Motley Fool Money - Facebook's Next Chapter?

Episode Date: July 27, 2018

Facebook plummets on slowing growth. Amazon rises on record profits. Chipotle serves up big earnings. Atlassian surrenders to Slack. And Spotify tries to produce sweet music for investors. Our analysts discuss those stories and weigh in on earnings from Twitter, Electronic Arts, GrubHub, PayPal, Starbucks, and Under Armour. Thanks to LinkedIn for supporting The Motley Fool.  Go to https://www.linkedin.com/fool and get $50 off your first job post. Learn more about your ad choices. Visit megaphone.fm/adchoices

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That's LinkedIn.com slash fool. Terms and conditions apply. Everybody needs money. That's why they call it money. The best thing in life are free. But you can get them to the money. From Fool Global Headquarters, this is Motley Fool Money Radio Show. I'm Chris Hill, joining me in studios. Senior analyst David Kretzman, Matt Argusinger, and Aaron Bush. Good to see you, as always gentlemen.

It is earnings paloza. We've got so many companies with earnings news. We don't even have a guest this week, but we will dip into the full mailbag. And, of course, give you an inside look at the stocks on our radar. Social media stocks, the headline this week. So let's start with Facebook, after the social network. issued its second quarter report. Facebook's market cap on Thursday fell by $119 billion in terms of market cap. That is the single worst day in market history. And David, a lot of parts this story. But I mean, in terms of that fall, the chief financial officer made it very clear that Facebook's revenue is going down by high single digits sequentially for the foreseeable future.

Yeah. So 42% revenue growth for this quarter, which is a... astounding number for a company that's already as big as Facebook, and that number, I guess, could go down closer to 25 or 30 percent by the end of the year. So we're definitely seeing a slowdown there. What also stuck out to me is that they're guiding for their operating margin to drop from about 50 percent today, which let's just take a step back and recognize that's an incredible number. They're basically twice as profitable as alphabet right now. So that is an incredible achievement. But over the next few years, they're guiding for that to go down to the mid-30s, but even if they drop down to an operating margin of 35% in the next few years,

that's still above where Alphabet or Microsoft had been at any time over the past five years. So I think we need to take a step back and recognize, take all of this in context, that Facebook is still a dominant platform. They're seeing a growth in their user accounts, user engagement, and this is still a very profitable company. Yeah, it's funny because they've been telling us this is going to happen, right? And here we are, and it's happening. So I think that's important to keep in mind. I do think that there is some truth to the fall. I think we are seeing not that Facebook itself is peaking, but Facebook specifically the platform in the U.S. and maybe in Europe, like that might be starting to near a peak with user growth tipping off. So it makes it more important that Facebook's other areas, Instagram, pick up the Slack for a long time coming forward. And it also puts more pressure on them to figure out what do we do with WhatsApp, what do we do with Messenger. If investors are starting to get answers,

about future growth, then they need to figure out how to step up in other ways. And, yeah, let's just remember to take more things in context here. I mean, we are backed right now. Facebook is at levels, I think, a few months ago when the whole Cambridge Analytica thing came out and Zuckerberg was testifying in front of Congress. And so we're just at that level. So I feel like the market cap that has been wiped away, which is still an impressive number. But that's what Facebook has grown in the last three months, which is astounding by itself.

Well, and as you said, Aaron, Mark Zuckerberg has been very clear about this, very open about this, saying we're going to be spending a lot more money. We're going to invest in technology. We're going to hire thousands of people. So you can sort of look at the fall in the stock and say, well, wait a minute. We knew this was coming. It is a different thing, though, when the CFO really spells out in very clear numbers, this is what it's going to look like. It's one thing to say, yeah, our margins are probably going to come down. Once you start to put real numbers, numbers against it, then I think that's what caused what we saw on Thursday. Yeah, something that Mark Zuckerberg reiterated on the call is that they're running Facebook for the next several years. They're not trying to juice results for the next quarter or two. And that really came through in this conference call. And I think as Capital Left foolish investors, business folks investors, that's what we like to see. And in the meantime, Facebook will probably still continue growing earnings above 20%, potentially even 25 or 30%. And right now the stock is just trading for a forward PE of 24 times. So I would argue that a lot of the pessimism

