and as always, we'll give you an inside look at the stocks on our radar. But we begin with the biggest public company getting even bigger. Apple is closing in on a market cap of $900 billion

after a blowout fourth quarter. Revenue and profits coming in higher than expected, and guidance that their next quarter could be even bigger, Ron? You make this easy for me, Chris. Where do you want to begin? Profits up 24%. 46.7 million iPhones sold. Mac revenue up 25%. When I just have to say Mac revenue up 25%, China increased for the first time since 2016 up 12%. India up 39%. The watch, remember the watch, up 50%. The 8 and the 8 Plus became Apple's two top-selling products at launch. I don't think people were expecting that. The iPhone X, depending on how you read or think about it, is coming out this week, Friday. And there's a lot of expectations around them, especially

for management, who offered strong guidance and think the future looks bright. And you look at the coverage Friday morning, Jason, of just the launch. Tim Cook out there joining one of the lines of people lining up for the brand new phone. What do you mean, he couldn't get an inside track to get an early model? You'd think he'd be able to get one. No, I mean, I think it's always funny to me to see how granularly people look at these phone releases, right? Will the 8 sell more than the 10? What's the 10 going to do now that the 8's out there? I mean, at the end of the day, it's just, listen,

the iPhone sells a lot, period, whether it's the 8, 5, 10, whatever. So, to me, I think it's really interesting to consider the prospects for this company, now that they have so many different models out there. We know that Apple has a very strong presence here domestically. Globally speaking, it's always been the challenge there. Now, as they introduce more models of phones and can introduce more price points, I think that opens them up to a bigger market, potentially. We always talk about how hardware is a race to the bottom, and Apple's not immune to that either. I mean, their margins are coming down, but that's OK. They're also selling a phone for $1,000.

Precisely. And not only that, they are doing a great job in growing that services side of the business. And I think that, in looking at that opportunity, globally speaking, to get more iPhones into more people's hands, I think that really gives them a chance to boost that services revenue a lot, which is higher margin, really attractive stuff. Up 34% this quarter. Yeah, hard to pinpoint anything to criticize this quarter. Well, what's impressive is that Apple, despite our concerns for, I think, years, that the iPhone and Apple as a brand is still aspirational. People want it, and to Jason's

point, the demand internationally and China growing, it shows you that people want those products. Apple should probably hold onto that pricing power for longer than we think. This is one that in hindsight looks easy, and I know it's not. But at $100 a share, when we were saying this looks like a value investment and people should really be buying and here we are at $170, and it doesn't look like things are slowing down, and the stock is only 18 times right now earnings in a market that's 24 times. There's no no-brainers out there, but this was a good one. O' Anyone think that a company other than Apple hits the $1 trillion market cap?

Eventually, yes. First, no. At this point, I'm still stubborn on this. I think the last $100 billion is going be tough for Apple. I think Amazon can still sprint ahead, maybe even catch them. Facebook shares falling a bit despite third quarter revenue growing nearly 50% year over year. Profits up big, too, Matty, but Mark Zuckerberg's comments on the call scaring off at least a few investors. Well, they've been warning for a while that revenue growth was going to slow down, especially in the second half of 2017. We're still waiting for that. As you pointed out, the revenue is up almost 50%, 47% actually

in the third quarter. That's up from 45% growth in the second quarter. And then the operating margin expanded from 44% to 50%. There are a very few number of companies, let alone ones as big as Facebook, that can have a 50% operating margin and be growing as fast as they are, and so net profits were up huge. On the engagement level, daily active users up 16%, multi-active users up 16%. What I think they're concerned about, as you point out, is they're going to be stepping up investments, especially in 2018. And a lot of that's going to go to content, connectivity, AI, AR, VR stuff that they're doing. But a lot of it's going to go to the security stuff to ensure quality and abuse prevention. I think that's

