Motley Fool Money - Behind The Most Exciting Stock Pop In Years!

Episode Date: August 19, 2026

Target reported solid earnings this morning, which is a great sign for the consumer, but the big news today was from Moderna. The company’s clinical trial results for a cancer vaccine were so encouraging it was fast tracked through the trial and, while there are questions, this could change how we look at cancer in the future. We discuss why the stock is up over 100%. Plus, we end the show with the latest from OpenAI and Anthropic. Travis Hoium, Lou Whiteman, and Rachel Warren discuss: - Target Earnings- Is Target Stock a Buy?- Moderna’s HUGE News- Scaling Qs- Is AI Growth Slowing?- Speed Running to an IPO Companies discussed: Target (TGT), Moderna (MRNA), Merck (MRK). Host: Travis HoiumGuests: Lou Whiteman, Rachel WarrenEngineer: Kristi Waterworth 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

Target's Hot Street continues. Motley Cool Hidden Gems Investing starts now. Welcome to Motley Fool, Hidden Gems Investing. I'm joined today by Lou Whiteman and Rachel Warren. Guys, we've got to start with retail. The big earnings report this morning was from Target. The company reported 5.3% increase in sales, 3.8% jump in same store sales. This is where they really struggled over the past few years.

So, Rachel, would you take away from this report? There were some interesting updates here. I mean, probably the one that caught most investors' attention was the 100% jump in earnings per share. That really catches your eye, but you got to look closely at the details. A large portion of that growth on the bottom line came from a one time $994 million tariff

refund. That actually added a $0.65 per share to those earnings figures. But even if you strip away that, Target actually grew its fundamental earnings by 20% year over year. You know, they're really leaning into this differentiated retail approach. They've lowered prices on more than 10,000 items

to try to attract more budget-conscious shoppers. But kind of the broader story here is Target is really trying to expand more into the digital and service-based revenue channels. So their traditional in-store sales grew by 2.7%. Digital sales grew by 8.7%. There's also a 25% increase in same-day deliveries and 20% growth in non-merchandise revenue. And the thing that I think is important to know it for anyone that's followed this business for a while, they've been struggling a lot compared to competitors like Walmart. Target really relies significantly on sales of more discretionary items. compared to the competition. So apparel, home decor, seasonal goods to drive traffic and protect

its margins. And so when you've got shoppers cutting back on non-essential spending, that leads to lower foot traffic excess inventory. You know, we have the newer CEO, Michael Fidelke, he stepped into the role earlier this year. They're implementing a multi-billion dollar turnaround strategy, slashing prices. They're investing billions into story models. This isn't a stock I'm running out to buy right now, but I will certainly say this was a quarter that I think showed some much needed improvement particularly under new leadership. Yeah, Lou, I don't know if now's the time to buy because Target stock's almost up 60% year to date. It seems like a lot of the turnaround may have actually been priced in already.

Right. The patient has a pulse. And congratulations for that because we didn't know that for a while. It was a beat. As Rachel said, it was an ugly beat, but at least things are not going down, which has been the problem for a while. As you said, the stock's up big. The market is yawning at this. I think that is right.

What Target did was Target held serve. Target delivered as expected. Can they accelerate, though? I mean, under 4% comp sales gains won't sustain the stock forever. And what are they going to be? They were cheap, chic or whatever, you know, like, and that's hard to do. They're trying to bring that back. They mentioned protein heavy potato chips as a big seller at a big driver and floral pattern phone basis.

I got to say, I do love all the minute details in these earnings calls, too. Right, right. But look, that sounds to me a lot like whack-a-mole. That doesn't sound like a sustainable strategy. Rachel mentioned they're going to differentiate themselves by lowering prices. Walmart called. They've been trying that for a long time. Target, this is the dangerous thing about retail. Nobody has just a God-given right to exist. We see retailers fall out of favor and never recover all the time. That's why it is really good news that they seem to have stopped the slide. but is it a good investment from here? I think they still have a lot of work to do to explain, like kind of the way Best Buy has explained and Dix has explained, we are here because we provide blank. I still don't think we have the answer to that question for Target. I don't think floral pattern phone cases are the long-term answer there.

