Motley Fool Money - Apple Shows Intelligence, Fed Signals Caution

Episode Date: June 14, 2024

Apple arrives on the scene with its AI debut Apple Intelligence, we check in on who is winning the artificial intelligence arms race and whether we’ll actually see a Fed rate cut in 2024 . (00:21) Jason Moser and Emily Flippen discuss: - Apple’s entrance to the world of AI, the details of Apple Intelligence and the OpenAI partnership. . -Tesla shareholders approving Elon Musk’s 2018 pay package and plans to move to Texas, and what’s next for the largest executive compensation plan of all time. - The Fed’s plan to hold steady on rates, and Adobe’s stellar quarter. (19:11) Trex CEO Bryan Fairbanks talks through the state of outdoor decking and the company’s plans to grow by replacing the average wood deck. (34:12) Jason and Emily break down two stocks on their radar: Autodesk and Green Thumb Industries. Stocks discussed: AAPL, MSFT, TSLA, ADBE, ADSK, GTBIF Host: Dylan Lewis Guests: Jason Moser, Emily Flippen Engineers: Tim Sparks, Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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Apple makes a splash. fashion AI, and the Fed holds steady. This week's Motley Fool Money radio show starts now. That's why they call it money. The best thing. Cool 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's senior analysts, Emily Flippin and Jason Moser. Fools, great to have you both here. Happy to be here. Hey, good to be here.

We've got the details on the biggest pay package in history, an early summer check-in on the state of the decking market, and of course, stocks on our radar. We are going to be taking off this week, though, with a rundown on the world of AI. Jason, we've been waiting a while, but we finally have a glimpse into Apple's AI ambitions. They unveiled some of their efforts at their Worldwide Developers Conference this week. What did you see? Feels like there was a lot of emoji stuff, I guess. I mean, that, yeah, we're in this period of discovery, right? I mean, we're learning, not just with Apple, but with AI in general, learning what all of this stuff can do, what is going to be most helpful versus what is more

noise. And, you know, Apple was, I guess, some might say, a little late to the table. But, I mean, that is done by intention, right? I mean, Tim Cook has said it before, and he said it again, I think this week, he says, you know, our objective is never to be first. Our objective is to be best. So they're not in a hurry, but they're looking to do it their way. And it seems like this is an interesting first step. But I'm not sure how y'all felt, and I'd be interested to get your opinion on this. I know this was an important step for Apple. I do get that. It it definitely felt like one of those incremental phone updates, right? Like better camera, longer battery life.

I wasn't overwhelmed. But by the same token, like I said, I know it's an important step, and it's just the first step. Digging into some of the stuff that they unveiled, we had Gen moji, as you were alluding to, the degenerative AI application for emojis. A lot of Gen AI and image stuff, image playground, another one, image wand, all of these things,

generating images based on inputs like sketches or text inputs from users. One of the things that I think was more interesting and a little bit more practical, Emily, as I was looking out at some of the things that they unveiled, was the Apple Intelligence Demo. This is their AI for the rest of us, their assistance on email writing, things that seem to play a little bit more into how people use their phones and communicate. That seems like the most interesting part, but what jumped out to you? Yeah, I love that. AI for the rest of us is a perfect way to describe it.

It was extremely practical. I will say heading into this developer conference, I was incredibly skeptical. Apple is late to the AI game. And so coming into this, I think expectations were incredibly high. We have all of these other big tech giants who have been launching these really, really big ambitions in terms of how they're going to change the world as it comes to artificial intelligence. And I think expectations were coming out, what is Apple going to do, right?

What are they going to say? How are they going to change our lives? And they really didn't change our lives, right? but they did do these little tiny incremental things to make our life just a little bit easier. And interestingly enough, I actually think this could be great for them because ultimately they're not an AI business. They're a hardware business. They want you to upgrade your cell phone.

