Motley Fool Money - Big Trouble or Business as Usual?

Episode Date: August 9, 2024

The Yen carry trade sent markets down across the world this week, but the rebound was swift – is this the market’s usual knee-jerk reaction to macro updates or is there more for investors to be mindful of? (00:21) Jason Moser and Emily Flippen discuss: - The market’s dip earlier this week and whether its business-as-usual or cause for concern. - Anti-trust actions against Alphabet’s Google and its search default agreements with Apple, what it means for the companies and the state of tech regulation.  - Earnings updates and big moves from: Axon, Shopify, Airbnb, and Upstart (19:11) Bill Mann walks through the Xs and Os of the carry trade that sent Japan’s NIkkei down big this week, and talks through whether the full effects have been felt and what opportunities look like in the country for investors. (31:38) Jason and Emily break down two stocks on their radar: Roku and Home Depot. Stocks discussed: GOOG, GOOGL, AAPL, AXON, SHOP, ABNB, UPST, COST, ROKU, HD Host: Dylan Lewis Guests: Emily Flippen, Jason Moser, Bill Mann Engineers: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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We've got the X's and! and O's on the carry trade and some big earnings movers. This week's Motleyful Money radio show starts now. That's why they call it money. The best thing. Cool global headquarters. This is Motleyful Money Radio show. I'm Dylan Lewis. Joining me over the airwaves, Motley Fool senior analysts, Emily Flippen and Jason Moser. Fools, great to have you both here. Hey, hey, hey. Good to be here.

We've got a breakdown on the worst day in Japan's stock market in decades. stocks on the move this earning season, and of course, some stocks on our radar as well. Emily, Jason, I am happy to see you both survive the market sell-off this week. Bit of a bumpy ride for investors the past few days. There's a market sell-off? Yeah, yeah. Volatile week, right? I mean, bumpy ebbs and flows.

Depends on when you check your brokerage account, I suppose. Why don't we talk a little bit about what we saw in the market over the past week? I think on last week's show, when we last left you, listeners, we were talking about some softness in the labor market. That bled into some concerns this week. We wound up seeing Japan's most important index, the NICA fall over 10% on Monday, wound up retracing some of those losses to end up flat. In the U.S., S&P 500 and NASDAQ both took a hit this week. When you look out at what we wound up seeing this week, Emily, was this a business-as-usual decline? Or was there something more to be paying attention to here. I don't want to be overly blase, because I know when we do

enter our next big recession, next big market decline, I am going to be blasé about it. So this is not me attempting to be hindsight as 2020 Emily here. But I will say to me, this is business as usual, which is to say the market is always heavily driven by emotions. And what we experienced over the course of the past week is a great, grade A example of that, which is to say you get one piece of bad information, right, or one piece of information that then gets snowballed into a lot of dialogue with a lot of big names, people coming out saying, you know, we need an emergency, 75 basis point cut. That sends panic and fear into the market and people freak out. And when you have a narrative, like we are going to enter a recession, people start to act like we are going to.

enter a recession, and that causes extreme volatility, which is exactly what we experienced this week. And this is kind of like the cart leading the horse, because we actually didn't have any evidence that we were going to be entering a recession or that there was really any economic worries beyond what we already knew was happening over the course of the past quarter, right? When we look at what we were actually experiencing over the course of this past earning season, while there were some company-specific issues, in large part, consumers are still, for the most part, okay. And earlier this week, we actually got jobless reports that were better than what the market was expecting, which again, provides evidence that we are not immediately heading into a recession,

which makes all those pundits who were out last week saying, you know, we're doom, gloom needing an emergency basis point cut, we're all heading towards a recession, look kind of silly in afterthoughts. And again, I recognize that I am saying this now. It is, you know, a week after the fact. This is very much hindsight is 2020. But it is a great example. And I urge you. all investors to use this as a time to reflect on how you felt at this point last week. Because you never know when it is going to be one of those times where you look back and the market is up 20% a week after or down 20% a week after. And if you miss those really bad days in the market, you are more likely to miss those really good days in the market too. Jason, any reflections on what

