Motley Fool Money - Customer is Key This Earnings Season

Episode Date: May 3, 2024

Whether it's smartphones or soy lattes, consumers are pickier right now. The companies that are keeping things convenient and creating value offerings are winning, the ones that aren’t are struggling. (00:21) Ron Gross and Jason Moser discuss: - Apple’s sluggish hardware sales and massive $110B buyback program, and Amazon’s killer cloud and ad segment growth. - CVS’s Medicare struggles, Wayfair working out of declines, and Coke keeping things business-as-usual. - The different fates in fast food for Starbucks, Domino’s, and McDonald’s. (19:11) Ron and Jason break down two stocks on their radar: Wingstop and Crowdstrike. Stocks discussed: AAPL, AMZN, CVS, W, KO, SBUX, DPZ, MCD, CRWD, WING Host: Dylan Lewis Guests: Jason Moser, Ron Gross Engineers: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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Consumers aren't eager to buy new iPhones or order Starbucks on them. This week's Motley Full Money Radio show starts now. That's why they call it money. The best thing. Global headquarters, this is Motley Fool Money. It's the Motleyful Money Radio show. I'm Dylan Lewis. Joining me in the studio, Motley Fool's senior analysts, Ron Gross and Jason Moser.

Gentlemen, great to have you both here. How are you doing, Dylan? We've got fast food brands signaling that consumer is getting a little pickier and also radar stocks. Ron, generally this time of year, our eyes are on earnings, but we do take a peek at the big macro to make sure that we're not missing anything. For a while, the story was rates are going down. We've had a more recent idea of our rates going up. We had comments from Fed Chair Powell this week.

We have fresh labor data. What are you seeing with the rate story? So two big stories out this week. On Wednesday, the Fed left interest rates unchanged at 5.3 percent and commented how they were wary about how stubborn inflation was proving to be. And they signaled that rates will likely continue to stay higher for longer. That's kind of been the mantra, higher for longer. And it is interesting to see how kind of sticky inflation has been. The Fed's preferred inflation index, while down from 7.1 for sure, which is great, still stands at 2.8 percent higher than their

target of 2%. Now, investors did cheer the fact that Powell said, he thought the next policy move was unlikely to be an increase, and the market actually rallied on that. So, you know, you'll take what you can get, I guess, in this kind of a market. Now, fast forward to Friday. Jobs report came out, solid, but much weaker than expected, which in a vacuum would not be so great. But in the context of an environment where you're looking for a soft landing for the economy, it's actually being heralded as a Goldilocks report. weakness, but not too bad. Economy appears to be slowing. Market rallied significantly on the hopes

that now one or potentially two rate cuts would happen this year, and we will see. The big macro can sometimes be the big metric soup. I appreciate you helping us wade through that one, Ron. Very good. All right, we have another monster earnings week to run through. That means we're recovering results all the way from A to W, Apple to Wayfair. Jason, let's start at the top of the alphabet. shares of Apple up 6% this week after the company's second fiscal quarter results, revenue down slightly year over year, but came in ahead of expectations along with earnings. It seemed like a little bit of a wait-and-see quarter for Apple.

Yeah, it definitely feels that way. I mean, they did not knock the cover off the ball here, right? But the results seem good enough for Wall Street, and like runs that you take what you can get. I mean, to your point, yeah, revenue down 4%. They saw products revenue actually down 10%. Now, they blamed this partly on timing and a tough comp from a year ago when supply chain bottlenecks sort of eased up. Take that for what it's worth. But when you look at the segments, you had iPhone revenue down 10%, services revenue was up 14%.

Mac was up 4%. iPad down 17%. And then I thought this was interesting. Wearables' home and accessories was down 10%. So just something to kind of keep an eye on there. but China always a big point of conversation with Apple. China was down again. But Tim Cook noted in the call that the results there are improving from a quarter ago. So they're seeing a reacceleration there in China. So it's becoming less bad, I guess, as what it was before. But we'll have to kind of

see how that shakes out because it's become a very competitive market. We know these replacement cycles are only getting longer as these phones continue to get better. And there are a lot of really good phones out there. Now, particularly when you look in that China market, conversation about AI, but still nothing really to report there. Yeah, I think a lot of people have been waiting for Apple's move when it comes to AI. And CEO Tim Cook alluded to, give us a little nugget of something,

saying we're looking forward to sharing some very exciting things with customers at events later this year. Jason, what would you want to be seeing from Apple? Well, I think the idea, at least probably what people are looking for is for AI to be incorporated somehow into the device, primarily that would be the phone, I would guess. Again, I mean, it's a wait-and-see in a lot of regards, because I think that's one of the problems with AI right now, just in general, is understanding its implications and how we as consumers might use it or how businesses might use it in sort of the form factor that takes.