And these little kind of small changes, right, summarizing your text messages, these little things that will get you to upgrade your phone. And I actually think they did a good job of selling people on that. And I came out of this developer conference pleasantly surprised. especially considering expectations were high coming into it. A very big part of how Apple seems to want users to interact with AI is kind of within the context of what the phone knows about you. Your contacts, your messages, and they are bringing Apple intelligence into Siri as well.

One of the interesting pieces of this, Jason, is not only is there Apple intelligence, which I believe is homegrown and their own system, they are also partnering up with OpenAI's ChatGPT, and we'll source to that and we'll disclose that to the user when they feel like they will be getting a better result that way. Interestingly enough, Apple users will not have to pay for ChatGPT, and I look at this partnership, and I say, this is pretty interesting. Apple's saying there's someone strong in this space. OpenAI may be getting some distribution here from all these Apple users. Yeah, it sounds like not really any money changing hands for this, but it's absolutely

a great opportunity for OpenAI just from a distribution perspective. The first thing it made me think of was just sort of this idea that content creators would accept less money to produce a show on Netflix because they knew it was going out to the biggest audience, because Netflix has so many subscribers. This could be kind of one of those things here. We're open AI saying, listen, we'll take a little bit on the front end there and not have to worry so much about that short-term profitability. If it's going to get us into all of these devices, I mean, we're talking about hundreds and hundreds of millions of iPhones. And I think Emily's right. I mean, this is going to be an opportunity for them to really convince us that we need to upgrade our phones. I mean, I think a lot of

people have kind of gotten tired with the, oh, well, it's just a little bit of a better battery and maybe the camera's a little bit better, but is that a reason for me to upgrade? A lot of people are starting to say, no, this stuff could change that, because ultimately this is what Apple does. They figure out ways to make your phone more yours, more personal. And if they can utilize these AI tools to do that even more, then it becomes a more compelling case for sure. To your point, Jason, this AI system will be available on the iPhone 15 Pro, as well as the iPads and Macs with M1 chips and later. I think 90% of the existing iPhones out there would not qualify for these upgrades. So they are providing a reason for people to upgrade. Having software fuel, a little bit of the

hardware story, Emily, I do think this is an interesting opportunity for us to check in on OpenAI, because this is a company that we've seen so many headlines about. Generally, we've been interacting directly with ChatGPT. Interesting to see their software going out and being more widely distributed. This is not the only news, though, about this company this week. We also had updates on their executive suite. They'll be bringing Sarah Fryer, formerly at Square, over as their CFO. What do you think of the state of Open AI at this point?

I actually think, in hindsight, this is a massive missed opportunity for open AI. And the longer that I've had to reflect on this deal, the more that I think the value is truly held in Apple's hands here as opposed to open AIs. And despite the fact that they're bringing in presumably people who have a lot of experience, both with publicly traded companies, both with artificial intelligence, who have a lot of experience behind their belts, I will say, I think that this is great evidence, the fact that they did not get an exclusive deal with Apple, that Apple is still reportedly making partnerships with Google's Gemini, with Anthropic. They're bringing other systems to Apple for free. Open AI is presumably not getting any money as part of this deal,

but they're still going to be paying for the servers. For all the people who are going to be upgrading their iPhone, who are going to be using their systems for free, they're still going to be paying for all that data. So hopefully somebody does pay for Open AI. They upgrade to their $20 month subscription through their iPhone. And maybe at some Apple gets a cut of that, but ultimately, I think Open AI really doesn't have a moat here. And that ultimately is the problem, whereas Apple is just kind of getting all of this great software for free. And I don't know. I'm reflecting on this. And I'm like, did Apple just beat everybody in AI by doing the absolute least? I like that you brought up the moat question,

because I've started to ask myself that as well. And it just struck me, we had a meeting our CEO was closing it out the other day, Tom Gardner. And he just started rattling off all of these different LLMs, all of these different sort of chatbot type functions, it feels like it's become very commoditized, right? And then so it all boils down to what's the easiest to use and what's the one that is going to hallucinate the least. Hopefully, getting out into that many devices will keep these things improving, and it will make sense more as time goes on. But yeah, when you think about OpenAI, not only are they not getting anything from this, they're still having to cut some serious checks to Microsoft just to keep their business open. It costs a lot of money