going to be critical, especially when 2018 is an election year. Are we going to be talking about this in six months, nine months. I don't know. I mean, I'm glad they're taking these steps. I think it's important. I don't think Facebook is a company that understands its own influence and how big it can be. But, you know, and so that's a medium to long-term worry for them. But I don't know. The results are just so impressive that growth is really going to take care of a lot of these problems, I think. Well, and again, the investments that they're going to make, as you said, particularly in security, I think that's what has a few investors saying, well, the margins have got to come

down. Unless, of course, the ad platform in six to 12 months is even more robust, even a better experience for everyone involved, and therefore, Facebook has pricing power and the margins not only stay the same, but possibly even get better. It's possible. I mean, they've been warning about the ad load problem for months now, almost a year actually, and that hasn't been a problem. If you look at the advertising revenue they're pulling in, it's just so impressive. Starbucks' fourth quarter report was a lesson in looking beyond the headlines. Revenue it was down slightly, earnings per share was flat, but the stock up on Friday, Jason, and

among the things that I think were missed by the robots that were selling this stock just on the headlines was the fact that they basically had the same results in terms of revenue compared to a year ago. But a year ago, there was one more week in the quarter, so the results are a little bit better than expected. Yeah, and you'd sort of question why it went from down so much after I was trading to up. I mean, I just don't think the bots spotted the fact that they said laser focus on the call, Chris. I mean, these guys are laser focused. I mean, for me, listen, I know there are a lot of growth concerns out there regarding

Starbucks in relation to where the stock is. It's so big, and we're talking about building more Starbucks inside of Starbucks and whatnot. But I really do feel like this is an investment that virtually any investor can own today and feel comfortable holding for many years to come. I think the interesting news here, we know that they were selling off a lot of the Tivana brand stores, closing that stuff down. Now, it's really interesting to see that they're actually going to sell the Tazo brand, or Tazo, and really place all of their chips on Tivana. And I think that makes sense, really, because I think Tivana probably carries more brand equity today than Tazo Tea does. It's hard to point towards anything here where I have a question or concern.

I mean, food mix was over 21% for the fourth quarter, and they're on track to hit their goal of 25% by 2021. We always talk about the fact that they just don't really ever nail it on the food side. One question I guess I have, I mean, they're talking about this partnered Starbucks credit card, this Visa card. I guess that could be kind of cool, but I'm not sure it really is that big of a needle mover. I don't know that that really matters as much for them. I'm surprised to see they only have 13.3 million rewards program users domestically. It just strikes me that they should have a lot more if you figure they probably have a market opportunity here domestically. I don't know, 250 million people

that would be in their target? So, for me, I don't know that that's something that's really going to last. And just to give you some real-time data here, I snuck a poll out there on Twitter today, asking people the hard question. If you can only choose one, the Amazon Prime Visa or the Starbucks Visa, which one are you going with? 90% of 150 votes, mind you. 90% are going with Amazon. So, take that for what it's worth. For sure. You mentioned they sold off Tazo to Unilever for nearly $400 million. What are they doing with that money? They are using most of that money to reinvest in the Teavana brand. They are also

closing down their e-commerce operations and sinking some more of that money into investing with their channel partners. So, while you probably won't be able to get coffee from the Starbucks website anymore, I imagine they're going to come up with alternate ways to get it. I wonder if Starbucks, because it's under reformed over recent years, I wonder if it's gone under a little bit of a transition on the shareholder side. In other words, I think, go back several years, I think there was probably a lot of growth investors who were following Starbucks, looking at those 5% comps and looking at what they're going to do in China and elsewhere. And I wonder if it's transitioned a little to, hey, these

are investors who are looking for a steady business, looking for a growing dividend, a company that's going to spend $15 billion on shareholders, either dividends or buybacks for the next three years. And I feel like maybe it's undergoing that shareholder-based change and now it's probably set to succeed a little bit, at least on an investment level. I think that's an excellent point. And I use myself as an example. I've never owned this stock. I never thought about really doing it back in the day when it really was a growth story. I said, there's too many Starbucks, there can't be so many on each block. Obviously, I was completely wrong. But now, actually, I'm actually thinking about maybe getting