And so I appreciate the fact that they're being deliberate and sort of taking their time there. But, yeah, I mean, they're going to need to bring something to the table because this conversation regarding AI is only growing louder. Yeah, I think the worldwide developers conference in June is probably something to keep an eye on where the next big AI announcement would be interesting that the stock rallied significantly on this report. It's all about expectations, really, even though there was some weakness here, it was better than expected.

Repurchasing $110 billion a stock continues to return a significant amount of capital to investors, shareholders, in addition to their... dividend, only trading it 25 times forward, but they do have a China problem. So it's going to be interesting to watch. For context, $110 billion of stock is a Boeing or an Airbnb in market cap. Apple just saying, yeah, sure, we throw off enough cash. That's not going to get in the way of us doing our R&D investments. We can buy that back. We can also raise our dividend, 4%. That's fine. We've got all this stuff in spades. I will say, I mean, with the dividend, it just kind of tilts me that it's so low.

It's a token dividend. Exactly. I mean, I appreciate what they're doing. Slow and steady wins the race, right? This is 12 consecutive years. They've raised the dividend. Credit where credits do. And it just requires looking further out and saying, okay, well, in year 25, right, this is ultimately going to be a dividend aristocrat and probably more. It just, man, I tell you, share repurchases are fine. I would love to see them make a little bit more of a material boost of that dividend. Here, here. They're setting a low hurdle to keep going up every single year on their path to becoming an aristocrat. Ron, Amazon not really needing to

wait for growth in the same way that Apple investors are. The machine just continues to churn their revenue up 13% to over $125 billion for the quarter. It seemed like an incredibly strong earnings result for the company, especially with its operating income. Great. Record first quarter sales as AI. We have to mention AI in every story. We're contractually obligated. AI, the boom, it's just powered growth through their cloud computing unit. Amazon CEO, Andy Jassy, This tried to shift the company to focus more on AI innovation, both in the Amazon platform, as well as the Cloud AWS platform. They were significantly behind Microsoft, Google, some others, attempting to kind of make

their way back into that space. Earlier this month, in a letter to shareholders, he laid out his vision for how generative AI could be critical building block and their next pillar of growth. So, you know, you had the website, you had Amazon Prime, you have AWS. now, what's going to come next? Perhaps it's AI. We will see. But as you noted, the metrics were wonderful. Revenue up 13 percent, North America up 12 percent, Amazon Web Services up 17 percent, really, really strong. Net income increased to $10.4 billion, and that includes a $2 billion loss from the Rivian automotive investment. So, theoretically, from an operating perspective, as you mentioned, even

higher, free cash flow came in at $50 billion for the quarter. They're putting up some real, real good numbers there. Guidance was pretty strong as well. CapEx is going to be pretty high now as they make investments for AI and other things. So we'll keep an eye on what that does to free cash flow. But a pretty strong report trading it 38 times. It's not the cheapest stock in the world, but it is Amazon. We were talking dividend just a minute ago with Apple. And I do have to ask, because everyone else in big tech is getting on the bandwagon. Jason, do you think that Amazon would ever consider issuing a dividend? I think one day they probably will, but I think that they also are not going to feel pressured to do so, right? They're going to do it on their own timeline.