to run that. I think I saw $700,000 a day just to keep that thing running. I mean, that adds up. It is interesting that regardless, Microsoft seems to win here, and Apple seems to be doing okay. Now that we have Apple at the AI party, you can kind of check in on the different approaches here and some of the different things that the big tech companies have been doing. I know it's early days, Emily, but as you look out at the landscape and the AI party, AI race. Is there anything that you think gives anyone an advantage here? I think there's two different approaches, right? We're seeing this approach from Apple, which is I'm going to do the bare minimum in AI, which is going to say, you know, what can I do to

get consumers to do that hardware upgrade, improve their lives just a little bit, while just also not doing the most. Well, I think Microsoft is out here saying, I'm going to do the most. Open AI, obviously, that entire business model. But Microsoft is making waves this week because they actually had to delay the launch of one of their newest AI products, the real. recall system, which is very controversial. You know, screenshots your computer as you're using it. And there's a lot of privacy and security concerns. They are moving full force ahead. Someone would say AI at any cost, right? But you have to appreciate the fact that they are moving full steam ahead and what many perceived to be the future of the technology world. And as what is one of the largest

companies in the world, I can ever keep track who's ahead of who at this point. I think Apple surpassed them this week. You have to say to yourself, okay, what is going to do? to be the winning model here? Is it the least or is it the most? Because Apple and Microsoft have taken two completely different approaches. You know, it's interesting on the wake of that Microsoft News, seeing Apple really lean into the privacy and security part of the conversation with the Worldwide Developer Conference announcements. All right, we're going to be back in a minute. Coming up after the break, we've got an update on Elon Musk's $50 billion pay package and a company that could be facing boom or bust with AI. Stay right here. This is Motley Full Money.

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The Rangerover event is on now. Explore enhance offers at range rover.com. Welcome back to Motleyful Money. I'm Dylan Lewis. Join here in studio by Motleyful analysts, Emily Flippen and Jason Moser. A lot going on this week, including Tesla's annual meeting in Austin, Texas. A lot of different things for shareholders to weigh in on. A lot of proxy items.

Chief among them, Elon Musk's 2018 compensation plan. Emily, quick history lesson here. Earlier this year, a Delaware judge struck down the $50 billion pay package after finding its approval process flawed. Shareholders had an opportunity to weigh in. It won't supersede the judge's opinion in Delaware, but overwhelmingly, we saw support for the package. Yeah, Musk went to the Court of Public Opinion this week, and he did win, which is impressive, considering there were a lot of large institutional shareholders who publicly spoke out against this plan. Of course, we don't know how people voted, but they did come out and say,

Hey, we think you should vote against this plan that included the California State Teacher Retirement System, as well as the Norwegian Sovereign Wealth Fund, as well as top proxy advisor, ISS. However, you know, ultimately retail investors, I think if you are a shareholder of Tesla, you put a lot of faith into Elon Musk who has fearlessly led this company since its founding days. So just because there is a large narrative around this business, you know, obviously Elon Musk and Tesla are constantly in the news. Ultimately, shareholders are the people who decide these things. And not only did they approve this, I believe, $56 billion, if I'm not mistaken, pay package, but they also approved to move the headquarters from Delaware, where this judge did strike down

the pay package to Texas. I do think there is some legal nuance there, so we'll see if that sticks. But it does show a lot of support from shareholders. Yeah, we'll have to see how this one plays out. There are a lot of wrinkles that could come up. But inso much as this is a referendum on Musk, it seems like he continues to have retail support, Jason. I think so. I mean, relatively speaking, Tesla is sort of underheld by institutional shareholders. A lot of retail and just everyday investors like us own a lot of that company. And, you know, stock price kind of dictates everything. If you bought Tesla five years ago, you're probably feeling okay about this.

