Motley Fool Money - Facebook's Big Surprise

Episode Date: January 29, 2016

Facebook reports record earnings thanks to strong growth in advertising. Microsoft connects with its cloud business. Apple loses some of its shine after projecting a decline in revenues. And McDonald's brings home the bacon thanks to all-day breakfast. Our analysts discuss the week's top business stories and share some stocks on their radar. Learn more about your ad choices. Visit megaphone.fm/adchoices

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I'm Chris Hill, and joining me in studio this week from Million Dollar Portfolio, Jason Moser and Matt Argusinger, and from Motley Fool Deep Value, Ron Gross. Good to see you, as always, gentlemen. Hey, hey, hey. How you doing? More than 130 companies in the S&P 500 reporting earnings this week, and we are going to talk about every single one of them. I'm exhausted.

We will dip into the full mail bag. And as always, we're giving an inside look at the stocks on our radar. But we begin this week with the social network. For the first time ever, Facebook's quarterly profit topped the $1 billion mark. And fourth quarter revenue increased 51%. Maddie, I don't even know where to begin with this company. It is the social network. You said it exactly right.

It's just hard. You have to marvel at Facebook's numbers. If we just start with a user base, monthly active users climb 14 percent to 1.6 billion. As my MDP colleague, Simon Erickson, wrote, that happens to be the combined population of North America, South America, and Europe. In case you're wondering, mobile monthly active users jumped 21 percent to 1.4 billion, also a lot of people. So this is, phenomenal, the growth. Revenue, and of course revenue, most of which is advertising still, surged 52 percent to 5.8 billion that crushed expectations. But here's the really fascinating

statistic I thought from the release, which is, if you're speaking of mobile, 80 percent of the of Facebook's ad revenue in the recent quarter was mobile. If you go back just three years to 2012, it was 23%. That's a massive shift in the business. And I think at the time, we were all, a lot of us, and analysts, a lot of people smarter than me about social networks said, wow, you're never going to be able to monetize mobile as well as you can on a desktop or PC. But they've certainly done it. If you look at the average ad revenue per user, it's $3.73 in the most recent quarter. That's up from $2.81. I mean, we thought, I thought, was one of the guys who really thought social networks would be very difficult to monetize,

but Facebook's doing it on a massive scale. It's so impressive. And where does the growth come from two, three, four years down the road in your mind? They certainly can't sustain 50% growth rates, but, I mean, it's hard not to imagine that can be 30 or 40% growth. And then you're looking at your 10 to 20 billion in revenue. And now that he's back from paternity leave, I mean, come on. On fire. On fire. But, I mean, to that point, Ron, if you think about the big questions that Mark Zuckerberg and his team have faced. First, as Maddie said, it was how they're going to monetize mobile. I'm not saying this was as big a question, but certainly when they spent a billion dollars

on Instagram, that was a big question facing. What are they going to do with that? And you look at this latest quarter and the way they're monetizing that. So I'm not sure, but I also know that I'm not betting against these people. Yes. Sometimes being a cynical analyst in a space where you've got a high-growth space with innovators really, you know, getting the job done and in the trenches every day, sometimes being a syndicalanical is the wrong way to be. I mean, you wouldn't bet against, I think, any company that has, you know, access to this many eyeballs, right? And I mean, this is more or less just kind of becoming your online ID card.

And so even if you don't really use Facebook, you still probably have a Facebook account, and I think that's going to continue to grow. I think they're going to capitalize on opportunities in India and other international locations. And I think that, you know, you mentioned the Instagram acquisition, which was just a tremendous acquisition in hindsight. On the flip side of that coin, you look at WhatsApp, and we're still faced with a lot of questions there as what in the world are they going to do with that. They paid $20 billion for WhatsApp. They've been able to get away every quarter with saying, well, we're just going to wait until we build the user base up to $1 billion.

And then we'll start talking about our monetization strategy. So I think that's still a big question in investors' minds. But regardless, I think a lot of the growth down the road here is just going to come from the fact that they can go out there and basically do whatever they want. They can buy whatever they want. So when they see talent early on and they have the minds that are able to identify it, they can really bring that talent in-house, make it a part of the Facebook sort of, you know, subsidiary of the big Facebook sort of network there. It probably do pretty well with it.