And to Ron's point about the investments they're making in cloud, AI, and whatnot. It's also nice to see that Jassie's very focused on costs as well with the business. So they are not just spending money freely, which is very encouraging. I think probably what comes with that is a singular focus on the balance sheet and that cash flow and making sure they have the capital that they need to make all of those investments. My guess is a dividend would probably follow years down the line, but hey, I mean, it could be wrong. And they do need to continue to make sure their cost structure is right. I mean, they let off 27,000 employees, I want to say, last year, and they keep doing it selectively to make sure their overall headcount is where they want it to be. That, obviously,

accrues right down to the bottom line as they save money. Pops free cash a lot. creates more money to potentially pay a dividend, buyback stock, make investments. I think they're closer to getting their expense structure correct, certainly more than they were in the past. All right, coming up after the break, earnings blues, it continues with a look at how Medicare is eating into CVS's results. Stay right here. You're listening to Motley Full Money.

What does leadership really look like? On the power of advice, a new podcast series from Capital Group, you'll hear from athletes, entrepreneurs, and executives who've led on the field, in the boardroom, and in their communities. It's not about titles. It's about impact. Discover what drives them and the advice they carry forward. Subscribe and start listening today. Published by Capital Client Group, Inc. Welcome back to Motleful Money. I'm Dylan Lewis, joined in studio by Ron Gross and Jason Moser. Our earnings rundown continues with a look at CVS, Wayfair, and Coke. Ron, CVS logging its worst day in about 15 years after reporting earnings this week, sales up slightly from a year ago,

but wide losses, in particular, tied to the company's Medicare operations. Walk me through this. This is an in-depth category here. Yeah, the stock got just murdered. I mean, investors wanted nothing to do with this company as they missed both revenue estimates and they decreased their guidance. As you said, revenue growth kind of anemic at 3.7%. So the problem with their Medicare unit and their insurance unit, two things.

increased utilization, and that means more money spent on insurance claims on insurance, as people continue to seek treatment more and more post-COVID. Everybody put off some elective surgeries. Believe it or not, we're still dealing with that. It seems like COVID's been a while now, but not in this case. So much higher utilization rates, that eats into bottom line. And Medicare reimbursement rates, those were cut. And that continues to pressure the company for the remainder of the year and potentially 2025 and forward, but that remains to be seen. So they got hit double whammy there. So, like, Aetna revenue, for example, was up 25%, but their adjusted operating income fell 60%. So they've got some work to do, and CVS is really paying the price

for a really big push into Medicare Advantage plans through their Aetna division, and it's kind of coming back to burn them a little bit. They're going to spend time. making sure they right-size their balance sheet. They're going to cut costs if they need to. I think all competitors are likely going to need to take similar actions. Even though CVS went hard into Medicare, they're certainly not alone. Earning's down 33%. Guidance was brought down as well. Stock is only trading for seven times forward guidance. Kind of intriguing, but I would be careful. Starting to look a little interesting while? Seven times. This is a company that is very different than the CVS of about five years ago, with the focus on health, with the focus on insurance,

the Medicare exposure. A lot of that has happened under CEO Karen Lynch's guidance. Is she on the hot seat? I would think for sure. Now, she used to run Aetna, so the fact that CVS has moved big into Aetna-based products, probably not surprising, but that could be a mistake into 2025. We'll have to keep an eye on it, but hot seat for sure. Much more favorable reaction to Wayfair's results, shares up 20% this week, and Jason, I'm probably part of the reason why their

sales story is doing okay. Two new kitchen stools and a mirror in my house. Revenue was down slightly but ahead of expectations. I'm glad I could do what I can down. Sounds like Dylan is a happy resident of the Waiberhood, right? They got just what he needs. Get used to that one, right? The Wabrohood, that's going to be a big marketing platform for them, a big campaign in the next several years. But yeah, like Apple, I mean, they didn't knock the cover off the ball by any means, but the results were good enough. Clearly, the market responded very positively to it. In management, did paint a picture of better days ahead. Revenue, $2.7 billion is actually down 1.6% from a year ago. When you look at

the metrics that really matter for this business, active customers are 22.3 million now. That was up 2.8% from a year ago. Revenue per active customer actually fell 2.8%. And orders per customer remain relatively flat. And I think one of the key metrics we've always kept an eye on with Wayfair is that repeat customer business, right? Because acquiring those customers is expensive. So when you get them, you want to keep them. And we've seen this metric really perform over time. Now, repeat customers placed 80.5 percent of total orders delivered in the quarter. That was versus 79.1% a year ago. So that number continues to move in the right direction as well. I think that, you know, this is a business that over the last three years, you know, they like many of these e-commerce

businesses went just through some really very difficult to support growth, right? I mean, a lot of that growth was pulled forward. They're kind of normalizing now, still working towards profitability, sustainable profitability. But you kind of key in on it there at the very beginning, right? It's just, we're all using it in one way or another, right? If you have a home or if you rent a place, they've got everything, right? So it's a nice place to be able to go look and find stuff that you need, you know, unless you're a true Amazon loyalist, I guess.