we saw over the last week or so? Well, I like what Emily wrapped up with it. I mean, I like everything she said there, but I like what you wrapped up with her. It's just in missing the best days of the market, right? There's plenty of data out there that shows that if you miss out, I mean, if you missed out on like the 10 best days in the market over the last umpteen years, your returns would have been decimated. I mean, that's nothing new. We know that. And so I think that really plays into why we invest the way we do here at the fool. And it does take a little, I guess we could call it intestinal fortitude, right? You have to be able to navigate. through times like these, where, as Emily put it so well, I think, the market seems to be driven

so much by emotion rather than logic. I mean, it's very knee-jerk reactions to thing like this. I mean, the subject of the week was the yen carry trade, right? I mean, it wasn't necessarily a secret that that was out there, but the financial media, of course, is always looking for a headline and something else to talk about, so that was front and center. You've got a lot of sort of mixed signals in regard to the economy, so no one knows really where things are going, but but now we are starting to hear the drumbeat grow louder in regard to interest rates. And I think the one thing that I'm curious to see, and I don't know how this will play out, but it's the psychological effects, the impacts of actually cutting rates.

Because I think most of us, most in this line of work, it felt like, well, cutting rates is ultimately going to be a good thing, and that will spur more capital going into the markets and a little bit more, you know, focus on growth and whatnot. maybe. I mean, maybe it will. I mean, I wonder if, you know, the flip side to that is if cutting rates doesn't, doesn't prompt some sort of psychological reaction that, uh-oh, things are starting to get a little bit hairy out there and we better batten down the hatches. So that's something I'm going to be watching out for in the coming months because it does sound like we're going to start seeing them inching down rates a little bit here at some point in the near future. So just just paying

attention to the psychological impacts of that. Listeners, we're going to have a breakdown on exactly what went down with that Japan carry trade and the yen later in the show with our expert on All Things International, Bill Mann. In addition to what maybe we'll wind up calling a speed bump here for the markets rather than a more seismic or big shift, we did have what seemed like a much more important and relevant story in the world of big tech come out this week. Federal judge amid meta deciding, quote, Google is a monopolist and it has acted as one. to maintain its monopoly. Emily, this in response to an antitrust case focused on Google being

the default search engine in places like Mozilla's Firefox and also Apple's Safari. We know it as one of the most ubiquitous and kind of default search engines in general, but those agreements really solidified it. Where does the story stack up for you? Yeah, I'm actually really interested to hear what you and Jason think about this as well, because I've been going back and forth all week about what this means for Alphabet shareholders. And it's funny because this story is such a big and important story, not just for Alphabet, but for big tech. Again, very overwhelmed, though, with the other stories that we got this week. So I feel like it didn't quite get as much air as it maybe should. But the way that I see it is that this can go three different ways for

alphabet and thus by extension Alphabet shareholders. The first one is what I would consider the best case scenario, which is that Google ultimately overturns this ruling. Now, this is still very distracting and expensive, right? But ultimately, I see it as not an overly big deal for Google. They can afford lawyers, and you can almost think about it as Microsoft back in 1998 when the DOJ ruled against it as a monopolist, and that Microsoft should be split up. They did overturn the ruling. It took time and money, but as we all know, Microsoft shareholders, they were fine. Microsoft is still around. So in my mind, that's kind of best case for Google. I think a more likely scenario is that we see some sort of court-imposed constraints. Google

maybe has to do something to limit its ability to grow its market share, especially over search. It could be through monetary penalties, adding new alternatives, removing those exclusivity agreements that you just mentioned, Dylan, you name it. And that's super ironic, actually, because Google really has had a monopoly for decades now. But specifically right now is the time when they're arguably the most at threat in terms of that monopoly, because they're actually seeing some of the biggest competition ever from businesses like Open AI, who is attempting to launch their own LLM-based search engine. So Google is actually, if anything, maybe losing its control. So it's a little bit funny to see this ruling coming down now. And then, of course, the other third thing

that could happen is, of course, a full breakup. There are some investors out there that I think could see this as a good thing for Alphabet. I only see it as a bad thing, though. They benefit from their walled garden, in my opinion. Yeah, Emily, I look at the story, and I'm going to focus on a slightly different angle here in that, I think after about 15 years of tech, dominant, regulating. Regulators are finally starting to catch up to the ways that digital monopolies are maybe a little bit different than the more standard vertically integrated monopolies that we think of in the world of like standard oil. And some of those businesses that had more tangible elements to them, I think the kind of wildfire growth of tech is more in view

