Motley Fool Hidden Gems Investing - We Didn’t See That Coming from Airlines

Episode Date: March 17, 2026

Just when you think you have a handle on how a company will react to rising oil prices, Delta Airlines goes and flips the idea on its head. Even though the industry could be facing significant increases in fuel prices, the carrier gave shocking rosy earnings projections at a recent industry event. Plus, Mastercard’s foray into stablecoins and a sample of stories we’re watching Tyler Crowe, Matt Frankel, and Lou Whiteman discuss: - Delta’s rosy outlook - The changes in the airline industry - Mastercard’s bet to become a crypto payments company - The wall between fintech and traditional finance crumbling - Bye bye, quarterly filings - NVIDIA’s $1 trillion projection - Who’s gonna insure that data center? Companies discussed: DAL, AAL, LUV, UAL, BA, MA, V, COF, SOFI, JPM, BAC, TFC, RFC, PNC, NVDA, META, GOOG, AMZN Host: Tyler Crowe Guests: Matt Frankel, Lou Whiteman Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices⁠⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

A guidance raise in the most unexpected place. This is Motley Fool Money. Welcome to Motley Fool Money. I'm Tyler Crowe, and today I'm joined by longtime Fool contributors, Matt Frankel and Lou Whiteman. On today's show, we're going to look at how the lines between the old guard of finance and fintech companies are getting blurrier by the day, and we'll follow up that with some stories each of us are following as we conclude here. But first, Matt, Lou, I think it's fair to say that the market has reacted with a lot

of volatility, but I think rather predictable results with every Iran, Middle East news story coming out there. a ship goes through, prices go down, port gets blown up, prices go up. I'm pretty on track here, right, Lou? Yeah. I mean, look, I think it's as you'd expect, but I am surprised at the micro-movement that we're not seeing the big picture here. We are just really up and down with every little thing. Yeah, I would agree with that. It's been predictable. I thought that oil prices would spike a little bit quicker than they did toward the beginning of the conflict. Remember, it took a little while until it really started to go upward.

But yeah, it's been pretty predictable. So, with that in mind and the predictability thing, Delta Airlines issued guidance this morning. It was ahead of an industry conference. And it really stood out because it didn't follow the script of what we thought would be predictable in the place of rising fuel prices. I thought we would all kind of say, hey, fuel prices are going to be higher, margins are going to get hit.

we'd probably see some conservative guidance or maybe even expectation of declines with vibes and fear or whatever. But this was like a record scratch moment. The company was guiding for higher revenue in the coming quarter. So, Matt, why don't you run us through the numbers and give us your thoughts on what you saw? Yeah. So, Delta announced far better guidance for the first quarter than investors had expected. And when I say better guidance, it might sound a little odd when I tell you that they essentially said that EPS is going to be in the original guidance range they gave with their last earnings report. But this was surprising because that range that they gave, it was $0.50 to $0.90 per share, so a pretty wide range.

It was prior to the fuel cost surge and prior to this terrible winter storm season that we've had this year. Delta CEO Ed Bastian said that demand has been great and revenue growth, which was previously forecast to be up 7% year-over-year, could be even higher. And it's also worth noting, you mentioned it's an industry conference. American Airlines separately said that it expects first quarter revenue growth at the high end of its guidance range. So, it seems industry-wide. Yeah. Funny thing about this industry, a little inside baseball, every quarter, last two weeks of the quarter, one of the big banks holds an investment conference, giving everybody a chance to clear the deck, kind of say what's

actually happened. And that's why the airlines always seem to meet or beat estimates. But, neither here nor there. The interesting thing, like Matt said, is that demand is holding up. Planes are full. Airlines can therefore pass on higher fuel costs. So far, so good. The real interesting thing to me about Delta here is the haves and have-not economy and the way Delta really has positioned itself to take advantage of the people who can afford to fly. 90% of Delta revenue is now tied to either premium offerings or their loyalty programs. The top 40% of earners are driving demand. Look, there's other ways Delta can benefit from demand too. This is a real diversified company now. Their maintenance business, MRO they call it, revenue is going