Stock's up like 1,200%. If you bought it three years ago, one year ago, you're probably feeling a little bit differently with a stock down the way it is. So I think it's always worth keeping that perspective in mind. But I think regardless, I mean, if you're a bull on Tesla, then Elon Musk is a large reason why, right? That's no secret. And so it's not surprising to see him get the support. All right. This week, we also got an update from the Fed on the rate picture.

Fed officials indicating rates are staying right where they are for the foreseeable future as the focus continues to be on moderating that stubborn last part of inflation. Emily, the Fed says there has been modest further progress towards the committee's 2% inflation objective. What say you? Oh, I will say the market responded awfully positive to some of the news this week. CPI data came in lighter than expected. It was flat on a monthly basis and 3.3% higher on a yearly basis. And this was, for once, slightly lower than expectations. So inflation is coming down a little bit.

And expectations were for a 0.1% rise on a monthly basis. basis and a 3.4% rise on a yearly basis, that is so much barely lower than expectations. So the fact that the market responded so positively surprises me a little bit. And then the Fed comes out and they say, you know, I know the expectations were for us to lower rates three times this year, but maybe we'll do it once. And the market goes up. And I'm sitting here scratching my head saying, am I crazy? But this doesn't sound good to me.

The unemployment is rising, and inflation is really just, it seems awfully sticky to me. When I look at the graph of how inflation has trended over the course of 2024, yes, it hasn't gotten worse, and that's great, you know. But at the same time, it almost looks like it's stagnating. It hasn't come down as rapidly as I think a lot of people, including the Fed, have wanted it to come down. And investors seem to be rewarding it. I think at this point, you know, we're coming in the mid-half of the year here with no rate cuts. If you had told us that at the beginning of 2024, I think investors would have sold off

pretty heavily. So the fact that this has been responded so positively by the market, I'm just pretty surprised. I mean, I don't want to look a gift horse in the mouth, but this is awfully surprising to me. You know, I think about a month ago on the radio show, our colleague, Matt Argersinger, said, maybe one rate cut, but let's be real. There's an entire possibility here that we have no rate cuts in 2024. Jason, as you look out to the macro picture, and and are just kind of thinking about how companies may be processing the rate environment. What are you looking at for the rest of the year? Yeah, I mean, you're right.

It's persistent, right? Inflation's just sticky, and it's not going anywhere. I mean, these are better than expected numbers. They're just less bad than what maybe was expected. And I saw with core inflation, that came down primarily because they saw moderation in car insurance prices, which have just been on fire lately. I mean, anybody who's paying their car insurance bill, no. I mean, those things have been on a meteoric rise.

And then I think also I saw airfares came down as well. But for the general consumer is not feeling all that great right now. I mean, you've got well over half of the country that actually thinks we're in a recession right now. I mean, that's just polled data. Most people out there actually think we're in the middle of a recession right now. And I saw a statistic posted by Amanda Kish on our site earlier that just referred to a recent TransUnion survey that now 84% of consumers list inflation as their top financial concern. That's compared to 79% just a year ago. So clearly, that narrative is only growing louder. And I don't think numbers like

these are going to cut it. I think one cut is the absolute best scenario. Wouldn't shock me at all to seem none. All right. As Emily mentioned, a pretty good week for the market, S&P up at 1.5%. And a particularly good week for Adobe shares up 15% after earnings this week. Pretty big reaction from a pretty big company here, Jason. What did you see in the results? Yeah, well, they have several large platforms in their creative cloud and document cloud and the experience cloud where they're able to innovate and bring additional value, right? A big installed customer base out there. And Emily raised a good question earlier this morning when we were kind of going through what we're going to talk about here on the show. In regard to their investments in AI, our

Are these investments keeping them relevant or are they being disrupted? And I think judging from this quarter, it looks like the numbers are still telling a pretty positive story. Revenue, $5.3 billion that was up 11% from a year ago, excluding currency impacts and non-gap earnings per share, up 15% from a year ago. Strong performance in the creative cloud. That revenue grew 11%. I was impressed, Document Cloud. That was 19%. I think they've been taking a little share from DocuSign with their recent stumbles, so keep an eye on that.