When you think about a stock like target, so 15.6 times earnings, as we're recording right now, it does have a dividend yield of about 3%. is that enough to be a value for investors or is the bigger challenge? What do they fundamentally become? Because the disruption story is still a bigger story. I think the digital piece is the one that I have the hardest time wrapping my head around. It sort of makes sense, right, that you could order your groceries. We get our groceries, non-perishable things. We usually get fruits and vegetables from the grocery store, but you need a box of cereal. It's cheaper to come from Target and it'll come right to

your door. That seems compelling to me, but at the same time, Amazon's trying to do the same thing. So it almost seems like they're in this strange middle spot. They are fighting everybody everywhere. And that's sort of a different way of putting the thing of like, what reason do you have to exist? What are you special at? The dividend, look, it's down under three now. And I'll note, I can get a six-month treasury today for 4.0. And I'm not going to get any growth there either. So you've got to explain to me where the growth will come from. We talk about this with reed stocks all the time. I love dividends on reed stocks, but if it's a reed stock that goes nowhere for a decade but pays you three, four percent, you're not beating the market. Target needs to explain growth. I love it

a good total return story. That dividend can be part of the answer here, but you've got to grow better than four or five percent consistently for that dividend to matter in terms of an investment decision for me. If they really want to grow this digital business, I just want them to integrate shipped. They still operate shipped as kind of a separate thing. And then they ask for a tip. So I'm paying to be a subscriber to this Target Plus or whatever it's called. And I have to tip the driver. I don't have to tip my Amazon driver. That whole thing, that whole integration just seems a little bit like it needs to be rethought a little bit. But at least they're heading in the right direction. So we'll see where things go. More retail earnings tomorrow when Walmart reports. So another thing

we'll probably cover here on the show in the next couple of days. When we come back, we're going to talk about Moderna stock, which is up 135% as we're recording. Introducing Fidelity Trader Plus, the next generation of advanced trading from Fidelity. Customize your tools and charts and access them seamlessly across desktop, web, and mobile. For faster trades, anywhere you go. Try the all-new Fidelity Trader Plus. Learn more about our most powerful trading platform yet at Fidelity.com slash trader plus. Investing involves risk, including risk of loss.

Fidelity Brokridge Services LLC. Member NYSE, SIPC. Hey, Fidelity. What's it cost to invest with the Fidelity app? Start with as little as $1 with no account fees or trade commissions on U.S. stocks and ETFs. Hmm, that's music to my ears. I can only talk. Investing involves risk, including risk of loss.

Zero account fees apply to retail brokerage accounts only. Zero dollar commission does not apply to customers designated by Fidelity is a professional equity trader. A limited number of VTFs are subject to a service fee of $100. See details of Fidelity.com slash commissions. Fidelity brokerage services, LLC, member NYS-E, SIPC. Welcome back to the show. Moderna is the big mover for today.

Rachel, this is your area of expertise. Shures are up, depending on the minute that we're looking at things right now, between 140, 160%. This is a crazy response. But what was the big news for today? We had major trial results come out. from the phase three trial for their MRNA-based personalized cancer vaccine. This is a major milestone for a few reasons.

For one, this represents the first randomized phase three clinical trial to show that an MRI-based personalized cancer vaccine can actually prevent high-risk skin cancer from returning. This is a made-to-order vaccine. It's manufactured by analyzing the unique mutations of an individual patient's tumor. So doctors first take a sample of the patient's tumor. They sequence the tumor's DNA. They compare it to the patient's healthy DNA to identify the mutations unique to that cancer. They select the most prominent mutations that they write that custom MRNA genetic blueprint

targeted only at those specific tumor fingerprints. So then when the patient receives the shot, it trains their immune system to recognize and attack those mutated cells. So this study involved over 1,100 advanced melanoma patients whose tumors had been surgically removed, and it combines this customized MRNA shop that I just described with Merck's established immunotherapy drug, Ketruda. This is a longtime blockbuster drug, and it very successfully prolonged the time patients live without their cancer recurring.