I'm going to take some cues here from the key business metrics, and I think paint a little bit of a picture with the consumer and the story there. They're active customers, as you highlighted, going up, but the spend per customer on average going down, I feel like that is a sign of something we are going to continue to see this earnings season with other companies. I agree, and it feels like we're seeing that type of behavior across the spectrum of businesses, right? I mean, particularly in things like retail and restaurants and whatnot.

But we're just seeing a lot of signs with a lot of these reports that while there is some growth there, it's very clear that the consumer is stretched and starting to make concessions and deliberate and postpone purchasing. Now, with that said, I think one thing they noted on the call was very encouraging. They said for the first time since 2019, they're seeing their suppliers starting to introduce large groups of new products into their catalogs as they try to build momentum. for sort of this recovery going beyond this year. So that's encouraging. I mean, you know, with Wayfair, it's ultimately a network. I mean, they're not holding all of that inventory, but they're connecting suppliers to customers. And to see those suppliers introducing a lot of new stuff, I mean, that's a good thing. And when the consumer starts to feel a little bit better,

Wayfair likely is going to get a few of those dollars. Jason, I know this is a company you've followed for quite some time. Going back pre-pandemic, we're seeing this business normalize a little bit. Do you see a business, a return-to-growth story here for them? I do, to an extent. I mean, I think it's a very competitive market, to be sure. I mean, you look at Amazon out there, the most obvious competitor that really is a threat to a business like this.

But they've done a very good job through the years of maintaining the narrative, investing for growth. They're not worried about that profitability and cash flow right now, because they feel they're building this network out. And the market opportunity is just so big, and they continue to grow that international business out, it does feel like there's another leg up to go here. More stools and mirrors in my future, it turns out. All right, we're going to wrap this earnings rundown with a look at Coke revenue coming in

a little bit ahead of expectations, up 3% year over year. Ron, when you look at the results from the company, maybe not quite as subject to some of the consumer whims, because they are on the lower price end. But what did you see? The two main things were anemic volume growth of only 1%. you really would like to see that be stronger. But the report was relatively strong, and that's because of a 13% price increase across their product line.

It's the age-old story of why Warren Buffett has always said he liked Coke, besides his addiction to cherry Coke. It's because of the pricing power, and they have that ability to continually raise prices over time. They attributed about half of the price increase to inflation. The other half was to keep pace with competitors, but for the most, part, consumers accepted it. They are seeing inflation decelerate. Corn syrup, sugar, aluminum cans are coming down, so that will probably moderate. Pricing will probably moderate as the year

progresses. Net revenue only up 3%. If we remove currency, up 11%, a little bit better than that. Adjusted earnings per share, up 7%. That's kind of like what Coke does. Coke's not going to really knock it out of the park, but they've got to continue to come up with new entries into the marketplace. They have this new Happy Tears Zero Sugar, you may have heard about, sold exclusively on social media. I don't know. I don't get it. But they up their guidance to.

But, you know, 3 to 4 to 5 percent expected EPS growth. Again, it's Coca-Cola. Trades at 22-time guidance. Pepsi's at 21 times guidance right in line there. So it's a fine company, but it's not going to, you know. You really came out swinging there, Ron. Anemic growth. I don't know.

I don't get it when it comes to the social media. I absolutely love the spice. Need to get more salty snacks in that portfolio. They won't be with Pepsi, right? That's right. Way to bring it. All right. Up next, the numbers just keep coming in.