Sherry purchases continue to bring the share account down. It's modest, but 7% of the last five years, and that's good for shareholders do. So I think they're investing in AI early. That's the right thing to do. And kind of back to that Apple discussion, we're just in this period of discovery. They need to be very careful of how they use that content in training their models. It sounds like they've come full circle on that and are trying to make people feel better about privacy.

But yeah, it seems like they're doing the right things. Emily, Adobe is a battleground AI stock. It seems like AI is a little bit in the eye of the beholder. There are other companies like Duo Lingo that are also in kind of a tough spot with AI. What are you looking for generally with companies to get a sense of how they're going to be shaken out? So long as that bottom line is growing faster than the top, I will not fault Adobe for it. So that's kind of what I look for. All right, Emily Flippin, Jason Mozer, Fools.

We'll see you a little bit later in the show. Up next, we're checking in on the market for decking and outdoor space with Trek CEO Brian Fairbanks. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Dylan Lewis. If you're like me, June Means patio furniture is out on the deck and the grill set up for afternoons outside. Now that we're officially in summer season and busy season for decking company treks, we caught up with the company's CEO Brian Fairbanks to get a read on how the outdoor project space is holding up during a tough renovation market and how the company's war on wood is going. Summertime feels like the perfect time for us to be chatting. I admittedly spent a solid six hours out on my deck this past Sunday,

hanging out, reading, taking in the sun. I know that there's no coincidence there. The warm weather months are a busier time for you guys and for your business. But there's also a lot of macro factors swirling right now in the space of real estate, in the space of renovation. What's the state of the business right now? How are you feeling? Yeah, you're right.

Regardless of the state of the economy, good times or bad times, we are a highly seasonal business. Second and third calendar quarters of the year are when the vast majority of the decks get installed, and especially when you're talking about a DIY installer. They tend to have more time over the summer months, and we see that volume go through the roof during that time frame. From an economic perspective, we are continuing to see positivity from the consumer as it relates to repair and remodel spend, and looking at the deck as a relatively inexpensive way to add living space to their home. Today, we've got an environment with higher-priced homes, higher interest rates, yet people have the desire to make more of their

existing space, and we continue to see momentum because of that. Yeah, so I want to parse some of what I'm seeing from the likes of Home Depot and Lowe's and then what you're seeing with your business, because we see commentary from Home Depot's management saying they're seeing consumers put some renovation plans. on hold due to the financing environment, due to household budgets being a little bit tighter. Are you seeing any of that flow through to you guys as well? Fortunately, only about 10% of people installing decks are using financing programs to be able to do that. So it's not a significant driver of volume.

The average Trex customer is different than the average customer walking into one of the home centers. We're tending to bring in a consumer who has a customer. a higher overall family income and is still active in repair and remodeling activities. So I would expect there to be some difference between the overall average home center customer and then the TREC's home center customer. We are continuing to see that those higher end customers, those with $150,000 and higher family income, continuing to see strength from there and buying our premium products. And then over on the housing starts and permitting side, we've seen some activity die down a little bit, but as I understand it, most of

your business is more in the remodeling and renovating side? Yeah, that's correct. About less than 10% of our business is on the new home side of things. The vast majority of it is going to be associated with repair and remodel. Whether that home gets it when it's brand new or not, it's still designed to receive that deck, especially where you've got water or slope. More often than not, it'll get a deck. If it gets a year later, two years later, that's fine. It gets counted as repair and remodel spend rather than new home spending. So if I'm parsing everything you just said, a lot of the major macro trends that seem to be affecting the space are things that you feel a little bit of a pinch from, but as a business

are not going to be as much of a headwind as they may be for some of the other major players and major industries in real estate and renovations. Yeah, I think that's correct. If you had asked me a number of years ago, that Brian, we're going to be in a higher interest rate environment. Home prices are going to be extremely high or much higher than what they have been historically. I would have expected there to be more pressure on our business. The piece of it that's allowing us to continue performing well is that people are staying in those existing homes.