Shares of Microsoft closing in on an all-time high this week after second quarter profits came in higher than expected CEOs, Sothea Nadella, doing a little cost-cutting, too, Ron. Yeah, they're getting it done. It looks nice. A lot of the headlines here are misleading. this is where it kind of pays to drill down a bit, because revenue and profits were down, and they beat expectations, as you said, but they were down. But that's where we need to look a little bit deeper and understand that there's a lot of currency

translations going on there, as I think we'll see with a lot of our companies. And they're moving to a deferred revenue model, which mucks up the profits a little bit. But profits were actually up 8%, not actually down 15%, if you just look at the headlines. Cloud business, the big story that continues to be really the driver of growth. Let's talk about the real story here, okay, guys. I mean, is Nadella a closet Denver Broncos fan? Because, I mean, this was the big headline, right? The Patriot Surface Tablets. Go down on the sideline. What's the deal, right? Oh, man. You're just trying to rub it in daddy's face hurting. Wait a minute now. I'm not rubbing in anybody's face. I just got over it.

The hardware business actually was pretty strong. They're actually selling those surfaces and the laptops. That business was up 29% excluding currency. That's not something that I would have bet would have been the case. No, that phone business is a complete mess and continues to be. But cloud and hardware, not too shabby. Did I see that they also slightly increase their market share on Bing, the search engine, which apparently still exist? Well, it's not too hard to increase a share from a low number. But I think that's certainly not the story. That is Zor business, the cloud business.

Azur grew at 140%. Still a relatively small piece of the business, but clearly the growth part of it, and that's what we have to keep an eye on. Apple sold nearly 75 million iPhones in the first quarter, and Wall Street was unimpressed. Shares down 5% this week. And Jason, they are projecting a revenue decline in the current quarter. First time that's happened in 13 years. Sure. I mean, that Apple can unleash numbers like these, and the market actually finds a downside to it, I think is a testament to not only how really big the company has become in its success to date, but it's also, you know, It reminds us that this really is, for all intents and purposes, a phone company, right?

I mean, Apple does a lot of things, and they do a lot of things very well, but the phone continues to be the overwhelming majority of their sales. And so, look at these results, and I think this is just another reminder. We need to remember exactly how groundbreaking the iPhone really was, the smartphone in general, but really the iPhone. I mean, that is lightning in a bottle right there, and to expect a company to be able to come up with that twice, I think is probably asking a lot. And for investors who think Apple will just do it because they're Apple, you're probably not

doing yourself any favors. So we look at Apple and say they're going to continue to be very successful with the iPhone. I don't think that's going anywhere. iPad, those sales shrinking. Mac sales shrunk a little bit. The balance sheet, $215.7 billion in cash. Worth noting that $200 billion of that is international, so we're probably not going to see much done with that.

To me, I think this is a fundamentally different company that was three years. ago. This is an income play now. For me personally, I would much rather see them juice the dividend here. I mean, they're doing a good job returning capital to shareholders and buying back shares and paying a dividend, but that dividend yield is still somewhere like 2, 2.2 percent or something like that. They have the means to juice that dividend and put cash in shareholders' pockets today. I know the counter to that is that when you buy back shares, you shrink that share account and ultimately that should result in more value in the shares. But that also is facing market psychology, and you still have to realize the value through the market

actually bidding those shares up. So I'd like to see them juice that dividend. But Jason, what about the electric car? What about the electric car? Come on. Buy Tesla. I don't think we're going to hear anything about that anytime soon. Just buy it. I'll tell you, the one thing I do, it starts getting old listening to their calls and hearing them frame how many iPhones they sold in the context of this many per minute results

and that many per day results and that many per week. Listen, I get it. You sold a buttload of them, right? Tell me about what you're going to do next, right? It is. It's the technical term. It's a technical term. Shares down 20% in the past year. I mean, it's an income play. Is this also a value stock at this point? Just as we were saying, what was it? Maybe a year and a half ago, two years, that it's a value play. The multiples are not high on this stock. They don't need to put up a lot of growth for the stock to go up. So I think profits are immense. Cash flow is unbelievable. Balance sheet, rock solid. I think the stock's cheap. I said on Twitter, I mean, instead of trying to figure out whether they're going to meet

expectations, beat expectations or miss them, try to look at this and say, is this a business I want to own for the next five years? And I think absolutely, yes, it is. Amazon's fourth quarter saw a rise in sales and membership to its prime service, but it also saw a big rise in expenses, Maddie, and the stock down more than 3 percent this week. Yeah, it was funny because it was up a lot going into earnings. And then, of course, Thursday night reports, Friday was down quite a bit. It's really only giving back what it gained in the week. So, revenue was up 22 percent to 35.7 billion in the quarter, just shy of estimates. You have to put that in context. I mean, we saw