and that slowdown in growth has already priced in. Earlier this summer, Twitter announced it is purging its platform of fake accounts. And on Friday, Twitter stock purged itself of nearly 20% of its value. Their profit for the second quarter, it was there, Maddie, but their monthly active users are down. That's right. It's another story where I think we should have expected this. We were going to see this and we knew it. And when the news finally hit, it was like buying the room or sell on the news. And the news came out and obviously investors sold the stock. But again, with monthly active users down a million, and of course they guided for a few million more losses, I think, in the coming quarters, I don't think that's

the metric the market or investors should be focusing on. For one, daily active users, and we know Twitter is much more a real-time platform. People are going there for the news as it's happening, sports as it's happening, culture as it's happening. That number was up 11%. And that's pretty strong. And then you mentioned the earnings. Well, revenue was up 24 percent. We expected to see that Twitter was finally getting traction with their advertisers. And that's happening. And I do expect that, you know, we're not going to call Facebook fallout. But I do feel like there might be a shift going on, that advertisers are looking for other

platforms and Twitter should be a beneficiary. I'm glad you mentioned that, because it really does seem between less so with Twitter, but certainly more because of Facebook, because we've started to see some reports here and there of advertisers moving their digital dollars. away from Facebook in the last couple of months onto other platforms. Doesn't it really seem like the table is set right now for other companies? And I'm thinking mainly of Snap, but really any business that's trying to make a big push into digital advertising, if you've got media buyers who are sort of now maybe hedging a little bit or pulling back some of that spend with

Facebook, Aaron, if Snap can't get it done in the next six months, it's time for them to like, you know, fold up the tent and go home. Yeah, I tend to agree with that. Snap has not been very impressive at all, and I do not have confidence. So they actually will take this opportunity and do a good job with it. But, I mean, there are so many other big players out there. I mean, YouTube could easily steal a lot of that. They've had some issues of their own, but they seem to be on fire, too. So if others fall, then they could hit it big.

But we'll see. And to give Jack Dorsey credit, Twitter's cash flow situation has dramatically improved the past couple years. It produced a billion dollars in operating cash flow over the past year. Companies sitting tight with about $3 billion in net cash. So from a cash perspective, the business is as strong as it's ever been. Amazon shares hitting a new high this week after its second quarter report. Web services keeps chugging along, Aaron. But speaking of advertisers, Amazon's advertising business is starting to rack up some serious numbers.

Yeah. I mean, I think my biggest takeaway from this quarter is that it's just so hard to have any takeaway because they're doing so many different things. I mean, their growth is so impressive. They grew revenue at 39%. Some of that is acquisitive from last year's Whole Foods acquisition, but a lot of that is organic, and it's because they're doing a great job scaling U.S. retail at 44%, international, a little less than that. AWS is still on fire more so than any other cloud platform out there. And yeah, they're trying all these new things. Advertising is ramping up. They have Twitch in the background, which might be a part of that, but ramping up subscriptions

in its own right. I mean, like Prime Day, even though it had bugs this past quarter, was still their largest event ever. And so they just have all these tailwinds. They continue to acquire. They've made a pill pack acquisition this past quarter. It's just so hard to summarize because there's so many things going on. But I do think one thing that is important to keep in mind is that Jeff Bezos is known for

saying this quarter is great because of things we did two years ago. And because we're seeing all of these things that they're doing now, it gives me confidence that two years from now will be seeing pretty good results then, too. What stuck out to me is the fact that Alexa probably got 15 times the mentions of Whole Foods. I mean, you go back a year ago, we were just losing our minds over Amazon acquiring Whole Foods. And now Whole Foods is really just kind of an afterthought. It gets like one or two mentions. And what's a really long press release, it's not even mentioned the prepared remarks of the conference call. I think at this point, Whole Foods is really just becoming a loyalty extension of prime.