This regimen, the combination of the vaccine and Merck's Ketruda, also met a key secondary endpoint. It reduced the risk of cancer spreading to other parts of the body. And this is really key. You know, we're at a time where Moderna has been for years now working to diversify its revenue streams post-pandemic. Merck is facing the eventual patent expiration of Ketruda in 28. Now, we're still waiting for the full detailed information from this trial. One thing I wanted to note that was really interesting. So clinical trials use what are known as independent data

monitoring committees to review data at scheduled intervals to protect patient safety. This interim review actually showed that the patients that were on this vaccine combo were significantly outperforming the control group in stopping the cancer from returning and spreading. And they actually hit such a high efficacy threshold in terms of the ability to save lives or prevent the disease, that standard medical ethics actually require you to then stop or modify the trial so that patients in the control group can access the treatment. And that's what they did in this trial's case, which is why we're seeing the results earlier than expected, why we're seeing all this data. Now, one final thing, Each vaccine is custom-coded to a patient's specific tumor fingerprint, if you will.

So it takes about a month to manufacture from the time of the biopsy. So even if this gets accelerated FDA approval, the next real debate is going to be the scaling, the pricing. But this is great news for Moderna. It's great news for the patients that could benefit from these treatments. Lou, I understood a lot of the words, Rachel just said. But if I can sum it up, this seems pretty cool. And I think that's it. And I don't want to be the wet blanket here, but as an investor, I think here is just the

word of caution. This is a wonderful proof of concept. It's an important thing. Moderna is closing in on a huge, huge leap for them. They are going from being a vaccine company with that vaccine kind of out of favor in the market right now to potentially being an oncology company, which would greatly increase its total addressable market. That's what the stock is reacting to. And it's very good news, okay? I think some context is needed on this jump, though. Yes, they are up 100, what, 150% today. Even with today's jump, they are still slightly below where they were in May 2024. It's about half the price it was in early 2023 and down by, you know, what, 25% or so from its COVID-era highs.

This was a company that not left for dead, but that investors had largely and wrongly given up on. And now we're seeing, almost like what I said about Target, we're seeing them off the mat or starting over. This fills me with hope, but there is still a long way to go. We didn't have the full details in the announcement. They're going to give all of the full details that other peers are going to have to review at a conference later this year. They're looking at the next year at earliest before approval. And there are still huge questions about cost and feasibility at scale. Rachel mentioned I saw up to like six weeks before it's ready from when a biopsy happens at scale.

And again, hopefully as these things prove out, And this was actually, they went after melanoma because in a way it was advantageous, but in a way it was harder. The dream here is that now that we've proven this, we can attack a lot of cancers and the infrastructure will be built. And over time, that will solve those six weeks questions, the scale questions, the cost questions. There is a path here. But I think as investors, it's important to realize that a lot of this, we have to put the words, over time, at scale, eventually. the big thing is, and this kind of fits in with the cancer patient as well, there's reason for hope. And hope is a great thing. But, you know, just clear-eyed as investor. Just be careful jumping in now after that jump because there is still a long path here.

Yeah, to put a little more perspective on where the stock has gone, it peaked almost exactly five years ago in August of 2021, down 69.5% since then. but the bottom was down 95%. So just a crazy volatile decade for Moderna, but this is one of those that I'm going to be keeping an eye on. I think the trend that I keep needing to learn more about is the personalization of medicine because it seems like this is one of those huge personalizations, but this is something that we're probably going towards more over the next decade or two. You could have bought the stock in the low 20s last September,

and I think that would have been a great time to buy in. I'm less sure today in terms of the near term, long term. Let's just hope it works for a lot of reasons. Yeah, exactly. Great to have some good news coming from the companies that we follow. When we come back, we're going to get the latest on Open AI and Anthropics growth. Two and five Canadians will hear the words, you have cancer. That's why every step and dollar raised matters.

On September 19th, join thousands in Toronto for the Princess Margaret Cancer Foundation Walk, Challenge yourself, friends, and family to walk 21 kilometers in support of life-saving research. Together, we can carry the fire and help create a world free from the fear of cancer. Register today at pmcfwalk.ca. This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business.