really no growth in retail this past quarter, especially from brick and mortar stores. And eBay, which we'll talk about later, also showed no growth. So the fact that Amazon's putting up 22 percent growth, very, very impressive. It's also, I'd like to point out that half of the merchandise sold on Amazon in the fourth quarter came from third-party sellers, which I thought you were going to say my wife. Well, I'm Ron Gross's wife. But that's so important because those are generally higher margin than Amazon's own sales. And it just shows you just kind of the immense amount of people using retailers using

the platform. Again, grateful a year for Amazon as well. They surpassed $100 billion for the first time. Walmart took four decades to do that. So Amazon did it about half the time, which is just so impressive. Amazon Web Services, again, huge grower in the quarter, up 69 percent, to $2.4 billion. growing as fast as Microsoft's Azure, but pretty fast. Operating profits there tripled to $687 million. So that's certainly where a lot of the profitable growth for Amazon is coming.

But you said, Chris, the expenses where Amazon's facing a lot of trouble right now. The shipping costs alone were up 37 percent and 12.5 percent of sales versus 10.9 percent a year ago. And that's from really trying to invest and make sure that the experience that Amazon buyers have and getting stuff on time, especially during the holiday season, they had to make a lot of investments there. But we've had this question from listeners before, Jason. Are they going to be competing with UPS and FedEx? And the answer to that may be yes, but the answer is also, if they are, that's not cheap. It's not cheap to compete with companies that have a lot of trucks and a lot of airplanes.

No, no question. It's not cheap. And I would say a couple of things. Number one, in regard to the shipping costs going up, you know, that's something that I think investors need to go ahead and accept is going to be the case. Because when they were asked that question on the call, like, listen, two-hour shipping, it's really hard. It's really hard. It's It's really difficult and it's expensive, but you know what? Our members love it. And so that's all you need to say. They are focused on their members, their buyers, their subscribers. The question was, I asked in regard to the logistics and the shipping. And I think really at this point in the game, what they're looking to do is find new ways to sort of take care

of busier times for them. So I don't know that we're going to see them jumping into directly competing with UPS or FedEx anytime soon, but they are looking for new ways to be able to handle the surge in volume when it comes during holiday times or if they're going to have another prime day sale or whatnot. I'll just say also that we're seeing Amazon fall after reports earnings. I feel like every other quarter Amazon reports, it falls 10 percent or more. And usually that's been a time. It's always been a time over the last five years to buy the stock.

And I see that opportunity right now as well. Coming up, we've got sports apparel, Dow components, and more. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in studio with Jason Moser, Matt Argusinger, and Ron Gross. Shares of Under Armour up 20% this week after fourth quarter profit came in higher than expected. The quarter was nice, Jason, but the guidance for 2016 was really nice. Yeah, really nice is a nice way to put it. I think the market obviously appreciated it. And, you know, we were hoping for some challenges this quarter in MDP to give us a chance to add to our existing position.

Man, I guess we got that one wrong, Maddie. It's a nice problem to have, though. And I think it was interesting to look at the real performers in this business. You look at direct-to-consumer. That growth was up 25%. Direct-to-consumer now represents 30% of total revenue. Footwear sales up another 95%. I think this is important because if you look at this 10 years ago, they had not sold a single pair of shoes.

Today, footwear represents 17% of their business at about $700 million in sales. And it wasn't that long ago where I think a lot of people were actually kind of laughing at their foray into running shoes. So they've obviously done a lot of really good things here. We always talk about weather, and I think it's probably apropos here to talk about weather because of the blizzard we just had. But the question is always asked of management there, what about the weather? And Kevin Plank is not going to use that as an excuse.