And as a prime member, I'm happy with that. But it's just interesting to see how much can change in a year. Alphabet's second quarter revenue rose 24 percent there. Other Bet's division was up 40 percent. Shares of Alphabet hitting a new high this week. Market cap now closing in on $900 billion, Maddie. Speaking of a large company that's still growing at just an incredible rate, I mean, if you look at the core advertising business, up 25 percent,

to 28 billion, that's 86% of their total revenue. The other segment within Google, which includes their cloud business, that was up 37%. I mean, they're just, I can't believe the amount of growth, the rate of growth that we're talking about on this radio show, given the size, even the market caps of these companies, it's so impressive. And I had to double-check this, but, you know, DK before we tape said, yeah, I think Google has over $100 billion in cash. And sure enough, they do. And in fact, if you back out just the modest amount of debt they have, $98 billion. in net cash. Or another way to look at it, it's 20 more years of EU fines that they can pay. So, I mean, it's an staggering number, and that gives that business so much optionality.

Well, and optionality, I think, is the key word, because when you think about Alphabet and you think about Amazon, I mean, great quarters they put up and also very visible issues that they each were dealing with in recent months. You know, obviously Alphabet with the fine. As you mentioned, Aaron, you know, Prime Day, they had a couple of good years in a row where Prime Day didn't really have any bugs, and they kind of broke that streak this time around. It's almost like when you have that kind of optionality, you can survive these types of blips. Oh my gosh. And then you can really take big, forward-looking, make forward-looking investments like Waymo, which is probably going to have some serious milestones this year. The other

bets, which includes their visual, their medical science business. I mean, it's just, there's so many things going for it. And yet you have a business that if you back out that cash, now it's It's not always smart to do that, but if you back out that cash, you're talking about a company that's trading for about 25 times this year's forward earnings. Growing the core business over 20%, probably for at least the next several years. Yeah, and what's really impressive to me is the fact that 90% of the company's revenue still comes from that core advertising business. So, in that business, will probably continue growing at above average rates for at least

another decade, if not much longer. So in the meantime, if Waymo hits, if they're unicorn or venture investments, really grab hold, any of those other projects, those are really just the cherry on top because the core business is still incredibly attractive. Up next, we've got music, video games, and a little something just in case you're hungry. Stay right here. You're listening to Motley Full Money. All right, quick word about buying a home because of rising interest rates. There's a lot of unpredictability when it comes to buying a home these days. and it's causing some anxiety, and our friends that, Quicken Loans are doing something about that.

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Rate shield approval only valid on certain 30-year purchase transactions. Additional conditions or exclusions may apply based on Quickenloans data in comparison to public data records. Equal housing lender licensed in all 50 states, NMLS Consumer Access.org, number 3030. Welcome back to Motley Full Money, Chris Hill here in studio with David Kretzman, Aaron Bush, and Matt Argusinger. Second quarter revenue for Spotify came in 26% higher than a year ago. Spotify has now more than 80 million paid subscribers. That looks good, Aaron, but they're still not profitable. Nope. And that's kind of a problem. I think they are doing a good job. They're in a difficult position. So what was impressive about this past quarter is that they grew their monthly

active users and they're paying subscribers by 30% and 40% respectively. That's important. But perhaps less impressive is that revenue growth was not nearly that high. And so they're not making as much money per user that they have. And even worse than that is that they're not really making that much progress in their gross margins. They're still really low, about 25, 26%. And that is where the largest problem is, and that is what is crippling their profitability. I do see a path to them, improving this, the more people that join them, which they are achieving, gives them perhaps a higher chance of making exclusive deals. And I do think the future of music is shifting the power away from people who own the music to people who own the listeners. And the more that they

can own the listeners, the more power they'll have over getting those exclusives. And even more than that, like negotiating prices with those who own the music. So I do think that they might be making progress there, but it's not very evident, and they're still in a tough spot. We've talked before about video streaming, Netflix, Hulu, Amazon Prime, et cetera, as it not being a zero-sum game, that people do and will continue to have multiple subscriptions. It kind of seems like that's not the case with music. Like, you're going to get one streaming service, and that's probably all you're going to get. I think so. At least right now, that makes sense because they tend to have the same content.

maybe one day in the future if Apple and Spotify are competing, for example, for exclusives, there might be a reason why someone would have more than one, but I think now is the time when lock-in is most important, so they must chase that. Yeah, as Aaron's talked about, it's really with the ownership component that I think separates, say, video content from music content. And so the reason people are willing to pay for Netflix, for Amazon, for Hulu, Disney, is because there's just that content that only exists on those platforms.