in and not thinking it's too late for the type of investment I'm looking for. Third quarter revenue for MercadoLibre rose 60%, much higher than analysts were expecting. Shares of the Latin American e-commerce giant up more than 10% on Friday. Matty, those fears of Amazon moving into Brazil, we can put those aside at least for one day. I think you can put those aside maybe for a little while now. As you mentioned, the Amazon threat and shares sold off after second quarter results because they missed earnings expectations, they ramped up their spending in free shipping initiatives, which hurt margins. But after this quarter, I'd say you can bet those investments are starting

to pay off. Units sold, which is what I use for currency-neutral revenue growth, a proxy, accelerated for the second consecutive quarter, growing 56% year-over-year. Unique buyers climbed 31% to 16.3 million. They added 10 million new customers, now over 200 million registered users. Payment transactions were higher. If you had any thoughts that Amazon was going to be a big competitive threat, and it certainly is, but just look at the Mexico segment for MercadoLibre. Amazon came into Mexico about two years ago. In Mexico, their units sold there have accelerated for eight consecutive quarters. Unique buyers are up 67%. And the purchase frequency among those buyers has nearly doubled over those

two years. And so, if investors are worried about Amazon coming into Brazil, look at Mexico. MercadoLibre's business in Mexico is as strong as it's ever been. I expect that to play out in Brazil as well. And even if Amazon becomes a big market share leader in Latin America, undoubtedly they will, I feel like MercadoLibre is still going to be a big player. Coming up, earningspalooza rolls on. Stay right here, you're listening to Motley Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Matt Argersinger, and Ron Gross. Tesla's third quarter report featured a loss of more than $600 million and production problems of its Model 3. For more on this, we turn

to the guy at the table who knows firsthand how long it takes to get a Model 3, Ron Gross. Oh, so rude. Chris, I'm a weird contradiction with this one. I own the stock, I have a deposit in for the Model 3, and yet I think the whole thing is completely ridiculous, especially from a ... You got a delay notice, right? Yes, I just got a delay notice that my Model 3 would ... I should think more 2019. That would be better, early 2019. As you said in the read-up, it's a Model 3 production delay, there are complications with the manufacturing process, specifically the Gigafactory was having trouble with their battery manufacturing process. So, Musk's very lofty goals, he's

very quick with the goals, seems to not be coming true. That pushes things out. And yet, the stock really doesn't get hit that much on these things, because if you're a believer in Musk and you're a believer in Tesla, you just are. But at a $50 billion market cap, with GM at a $60 billion market cap, and BMW at a $60 billion market cap, and Ford right in line at a $50 billion market cap, it doesn't make sense to me. Tesla is not going to be the only winner of the electric car business. Everyone is moving to electric cars. I don't see how the numbers can support the valuation. Well, and particularly if you want a new car, you know, soon. Shares of Under Armour are falling 25% this week after the

company's third quarter report featured the first sales decline as a public company, and on top of that, Jason, they cut guidance. Woof, woof. Man, I've seen better quarters out of the Cleveland Browns this year. Listen, I'm trying to find a light at the end of the tunnel here, and I'm just not seeing it right now, unfortunately. It is a strong brand, and perhaps that's it. The international business continues to perform well. But we put this on hold in MDP because of this quarter and a lot of red flags that we're seeing in the business right now. It's in a state of chaos. And I think Kevin Plank's leadership is being questioned, and I think that's a fair point. Internationally, they're

doing OK. But North America, they've run into a real buzzsaw in this massive retail shift. Their wholesale revenue is down 13%. You see all of this trouble with Sports Authority and Dick's Sporting Goods. The investments in direct-to-consumer are working out for them, and that's ultimately what's going to have to lead this business forward. But we are looking for some key points here in order to be able to hang onto this stock. We want to see that this new leadership team they have in place is still there a year from now. We want to see that they can really stanch the bleeding of this wholesale leak. And if they can really work on turning their balance sheet back into a source of strength, as opposed