As a matter of fact, he seems to stare that thing right in the face and tell you they're going to do the opposite, right? He says that, quote, we do not let weather play a day. decisive role in dictating our success." So it will be very interesting to see this quarter that they're in. They can back that up. Two years ago, 2014, the Men's World Cup, Nike was pretty upfront about the fact that they were going to be increasing their marketing spend going into that. We got the Summer Olympics coming up. I'm wondering if Kevin Plank and his team gave any color on potentially

spending a little bit more in advance of the Olympics. Sure. And in the call, in the context of these coming Olympics, that word was mentioned precisely one time. What they are doing is maintaining flexibility. They do a very good job of bringing in a lot of high-profile athletes who do a lot of advertising for them. And they'll have a lot of athletes out there in the Olympic Games who are representing the Under Armour brand. But international sales represent a decent slug of the business today versus what it was even just five years ago. So I suspect we'll continue to see them grow that global football. And I'll just say, I know the Olympics, but gosh, up into that, who are we watching?

We're watching Steph Curry. And we're watching Jordan Speeith. Yeah, you're ready to watch Cam Newton here. And Cam, there you go. I mean, just, wow. The Dow Jones Industrial average being pushed up this week by a couple of key components. 3M stock up 8 percent after fourth quarter profits came in much higher than expected. And shares of Caterpillar are up 4 percent, which is a little strange, Ron, when you consider fourth quarter results weren't that great and they lowered guidance for 2016.

Let's go with 3M first. Sure, it's both a little strange. Both industrial companies, both struggling, both companies do. what they have to do. I like what 3MCEO said. He said, we controlled the controllable while investing in our business and returning cash to our shareholders. And that's all you can do in the time where the industrial economy is weak. They've been cutting costs. They've been laying off people. They've been taking expenses out of the business. Everybody's being hurt by currency effects. Things are not necessarily very strong right now, so you do what you can

do. Profit in the quarter was down 8% for 3%. M. Revenue was up slightly in some areas on an organic basis. Revenue is up four and a half percent in health care, 2.7 percent in the consumer business. So better than expected results makes the stock lift, but things are not so rosy here, and they're cost cutting their way back to health. Now, we transition to Caterpillar, and this is tricky. Things are very, very weak in Caterpillar's business. In mining, industrial equipment, there are 20, 16 guidance is weak, but yet stock went up and guidance was relatively healthy. So what's going on there? You may ask, Chris. Go ahead.

Believe me. I'm asking because when Caterpillar, which has not performed well over the last few years, comes out and says, our profit this year is going to be so much better than all of you Wall Street analysts expect. And the stock pops, all I can think is everyone's just saying, oh, okay, we'll take your word for it. Right. So there's a lot of accounting things going on here. So if you exclude all the restructuring charges that have come and will come. And then you take into account that they had a big accounting change for their pension plan. That makes things look significantly better than they actually are. So it's kind of a little bit of fuzzy math there, in my opinion. You need to look through

that. You need to understand that Caterpillar business is weak. It will continue to be weak through 2016. They're controlling what they can control by cutting costs, 10,000 jobs being cut. But we won't see top line growth for quite some time until that global economy. me really strengthens. One of the big spinoffs of 2015 was eBay spinning off PayPal. Both companies reporting this week and both stocks going in different directions. PayPal's fourth quarter profits slightly higher than expected and revenue was up as well. eBay's fourth quarter results almost didn't matter, Maddie, because their guidance for 2016

sent the stock down more than 12 percent. Awful. Let's start with PayPal. I mean, 6.6 million new users in the fourth quarter, including 1.6 million from their highway robbery, I'm sorry, acquisition of Zoom. Somebody's better. I'm looking at Jason. So PayPal's total user base up to 179 million.

Revenue up 17%. Merchant service payments, which is their core payment transactions metric, up 36%. Very, very strong there. And they announced a $2 billion buyback plan. It's kind of like what's not to like about PayPal. With eBay, it's kind of like, what's to like? You know, because if you think about it, in the e-commerce world we live in, we saw how Amazon did, it's amazing to see that eBay, which really, I mean, if you go back eight or nine

years ago, I'd say eBay and Amazon were pretty much neck and neck, and you could find investors who were willing to bet either way on who would kind of be the king of e-commerce. We know that for sure, and it's Amazon. But for eBay to report virtually no growth in the quarter, just $2.3 billion in revenue. Gross merchandise volume was flat. Net profits actually fell 12%. And they're guiding, Chris, you said, just between 2 and 5 percent growth. in 2016. So you're talking about a company, an e-commerce leader by all standards, but they're kind of predicting growth that's going to be kind of in line with the economy. It's really not impressive at all.