And for music, it's just not quite there yet. And maybe, as Aaron said, maybe the network eventually gets big enough for Spotify to actually accomplish that. Electronic Arts, first quarter profits came in higher than expected, but that got outweighed when EA lowered guidance for the second quarter and the full fiscal year. How concerning should people be about this, David? I wouldn't be too concerned about this. I mean, the company over the past year has generated over $1.5 billion of free cash flow.

They're sitting on about $4 billion in net cash. So the underlying business is still very strong. The video game business is lumpy, you know, quarter to quarter in a year to year, just based on the timing of game releases and things like that. But we just wrapped up the World Cup a couple weeks ago. But now next week in London, the FIFA E-World Cup grand finals will start where the 32 best FIFA players in the world will descend on London. Over the past year, competitive FIFA games have attracted 20 million players from 60 different countries. So EA really trying to generate a lot of engagement with their games. And ultimately, in the coming years, the company wants to connect one billion players worldwide.

So that larger vision at the company, backed by those strong sports titles, as well as other action shooter games like Battlefield, I think there's reason to be optimistic. One other thing to keep in mind is that over the past couple of years, EA has made a ton of money off of loot boxes and has received a lot of criticism for that. So they're very quickly trying to not do that again and to figure out how to make money in a recurring digital way. through other things. And I think part of this change has to do with trying to figure that out. That's not good for this year, but I think ultimately that actually does lead to healthier growth because it means that they're not going to be making people mad. So that's kind of important. They still have tons of great franchises, and that's not going away. Yeah. Speaking of that, one business model tweak that they're looking at is subscription

gaming. So essentially you subscribe, you pay a flat monthly fee, and you get unlimited access to all of their new titles. That's something if they're rolling out on the PC next week. I think we'll see more of that in the years ahead. Grubhub's second quarter revenue rose more than 50% compared to a year ago and shares of Grubhub up nearly 20% this week. They're doing well, Maddie, but this is starting to be a really pricey stock. It is, but gosh, I have to, you know, I feel like they've earned the grub stake that they have in the market now.

Because I mean, look at the, you mentioned the revenue number. The number of active diners up 70% year or year to 15.6 million. They now have over 85,000 restaurants in over 1,600 U.S. cities and London. That, to me, is a pretty sizable network. And so, you know, when I thought about Grubhub in the past and shame on me for not taking a bigger look and buying the stock myself, but I always thought, you know, you've got competition between, you know, you've got Uber Eats, DoorDash, Amazon's got, you know, food, meal delivery as well.

It just felt like this was a hyper-competitive market, and it was going to be tough to make a lot of headway and certainly any margin in it. But Grubham has certainly separated from the pact. I think the network they're building now, they certainly are the leader. Shares of Atlassian, the enterprise software company, hitting a new high this week. Atlassian issued strong results in the fourth quarter and announced a new partnership with Slack. You tell me, Aaron, which of these is more significant? The Slack deal is definitely more significant.

So over the past several years, Atlassian has competed with Slack through their hip chat and stride products. But they've never really been that successful in making that as popular as Slack has been able to make their own product successful. So what they're doing is they're essentially selling the IP of those two products over to Slack. Slack's going to pay them a bit for it. But then Slack is going to shut those two products down and just roll those users into Slack, I guess. But through this, Atlassian is actually taking a stake in Slack.

So this is really like the end of competition for these two companies in the beginning of collaboration. And I think that's a big deal. Both of these companies now focus on two different parts of enterprise collaboration software. And I do think we'll be able to see more integrations over the next few years. I think that's going to be a big deal. It is so rare to see a company that accepts the fact that they have the inferior product in the marketplace. To a smaller competitor. Right. And immediately says, you know what, we're shutting down our own products, or at least we're going to do a partnership deal and we're going to adopt their superior product and see if we can work. together. I mean, it's a fantastic decision by Atlassian. And I would just say, too, that Atlassian also makes tons of money. And they've done

such a good job rolling up other competitors, too. So they're kind of in a deal-making kind of zone. So I expect them to, this will free up more cashier than that they can then put to use in areas they can dominate even more. All right. David Kretzman, Aaron Bush, Matt Argusinger. Normally this is a part of the show where I say, thanks for being here. But no, you're sticking around because earning Paloosa continues to roll on. Stay right here. You're listening to Motley Full Money. Chris Hill here in studio with Matt Argusinger, David Kretzman, and Aaron Bush. New radio station to welcome to our family of affiliates. News Radio 1240 and 93.5 FM WT-A-X in Springfield, Illinois.