to the weakness that it is due to some reckless spending, then I think there is a light at the end of this tunnel. But it's going to take a lot of time for them to get it straightened out, and I think a lot of patience from investors. It's remarkable to talk today about Kevin Plank as a liability, when I think years, we kind of said, oh, well, you buy Under Armour, you're buying Kevin Plank, he's an owner, a founder, CEO, he's great, he's going up against Nike, he's succeeding. And now it's kind of like, well, gosh, I hope the executive team around me can keep him alive.

It was a real dilemma when we batted this back and forth to add it in MDP, because we said just that, we were like, Plank is a tremendous asset, but he's also one of the top three risks in owning the shares, and that's certainly playing out on the company today. If you're negative Under Armour, are you positive Nike is just a matter of a rule? But we own both in the portfolio. I think that, clearly, Nike is a better-run business today. And I think that Plank made a lot of reckless investments in the name of growth, as opposed to making smart investments and letting growth be the byproduct of that. So, let's hope he can get that straightened out.

Activision Blizzard's third quarter report was a lot like other recent reports from the video game giant. Profits higher than expected, and they raised guidance. Shares actually down on Friday, Matty. Is that simply a valuation thing? Because 2017 has been a a great year for this stock. It's had such a great run. As you mentioned, they basically raised annual guidance almost every quarter this year. The results have been a bit lumpier this year because they had so many big releases last year. When big video games come out, it really shakes up the results. But I think they're going to finish the year strong because Call of Duty World War II actually comes out today. That's

always their big holiday release every year. They're going back to the World War II period, which is what made Call of Duty the big hit that it is. I think that's going to be huge. But overall, the business itself, 49 million active monthly users at Activision, 42 million at Blizzard, 293 million at King Digital, which is their candy crush. Those millions of users are spending an average of 50 minutes per day playing Activision games, which is a tremendous number. I'm really excited for 2018, because I think that's the year where esports is going to break out in North America. Activision is kicking that off in January with their Overwatch League. How is their marketing spend? You

mentioned the new version of Call of Duty, I've seen a lot of ads on TV for that one. Yeah, their marketing spend is always huge, but the value that they have, of course, is that these brands, these franchises have such huge followings. And so, I doubt they're spending a lot more than they do have in previous years. AutoNation's third quarter profits came in higher than expected. You tell me, Ron, is that why the stock was up 15% on Friday? No, I do not think so, because it was kind of a blah. It wasn't that good.

It was a block order. They beat estimates, but the adjusted profits were down 3%, and the adjustment is for the Hurricane Irma, which took about $8 million after-tax dollars off of the bottom line. And for the most part, it was a rather lackluster quarter. The reason the stock popped, I think, is that they announced a multi-year service agreement with Waymo, which is Google's autonomous car division. And AutoNation is going to provide long-term vehicle maintenance and repairs for Waymo's self-driving fleet. It remains to be seen how that translates, what level of revenue and income that translates to, but I think everyone got pretty excited that these traditional car dealerships are going

to have a place in the autonomous world. You know, Ron, since you're waiting on a new car, there is an AutoNation not too far from Fool HQ. We could hit that after the show if you want. So rude. Hit a man while he's down. I'm trying to help you. Tesla says they don't think people are going to cancel and ask for their refunds back, but I've got to admit, I'm thinking about it. I haven't pulled that trigger yet. A couple of weeks ago, I saw a story on MarketWatch about a secondary market opening up

where people are essentially selling their place in line at a profit. So, you plunk down $1,000, and you can sell that for $2,000, $3,000 to someone who wants your spot in line. Twitter me, rongross144. Let's talk. Alright, Jason Moser, Matt Argesinger, Ron Gross. guys. We'll see you later in the show. More earnings as Earnings Palooza rolls on. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. A couple of weeks ago on the show, I talked with Scott Galloway, professor at NYU's Stern