Up next, earnings paloosa rolls on. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Matt Argusinger, and Ron Gross. Radio at Fool.com is our email address. That's Radio at Fool.com from Forrest Clontz in South Carolina. What in the world? is happening to Ford Motors stock. This entire past year has been a mystery to me, and this week they beat on fourth quarter profits, they beat on revenue, and confirmed good guidance ahead. There were even articles popping up entitled Ford is running on all cylinders. That's what?

That's trademark. Whoa. Let's call my lawyer. Did you get a royalty payment for that? Jason, what is the story, though? Well, I mean, you know, to steal Iranism, I mean, they are firing on all cylinders. There's no question about it. I mean, I think they had a... You know what's not firing on all cylinders?

What's that? What's that? You're very correct. That's a good observation. Let's talk about that, Chris. You know, I think the biggest problem that Ford and its ilk face at this point is that the market, as we know, is forward-looking, and it is looking to what is next. Now, here's the reason why that's a problem.

The U.S. new car market just hit a record 17.5 million cars here in 2015. I mean, there were, remember that technical term about iPhones? I threw on a little buttload. Okay. It was a buttload of cars sold, too. And dealers were doing all they could to move those things off the lot. They were offering great incentives. So with the cost of money being very low, there was a lot of incentive to get out there and

buy new cars, trucks or big sellers right now because fuel prices are so cheap. So the market is thinking, hey, all right, they just had this banner year. What do we expect here coming down the pike? And I think it's reasonable to assume that it's going to be a bit of a challenging environment over the coming years here. You know, Ford sold more than six and a half million cars in 2015, and that was up from the year before. And again, they're doing a great job building cars that people want to drive, and they're moving them out the door. But I think that we are hitting a point now where

a lot of people have gone out there and bought new cars. And I think that the question is a valid one. What kind of sales numbers can we expect from these guys? Guidance notwithstanding, because guidance is just guidance. Let's see kind of how's 2016-2017 is going to shake out. This actually may be a great time for something like a car max, because as the cost of money starts going up, you know, as people start saying, hey, well, maybe trucks aren't the way to go. If fuel prices start going up, maybe something like a used car dealer like CarMax, which has really done a great job in that experience. Maybe that's something worth looking at. We saw recently with the Consumer Electronics show, the reports leading up to it were that

Ford and Google were going to be presenting some sort of joint venture together. That didn't happen. Is that something that Ford needs to consider if it's going to do anything as a business to propel the stock. Because when, you know, we joked earlier about Apple and the electric car, but let's face it, all indications are Apple's working on some type of vehicle. And I'm wondering if Ford needs to find a dance partner. Well, I think it probably helps to find a dance partner in that case. And they are, if I understand correctly, setting it up so that their 2016 models going forward will be compatible, I believe, with Apple's car ecosystem and Google's as well. So I think there are

going to be some options there. In regard to the electric car initiatives, I think that all of the big automakers out there are trying to be a part of the space. They're investing a lot of money in trying to sort of move forward to that technology. It's a good reminder that Tesla is not the only game in town when it comes to that. And that automakers like Ford GM have the scale and the resources to definitely invest in that space. Second quarter profits for Coach came in higher than expected, and sales rose for the first time in ten quarters, Ron. That's a nice streak to break. Look, who's not dead yet.

Yes. As you said, first quarterly sales gain since June 2013. So investors who have been patient are seeing a little bit of a turn. Now, we need to understand that almost all of that goodness there is due to the acquisition of Stuart Weitzman, the shoe company. The core coach brand was actually still down 3% globally and 7% in North America. But believe it or not, Chris, that's actually quite an improvement over previous quarters. It's just kind of sad. And it looks like perhaps that business is turning the corner and they've scaled back promotions

and they've shut underperforming stores. They've upgraded some designs. So they seem to be making progress and the Stewart-Witesman business is kind of towing the line for now. Profits were down 8 percent. So they haven't turned the quarter to profitability at gross margins have narrowed still. Trying to look strong. Europe looks strong.

Double-digit increases in both. They've raised guidance as a result of this strong quarter. So things are better, but we haven't gotten quite there yet. A couple of years ago, I remember one of the narratives with Coach was, well, they've got a new designer coming in and this is, we're going to see how that works out. It seems, based on what you just said, it seems like, yes, you want a good designer, but it sounds like what they need is a really good operation. They need a real strong operator because if what's going to drive this stock is how well they do

in terms of sales per square foot and that sort of thing, and managing inventory, maybe they need that. I think that's right, but if you recall, when the new design chief came in, the whole real senior management team turned over from the top down. And I think that's what led to the shutting of underperforming stores and new promotional strategies.