when we kind of look at the regulatory environment now. I think that's totally fair. And if you are another big tech company. You are watching this deal for Google in this case with very close eyes, because if this stands in Google is not able to overturn the ruling, then it begs a question of, okay, who is next? But at the same time, we could have argued the same thing for Microsoft back in the late 1990s. In the past two decades, have been some of the best time to be a big tech investor, right? Regulators did not keep up with the advent of the internet. So this is just one case. This is just one judge, this is just one ruling. And despite all the narrative that we have around big tech and this government, we're also heading into an election this year with a government that may actually be

a lot more favorable towards big tech. We may see nothing come out of this. All right, coming up after the break, we've got a rundown on some big earnings moves from some heavily followed full stocks. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Dylan Lewis here on air with Emily Flippen and Jason Moser. In addition to all the big picture headlines, we did have companies reporting this week and just in the general quarterly business of updating shareholders want to dig through some of those results and some of the big market reactions we saw. Starting us off here, Jason, shares of AXon up around 20% following earnings this week. Just really continuing an incredible run for the maker of Taser and the body cameras worn by law enforcement.

what had the market so excited about the report? Yeah, I mean, it was a heck of a week for shareholders. And, Dillon, honestly, when it comes to AXON, I can't say that I'm shocked. Badoom, see what I did there. No, all right. Seriously, though. I mean, Axon, they have a very strong competitive position, and that really hasn't changed. I mean, there is no real Pepsi to their Coke or Coke to their Pepsi, if you prefer. And the business just continues to perform.

They dominate their market. And so you look at these numbers, revenue, $504 million. that was up 35% from a year ago, and that marked the 10th consecutive quarter of revenue growth better than 25%. Another encouraging metric with a company like this, annual recurring revenue, grew 44% to $850 million, and then total future contracted revenue of $7.35 billion was up from just over $5 billion a year ago. So when you break it down by segments, the three key segments to the business, cloud and services revenue grew almost 47%. sensors and other revenue grew 28.5%. And then the Taser segment revenue grew just over 27% as well.

And I think the market was also very encouraged by the fact that management raised guidance, modestly now expecting revenue for the full year of between $2 billion and $2.05 billion. That would represent close to 30% annual growth. So, I mean, there's just not much to be concerned here with this business. The one thing I will point out, the valuation is robust. And, you know, actually, just continues to set the bar high and they continue to clear it. At some point, that becomes difficult to continue doing. And so I do kind of keep an eye on, you know, at what point does this business pull back? What point does this growth slow? Because the market might take a little bit of a different perspective. But for now, it is smooth sailing for these guys.

count me as a very happy Axon shareholder. But my portfolio was also excited to see the report from Shopify this week. Shares up over 25% following earnings. Emily, what was in there? Yeah, to be clear, heading into this report, expectations were very, very low, Dylan. In May, they had a particularly bad earnings report where they guided really low for really important metrics, including revenue growth, gross profit margins, operating expense margin. All of those things beat expectations. by a handedly good margin this quarter. So that is the reason why shares are up pretty significantly over the course of this past week. And naturally, all of those metrics beating expectations meant that Shopify was able to double its free cash flow margin year-of-year to 16% in the quarter.

So shareholders are certainly rewarding that. Now, I love talking about financial performance, but I hate just spewing numbers because really all the numbers are just like the symptom. And it's just a symptom of the bigger story in the business that's something. is really what's causing the metrics to perform better than expectations. And it all comes down to Shopify doing really well and expanding their offline business, integrating more merchant solutions into their offering, and in particular, their higher margin offerings as well. Their payment services are great. Those are still performing well, but those are lower margin than their other services that they're offering. So both of those growing at the same time

has meant great things for Shopify in the most recent quarter. Slightly different story when we look over at results from Airbnb this week shares down about 15%. Jason, it seems like we are seeing interest in bookings and demand for stays, start to moderate a little bit in the United States. I think that's a fair statement. This is certainly something that they called out, but it's not something that's specific to them, and I'll get to that in a second. But I mean, I think when you look at the court, this was a good quarter.

And I think that the long-term thesis with Airbnb is still very much intact. as just one of the global travel juggernauts out there. But this really is, it's all about the guidance. It's all about the near-term concerns that, to be fair, again, they aren't Airbnb-specific. Revenue, growth, up 11 percent to $2.75 billion. And they grew adjusted EBITDA to almost $900 million for the court, I think, up 11% as well. Knights and Experiences booked up 9%. And gross booking value was up 12% while the take rate was essentially flat.