It's difficult to be able to trade up to that next 500 or 1,000 square feet that the family usually wants to do every five or 10 years. So instead, they're building on that additional square footage, but doing it in an outdoor environment, which is very much on trend these days. One of the things I wanted to check in with you on with the macro picture and the big picture is pricing. We've seen different markets and different industries over the past few years take very different approaches to the inflationary environment. Some companies being incredibly opportunistic looking to seize some of those extra margin that they're able to squeeze out only to then have to become a little bit more value-oriented recently. You guys are

a premium product. How have you been thinking about pricing in this environment? We took a very balanced view as we moved through the pandemic and we saw the surge in inflation. In late 2021 and into 2022, we took the majority of our pricing and then a little bit in 2023 timeframe. Had a lot of questions that, hey, you probably could have taken more just from a pure opportunistic perspective, that's really not the way that we drive the company. Our profitability algorithm is first going to be looking at continuous improvement opportunities, second, efficiency within manufacturing, and third is going to be improving the utilization within our existing capacity. That's delivered well for Treks over the years where we can provide

for higher gross margins and higher EBITDA margins. But when we are faced with significant inflation that we can't offset with those programs, we will revert to pricing. And we did that in 21 and 22. We haven't seen a need to do that at that time. If we see inflation run to 3 or 4%, there probably will be some pricing that we'll have to take in the coming years. If we see it drop back to that 2% or below, then there's probably less need for pricing. So we're not looking at taking pricing just purely from an opportunistic perspective. I know about 95% of the material that you guys wind up putting into your decking is recycled.

Is that something that wound up not really playing into higher input costs with the inflationary environment or did it? It's kind of a unique supply chain for manufacturing. Yeah, you're right. It is very unique. We did see inflationary pressures on that recycled material. And the reason for that was that virgin plastics went up quite significantly. other manufacturers who in the past maybe wouldn't have used recycled materials elected to

start using more of that, and therefore the prices went up for it. Because there is now a stronger desire across all manufacturers and producers for using recycled content, we've seen that price remain high. So virgin plastic went up, virgin plastic came back down again. What we've seen is with recycled materials we're buying really pretty much just held in that same spot. Fortunately, we've not had a significant amount of volatility after that. It's held pretty steady. Also another rationale for not taking significant additional pricing. When we had checked in with you a little over a year ago, one of the big themes in the

conversation was normalization. And I think that's probably been something that a lot of companies have been dealing with over the last couple of years. I think in your case, it was related to inventory channels, focusing a little bit more on product development. Where do you feel like you're at with those priorities now? I feel as though 2024 is the year of normalization for the company. Like many companies, we were whipsod during the pandemic.

2021 inventories were emptied out of the channel. We started to bring more capacity on. Our customers purchased as much as they could get to make sure that they weren't going to run out. By mid-22, the channel was now overstocked with material. Through the second half of 2022, we took that material back out of the channel. again. 23, everybody was very conservative from where they needed to be from an inventory perspective. Moving into 24, what we've told our customers is that between our distributors

and between Treks, that inventory will absolutely be there to service you regardless of what happens in the marketplace. I think we've hit the right equilibrium again, where our distributors have plenty of material on the ground. We have the material on the ground. Nobody has an excess that we're concerned about at this point in the cycle. So we feel good about getting back to more of a normal environment. In that normal environment, what becomes the main focuses and priorities for you guys going forward? First thing is making sure that when the season turns on during the second quarter, the appropriate amounts of inventory are in the channel.

If the channel tries to bring all of that inventory in during the peak, it's very difficult to be able to receive all of those trucks. We have a hard time holding on to it on our ground just from a space perspective. So we want to make sure that we're staging it ahead of the season so it's ready to go. Next to be new product development. During our investor day last year, we talked about every six to nine months we'd be bringing new products to the market. It's a little bit different from the strategy that we've had over the past five years.