Welcome to the Motley Full Money family. All Starbucks did in the third quarter was post-record profits and record revenue. Shares of Starbucks up a little bit on Friday. Maddie, but it's not really getting the response that we've seen, certainly when you're posting record numbers. Right. Mainly because they pre-announced pretty much all of this about a month ago. I remember that day, the stock got hit pretty hard, and they guided their comps down, and that's kind of the news is kind of just flowing out of that. And the 11 percent increase in revenue, which took them up to a record, it's mostly

from new store openings and the fact that they consolidated their East China business, which was previously licensed, and those are now owned and operated stores. And so, yeah, there's not a lot to like actually about this release because we know that the COPS have been trending down. Well, they were down again, only up 1 percent in the current quarter. What's interesting here is that China COPs, which have been so strong, we're actually down 2 percent. That was surprising.

And on the call, management talked about the fact that in China, they're really just focusing on new store openings right now. They feel like a lot of their new stores in very urban-ly dense cities like Shanghai and Beijing. We're kind of cannibalizing some of the older stores. OK with that right now because they just want to really just focusing on the footprint. So there's that to worry about. Again, we just want to see those comms bounce back. And the trend is right now not in Starbucks's favor. It's really not. And it sort of seems like it's almost like they need to clean up their

house a little bit over the next couple of quarters. I sort of, and I'm a shareholder of Starbucks, but I look at this company and I think I don't really have any expectations for the rest of 2018 for this one. I agree. Basically, they probably know that they've overextended in certain places, and they need to kind of roll back. One bright spot in the U.S. is that they're finally seeing growth in their digital platforms. So they now have over 15 million active Starbucks rewards members, and that's up 14 percent

year over year. It's been a while since we've seen that kind of growth, and they have more plans over the next year to revamp that digital platform. I think that'll be key. Shares of Chipotle up 4 percent this week after a solid second quarter report. Chipotle's same store sales were up due to higher average. tickets. So, David, foot traffic down a little bit, but it looks like Chipotle is exercising a little bit of pricing power.

Yeah, and I'd say that the biggest bright spot for the company right now is the fact that they're going all in with their digital platform and their initiatives there. And they're seeing some nice traction. So now they have 4 million monthly active users on their app or their website. That's up 65 percent so far this year. Digital sales this quarter, we're up 33 percent, now making up over 10 percent of revenue. And now they have a second line in the back of the kitchen that's powered. or plugged into that digital platform in over 500 locations and more to come. So those digital tools, I think, really help engage customers,

keep people coming through the app and the website, much more convenient. They're also testing out pickup shelves similar to Panera, so you can order online, walk right into the store, and pick your food up off the shelf. So they have that rolled out. And a few locations in New York will probably be coming to more locations soon. What about the case? Have they fixed that?

Have they done anything to fix the Koso? All they'll say is that Koso is still a positive contributor to sales. I personally haven't tried Koso in about six or seven months. I might have to try the recipe again. I can see Mack shaking his head behind the glass. He's obviously not a fan of that. That is the investor equivalent of damning with faint phrase. That's about as faint as it gets.

PayPal's stock hit an all-time high this week after strong second quarter results. But guidance for the third quarter sent the stock falling PayPal's chief operating officer. said that some investors misunderstood their guidance. What do you think, Aaron? I think they might have misguided their guidance. I mean, this quarter itself was really strong. Revenue grew 23 percent. Earnings grew even faster. And by all key metrics, they're making steady progress. They added 18 percent more accounts year over year. And the number of transactions grew 28%. So that tells me not only are they adding new people, but the users who use PayPal and their services are using them more frequently.

So there's a strong network effect going on there. And I don't think that's going to go away. I think it's also important to mention that Venmo has been on fire. Their payment volume was up 78% year over a year. And it now represents a quarter of all of PayPal's payment volume. And so I do think part of the slowdown could come from just a natural slowdown in Venmo now that it is becoming a larger part of their payment volume. But they do have a lot of other stuff going on. They announce a, a $10 billion buyback, which told a lot of investors that, like, wait, you don't have anything better to do with $10 billion? That was my reaction. This is a relatively young company.