So all of the metrics that matter are really headed in the right direction. But again, going back to that guidance and how things are looking going forward, we saw some language in the call. There's some small cracks beginning to appear that make one wonder if we aren't entering a period of slowing growth. They noted in the call, they're seeing sure booking lead times globally, right? So they don't get as much clarity into the bookings and the money that they're going to be bringing in. And they're seeing some signs of slowing demand from U.S. guests there. And so, again, there's not as much clarity in travelers' plans these days.

And I think a lot of that just kind of has to do with current economic conditions. It's a little bit of a difficult picture to really fully see. But I will say, you know, I will note the Expedia released their earnings report this morning as well. And noted the same thing, right? They noted the same thing in regard to that slowing demand. So, again, that kind of goes back to the – it's not just an Airbnb. specific issue. I do think we're just seeing some questions from consumers in regard to the plans that they're making and the money that they're spending. But the company continues to perform

very well. They continue to repurchase some shares, which I think for a business like this, it's still a little bit young. I'm not sure they really need to be doing that. But for the trailing 12 months, they repurchase $2.75 billion in shares. They are actually bringing that diluted share count down. So that's nice to see from that. And they have the remaining purchase authorizations. of up to $5.25 billion. So I suspect with a depressed share price, we'll likely see management trying to capitalize on that, take advantage of it, because this is a business that generates a lot of cash. All right, rounding us out this week, shares of AI lending platform upstart, up 48%, bringing shares roughly back to where they started in 2024 after a relatively rough

start to the year. Emily, is this earnings? Is this rate outlook? What's going on here? Yeah, it's definitely not this quarter. I'll tell you. you're that much. The quarter itself was pretty bad. Revenue fell 6%. And while that was less bad than expected, you know, they still weren't profitable, agestity, but it also fell. But as you mentioned, Dillon, you know, this is guidance-related. They were guiding for a better second half of the year in terms of the third and fourth quarter. And while management specifically said they weren't including any expectations for rate cuts in their guidance, you have to see that 50% jump, that near 50% jump and think to yourself, surely, this is the market.

baking in some expectations that rate cuts for this lending platform is going to mean good things in the back half of the year. I think generally, as we're looking at some of these more cyclical, maybe rate-driven businesses, how are you thinking about what you're getting from management? Yeah, I really do want management to not be baking in the expectation of rate cuts, because if you're doing that in the first half this year, you will be have been sorely disappointed. So I like more conservative expectations, but I do want to see clear guidance when it comes to how they are managing their platform, especially in the case of Upstart, who has such extreme volatility in their consumer demand. All right, Jason Moser, Emily Slippin, Fools.

We'll see you guys a little bit later in the show. Up next, we're going to dive into the trade that sent the market down this week, whether it's over and some companies to watch in Japan. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Dylan Lewis. It was a rough start to the week for the markets.

Thankfully, we did see some rebound, but the Niki, Japan's main index at one point down 20% in a few short days. Here in the States, the S&P 500 fell as much as 3.5% before finding its footing. At the center of it all, currency trades, central bank moves, and some speculation. Motleyful senior analyst Bill Mann joins me to talk through it. Bill, you're my go-to for all things, international. Huge global macro story. first call for me. Let's lay this out. What happened? Man, some weeks contain decades, don't they?

Unbelievable. Yeah. And some weeks undo decades in the case of Japan's stock market. So, Japan's stock market, kind of depending on how you measure it as second or the third largest in the world. So it is a pretty crazy thing that it would have lost about 25% of its value from July 10th through Monday of this week. And really what was happening was, that Japan has, unlike the rest of the world, not really come off of its zero-interest rate policy. Basically, the risk-free rate in Japan was something close to zero, is it 0.1%. And to the Bank of Japan, finally, because things have been going well in Japan, has made noises about raising rates, and it actually did so from 0.1% to 0.25% on the 31st of July.

a lot of times these things happen because of the relationship between countries. And in this case, it was specifically the relationship of interest rates in between Japan and the United States because there is a really simultaneously well-known and not well-known trade that's been going on called the Japanese Yan carry trade. And basically, how to explain this? You know how there are a lot of people who own houses right now who have mortgage rates that are well below the rate that you can get for a new house? Yes, and we're all jealous of them. Yes. It's pretty much the same concept when you think about the Japanese yen versus the U.S. dollar.