The next five years will be heavily driven by product development. Since that time, we've launched additional colors with our transcend lineage. which has heat mitigating technology. One of the complaints in the composite industry is still about heat on the deck. So we're coming up with solutions to reduce that heat impact. We've also launched a couple of railing lines. Our cable rail is just hitting the market now. And then our T-Rail program, which is designed to go after the vinyl PVC marketplace,

roughly a $300 million market by itself. We started shipping that last year, and we are seeing nice traction on those product lines. you'll continue to see more as we move forward. I want to take a look at some of the big, long-term growth opportunities for you guys. The U.S. is a large chunk of your overall business, but you do sell to over 40 countries. You've talked about it being something where the reception's generally been good, but there is some education and branding work that you need to do on the international side. What is that opportunity looking like for you right now?

And how do you feel about the progress you've been making so far? International markets from a decking perspective are probably 10 years behind where things are in North America. So where we were education-wise at that point is where the international markets are. We tend to focus on the largest economies, highest GDP, highest family incomes, as to where we're going to have the most success. Through the pandemic, it was quite a challenge for us to get the appropriate amount of product into those markets. We are starting to see things turn there. The European economy over the past couple of years has been challenged with war in the backyard,

higher energy prices, higher inflation. We are starting to see those markets turn again. Our focus is on those larger markets in Europe and Australia. As you mentioned, we do ship to over 40 countries. If you're interested in a commercial project or need a container of material in any country, we're willing to work with them. We just won't be building websites or doing custom literature

for those smaller market opportunities. But long term, we've got great excitement over the opportunity, and over the next 10 years to bring that education level up to a similar level where we are in North America. Over here at the Fool, we joke internally that the credit card companies are fighting the war on cash. That is their opportunity, right? Any transaction that's currently being used with cash

is an opportunity for the credit card businesses. In your case, you are fighting the war on wood, in a sense. You are looking for replacements of conventional decking. And in recent results, you provided a little bit of update on the breakdown between wood and alternatives. I think it's about a quarter of the market overall. Where do you see that sitting longer term as you're able to make inroads in all these growth markets you see? Yeah, some people talk about Treks being the number one player in the industry. And we are from a composite perspective.

But from an overall perspective, wood is still number one. far from a volume perspective. Wood today is about 75% of the market. Composits in total are about 25% and Trex is about half of that 25% in total. So we do not lose focus on where that largest opportunity. Anytime somebody's in the market for a deck, very likely they're talking about wood. How do we make sure that we're getting in front of that consumer to show them that there There are great products available for them. Very affordable if they want to go with wood conversion, something like our enhanced basics or enhanced naturals, anywhere between two to three times the price of wood.

Moving up to some of our more premium products that could be five or six times wood. It's more about the aesthetics and the performance of that deckboard. But longer term, we've been seeing that wood conversion expand between 150 and 200 basis points a year of share coming over to the composite industry. I see a pathway upwards of 45 to 50% conversion with the products that are in the market today. It will take time to get there. When we start seeing a pathway to get to those kind of numbers, like we've always done in the past before, we'll step back, we'll understand what do we need to do next to keep this market moving forward? If you ever need any help on the advertising side, I think you can just show

people a video of me pressure washing and staining my wood deck that came with the place that I currently live in every year and a half or so. I think that'll be a compelling pitch for anyone who's thinking about maybe going the more traditional route. That's usually our best customer. Somebody who's gone through that process just a couple of times, I will never install a wood deck again, and they're automatically not buying a Trex deck the next time. That'll be me in a few years, I promise. Listeners, hope you got somewhere cool to spend the warmer months, and we're always looking for interview ideas. If you have someone you think we should talk to for the show, shoot us a note at Radio at Fool.com. Coming up next, Emily Flippin and Jason Mozer join me again with some stocks on their