It's got a market cap of $100 billion. That was exactly what I thought when I saw that. Like, really, you got nothing else to do with $10 billion? Yeah. So I don't know really what to make of that. I will say, though, just in the past quarter, they have made four acquisitions, and they've made plenty of acquisitions before. So I don't think that is true that they don't have anything to do better.

I just think that gushing lots of money is a good problem to have. And they're just figuring out what to do with that. International sales for Under Armour rose nearly 30 percent in the second quarter. And that's good, Maddie, because here in North America, Under Armour sales were barely positive. Right. And barely positive, considering we had three consecutive quarters of negativity in that number is not bad.

But yes, I think after Nike reported last month and reported fairly good North American numbers, I expected Under Armour to do a little better. It's nice to see the growth, but the international is where it's happening right now. I think Under Armour has a lot to do to fix its North American business. Overall revenue growth of 7%. You know, when you factor in all the restructuring they've done, the debt they've built up on the balance sheet, the inventory issue they're still facing, it's not a great number, especially when Nike and other competitors are growing about twice that rate.

And so I feel like Under Armour still has a lot of work to do. Well, and that's the thing where you sort of felt earlier this year that 2018 was going to be pretty pivotal for Under Armour for a lot of reasons, one of which had to do with just sort of management and the team that Plank has put around him. And can he put that team to use and can he keep them in the building? Yeah, keeping the operative verb. Exactly. But it does seem like coming into this, like, okay, maybe they are finishing their cleanup

work and then they can sort of unleash the business, but it still seems like they're Not nearly at that point. No, I, yeah. I mean, maybe as we get closer to the holidays, maybe this could be a final nice push for the second half of the year. But all evidence that I saw, at least on this quarter, is that it's still a work in progress. Coming up, we've got a few thoughts on self-driving cars and a few stocks on our radar. Stay right here. You're listening to Motley Full Money.

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Welcome back to Molly Fool Money, Chris Hill, here in studio with Matt Argusinger, David Krentzman, and Aaron Bush. Quick shout out to producer Matt Greer for hosting the show last week and to Ron Gross for hosting the week before that. Well done. Good work, guys. Yeah, I mean, they did so well. I was kind of thinking, maybe I'll just stay on vacation. Second quarter profits for tractor supply came in higher than expected. David, I get that selling equipment to farmers and ranchers is not the sexiest business in the world. But tractor supply stocks had a good run over the last 12 months. Up 43% over the past year. And this was a great quarter.

Same store sales up 5.6%, which in a relatively challenging retail landscape shouldn't be overlooked. And I think the company really has a formula for surviving and thriving in the age of Amazon. They, like you mentioned, they have a specialty retail focus. They're going after farmers, gardeners, ranchers, with e-commerce, with their strategy there. They're using their stores to their advantage. So right now, buy online, pick up in store, makes up 70% of... their e-commerce orders. And by the way, they've had 24 straight quarters of double-digit e-commerce sales growth. It's still a relatively small piece of the overall pie, but they are seeing

some progress there. And then finally, they also have a loyalty program, the Neighbors Club, which has 8.7 million members, and those members spend three to four times the average of non-loyalty members, and they're aiming to get 10 million members by the end of the year. One other thing, cool thing that they're doing in their store is that they have kiosks. So when you're walking through the store and you see an item that's not quite the right size or fit for what you're looking for. You can just order online through that kiosk. So definitely thriving in the age of Amazon. But are they going to thrive in the age of Trump and all these tariffs that are probably coming?

And well, that are coming and kind of hurting potential agricultural exports in the U.S. I was just wondering if there's any comment about that on the call or in the release. It definitely came up on the call. I think that'll be something to watch, especially for those bigger ticket items like mowers or larger piece of equipment will suddenly be a lot more expensive if those tariffs go through. But at this point, I mean, they actually raise guidance for the rest of the year, so clearly they're still optimistic. See, Maddie, that was your thought listening to David.

My thought was, I didn't think I could feel worse about Starbucks loyalty program until David mentioned the tractor supply, which I'm just going to go out on a limb and say is more of a niche market business than a company that sells coffee. Tractor Supplies Loyalty Program has 50% as many people in it as Starbucks. And it just launched it a few years ago, too. It is confounding about Starbucks. I mean, we should almost send a question out to our dozens of lists. How many are Starbucks rewards members?