So I think they're kind of doing both, which is maybe why we are seeing the improvement. They're also exploring, they're doing some creative things like exploring the sale of their New York headquarters, Manhattan real estate is so high at the moment, maybe that would be a way to unlock some value. So there's some financial engineering here as well as strategy, as well as design. Yeah, Ron, I was question for you. I do you think, I mean, we know with fashion companies, apparel companies, it's natural for them to go through these cycles, I think, where they're

either out of fashion or in fashion. Is Coach one of those, do you think kind of is a sustainable long-term brand? I mean, in other words, we'll be talking about people will be buying coach 10 or 15 years from now, the same brand, just, you know, obviously, It'll look different. The purses will look different. But we'll see. I think the answer is yes. But that doesn't really inform you as to what to do about the stock. I think the stock is going to go up and down and up and down. And this is the kind of thing. Fashion in general, specialty retail in general, you need to buy it right. They're not always

great buy and hold investments. So while I think coach will be around, you need to catch it at the right part of the cycle in terms of an investment, otherwise you won't make money. Shares a coach up 15 percent this week. So as you said, patient investors getting a little bit of reward. McDonald's stock hitting an all-time high this week after fourth quarter profits and revenue came in higher than expected. Same store sales in the US up more than five and a half percent. And Jason Moser, you were skeptical about the all-day breakfast. Jason. And it is paying off.

It paid off. The question is, will it continue paying off? So as of now, I think we all should doff our collective caps to Steve Easterbrook, because he really has done what I consider to be a phenomenal job in creating, in sort of changing the narrative on McDonald's, because for a very long time, it was really sort of, you know, it was in the gutter, you know, for lack of a better description there. In my, how times have changed. Chipotle now is really more or less being dragged through the mud, and for good reason. I mean, I think they're sort of working on turning those operations around, and we've seen

a lot of optimism on the McDonald's side. I think that's for good reason. I mean, the Breakfast All Day Initiative certainly has worked. worked very well. That was a big credit to the sales numbers that they've been able to turn in here this past quarter. A buttload of epic muffins sold. I mean, that's, you know, it's a technical term. It applies for all segments, all markets around. But I think that the biggest question is this going to be sustainable, because

it did bring more customers in at more times during the day. They did witness incremental sales from it, so it wasn't like people were just swapping out a McGrathes. for a Big Mac or the other way around. The question is, is that sustainable? And time will only tell there. But I do think that Steve Easterbrook, what he's done a really good job at is being very proactive and trying to figure out exactly what customers want now. And sort of, you know, we've made a little fun of it before about trying to become this modern progressive burger company. But there is something to that. At least that's his vision. And part of that is understanding what the consumers want. So it's a matter of quality of food,

quality of service, and the environment. And what they're doing is, you know, on those last two points, focusing more on digital initiatives. They've seen 7 million plus downloads of the app. They're throwing in more ordering kiosks in stores, so you can kind of go in there and just order and it reduces the friction of actually dealing with a person. Accuracy of orders tends to be a little bit better. And they're going to move to some more franchises. It's already an 80 percent franchise model. They're going to become even more of a franchise model, which allows them, I think, to focus on their real strengths, which is supply chain management and nurturing that brand.

Well, we know breakfast worked last quarter, but we know what's going to work this quarter. It's the chocolate fries when they hit North America. Watch those same store sales restaurant. Well, it's going to explode. And they just might get to America because, well, we'll talk about that in the next segment. For a while, this was a stock that, to the extent that there was a case for it, it was, well, this stock looks cheap. Easterbrook took over March 1st of last year.

It's up 23% since then. This doesn't look nearly as cheap as it used to. No, it definitely did. It doesn't. And I think that investors looking at this as a potential buy today need to at least recognize that. But also, I think if you're buying McDonald's today, you're probably buying it more for the income than anything else. I mean, Easterbrook was very clear on the call. They feel that it's going to take a couple of more quarters before they can really sort of change the conversation from turnaround to growth. I think growth is going to be a little

bit more difficult for them to come by, given the size already in sort of the changing competitive landscape there. But regardless, I mean, they've done a very good thing. good job of returning value to shareholders via buybacks, via dividends, and I expect that to continue. Coming up, we will dip into the full mailbag and we'll give you an inside look at the stocks on our radar. Stay right here. You're listening to Motley Fool Money. If you've got the money, I got the time. We'll go honky talking and we'll have a time. We'll make all the night spots do the town of fine. If you've got the money, Honey, I got the time.