School of Business and author of the new bestseller, The Four, the hidden DNA of Amazon, Apple, Facebook, and Google. And we ended up talking for so long that we couldn't include everything in a single episode. So this week, we wanted to share the rest of that conversation, starting with Amazon's acquisition strategy. You predicted that Amazon was going to buy Whole Foods, and you've also said that the next logical acquisition in the retail space is Nordstrom. Why is that? So they now have license. Amazon's strategy, it appears, is to have really great intensity across the 60% of U.S. households that have a Prime membership. It's probably going to 70%.

In two to three years, it's likely that more people will have a relationship with Prime than they have cable television. Already more people have Prime than a landline phone. To get that sort of intensity, you need fluidity, and you can't be an episodic relationship. And the only way you can be in a consumer's household once or twice a week is with grocery. And now with the acquisition of Whole Foods, Amazon has licensed access and permission into the wealthiest refrigerators in America. However, they still don't have licensed permission or access to the wealthiest closets or medicine cabinets or beauty cabinets. They've had

trouble getting official distribution from luxury and fashion brands. And the acquisition of Nordstrom would give them that. Nordstrom is in Seattle. Nordstrom has outstanding locations. They have outstanding management and operations. It's a very well-run company. The X factor here is this is a family-controlled company, and these decisions are made over the Thanksgiving dinner table as opposed to in shareholder or board meetings. So you just don't know what could happen here. Most likely, it'll be a series of little acquisitions around the fulfillment side, and the dark horse for acquisitions from Amazon would be a Scripps or an AMC. I think Amazon is frustrated that despite having the second largest content budget in original TV, HBO still wins

more Emmys with about 40% of the original content budget. And Jeff Bezos doesn't strike me as someone who's, I think he's willing to make big bets. I wouldn't be surprised if they go after a couple of these cable stations to get from D to letters D to M really fast with content. And they can also pay a lot because they can monetize this content by selling paper towels in the household. So a lot of different things. I think in the next six to 12 months, they likely stay quiet and just digest whole foods. But there are some very interesting opportunities for Amazon. I want to move away from the four for a second and get your thoughts on a couple of other topics. And you mentioned Uber, and I'm curious about where you think Uber goes from here. Because as

you said a year ago, Uber was looking every bit like the next great dominant company and for investors, the next great potential stock. And that has obviously changed. Where do you think Uber is right now? And where is it going next? Yeah, so three or four years ago, I said publicly that I thought Uber was a huge threat to Amazon. And I was wrong. I thought Uber perhaps had sort It could be the artery or the circulatory system for last-mile delivery, and it could be turned into these flexible delivery trucks, and that just hasn't happened. Uber has probably lost $10 or $20, maybe $30 billion in value because of some of the cultural issues. And also the fact that, and I didn't recognize this a few years ago when I made this statement,

you and I could start a ride-hailing company with $20, $30, or $40 million in Los Angeles because we need the money to create awareness, but we can create demand and supply, and that is we can create drivers and we can create riders in one city. Whereas a company like Airbnb not only has to have local demand, it has to have local supply of apartments, it has to have global awareness and global demand because everyone descending on L.A. is from different parts of the world. So, for example, I would predict that Airbnb's value is going to surpass that of Uber's in the next 12 months because their moats are bigger. And if you look at Uber, what's become clear is their Amazon strategy of trying to spend everyone into the ground hasn't worked.