You could go as a large financial institution, borrow money in Japan at a really low interest rate and use it to invest elsewhere. It's the same exact notion as people remaining in their houses and the principle that they have. there is worth a lot more. So it's called a carry trade, and it is a tried and true financial instrument. The issue here, though, is that the carry trade comes with a lot of leverage, right? Whatever you have borrowed is, you know, you're borrowing from a bank, essentially. And so when this reverses, people have to unwind their leverage. So that's what started happening in the beginning of July. And then the U.S. employment. number came out very, very light. And suddenly, it seemed as if the long-awaited interest rate

cuts here in the U.S. were coming sooner. And that created a real panic amongst people who had were levered towards the yen-carry trade. So, Bill, kind of trying to distill that down, we had people taking advantage of a weak yen and really kind of being opportunistic in the spread on what they could get by investing that borrowed yen. We then had the Bank of Japan increasing rates, makes more expensive to borrow, also boosts the value of the yen, as I understand, global currencies in as much as I do, which is not very much. And now we are in a position where it seems like some of the dust has settled, but this was a pretty widely known approach. And as you mentioned, it's a trade that people are familiar with. This is just one application

of it focused on Japan. So what extent is what we've seen already the unwinding of this? How much of this is still out there or caught up in this trade? So quite a bit. The Japanese federal balance sheet contains about $20 trillion of foreign assets. So when you have a situation where the Japanese yen goes up 12% in a month, which is an extraordinary move for a freely traded currency? I mean, that's the kind of move that you expect from like the currency of Zimbabwe, right? like the Japanese yen, the euro, the pound sterling, the dollar should not move that much against each other. So this was a panic move. The Bank of Japan has come out on Wednesday and said,

hey, we're not going to continue raising rates for a while. Because they are looking at these types of destabilization, you know, we need to figure out how to get out of this in a very, in a much more orderly way. A 25% drop in the stock. stock market, and some of the companies in Japan had much more severe moves than that. Huge companies. So there are a lot of knock-on effects. It just does bear stressing that there really isn't that much in the way of a financial stress in Japan. It is simply a structure that was in place, added with leverage, that has to be unwound and was being unwound really, really quickly. Let's unpack part of the Japanese company side of this, because I mentioned the Niki fell a very

large amount, an amount that would be panic-inducing for a lot of investors here if it happened to the S&P 500, but some of the largest names on the Japanese exchange and some of the best-known names fell even more. Walk me through how a stronger currency, a stronger yen, winds up hurting some of these Japanese businesses. Well, one of the ways the Japanese businesses have been able to benefit is the fact that when you have most of your price structure in yen, and the yen is devalued against other currencies, you have a natural advantage when you're selling things overseas. And Japan is very much an export economy. So when the Japanese yen goes up, that automatically makes their goods a little less attractive overseas. Now, the yen is

still way, way devalued compared to where it was three and four years ago. It, it has, it has moved from about 161 to the dollar or two, as we're recording about 143. That is a dramatic move. So these companies have had the opportunity. Essentially, all of their goods are 12% more expensive overseas than they were a little less than a month ago. So taking that into effect, and also the Bank of Japan saying, we are not going to be raising rates dramatically anytime soon. I mean, realistically, what's the outlook here for investors in Japan or people that are interested in the Japanese markets? I mean, this is a country that had its major index returned to the highs hit in the early

90s just recently, retracing what was kind of a few lost decades for them. Is this a space that people should be interested in, excited about? Or is it still going to be kind of a wait-and-see evolving macro picture? The Japanese market is a funny one, because as you point out, they recently were able to surpass highs that they hit 34 years ago, which is an absolutely extraordinary thing to think about. I mean, could you imagine American investors being patient for 34 years? I don't like so. Japan, there has been a number of structural changes that have happened in the country. I actually find it to be a very exciting market to invest in now.

But it is a bit of an odd bird compared to a number of other markets. markets overseas, but the drops that we've seen in companies, and I mean structurally important companies like Tokyo Electron, which provides goods and services to companies like Nvidia. I mean, these are really structurally important companies to have seen their shares crumble by over 40% within a month. I think that you have to be interested in something like that. Keeping in mind that whatever it was that made the market so fragile and so volatile is something that can actually end up impacting these companies. I think you just gave us one there as a company to maybe watch or just kind of keep an eye on, but any other names that are on your list?