to be up 150% year-over-year. That's because rivals are running their equipment just as much as they can too. Delta does a lot of work doing tune-ups and maintenance for other airlines other than Delta. So a lot of ways to win here as long as demand holds up. As nice as these numbers sound and pointing out that Delta is clearly a different company, perhaps I'm being cynical here, but I feel like the airlines are perpetually in this, this time it's different category. They always seem to run into some catastrophic event that we see demand destruction for one reason or other. We saw. 9-11 was a great example of this. Then we had the Great Recession in 2008. The 2010 through 2020 period was probably the most calm market that we've seen for the airlines. And then 2020,

and then COVID hits. Then we get Boeing. They can't deliver planes on time, so they're capacity constrained. And now we're talking about extraordinarily high gas prices and hinting at a little bit of K-shaped economy sort of stuff. So with that in mind, is there any reason to think that as investments, the airlines, and we can narrow in on Delta and American in particular, them showing strength in the face of rising fuel prices, is this a sign that the industry's actually in a better place here? Yeah. If you go back, Tyler, it used to be every downturn were some high-profile bankruptcies. Eastern, Braniff, so many of the names that people grew up with just disappeared. It is different. I know it's dangerous to say this time it's different,

but the industry post-2008 is different than it was prior to that. Why 2008? 2008 is when Delta bought Northwest, and it kicked off a wave of consolidation that has left us with more than 80% of domestic capacity in the hands of four carriers. Those carriers are big enough and well managed enough to survive cycles. It's still a cyclical industry. There are still haves and have-nots. For me, Delta and United are running so far ahead of American and Southwest, and the smaller companies are still dangerous in the cycle. But the difference is that whether or not they can thrive in a downturn, they can survive a downturn, which is a very different industry than it had been. I agree that the consolidation we've seen makes the airlines more able to survive

cycles and remain profitable, or at least not suffer devastating losses when cycles turn. And Lou kind of mentioned this earlier, airlines have done a much better job just in general across the four major airlines that Lou just mentioned, of better monetizing their product. For example, with first-class seats, it used to be you either paid $2,000 for a first-class seat or $400 for a coach seat, and they gave the unsold first-class seats away to their loyalty members. Now, they're doing upsell offers throughout the industry and getting people to pay for what they used to give away for free. Delta specifically cited strength in its premium cabin as one of the reasons for its strong guidance. You'll still never find an airline stock in my portfolio.

I'll never say never, but at least not in the immediate future. I know, Tyler, your Mexican airports might count. But it's a more solid industry as a whole than it was a couple of decades ago, for sure. All I'm going to say is, airports and airlines, two very different business lines. We could go down a deep rabbit hole there perhaps for another time. After the break, we're going to talk about the blurred lines of fintech. Stop wasting your nights on a mattress that doesn't get you. Experience the most comfortable mattress in the world, the Sleep Number Smart Bed. At the touch of a button, you can personalize your comfort.

Choose firmer or softer. Adjust cooler to warmer. And right now, save up to $2,500 during our massive Labor Day event. Hurry into your local Sleep Number store today because we have your number. MasterCard announced earlier today that it was acquiring a UK stablecoin company, BVNK. I think it's just the acronym. I hope it's not BVNK or something like that. The deal is for about $1.8 billion. And this is an effort for MasterCard to bring crypto and stablecoin-based payments into the MasterCard infrastructure of payments. Now, this is like the second large announcement that MasterCard has made in the past month in relation to crypto and stable

coin-based companies and giving them access to MasterCard payment rails and trying to, I guess you could say, bring MasterCard into the fold with digital currencies, tokenization, and all of these other things. What are you guys thinking about when you saw this as your knee-jerk reactions. Yeah, I wasn't surprised to see BVNK get scooped up. Coinbase had been pursuing an acquisition of the company last year for $2 billion, but it was called off toward the end of 2025. The company, they process over $30 billion of stablecoin transactions annually already. They have an impressive clientele. For example, they're the ones who power the stablecoin payments for WorldPay. They have a relationship with Visa through Visa Direct.