We've got details on Starbucks's 15% drop this week and updates on two major fast food chains. Stay right here. You're listening to Motley Full Money. I'm Dylan Lewis. Join again in the studio by Ron Gross and Jason Moser. We've got earnings from three of the biggest food chains in the world this week, Starbucks, McDonald's, and Domino's. Slightly different outlooks across all of them. of them. Jason, I want to start with Starbucks. Shares down 15%. And this is not something

that we see all that often with a company like Starbucks. And there seem to be a lot of concerns and not a lot of inspiration in the results that we saw from the company. Also, not a lot of inspiration in the commentary from management after the results. Yeah, I think you could say that again. I mean, these were not good numbers, clearly. And we'll get to that in a second. But I think CEO, Loxman, RSMM, seemed very caught on the defensive, right? Whether it was the earnings call or whether it was interviews that he was offering financial media, it almost, I don't want to say detached from reality, but it just didn't seem like he really had a focus on what the real problems were. He kept on throwing around a lot of

sort of catchphrases and buzzwords. And, I mean, there were some assigning a blame to the customer and whatnot. It just, I don't know. So to me, I mean, he really has work cut out for him, but I think even more. So, to me, the drumbeat is only going to grow louder, right? He's been there for a year now. Stock is down 35% under his watch. This is Starbucks. That's a big move. It's only going to get louder. We're going to start hearing the questions. Is he the man for the job? And that's a really fair question, I think, at this point, particularly after this report. I mean, revenue was down 1%. Global comps down 4%. They saw particular weakness in China. That was down 11%. And they noted, It means a very competitive market there.

There are plenty of options there in the Chinese market. They don't have unlimited pricing power there. They do continue to open stores. So there is room to grow there and room to succeed, but they run into a little bit of a buzzsaw there. You saw operating margin down 140 basis points. Earnings per share down 7%. And I think really what got the market worked up, this guide down was significant. I mean, they were calling for earnings per share growth in that 15 to 20 percent was.

range earlier. And I mean, now that's been whittled down to just flat to low single digits. I mean, that's a big deal. And so the market's reaction, I think, was absolutely right. Now, the good news is I think a lot of this is very fixable. These are fixable problems. But much like Disney's got an Iger problem, Starbucks seems to still have a Schultz problem, and that is not going to be going away anytime soon. So the results weren't particularly strong, and I don't think the picture is going to get that much better that quickly. Management did identify. three different execution opportunities, they call them, for kind of getting back on track,

particularly in the United States. And this is separate from the triple shot with two pumps, really? This is a separate sub-plan. Now, see, I'm already confused. Cringy. So the first they identified was meeting demand across day parts to drive future growth. So essentially, meeting the demand of people who are coming into the store, because it seems like, especially during some of their more peak hours,

they're actually supply-constrained with what they're able to give consumers. Yeah, well, I mean, if you are waking up in the morning and Starbucks is a part of routine, and it is for a lot of people. I mean, that is one of the peak traffic parts of the day for them. I mean, they note in the column, people will go in there to the app, put an order together, and then see how long that order is going to take to fulfill, and they bag it, and they go somewhere else. I mean, that's just unacceptable, right? And we've seen restaurants that have to deal with those throughput issues. I mean, the one that stands out is Chipotle. I mean, you remember back in the day where, I mean, you knew if you went to Chipotle at lunchtime,

you were waiting in the line starting outside. But there's, you know, you know, you know, It was almost like magic how quickly they got you through that line. Starbucks needs a little Chipotle in them right now if they want to fix that throughput. And that, to me, I think, is a key issue that it needs to have 100% of their focus. This is a little Wall Streety and not company focused. But the reason that the stock got slammed so much is because the investment community was so taken by surprise about how weak the numbers were. I saw some comments from analysts who were like, they were stunned. And so they've got to improve communication.

They don't have to, but they should improve communication. So investors kind of have a better understanding of, I don't know how they missed it so bad. They could have pre-announced. They could have updated guidance. I'm happy to see that they kind of brought guide down significantly for this quarter. At least it's better communication. Ripped the Band-Aid off now better than later. Yeah, maybe they can improve, right?