Another company that has dropped substantially is a company called Hitachi, and it's a well-known company. It's essentially a consumer brand company there in electronics. They're in all these different things. None of the, really with the exception of the fact that the their products are now 12% more expensive worldwide because of the currency appreciation of the yen. Nothing's really happened at these companies. So, yeah, these are two very, very interesting, large, systemically important Japanese companies. As you were giving the rundown at the top, you did note, we saw some softness in the jobs report last week, and that did play a little bit into this global cocktail that we all had to drink and digest over the weekend.

and then maybe have a little bit of a hangover from on Monday. When you look at what we saw in the most recent jobs report and the market response, anything worth paying attention to here. There's a financial concept known as reflexivity, right, which is this. When you have something that's meant to track something else, so we'll take the S&P 500, we'll take the NICA 225, sometimes the thing that is tracking also ends up impacting the underlying asset. And in this case, what we're measuring is the health of an instrument, but it should be noted

that this type of volatility just does actually reflect a little bit of weakness, a little bit of fragility in the market. And we have known this for a long time deal. We've talked for a while about the fact that the largest 10 companies in the United States, which is the largest stock exchange in the world made up 35, 40% of the total index. Those same 10 companies make up something on the order of 20% of the global market cap for publicly traded companies. And it's not to say that that's not something that can't sustain. It's not to say that that's something that isn't warranted, but it is a risk when you have that level of concentration. And I think that some of what you're seeing now in terms of the volatility has to do with people really focusing on the fact that

that does make for a slightly fragile situation. Some of those incredibly important market-driving companies wound up being on sale earlier this week, particularly on Monday. I'm curious, Bill, with some of the discounts out there on the market, did you do any buying this week? I did. As you know, I'm an internationalist and a small-cap guys. So some of the things that I was buying may not have been names that are ones that people are all that familiar with. I was buying in countries like Sweden. I actually did buy a little bit in Japan. If you are an investor, I mean, a fancy way to put it is to say that you are short volatility and long stability. And so when you have a situation where stability begins to wane, it really is the case.

a lot of times companies that have no exposure at all to the underlying problem get a heck of a lot cheaper. And we love that as investors, don't we? We are fond of cheaper. Bill, ma'am, thanks for joining me. Thanks, Tilley. Listeners, stay right there. Coming up on the show, Jason Moser and Emily Flip in Return with a couple stocks on their radar. You're listening to Motleyful Money.

As always, people on the program may have interests in the, the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Dylan Lewis, joined again by Emily Flippen and Jason Moser. Fools, earlier this summer, Costco announced it will be raising its membership fee for the first time in years. This week, the company announced another initiative that might be intended to help boost numbers a bit. The retailer will be putting scanners at the entrance to its stores to enter, and guests must be accompanied by cardholders, to shop at the store.

Jason, it feels a little bit like Costco is borrowing from the video streamers here and saying, you know, you've had it pretty good for a while, but we're going to start clamping down on these things. Hey, listen, you may be able to get a hot dog and a Coke for a buck 50, but at Costco, there is no free lunch, right? I'm glad you mentioned the video streamers because that's where my mind went first. And I can't help but wonder if maybe this was something that was spurred. by watching Netflix, for example, in the way they've executed, like, you know, the account-sharing initiative, because that really has been a very successful initiative for them. And it really

just proved that, hey, I mean, number one, they can diversify their service offering. But furthermore, viewers of Netflix, lovers of Netflix, they're going to pay for it, right? Even if they didn't have to pay for it before they like it, they're going to continue to pay for it. And so I think in regard to Costco, I'm a little surprising more than doing this before, but I guess better late than never. It makes a lot of sense in this day and age. And I think that ultimately this does nothing but potentially expand their customer base. And a lot of that just really boils down to the fact that we've seen it. I've been here for 15 years.

We've been talking about Costco all the time throughout this 15 years. It's just an amazing business with a rabid, loyal customer base. And I just don't see that going away anytime soon because they just remain so focused on the customer, right? It's a razor-thin margin to begin, a business to begin with. And so they really do need to capitalize on those membership fees because that enables them to really continue serving their customers with the highest touch service they can. So I suspect this is going to work. I'm glad to see them doing them. Emphasis on highest touch there, Dylan, because at this point, they're going to be holding you a gunpoint at the door saying, let me see your ID.