radar. Stay right here. You're listening to Motley Fool money. Build this front of this trailer all by myself, 482 bucks, little piece of heaven on. 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 in the studio by Emily Flippen and Jason Moser. Fools, we've got stocks on our radar coming up in a minute, but first, a fun one. Jason, every few years we see a story about investing in sports. This week, that story was that Broncos linebacker Baron Browning will be offering stock in his NFL earnings through company

vestible. This keeps popping up. I feel like it's a little cyclical every couple of years. One of these concepts comes up. What do you make of the investing? in athletes? Well, it feels like it's definitely in line with sort of the way sports are being viewed these days, I think, as younger generations kind of come into play here. It's more about the athlete and less about the team, it feels like. You're kind of following the athletes to wherever they go, fantasy, stuff like that. So I definitely get it.

I'd be a little concerned with the staying power. You know, I could see maybe I'm a little bit more attracted than something like music. I mean, I wouldn't mind on a couple of shares of widespread panic or something like that. But, hey, you know, I love innovation in the space, that's for sure. All right. So, Emily, Jason is going music rather than sports. If I can give you the ability to invest in any celebrity, any category, where are you going? Yeah, I like Jason's point about staying power, which leads me, you know, I've been watching a lot of Netflix recently.

So I'm going to go with, like, the Netflix reality star circle. Like, I want to be able to buy stock in that group of entertainment stars, right? the Love Island USA crowd or the Bachelor franchise, how do I buy into their earnings? Because those people are making bank. I like that even in the investing hypothetical. Emily is sticking with the tried and true. Buy what you know. Exactly, exactly.

I don't have to watch sports to make money, please. 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. Jason, you're up first. What are you looking at this week? Yeah, Auto Desk, ticker ADSK. They reported earnings this week. Shares traded up modestly higher on the report.

And for those who are unfamiliar, Autodesk provides software tools like AutoCAD, computer A to Design tools for architects, engineers, construction professionals, all over. Runs the gamut there. But revenue is up 13%. They saw remaining performance obligations up 9%. Ultimately, bringing a little bit more down to the bottom line. They saw non-gap operating margin expand 3%. percentage points, and ultimately earnings per share grew just under 21%. So encouraging from that

perspective, it's been a very slow start to the year for Autodesk. They had a recent investigation into previous financial statements. Part of that was due to a change in how they were pricing with their partners. But that's been all resolved. There will be no restatements. So now you've got a business that can focus a little bit more on the future, and that's a good thing. Dan, a question about Autodesk. I'm actually already an Autodesk shareholder. As am I. And it has been a little bit of a rough ride, so I'm glad to hear some good news. Me too, Dan. I'll keep you up to speed. All right, there we go. Some support from Dan early on in Stocks on our radar. Emily, what is on your radar this week? I have something a bit more fun than boring old auto desk. Please, Dan, I want you

to hear about Green Thumb Industries. The ticker is GTBIF. It's traded over the counter, and it's one of the best performing U.S.-based multi-state operators. It is a cannabis company, actually. And believe it or not, hear me out, it is profitable. It produces 5% gap net income margins, and that's after paying out more than 10% of its total revenue and taxes. And that is hopefully going to change this year with rescheduling. So you can buy it and hopefully see that that net income is going to increase here in the relatively near future with the rescheduling of cannabis and the change in tax laws. Dan, a question or comment about Green Thumb Industries. I mean, it's the stock chart, though, Emily, of this, it's

is wild. Are you a full, Dan? What do you mean the stock chart? Since when do you look at stock charts and make your decision that way? That's a good point and the whole marijuana industry definitely has some tailwinds right now. But this is the kind of thing I look at it and I'm just like, what is going

on? Dan, I got to put you on the spot. Which one's going on your watch list? I've got to go green thumb. I mean, Autodesk is already there. Yeah, he already owns it. All right. That's going to do it for this week's Motleyful Money radio show. The show is mixed by Dan Boyd. I'm Dylan Lewis. Thank you for listening. We'll see you next time.