I mean, maybe that guide down is sandbagging. We won't know until we get there. But you made a good point there, I think, in regard to the pre-announce. And I wonder, just given your experience at the time that you've been doing this and the jobs that you've held, me, if you pre-announced something like this four weeks ago, they come out, and we've seen pre-announcements all the time, and whatever the reaction is, I mean, if they pre-announced this four weeks ago, probably the market has a very similar reaction, wouldn't you say? But assuming they pre-announced four weeks ago, then there's some time there to digest to kind of get through it, put the market.

together, you know, some communication and how you're going to solve these problems. So, it does feel like a pre-announcement would have been apropos in this case. And as you say, they would have taken the hit, maybe not as badly, back then. But it's better to see a company being proactive and communicative than not. And so even if you're going to take the hit, be upfront, let us know how the business is doing, the shareholders or the owners of the company. And, you know, just don't play it so close to the vest. So, Jason, after this decline post-earning, shares are down around a level that has only really happened a couple times over the last five years for this business.

Generally, when they've fallen down to this level, they haven't stayed there very long. We've seen them rebound pretty quickly. When you see Starbucks at this point in time and the challenges that they currently face, are you interested or are you sitting on the sidelines? Well, I'm getting interested. I'm a shareholder in Starbucks today, thankfully, to much lower cost basis, so it's still working out okay. You know, it's a retirement portfolio holding. I own it primarily for the dividend.

And so when I start to see this, I do start to get interested. Now, the flip side to that, I think things are going to get worse before they get better. I am not convinced that Loxman is the man for the job. And this quarter really sort of reinforced that. So, again, I think the drumbeat is going to continue to grow louder in regard to that. He said they didn't pre-announce because they were focused on putting together their game plan, their action plan. I'm like, you can't do both. I mean, you can't pay an awful lot of money to do this job. It didn't seem like it's that difficult of a hurdle. But to me, I think patience probably works out well here. It does feel like it might get worse before it gets better because they are noting,

as most everyone else is the stretched consumer, right? They can't keep on raising prices to the moon, so they're going to run into a little bit of a wall there. We're going to stick with food and look at results from Dominoes. And, Ron, going through all of this, I am not seeing all of the same stretched consumer elements quite showing up in the numbers for Domino's. It seems like they've been able to weather this environment a little bit better than Starbucks. Their mediocre pizza is reasonably priced, and that appeals to quite a number of people, including my son from time to time, who was born in New York, and his dad is from New York, and we just deal with it. It's the throughput, and they get you

this stuff quickly. Look at the stock, up 30% this year, up 50% over the last year, And this report was pretty strong, thanks to promotions and marketing, that actually paid off. That doesn't always, but the spend paid off. They revamped their loyalty program. They're advertising on Uber Eats, delivery and pickup orders, both increasing. We saw their network sales. No, it's mostly a franchise business, but their total network sales up 7%. Their revenue were up 6%.

U.S. same store sales growth up 5.6%. higher numbers of carryout and delivery orders across all income groups. And the income group part is interesting. So they started to work with Uber Eats back in 2023, and it was because they wanted to reach wealthier households who were willing to pay a delivery fee and use a program like Uber Eats to improve sales in that channel. And they are making nice headway.

They expect Uber sales to reach 3% of total sales by the end of the year. That's in addition to the revamp loyalty program, 33 million plus active members, more than 2 million of would join since the revamp on September. In September, the relaunch in September. So margins are up, net income up 20%. They're launching a New York-style pizza, Dylan. Hey! I don't know.

We'll say. But long-term guidance, they're sticking to their long-term kind of more hungry plan, hungry-for-more plan, I think I should call it, yes. which is pretty good. 31 times forward earnings, something like Chipotle at 54, something like McDonald's at 22. I will note, as someone who grew up in New Jersey, spent my time going into New York every now and then, I will occasionally get Domino's Pizza. It is not my favorite Ron, but it kind of exists in a class of its own.