And both Lyft and other competitors, including Ola, have been able to kind of go toe-to-toe with Uber and are now punching in their weight class. What do they need to do? I think they're doing it. They've cleaned up their corporate governance. They've got a new CEO. And at the end of the day, the only way they're going to maintain the current valuation, which I believe is greater than Airbus, is they're going to have to become the operating system for travel. And that is you not only push on Uber to get a car from uptown to downtown,

but you push on Uber to get wherever it is you need to go, whether it's a car to the airport and then the plane to Minneapolis and then the hotel in Minneapolis. I think this company needs to become Expedia before Expedia becomes Uber. And I think the new CEO has a lot of experience with travel portals, but look for Uber to make some acquisitions in the travel portal space and try and become the operating system for all the travel. You've said that the new battlefront in business is the home and that no one has been able to really pull it all together. I have to say I'm a little surprised at given Google's acquisition of Nest and for all the talk of the smart home over the last few years that Google, among others, really hasn't been able to pull it all together. Is there a market leader right now? Is there a betting favorite for who is best positioned when it comes to the connected home?

yeah and the answer is the same across almost any sector if you said who's the who's the favorite it's amazon the the most exciting thing happening in the home is voice and about a third of all computing now is going to take place without a screen and the place where that's most obvious in terms of maybe being 50 of all computing will be without a screen is in the home and you're Right, no one brand has really locked it up. But Amazon's Alexa is now kicking the crap out of Siri in full view of everyone else. It's sort of leapfrogged Siri, which still has market share from a total installed base because of the iPhone. But in the home, Alexa now has a 70% market share of voice in the home.

So the comfort with voice and with the operating system, I just got an Amazon show, and it's just incredible. The odds-on favorite right now, I would say, are Amazon. Who would have thought two or three years ago that the hardware innovation of 2016 and 2017 wouldn't be the Apple Watch or the Apple Pods, but it would be Amazon's Echo? So the odds-on favorite here is Amazon, but there's a lot of companies that could pull it off. Samsung is potentially a dark horse here. Google, you never want to count Google out of anything.

But right now, and Apple, everybody wants an Apple logo on everything they own. But right now, it looks like Amazon has the most momentum. 20 years ago, there were about 10,000 public companies, and today that number is down to about 6,600. You took a company public. What's the best part about being a public company, and what's the worst part? Gosh, that's a really interesting company. I can name a lot of the worst part. the best part you know it's if you're an entrepreneur having a company go public is

very gratifying it's it's it's great to see employees and investors get some liquidity it's nice to have potentially the currency to go acquire companies but you can understand why as as you uh joyfully pointed out the two-thirds of public companies are no longer around because the Private markets now have liquidity, and the reporting requirements and sort of the vagaries of the market or the short-term pressure of the markets make it more tempting to stay private longer and longer. And unfortunately, this creates an environment where retail investors can't participate in some of the most interesting and exciting companies. But, yeah, I don't have any desire to take another company public once. That was my first and last time starting a company that gets taken public would be my guess. Your day job is being a professor. How are your students feeling these days

about the economy and their ability to just make their mark in the world? So if you have the right skills, if you're a talented kid who gets a degree from a credential from a good university, and kids who graduate from the top 20 business schools have both those things, are really well set. They're outstanding. And this has never been a better time to be outstanding. But it's never been a worse time just to be average or good. So those kids I don't worry about. It's the kid coming out from not a top 20 school but a top 100 school that maybe has a little bit of debt that these technology or new economy companies don't recruit at

and that maybe comes out of school with debt and doesn't have access to this sort of innovation economy. That's the scary part. My observation of this economy is it's never been easier to be a billionaire. I do believe there's some kids in my class every year that are going to become billionaires likely through alternative investments or hedge funds or getting very lucky in a tech startup. But at the same time, it's never been harder to be a millionaire. And that is just a solid citizen who gets a good job, goes to a decent university, gets a good job, plays by the rules, and expects at some point in their life to be a millionaire. I think that's getting harder and harder.