It's interesting you mentioned bringing stablecoins into MasterCard's payment rails, because BB&K is the payment rails for the stablecoin industry in a way. This gets MasterCard that established stablecoin infrastructure, not just the coins themselves, but it's the infrastructure that would take years and billions of dollars to replicate on its own. There's somewhat of a race to control the enterprise stablecoin infrastructure end of the market. Stripe acquired a major stablecoin infrastructure company for a billion dollars last year, for example. And I mean, this move, it helps ensure that MasterCard won't get left behind. The deal itself, perhaps I'm being, again, I'm the most cynical person as a podcast host talking

about investing or skeptical, whatever word you want to use here. To me, this wasn't the most noteworthy thing. $1.8 billion. MasterCard can pull that out of its couch cushions to make that acquisition. This isn't some groundbreaking thing for a company this size. What I want to focus on here, though, because it does set the stage for a story, a narrative that's been going on in the markets that I want to explore a little bit more. That's this convergence of the old guard in finance and these payments and fintech companies. They're all starting to blend into each other, into a broader ecosystem of payments where they're much more direct competitors with each other rather than having this very separate place of fintech is over here and the Visa and MasterCards

of the world are over there. As fintech companies mature, they're looking more and more like the old guard. For example, Matt, I think a couple of weeks ago, you've highlighted how buy now, pay later companies are getting into what looks like more conventional loan products. we've also seen lending platforms like sofi become more and more like banks and most stable coin companies now look like narrow banks with the way that they take deposits give you a token which has no deposit yield or anything like that but then all of a sudden is you know paying they're getting the net interest spread from basically buying treasuries with that and this particular news story about MasterCard, I feel like flips that idea on its head, where now we're taking the

old guard and they are going towards the fintech side. So, this leads me to an interesting question and I don't know how to answer it, but I'd love to get your thoughts. If all these companies are converging into direct competition with each other, does it make them less attractive or more attractive? Fintechs are leaning into proven business models, but now it's got to carve up a up high among more competitors. And similarly, companies like MasterCard might find new legs of growth, but they'll likely have to spend a lot to make them competitive in these spaces. So, Lou, I'll start with you. Where do you fall on the spectrum? I would take a step back and say, if we're surprised, we shouldn't be. As investors,

we should learn a lesson here. The age-old story of innovation and financial services is that the innovation just gets swallowed up into the incumbents. We have gone from blockchain wiping out MasterCard to now MasterCard using blockchain to grow more efficient. This has happened over and over again. Just look at what Discover tried to be when it was launched versus what Discover was by the time it went from disrupting credit cards to being one of the credit card companies. I think investors should keep this arc in mind as they're bidding up shares of fintech darlings based on new paradigms and innovation. The nature of this industry is the house almost always wins. I think that, yes, it's kind of a rising tide for all

boats, but I think those that are overvalued, I think that the market might be putting too much stock into the idea that innovation can really change the rules. Inevitably, it is the master cards of the world that tend to benefit over time. I'm going to push back a little bit. I have a feeling there might be a follow-up question coming after I do this. I agree with what Lou said. The newer fintechs and legacy companies, they're definitely moving toward similar models with a lot of the newer tech being swallowed up by the legacy companies. That's not unique to the financial industry, by the way. That's just generally what happens with innovation. With companies like SoFi, which Tyler mentioned, they're becoming more like traditional banks

in the sense that they're expanding the amount of products they offer. They want to do everything a traditional bank does. That's been by design for several years now. The difference is that the newer banks are going to have, or the goal is that they'll have a lower ongoing cost structure that companies like Bank of America and JPMorgan Chase won't be able to match. I know that's not the case right now, but MasterCard is a bit of a different situation. They're adapting to the most efficient and modern ways of moving money around the world. When you think of what MasterCard just how you used a MasterCard product 10, 15 years ago was a lot different than you use a MasterCard product today. There wasn't a chip in my card. You didn't have things like that.