It is not pizza in the conventional sense. You just have to say, I'm having dominance. I've been a recommender of this stock for a long time as we have been at The Fool from time to time, and they provide a product that people want. We'll stick with a product that people want, and maybe a different idea of Burger looking at results from McDonald's. Not so much fanfare with their earnings results, Jason. It seems like there are, though, some similar threads showing up in McDonald's earnings and

the commentary around it that we've been seeing with Domino's and with Starbucks. Yeah, I mean, it was a fairly benign quarter, but definitely fell in line with the theme that we're seeing more widely across the industry, right? The consumer getting stretched, making concessions, starting to focus a little bit more on value. The good news for McDonald's is that's the play. It's a value play, right? They're focused on value, which is something that Starbucks can't necessarily claim. And so even when it gets difficult for McDonald's, they still have that to fall back on. Like I said, I mean, relatively benign core. Global comps are up 2%. But they did grow operating income 8%, which is encouraging,

and they saw earnings per share growth of 2%. So, you know, nothing to write home about. But it was the 13th consecutive quarter of positive comp sales growth, and they are continuing to focus on opening stores. I mean, it's, yeah, I mean, McDonald's is everywhere, but this is kind of amazing to think about. They're targeting 50,000 restaurants by the end of 2027 from just over 40,000 today. So they still feel like they've got a lot. Where are they going? Well, I know. And Ron, you'll have one in your garage. I think that's a fair question, because Starbucks is kind of doing the same thing, right? I mean, they're targeting. opening up thousands of new stores as well, and you start kind of going back to that onion headline

of like the Starbucks inside of the Starbucks bathroom or something like that. I mean, you just saturate the market at some point, and you can't open stores forever. But they did just open their 6,000th store in China. They see that opportunity still with plenty of runway there. So I think when you look at it from a global perspective and you look at this as a value proposition, They're, I guess you'd say, in the right place at the right time. I mean, it's not a stock that's going to double over the course of the next five years, probably. But again, you probably own this one because of the income, right?

Because of the dividend. And it feels like they're doing a good job with the difficult conditions. So, Jason, you were talking about how McDonald's being a value provider plays very well right now with the market and with a pinched consumer. It's really interesting to me as we kind of process results from all of the different restaurant, fast food, quick serve. fast-cadual brands, because we had results from Chipotle that were absolutely stellar earlier in this earning season. They are, I would say, more in the upper-middle class as a standard customer. And then we see Starbucks in the middle kind of getting waxed because they are both appealing to a value audience, appealing to not so much of a value audience, and seemingly

having a harder time operating this environment. Well, yeah, and I think what Chipotle has done so well over the course of time is just basically remaining true to what they are, right? I mean, along the way, they fiddled around with different concepts, maybe we're going to try to open a pizza joint or a burger joint. They quickly realized that that wasn't really a very good idea. Although, I will say, that's shophouse restaurant. I really wish they'd pursued that one, but they didn't. It does feel like the Chipotle has just remained true to what they do so well.

When you look at Starbucks today versus the Starbucks that we knew like 20 years ago, They're selling more cold beverages now, right? And that's different. It's not necessarily just coffee anymore. What comes with all of those cold beverages? A lot of different ingredients, a lot of management, which breeds a lot of mismanaged, a very difficult supply chain to manage there. We always make fun of them because they just have never nailed the food part right on Starbucks.

So you just see, I think, the juxtaposition there is interesting because you've got one business in Chipotle that just, they continue to do what they know how to do so well. It feels like Starbucks is a little bit aimless these days, and the market is making it pay the price for it. When I think of a company that does what they do so well, I think of like a Chick-fil-A, right? Chick-fil-A knows what they're doing. From a throughput, from a food perspective, I think Kava, although it's in its infancy, could end up being like that as well. But you have to know who you are, and you have to know who your consumers are, and you have to deliver the quality product at the right price point.

Not the easiest thing to do. Restaurants are notoriously tough things to run and tough things to invest in, but those that do it right, it really pays off. All right. Coming up after the break, we've got stocks on our radar. Stay right here. You're listening to Motley Fool money. As always, people in 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 something on what you hear. I'm Dylan Lewis, joined in the studio by Ron Gross and Jason Moser. This weekend is Berkshire Hathaway's annual meeting up in Omaha, Nebraska. Gentlemen, as we tape here on Friday, we're a day away from the Woodstock of capitalism. Ron, what are you looking for this year in Berkshire's annual meeting? You know, it's the first one without Charlie Munger.

So there's certainly going to be a lot of sentiment in the room, a lot of emotion in the room. I'll just be interesting to see how Mr. Buffett handles that. But I'm interested in to hear, of course, about the health of the various businesses, what their plans are for stock buybacks. Shares are probably around two times tangible book value right now. It might be a little pricey for Warren. But if they're not going to find any huge acquisitions as they continue to struggle with, I'd like to see them continue to purchase stockback in a pretty meaningful way.