The rewards for being outstanding are immense. The rewards for being average or good have not been this bad in a while. Beyond the books, beyond your curriculum, what are you trying to impart to them? So I think to understand, the first year of business school is outstanding in the sense that we take human capital to make $50,000 or $60,000 a year, and we turn it into human capital to make $100,000 a year by inculcating them in finance, operations, management, and marketing. And the second year is largely there so we can fulfill the teaching requirements of tenured faculty and charge them $120,000 in tuition versus $60,000. I think if we were going to be true to ourselves in terms of adding the same amount of value we had the first year or adding the same amount

of value the second year as we do the first year, I think we would steep these kids in a deep understanding of the businesses, the evolutionary anthropology benefit of these four companies, how they've dominated, what the complexion of their business activities are. But to really understand these four companies is to understand the intersection between technology, media, retail, information services. So what I'm hoping to accomplish with this book is the same thing I'm hoping to accomplish with my class. I hope the people who read it feel as if they or their kid have a slight economic edge over the competition and have an easier time creating economic security for them and their families. The book is The Four,

the hidden DNA of Amazon, Apple, Facebook, and Google. It is available everywhere you find books. Scott Galloway, thank you so much for being here. Scott Galloway Thank you. Thanks for your time. Coming up, we'll give you an inside look at the stocks on our radar. Stay right here, 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 in studio once again with Jason Moser, Matt Argersinger,

and Ron Gross. Before we get to the stocks on our radar, more earnings, guys. Third quarter revenue for Wayfair grew nearly 40%, but shares of the online home goods retailer down this week. They're in growth mode, Jason, and the stock has had a great year. I'm just wondering if they're getting a little too frothy for some investors. Well, generally speaking, I think this business continues to do very well. You keyed in there on the revenue growth. And I think all of the metrics that really matter are moving in the right direction. But there are three problems as I see it today. These guys are still not profitable, they're not cash flow positive, and they're not Amazon.

If they were one of those three, the market probably gives them a little bit more credit. But with that said, let's look at the bright side here, because I think there's a lot to unpack that gross margin held the line versus a year ago, which is important, I think, because the cost of goods includes that shipping and fulfillment, which is really what these guys have to spend so much on year in and year out. And again, percentage of orders from repeat customers continues to grow. It's now 61% versus around 56.5% a year ago. So, again, I think it's a good business. It's going to take some time and some investment and some patience. But I think another encouraging sign is they have millennials really starting to enter that key demographic

customer that they focus on, that 35 to 60, 65-year-old homeowner, or it can be a renter for all that matter as well. And I think that's going to resonate with a lot of these consumers that have been raised in this e-commerce age. So, there are a lot of tailwinds here. I think they're witnessing some success on the wedding registry front. And all in all, it's a good business. I like what they're doing. I would not bet against these guys. I think they have a great perspective in trying to build out something that lasts. Have they given any guidance on when they think they will be profitable, or do you as an analyst have any expectation of, hey, it's got to be by this point in time, or they're

really going to be in trouble? I think that they're going to continue to string this along as long as the market will let it. I mean, it sold off after earnings, it recovered a little bit the next day. I think the market still gives these guys a lot of credit, because the bottom line, those numbers, the sales numbers, the customers that are ordering, that all tells the tale. This is a business that's growing. A lot of people are using the platform. The pizza wars are heating up. On Wednesday, Papa John's reported third-quarter results, lowered guidance, and blamed the NFL for their struggles. Founder and CEO John Schnatter

said the NFL and its leadership hurt the company by not resolving the player protests that have been taking place during the national anthem. On Thursday, Yum! Brand's third-quarter report featured strong results from Pizza Hut, and when analysts asked, Pizza Hut executives said the NFL is having no impact on their sales. I was fascinated to watch this little drama play out, in part because I just felt like Papa John's was kind of getting ahead of themselves. It seemed like a not very great excuse. Put the politics of the issue aside. I just don't know why they would come out and say that, because we're not talking about that many days in the quarter.