Near-field payments, they embrace that. They're doing it in the most efficient way possible, which is an acquisition instead of trying to build that themselves, which, like I said, would take billions of dollars and years of their time. You said that the legacy banks, the Bank of America, they'll never be able to match it. And one of the things I keep thinking about when I hear this is a lot of these newer banks, the SoFi, so the world companies like that, they are going very hard into the consumer product. It's a lot of personal lending and things like that, which is fine. And you could argue that they have a slightly better cost structure there. But when I look at a JP Morgan or the Bank of America, they are so much more than

just consumers. It's wealth management, it's commercial lending, a lot of much, much bigger things in trading and derivatives trading and things like that, that clearly SoFi isn't into. And I'm curious if you think that SoFi, with the way that they've set up their business, would be able to translate that type of, as you said, ongoing cost structure benefits that the big banks have in these other areas. You mentioned things like investment banking and trading and things like that. I hope they don't try to compete with the Goldman Sachs of the world on trading and derivatives and things like that. When it comes to wealth management, I can see a future where they have a better cost structure than the incumbents.

They don't have offices. Some of the top producers at Goldman and JPMorgan Chase have multimillion-dollar salaries. There's a lot to be said about that. But no, the incumbents are going to control the business banking space, the investment banking space for the foreseeable future. I don't see in 10 years SoFi being the next great Goldman Sachs, if that's where you're going for it. But I do see them building out their cost structure, lowering their acquisition costs, continuing to expand in the wealth management arena and being more of a, not quite a JPMorgan Chase, but getting closer to that model. Tyler, to your point, and maybe I'm overstating it, but it is funny that seemingly two of these things that we believe are true

can't be true together. Just that the SoFi, the new generation of banks, the strategy is so much better. Yet, we think the world of Jamie Dimon and the management of everyone, JPMorgan, they're not run by idiots. Bank of America aren't run by idiots. They're keeping their branches for a good reason. I think that's the point you're trying to make. Now, look, the number of nationwide branches is down 15%, 20% just in the last 10 years. They are making it more efficient. But from business banking, wealth management, all of these areas where you tend to get an advantage to having someone across the table versus just on the internet. And look, those are the things that really, really drive profitability. Consumer is a tough business. And not that these big banks are

just dumping consumer. They want the consumer. They want the deposits. But we focus so much on the consumer, and it's such a small part of the industry. Again, my bet is the house wins. Let's finish up here. Looking across the world of payments, financial companies, companies, this place where they're all starting to converge into one competitive space. What are some of the companies that you're looking at that seem pretty attractive today? Matt, we'll start with you. I don't want to help make Lou's point here, but online banking has been around since the 90s. How much bigger have the Bank of Americas and JPMorgan's of the world gotten since then? There's a fair point to be made

there. MasterCard, as we already talked about, it's not a cheap stock. I can never remember a time when I considered MasterCard to be a cheap stock. But I feel like the moves like this, being generally more proactive than its chief rival Visa when it comes to embracing newer technologies, makes it a little more appealing to me. After the recent turbulence from the oil and just general uncertainty in the world, several major payments and financial stocks have become more attractive. SoFi is still my highest conviction name in the industry. And I think Even Lou might agree that SoFi is being valued more like a bank now. It trades for a lower price to book multiple than JPMorgan Chase, which isn't growing at 35% year over year. Beyond SoFi,

I'd say Amex is another one that stands out to me as a way to buy an industry's best. They're the shining star of the credit card industry after more than a 20% decline. Definitely. SoFi has come back to reality. I don't know if I'm personally buying in on the hope that they once again separate from reality, I guess, should I say. But look, I see better bargains out there today in the super regionals, not the biggest banks, but you can buy Truist and Regions and even PNC, probably the gold standard of these, just below the biggest banks, at valuations at half of what SoFi is still trading at. You also get dividend yields into 3% to 5% as a bonus, which you don't get from fintech. Given the macro uncertainty, I don't think that this