You know, it's always an interesting time to see what they're doing over there. We'll, of course, be looking for the quotes, right? 50 quotes as well. Jason, what about you? Yeah, I think with Berkshire, for me, it always, especially with all of this dividend talk, it comes back down to, like, at some point, are we going to see this company pay a dividend?

And it seems like now might be just an ideal time to do it. I mean, Buffett said, I think here recently, that Berkshire is not set up to be some company that just presents these outsized returns going forward. I mean, understandable, right? It's a big company, a lot of things going on. We know he likes dividends, Dylan. He loves collecting.

He gobbles them up. He just doesn't want to pay him out. But if we're looking at sort of this new growth profile for Berkshire, at least according to his projections, I wonder if maybe now isn't a good time to consider rewarding shareholders with a dividend policy, because obviously, I mean, he's not going to be there forever. You wonder if that's something where he wouldn't like to leave that as part of his legacy. I don't know.

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. Ron, you're up first. What are you looking at this week? I'm taking a look at Wing Stop, W-I-N-G, a company I've never owned, but I have contributed to their sales quite a bit. Shares are up 75% over the last year, 450% over the last five years. We do like our wings. Obviously, they're a wing restaurant, 2,300 restaurants system-wide. They're going to grow those well over 3,000. The numbers are very impressive. 34% increase in earnings, 66% increase in earnings per share.

34% in revenue, excuse me, 66 in earnings per share. 100 times forward earnings, I got to dig in a little bit more there. Their wings are good, but they're not that good. Wow. But I love that you're bringing it to us, Ron. Dan, a question about wing stop. Not really a question. More of a quick story.

During the Super Bowl this year, I had to run out to the store to get something, and I drove past a wing stop. And I got to tell you, it was standing room. only in there and half time on the Super Bowl. When you'd think that people would be getting them delivered or already have eaten them. So, while I've never had it, there's something going on over there. Digital sales, 68% of sales in Q1. So lots of people on their phones, but also a lot of people in the stores. I say I'm a wing snob. Ever since I got that Trigger, I only like to make wings at home anymore. I will say, of the ones that you can go out and get, wing stop some of my favorites. A lot of the chains don't do wings very well. They do a pretty good job. Jason,

your radar this week. Taking a little bit of a closer look at CrowdStrike, ticker CRWD, I think several weeks back I had called that Palo Alto Networks as a radar stock. So, I mean, when you look at cybersecurity, right, a few market opportunities really offer the scale and sort of that mission-critical nature that cybersecurity offers. So it's an attractive market from that perspective, but it's a difficult one to understand. I am certainly no expert in the matter. And I've kind of always felt like maybe just investing in a cybersecurity ETF might be the better way to go. But it also feels like, you know, maybe we've got some winners in the space here. And CrowdStrike seems to be one.

This Falcon platform that they have offers 27 modules for its customers to be able to use what they feel is necessary. And then they continue to add on modules. And we've seen over time those customers that have been with them for longer periods of time, they do. They keep adding those modules all along the way. 29,000 subscription customers worldwide, and you've got a revenue that's grown about 65% over the last five years annually. Dan, a question about CrowdStrike. What is, okay, so before we got on for this segment, I was like, is it Cloudflare? Is it

Cloudflare? Cloud Strike? I mean, there's just, there are just so many of these big cybersecurity companies, and they're all kind of faceless. You know, Dan, it kind of sounds like you might be a better fit for the ETF. You've got to be honest. Or wingstop. Dan, which one's going on your watch list this week? Even though I do love a good ETF, I'm going to go wingstop this time around. I love it. I didn't want to put my thumb on the scale, but it's Ron's birthday this weekend. So, Ron heads into the weekend with Radar Stocks win. Jason Mozer, Ron Gross, thanks for being here and bringing your radar stocks.

Dan, thank you for weighing in. That's going to do it for this week's Motleyful Money Radio Show. Shows mixed by Dan Boyd. I'm Dylan Lewis. Thanks for listening. We'll see you next time.