I think they need to be careful of not to see they're not seeing the bigger picture and the bigger picture is that they've tied their wagon to the NFL for the last seven years as the official pizza of the NFL and viewership is down and viewership is not down because of this controversy here it's down for many reasons among them being that we're all watching TV differently nowadays nowadays TV viewership in general is down and if that's who their wagon is tied to they need to rethink their marketing campaign or they're going to continue to suffer We're also living in the age of Grubhub, too. I mean, you can have anything delivered at this point. It's not just pizza anymore. I think that's playing out on not only Papa John's, but Domino's Pizza, all of them. I was just going to say, Domino's seems to have no trouble putting up comps of, I don't know, 8% or higher, quarter after quarter. So, real quick, before we get to the stocks on our radar, what is your go-to pizza, Jason? You know, at the end of the day, I think you've got to keep it simple.

We don't need to go through topics. You got to go with the Neapolitan margarita. Just sauce, some buffalo mozzarella, some basil, and let it rot. Matty? I like Canadian bacon, but it's hard to find now and then. Really? Oh, yeah. I'm all in Canadian bacon. What's wrong with regular bacon?

There's something about Canadian bacon. Yeah? I don't know. Saltiness? Isn't that Canadian ham? It's like sharp ham. Crusty ham. It's like ham on steroids, but not steroids. I get what he's saying. I'm perplexed by what appears to be a lack of Canadian bacon in America. I don't know. I can't find it. That seems like an

opportunity for someone. Ron Gross? I'm a New Yorker, man. Give me the pepperoni. All right. And you make it yourself, right? You hand it to the kitchen. You know, we always say on this show that we can't offer personal advice, and that's because we can't. But here's the good news. Our friends at Motley Fool Wealth Management, they actually can offer personal advice. So if you're interested in more details on that, just go to personal.fool.com. That's personal.fool.com, and check out our friends at Motley Fool Wealth Management. Let's get to the stocks on our radar. Jason Moser, you're up first. What are you looking at this week? Yeah, dipping into the war on cash basket this earnings season. Square, ticker SQ,

earnings are up for next Friday. And these guys are actually really performing very well. Not only are they growing a compelling business on the transaction side of the equation, but I like what they're doing in using all of their data to provide small business loans through the Square Capital wing of the business. Last quarter, the loan volumes were 68% there, and Jack Dorsey, I think, is dead set on growing that part of the business. Having worked at a bank and having originated a few small business administration loans, it was like pulling teeth process. Really, Square is simplifying that immensely, and I like that. I like what the company's doing. I like what they stand for. I love that space. And so, I'm really going to be

interested to see how their core is going, how they see the 2018 year coming. Ron Gross, what are you looking at? I wish Steve was here, because I'm going back to Titan International, TWI. I've talked about this industrial wheel manufacturer time and time again, but it looks like this cycle may finally have turned. This week's earnings report showed third consecutive quarter of year-over-year growth. top line was up 21%. All segments up year over year on higher volume. Shares popped 15% on strong guidance for 2018. EBITDA going to increase 50% to 100% in 2018. Don't let the pop scare you. Plenty of upside left. Yeah, Steve was-

He made a little fun of me. A little fun of you. A little shot. Last time around, Matt Argersinger, what are you looking at this week? I'm starting to sound like a homer on this one, but I'm sticking with MercadoLibre, M-E-L-I. Even with the pop? Even with the pop, especially with the pop. The Amazon threat is certainly real, but I think you have real evidence this quarter that MercadoLibre's business has great sustainable competitive advantages. The investments they're making in shipping, customer loyalty, payments, it's really creating this sticky ecosystem for a lot of their users.

Look, you have a $12 billion company that, no matter what, is going to have a significant share of Latin America's e-commerce. It's going to be a much bigger company in the future, no doubt. And the ticker symbol? Oh, sorry, M-E-L-I. Yeah, it's a good point. They're in first right now, but they don't have to end up in first. They can be second and still do well. Yeah, still be huge. Alright, Jason Moser, Matt Argersinger, Ron Gross, guys, thanks so much for being

here. Thank you, Chris. That's going to do it for this week's edition of Motley Fool Money. Our engineer is Steve Broido, our producer is Matt Greer, Rick Engdahl helping us out behind the glass this week. I'm Chris Hill, thanks for listening, we'll see you next week.