Let me see your ID. You know, I have to agree with Jason. I'm a little surprised that some of these rules weren't rules to begin with. But I think, Emily, I think Costco will be okay as long as they keep the hot dog combo a $1.50. I feel like that will be the last thing to go. And as long as they can preserve that, customers will stay happy. Yeah, you're probably right. And look, I think the story here has got untwisted because they were already implementing this just at the checkout counter.

Maybe not with the ID, but at the checkout counter, which is slowing the entire process down. So I think this is them trying to speed up the checkout experience for members who are getting irritated by their prior policy. But I will say, unlike Netflix, which has all of these exclusive things that you can only get on Netflix, I mean, other than the Kirkland brand, which I don't know how much of a loyal following the Kirkland brand has, what does Costco have that you can't get at like a Sam's Club? Careful, Emily. Mac might be listening. I'm just putting it out there. Yeah, the deals, maybe.

Maybe an opportunity there, too, with some of the things they're able to get for their customers. My mom just bought an e-bike from Costco that she was able to get as a special discount through their membership. So it's not Kirkland. It's not a Kirkland bike, but they were able to get a particularly good deal for their members. Maybe that's helping people a little bit, too. 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. Emily, you're up first. What are you looking at this week?

Yes. Well, I'll have to start. Actually, I'm going to switch this on its head. I'm going to start by asking Dan a question. Dan, who is your connected TV provider? What platform do you watch TV on? Well, I have cable subscription. You have a cable subscription? Yeah, I do. I like live sports and specifically baseball.

And the baseball streaming situation is complete garbage if you happen to live in the area that is, you know, your team's area. Okay, well, Dylan, I seat the rest of my time to Jason. I've already lost this radar stock competition. But no, for the sake of just finishing this up here, my radar stock was going to be Roku. The tickers are OK, you for anybody's unfamiliar with it. They are the largest connected TV streaming platform in the United States with nearly 50% of all connected TV hours watched in the country. They have a lot of great integrated devices.

Dan, I'm pretty sure you could probably still watch your sports on it if you wanted to. And I will say the reason it's on my radar this month is because shares are down. so significantly that I think this business is incredibly undervalued, given the amount of engagement they still have. If they can do a Spotify-esque turnaround in terms of their cost structure, especially as they make improvements to their ad monetization, thanks to a new deal they have with the trade desk, I think this is ripe for a turnaround. I'll bill you out there, Emily. I have a Roku in my house and use it all the time. It made my not smart TV, a smart TV, and I love it. Dan, do you have a follow-up commentary? I can't tell if that counted as your question or your comment.

Listen, I know that I could get a V-A. VPN and run my home network on it and pretend that I live in Iowa or something and watch Nationals games on the MLB app. I know I can do that. I just don't want to. So I don't. There you go. Jason, what's on your radar this week?

Honest Dan. Honest Dan. That day fits with my company, Home Depot, ticker HD. Earnings for Home Depot come out this coming Tuesday before the market opens. And I always just enjoy paying attention to what this company is doing. A little bit has changed since the company's last earnings call, right? They did reaffirm their guidance last quarter, but as they noted, they feel like the worst of inflation is beyond us, the consumers are still putting off projects.

But we've also now seen some acceleration in this rate-cutting conversation. So I'm going to be looking to see if they address this in any way in the call. Again, kind of going back to the top of the hour there with the psychology of cutting rates, how will that impact a company like Home Depot? But the SRS distribution deal is officially closed, that will open up additional market opportunities. This is just a behemoth of a company in the space with a 2.6% dividend yield to boot. So I think in time and it'll only grow, I'd imagine. Dan, I don't know if I have time for a question or a comment here on Home Depot.

I might have to go straight to which company is going on your watch list. You know Home Depot. We don't need to do a follow-up here. You do a lot of research on the company. I do research as in I was just there this last weekend, buying a new hose, Dylan. It was great. It happens to be the closest big box hardware store to my house, so you know, I love it. Sounds like it's going on your watchless this week. Absolutely. All right, that's going to do it for this week's Motley Fool Money Radio show. The show is mixed by Dan Boyd.

Thanks to Jason and Emily for joining me. We'll see you next time.