It feels like it should be bigger. And yet, Starbucks just doesn't have a very sizable number. It doesn't make sense. You can drop us an email, Radio at Fool.com. You can hit us up on Twitter at Motley Fool Money, not just with the Starbucks feedback. but also send us a question. We got a question from Bryant Conger, who writes, when it comes to self-driving cars, who are the market leaders and are there alternative ways to play this industry? You guys rock. Thank you, Brian. You rocked for listening.

Self-driving cars, where are we now? Because I'm the old man at the table, and I just sort of look at self-driving cars, and I think, probably not for me in my lifetime. Oh, I think certainly in your lifetime. We mentioned Alphabet and Waymo. And there's Uber doing a I think you almost for self-driving cars at least in the next five to ten years. I think you have to look outside the U.S. And I'd say you particularly probably want to look at China. And you want to look at things that Baidu is doing or a company called BYD, which is a big electric car manufacturer in China.

I say that only because China is going to be a lot more open, I think, to experimenting, testing, and ultimately rolling out autonomous vehicles much faster than we are going to be able to do that here in the U.S. I think it's going to take a long time for this to fully catch hold. But I do think that there is an in-between zone. It's not like this is a light switch where you suddenly turn it on and all the cars start driving themselves. So I do think that there will be like a ramp-up period where maybe in certain areas you can have self-driving cars do certain things and that slowly starts to build.

And I do think that, yeah, Waymo has a good start right now and they'll probably do a good job partnering with a lot of others. I mean, Tesla is working on it. GM acquired cruise and is working on it. Ford recently consolidated some efforts there, too. So everyone is thinking about it. Yeah, I'd say Waymo at this point, in the U.S. anyway, has the biggest head start. It just came out recently that their Waymo self-driving cars have now logged 8 million miles on public roads, and by far that's the most of any company out there.

Tesla is also supposedly dabbling a little bit autopilot or auto-drive, whatever they call that. But, NVIDIA is also one of those kind of suppliers with their general processing units, essentially the backend chips or technology that can be used to power these self-driving vehicles. Still a small part of their overall business, but it is continuing to grow. But I agree. I think this will be further out than a lot of people expect. If you go back a year or two ago, there's so much hype and excitement about self-driving cars. But I think we're still looking at at least a decade before it's common to step into a self-driving car.

I'm glad you mentioned NVIDIA because that was one of my thoughts. that maybe for investors, the better way to invest into this trend is not with the manufacturers themselves, but more with the suppliers, because there's going to have to be so much testing. And the companies that are producing these vehicles, they're going to continue to buy these parts and technology long before they're actually selling stuff on the road, right? Yeah, and I think it's also important to remember that at this point, you're not going to have any small, pure play companies only focus on self-driving cars that are publicly traded. You might have some private companies dabbling in it. Uber has been doing a lot with self-driving cars. They're allegedly

going public at some point at the end of 2019, so it'll be something to keep an eye on. But yeah, at this point, I'd say focus on Alphabet, MVIDIA, some of those companies that already have a dominant core business and they just happen to have some promising technology or starts. And in the case of Alphabet, they also have $100 billion on the side. Yeah, it can hurt. Yeah, it definitely doesn't hurt. Yeah, I just wanted to underline the Uber part, also Lyft, too. And both of those companies will probably go public in the next couple of years or so. I do think that probably at the end of the day, you know, 20 years from now

whenever this happens, the two big winners will be those who own the technology that makes it possible and those who own the networks of fleets. And so I think all of the pieces of the value chain are worth worth worth probably like a trillion dollars at some point. So it's not too soon to start thinking about it. Our final story, not earnings, but wonderful news, and that is Radio Shack is back. Oh, sure. Radio Shack filed for bankruptcy twice in the last three years, but it is being reborn as Radio Shack Express, a store within a store that's going to open in 100 Hobby Town locations across the United States. Let's go to our man behind the glass, Steve Broido. Steve, overjoyed at this news or ecstatic about this news? Well, you've got Express and Hobby Town.

in the same sentence. So there's nothing but goodness there. Am I the only one who had never heard of Hobby Town before this? It's, I guess, a specialty toy store of some sort? Is it, like, Hobby Lobby? I don't think it's Hobby Lobby, because that's more crafty. This is more, like, specialty gadgets and toys, I think. I went a deep dive into the Internet to figure out all things about Hobby Town. And there's all sorts of goodies there.