investment is going to pay off immediately. But I think as a long-term hold, that tier of banks is where I really, really find value right now. Coming up after the break, we're going to go through a lightning round of stories that are on our radar. We're still pretty early in the week, and there's pulling on threads as investors and watching stories to change and shape how we think about markets and investing, things like that. We wanted to do this as a quick three-story wrap-up of what we're seeing in the markets, things that are kind of piquing our interest. Lou, you drew the short straw, so you get to go first this week. Guys, I'm really watching this SEC proposal to make quarterly earnings reports optional. I'll be honest, I don't know what

to think. In one sense, we're all better off focusing on the long-term. I'm pretty sure obsessing over these quarterly numbers makes us all dumber as investors. That said, I believe in transparency. I'm naive enough to think that as the owner of the business, I should get regular updates onto how the business is doing. I fear it's going to be the least trustworthy businesses that really, really lean into this and disclose less. Finally, guys, the market short-term mindset does create post-earnings buying opportunities. I bought a company today that I think the market have reacted to a bad report. In a perfect world, I'd like to continue to get quarterly updates, but just not dwell on them. That obviously isn't going to happen. I'm curious to see how this plays

out what the actual rule looks like, if and when it happens, and how we as investors and companies adapt and evolve should this all change. I think a couple of months ago, we also discussed this story, and it is interesting to see how it's evolving into actual policy these days. Matt, what do you got? I was going to also say that it's been done elsewhere in the world. In a lot of parts of Europe, you don't have to report quarterly. That's why one of my favorite fintechs to watch Adyen. They issue semi-annual reports. But the story I'm watching has to do with the AI trade. And it takes some really big numbers to surprise me these days when you're talking

about AI investment, when you get the Metas and Amazons of the world saying they're going to invest $200 billion this year on infrastructure. But Jensen Huang managed to do it yesterday. At the company's annual conference, he revealed the company's new flagship data center product, announced a few new partnerships, announced that they were expanding their autonomous driving chip business, and a few other things. But what really stopped me in my tracks was when he said, the company expects to sell $1 trillion of its Blackwell and Rubin chips by the end of 2027. Now, Vidya has $216 billion of trailing 12-month revenue, previously guided for hitting a $500 billion milestone by the end of this year. But if it can achieve that $1 trillion figure

while maintaining its margins, which is a big if, as we've discussed on other shows, they could do the unthinkable and make a $4.5 trillion company seem undervalued. I'm having a hard time finding the words how to react to numbers that large. It follows into the story I've been thinking about, too, which is AI infrastructure. Obviously, NVIDIA is a big part of that story, but running into the bottlenecks that it is as we try to transition these big dollar numbers into actual physical reality. And we've talked about circuit breakers and HVAC companies and things like that. But one of the interesting ones I saw in the Financial Times recently was another bottleneck is insurance. And this was the thing that stood

out to me in the whole thing. And it's like, we're talking about Meta's Hyperion campus that it just built down in Louisiana. It cost them about $30 billion. And it took about $4 billion worth of coverage to get the insurance adequate for this particular facility. This is what I find fascinating, because what the story is going is, it's getting harder and harder to find insurance for these massive data center projects. It's maybe less of a problem for the Amazons and the Alphabets of the world, because they are self-insuring to a certain degree. They've got mountains of cash, and they're like, look, it's probably better that we just self-insure. But for the smaller companies and lenders and private equity, private capital out there trying

to bootstrap their way into data centers, they're finding there isn't enough insurance companies that can carry this kind of insurance and don't have the capacity to underwrite a premium of this size. Writing a factory for several hundred million dollars or maybe a billion is one thing when it comes to excess and surplus insurance. But a $30 billion facility is right in the middle of prime hurricane country for Meta, there aren't a lot of independent insurers that can incur these kind of losses even with reinsurance going on to it. This could be a big thing or maybe not. My gut reaction is eventually somebody's going to figure it out because we always tend to figure these sort of things out. Nothing the finance industry loves more than creative financial

instruments to make something happen. But I think this is just going to be another one of those places where the massive dollar figures for infrastructure are just kind of running up against limitations. And it'll be interesting to see how this sort of rectifies itself in the next couple of months. 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 stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes.

Thanks to our producer, Dan Boyd, and the rest of the Motifill team. For Matt, Lou, and myself, thanks for listening, and we'll chat again soon.