As always, people on 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 or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. I'm Chris Hill. Joining me in studio, Jason Moser, Matt Argusinger, Ron Gross. Guys, a couple of housekeeping notes. Two new radio stations to welcome this week. Our first affiliate in Minnesota, Brainerd's Business Radio, KVBR AM 1340,

and in Tampa, Florida, WWMI, AM 1380. Go Bucks. You're a Bucks fan. I am a Bucks fan. Radio stations across America, but we've got listeners around the world thanks to the podcast version of this show. And last week, as you indicated, Maddie, we talked about McDonald's unveiling the

Michako potato in Japan. This is French fries, drizzled with chocolate sauce. And our listeners in Japan did some on-the-ground research and told us about it. Jay Melton included some photos in his email, as he wrote. As you would expect, there's not. enough sauce for the whole order of fries, but that's a blessing in disguise. From Danny Simmered, I can say with confidence, this is a hit here. It's delicious and mysterious. Hopefully they'll bring it to America. And from Michael Patrick, to all you doubters out there,

have you never dipped your fries in a chocolate malt? That isn't just a Midwest thing, is it? I don't know. That is a very good point. Now that I think back to my days, you know, as a kid on the swim team in McDonald's was always where the after swim meat parties went, and man, dipping those fries and chocolate shakes. That was a thing. You were on the swim team? Oh, yeah. What was your specialty?

Oh, baby. It was all. Butterfly? It was everything. It was a buttload of things. It was butter back breast-free. It was non-stop. You did it all. That's so impressive.

Before we get to the stocks on our radar, one non-earning story to get to, but hopefully this will be an earning story at some point in the future. And I have to thank Ron Gross for flagging this one, which is that we've talked before about Radio Shack and how it filed for bankruptcy. But one fellow electronics retailer, Circuit City is apparently back from the dead and is going to be opening up new locations starting later this spring, acquired by a couple of private investors. They acquired the brand, the domain, and all the trademarks, and they plan to open 50 to 100 corporate-owned stores by this time next year, Ron. But important to differentiate the old and the new.

They're not going to be super stories. They're thinking more of electronic boutiques, what could go wrong there? There's very little competition in that space, so it should be fine. But it's interesting to see them back. Let's bring in our man, Steve Broido, from the other side of the glass. Steve, you know more about electronics than anyone I know. First, how excited are you for the prospect of Circuit City opening up a location near you? Well, not very.

I will say that even the name Circuit City. It's just a city built of circuits, right? It's just better than Radio Shack. It's great. It's terrific. Not exciting. But it's better than, as a name. It's better than radio Shack, yes.

But a low bar to clear? Low bar, and there's definitely too much competition in this space as is. All right. Do you have any interest in the chocolate fries? If they're really this big a hit in Japan. Absolutely. I give them a shot. Yeah, sounds good.

I saw that vanilla sauce as well. You can mix the chocolate and the vanilla. There's two. You get fries and they give you two packets. One is sort of regular chocolate sauce. One is more of a white sauce. chocolate sauce, and apparently there's not enough to cover the whole thing. Glad to see they're doubling down on the health aspect of the menu.

My wife and I dip everything in Nutella. But most things, a lot of things we've dipped in Intel. Not going to. So it's not a stretch. It's not going to be a stretch for me. All right, let's get to the stocks on our radar this week, and our man, Steve Brodow, will hit you with a question. Ron Gross, you're up first.

What are you looking at this week? I've been focusing a lot on blue chips, so I decided to go the other way this week with a recent re-recommendation by our hidden gem service, which is a dead. Neckers Outdoors, D-E-C-K, best known, I would think, for their UG brand. And also they have the Teva Sandals, the Sanuk, the Hoka-1-1. The H-G guys really... Are you just making up names now? You know Tiva Sandals, come on.

Yeah, it was that last one that made no sense to be. Hoka-1-1. Okay. You know. Oversized, ultra-cushioned, ultra-running shoe. I'm completely unfamiliar with these, but go on. So with the reinvigoration of Ugs and the potential growth in Tiva and Sannock, the HG guys think margins and cash flow will approve here.