All sorts of, like... So where are these stores? Did you find that out? Oh, I have no idea. It wasn't that deep of time. I was lost in the merchandise. Steve, I'm wondering, though, because you've made the point on this show in the past that Radio Shack really needed to rebrand. I'm wondering if they missed an opportunity here.

I think so. I think radio plus Shack wasn't so good. So maybe something more current, a little bit more today. Although adding Express, that has a dynamic quality to it, don't you think? Absolutely. Express means better. That'll appeal to millennials, for sure. Let's get the stocks on our radar, and Steve will hit you with a question. David Kretzman, you're up first. What are you looking at this week? All right, Steve, you're ready for this?

I'm going with Cush Bottles, ticker K-S-HB. They're aiming to be the go-to supplier for the cannabis industry, everything from containers, packaging, branding services, vaporizers, and much, much more in their 12 facilities here in the U.S. They're already serving more than 5,000 clients in every major U.S. market where cannabis is legal. And they still have two co-founders with the company, including one who's remaining as CEO, Nick Kovosovich. And those two co-founders still own about 30 percent of the company, so you have some

skin in the game there. Steve, question about Kush bottles? How important are accessories in the cannabis industry? I mean, is this that big of an industry for when you're buying cannabis accessories? Well, they're mainly a business-to-business suppliers. So they're supplying products to dispensaries, things like containers and packaging. their main business and then the vaporizers, which are more used by the end consumers, those are important as far as I know. But I'm not a user myself, so I can't speak from direct experience.

Aaron Bush, what are you looking at? I am looking at Ubisoft, ticker UBSFY. This is a French video game company behind big franchises like Assassin's Creed, Far Cry, Tom Clancy Games. And just like pretty much every video game publisher out there, I mean, there's a huge runway for new games, new gamers, mobile, digital licensing, e-sports. So there's a lot of tail-and-time. there. But I'm also feeling deja vu because they recently made a deal that is eerily similar to what Activision made a few years ago. So Vavendi, which owned over a quarter of their shares, they recently came to an agreement where Vavendi is going to sell its entire stake. The founders

are going to buy more. There's going to be a big sherry purchase, and Tencent is coming in and buying up part of Ubisoft to help them expand into China and grow their mobile presence. So, there's a lot to like here. The stock isn't cheap, but they're smaller than other top publishers, and I think it could be an interesting investment. Steve, question about Ubisoft? In five years, what will be the biggest platform that Ubisoft is on? I would still guess probably PS4 or Xbox, but probably PlayStation. Matt Argusinger, what are you looking at?

Going with JD.com, ticker JD, I think one I've spoken about before. China's second largest e-commerce company, but largest overall retailer. You look at revenue growth over 40 percent. It's got China's largest shipping and logistics network. It has partnerships with companies like 10 Cent, Walmart, Alphabet. And you can buy shares for less than one-time's revenue. I still don't know what I'm missing about this business. I'm missing something, obviously, but it looks like an incredible bargain to me. Steve, question about JD.com? Just the news that we're hearing politically about China concern you in regards to this company?

Not so much for JD, because 90% of JD's business, if not more, is just in BTC revenue retail in China. So, nothing in terms of import, export, or U.S. relationship should get in the way of that. UBesoft, CushBottles, JD.com. You got a stock you want to enter your watch list, Steve? I think I might go video games. It's my first one. I'll take it.

Can I just say I love the names of this week's radar stocks? I mean, you told me it's like, ah, I got this new company. called Ubisoft. You know, it's a video game company. It might as well be like baby products or something like that. Cush bottles? I mean, because it was you pitching it, I figured it had something to do with the cannabis industry, but I don't know, Cush bottles, maybe like a new acquisition for Coca-Cola. Just call me Cush Cretz. What? I don't think I will. I don't think anybody else will. All right, scratch that. Aaron Bush, David Cretzman, Matt Arguson. Guys, thanks for being here. Thanks, Chris. That's going to do it for this week's show. Our producer is Matt Creer, our

is Steve Broido. I'm Chris Hell. Thanks for listening. We'll see you next week.