The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. The other big news in the market today is OpenAI and Anthropic. We've gotten some news about their growth in the second quarter. Lou, this has gotten a lot of discussion from investors, but 18% growth, quarter over quarter for Open AI, and that was disappointing. Usually companies that are growing that quickly, investors are really excited, but this is not the triple-digit growth that we're

maybe expecting. A lot of this is what stage of life is a company in. 18% isn't great when you're supposed to be in hyper-growth mode. Here's the real thing, though. 18% growth is even worse when your operating loss grew by 30% in the same period. That's trending in the wrong direction. Put it together and Open AI is deeply unprofitable and growing more unprofitable by the quarter. What's not the law? And by the way, just yesterday or the day before, they lowered prices on their API. So it seems like they're trying to get market share by winning a price war. Let me tell you the charitable explanation here. And I do think that we have to give because I would love to spike the football on Sam Altman right here. I am here for it. But here is,

I think, the charitable explanation. They are investing for future growth. They should be. spending more than they're bringing in. So I'm being a little snitty when I point out the expenses are growing faster than the revenue. We can't rule out that it's going to work. I know a lot of AI, very, very AI embedded people in the last month or so saying they're getting increasingly frustrated with Claude and they're really impressed with ChatGPT. I'm not calling a swing here, but it's important to remember just how new, how early we are in the game.

I can say this, but two years ago, ChatGCP is all we ever heard of. And then we didn't even know what Claude was. Nothing is finalized. If they are doing these investments and there is a huge revenue burst later, then this all will have worked out fine. But clearly what we know is things are not going to the script that Sam Altman would like. And we'll see what happens. I think the most honest answer is we don't know who the winner here is yet. It's too early.

So we just have to take these businesses for what they are and watch closely. Rachel, the reason that this is so important is so much of the market today is tied to the growth of Anthropic and Open AI. Those two companies alone account for a vast majority of the backlog for a lot of these hyperscalers from the neoclouds, which then flows its way down to semiconductor companies and equipment companies. And these are all the companies that are driving the market right now. And the other tie here is they're both racing to the public markets to IPO. Potentially, I saw Anthropic looking at maybe in the next. next few weeks. So with all of that backdrop, how do you think about this battle between these two

companies to grow at all cost and then what the actual numbers are? It's an interesting dynamic. And I don't think it's a winner-takes-all scenario. I do really think that these are both companies within their respective niches that can continue to grow and thrive. But the race to the IPO isn't just about prestige. I think it's also very much kind of a scramble to secure that permanent public liquidity before maybe we see some broader AI investment cycle spending rationalization. For Anthropic, I think it's about striking while the iron is hot. You know, they can capitalize on their revenue run rate, which just surpassed $65 billion. That could anchor a public valuation of up to $2 trillion, based on some of the recent numbers we've seen.

You know, we will see what this looks like in practice. For Open AI, I think the motivation's a bit different. They are obviously looking at increasing operational losses. They've got this fast-paced rival. I don't think they can afford to let Anthropic monopolize public institutional capital. So I think that's key as well. Open AIs growth rate in this recent quarter, that would be a strong result for a mature software company. Not so much for a fast-moving AI business. Obviously, their losses have deepened. You know, Anthropic more than doubled its revenue in this quarter. But it's also important to understand that they're kind of operating in some adjacent sandboxes. You know, Open AIs the market leader in total consumer user scale. We're looking at Anthropic, obviously benefiting from the broad enterprise adoption, high-value corporate contracts for tools like Claude. code. I think that that's also playing into some of the profitability dynamics that we're seeing. I think there's a lot for investors to watch in the coming months if we see these two companies

go public within a short period of each other. I am excited to get the S-1s, which is the initial filing where they actually tell all the numbers and all that kind of stuff for both of these companies, because that will tell us a lot about not only what their revenue looks like, but what their costs look like and what their obligations for future spending looks like. So more to come on those two companies. As always, people in 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 our sell stocks based solely on what you hear. All personal finance content follows the Montley Fool's 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. For Lou Whiteman, Rachel Warren, and Christy Waterworth, behind the glass, I'm Travis Hoyam. Thanks for listening. We'll see you here tomorrow.