They think the stock could be worth $70, and we're really only at around 50 right now. So 40 percent potential upside, but they do highlight, and I will as well, that this is a high-risk stock, mostly because they are really, really dependent on Ugs, which provides more than 80 percent of the top line. 80 percent? They have all those brands. they're just betting everything on Ugs? Big, big number.

Steve Brodo, question about Decker's outdoors? If I wanted to buy some Hoka shoes, where would I go to do so? I would go to Zappos. How about that? Sounds like you got to go to Hawaii. You know it's a big Ugs guy. Tom Brady. Oh, heck yeah.

Tom Brady. Jason Mozer, what are you looking at this week? Touchdown Tommy? Sure, so the Stock Advisor team and I have been talking with them recently about some of their favorite ideas, and Crittio is one that keeps on coming up To the top there, ticker is CRTO. And Cridio, for those who are not familiar with the company, uses predictive software to deliver targeted, personalized advertising across display, mobile and social media sites for thousands of advertisers worldwide.

What a memory you have. So what that means is they use technology, and I have no idea how it works. But it seems to be working, because now they have more than 9,000 clients with a retention rate better than 90 percent. And all of this information goes into feed. What they have is called the Cridio engine. And as it feeds that engine, it gets smarter and smarter, which grows their competitive advantage. So it's one I am definitely looking at bringing over to the watch list for MDP, learning a little bit more about, because it certainly seems like an interesting opportunity.

Steve, question about Cridio? Well, advertisers just lose faith in the fact that they won't have 8 billion views. It's 1,200, but it's really qualified leads. Are they going to go for that? I'm not quite sure what you're asking. Are you saying that the leads seem to be less and less quality? No, they're higher quality leads, but they're lower in number. Well, I think lower and number is okay as long as they are higher quality. And so we saw another good example in Trip Advisors.

They moved over to their meta-search. It reduced the actual number of clicks, but it made those clicks more valuable. So actually, that works out pretty well for the business, if they can execute. Maddie Arkansinger, what are you looking at this week? No, I'm looking at Tesla Motors again, ticker T-S-L-A. Any time the stock drops full of $200, I start to get more interested in the company. I think it's one of the most exciting companies out there. Such a huge ramp-up for what this company could become.

I think a lot of people are saying, well, low gas prices right now. No one's buying electric cars, but trust me, that's not the reason people are buying the Model S or the Model X. So, Tesla. Steve Brodo, question about Tesla Motors? Would you spend that kind of money in a car, Matt, personally? That's a lot of money for their... Well, I'm not a big car guy, but when they come out with the Model 3 in a few years, which is supposed to be priced around 30 to 40,000, I'm going to be very interested.

How does it handle the Blizzard? Snowzilla, you know, it might not do so well. But I'll probably stay in if that happens again. I think that's one of the more interesting things to watch with Tesla Motors is you look at how the big automakers, for the most part, Ford, as we talked about before, GM, etc. They really haven't gone after Tesla motors because they understand that Tesla is first and foremost a luxury car maker. So they look at Tesla and think, well, that's not really competition.

But I think it'll be interesting to watch if when they come out with this $30,000 to $40,000 vehicle, if then the knives come out. That's right. And so I think Tesla is innovating so well at the high end, and having a sustainable business, I think they'll innovate just as well at the lower end. Well, it'll also be very interesting. To me, at least, is a luxury carmaker, yes, and they've been able to maintain very high levels of service, and they're known for that.

So if they come out with a car that appeals to the masses, will they still be able to maintain that high level of service that they're so well known for today? We were kidding around before that Apple should just go ahead and buy Tesla. Give me odds. What do you think? Odds are low. A few years ago, odds would have high. Odds are very low now, I think because Tesla's got a sustainable business, a good enough balance sheet. I think Elon Musk sort of wants to be on whatever Mount Rushmore he's going for by himself. And on Apple's shoulders.

I'd say it stays independent. Steve, Tesla Motors, Cridio, Decker's Outdoors. One of those you think you want to put on your watch list? Cridio sounds unusual and I'm interested. Yes. All right. Ryan Gross, Jason Moser, Matt, Arkansas. Guys, thanks for being here.

Thank you. You can check out all of the Motley Fool's Podcast. Just go to Fool.com slash podcast. That's Fool.com slash podcast. Take us with you when you go on your commute or when you're just doing stuff around the house. Fool.com slash podcast. That is going to do it for this week's edition of Motley Fool Money. Our engineer is Steve Broido.

Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.