Motley Fool Money - Google’s Quantum Chip

Episode Date: December 12, 2024

The new Willow chip performed a computation in under five minutes that would take a supercomputer 10 septillion years. That’s longer than the universe has been around. (00:14) Nick Sciple and Ricky Mulvey discuss: - The potential futures and lingering questions for quantum computers. - A restructuring at Warner Bros. Discovery that’s pleasing its investors. - Why the media conglomerate may be a falling knife. Then, (18:42) Motley Fool Contributor Lou Whiteman joins Mary Long for a look at FedEx, and holiday shipping season. Visit our sponsor: Get $1,000 off Vanta at www.vanta.com/fool Companies discussed: GOOG, GOOGL, WBD, PARA, TKO, FDX Host: Ricky Mulvey Guests: Mary Long, Lou Whiteman Engineers: Rick Engdahl, Chace Przylepa Learn more about your ad choices. Visit megaphone.fm/adchoices

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We're going to the Quantumverse. You're listening to Motley Full Money. I'm Ricky Mulvey, joined today by Nick Seiple. Nick, good to see you. Great to be here with you, Ricky. Let's get into this Google announcement, which is a little tough to parse through anytime you're talking about quantum processes, but Alphabet announced a new quantum computing chip called Willow. The stock has jumped about 12% over the past week as Wall Street analysts pretend to understand quantum science. Now the stock is in an all-time high. Google reporting

that, quote, Willow performed a standard benchmark computation in under five minutes that would take one of today's fastest supercomputers, 10 septillion, that is 10 to the 25 years. We're getting into, we're getting into some logarithmic math there. Sounds like this thing can get all the Bitcoin at once, Nick, but what does Google want from this research? Sure, I think Google just wants to stay on the, cutting edge of new computing technology. As you laid out here, these quantum computers have the promise. commercialization to do calculations that today's existing computers couldn't do in the entire history of the universe if you kind of stretch out the time there. So just trying to push forward the state of the art of science as Google has done with their AI investments in the past

and other places. This is one of the big focuses that Google has outside of their core business to just invest in innovation. For those who are unfamiliar with this game, and none of us are going to pretend to be quantum experts here. I don't want to put words in your mouth, Nick. But what can a quantum computer do that's so much better than a regular computer? Why are the researchers so interested in this? Yeah, I mean, without getting too deep down into the weeds, my understanding is you essentially use the fundamental particles of the universe to do the computing for you. So it uses qubits, which is electrons, that sort of thing, which can exist in a superposition state. We're getting down into kind of complex physics. They can be both zero and one at the same time, unlike classical

computers that have to be either zero or one in any given particular time. This unlocks significant potential to perform multiple calculations at once faster and simulate problems in large data sets you couldn't do today. However, there's lots of instability in these cubits and we haven't been able to get them to be stable enough to build these computers in a functional way. But this breakthrough that Google announced really is a sign that we're getting closer. And if we do reach commercialization, and then this would be a breakthrough in computing and could change the world. This is a bleeding edge technology,

and as you mentioned, getting these chips and computers stable is a monumental challenge in and of itself because you're not dealing with ones and zeros. You're dealing with particle uncertainty at an atomic level, which sounds a little above my pay grade. But there's a lot of promise in use cases to watch.

What are you going to be watching as this technology plays out? Yeah, I mean, you think about a breakthrough in computing technology, could touch things, healthcare, code breaking, that sort of thing. For me, the place where I think you'd see quantum computing used first is in defense. If you think about past cutting edge technologies, they all seem to find the first application in defense, rockets, the internet, drones, GPS, nuclear technology, all these things started out as defense applications really make sense. The DOD isn't worried about profits or commercialization, really worried about national defense. And we've kind of agreed as a country that there's not a price we want to put on that. So I'd expect quantum

computing to find its first applications in the defense field. You think about codebreaking, certainly has been one of the earliest applications of computers going back all the way to the beginning. So you could definitely tell a story about where that could be applied in the defense realm. So if we do reach something where this applies, I think defense is going to be the place where you see it used first. Yeah, one thing I'll be watching. You mentioned code breaking, and this could fundamentally change as this tech plays out. Cybersecurity companies, is cyber threat change. There's a book quantum supremacy and kind of lays out one example where there could be two internets where if you're trying to send secure information, you might not be able to do that

along the normal broadband infrastructure we have. If you're a company doing banking information, that kind of thing, you might need laser beams to send it because otherwise it could just be so easy for these quantum computers to break into. Let's talk about the stock side because remember a few months ago, everyone was worried about Google and how it didn't understand artificial intelligence. Well, now investors are saying, boy, oh boy, do you understand quantum computing and we're excited about that. Wall Street Journal columnist Dan Gallagher has a column out today, saying, quote, Google's quantum boost doesn't really compute and pointing out that basically the $250 billion that was added to the company's market cap is looking speculative at best.

This is because the advertising business generates about that money in a single year. You know, pessimism always sounds smart, Nick, and this is something I'm excited about. Quantum computing is cool. So you tell me, is this smart analysis from Mr. Gallagher? Is he, you know, does this belong at the player haters ball? I would say you could say both in one way or the other. I mean, it's smart analysis in the sense that is this quantum computing technology commercially ready enough to be adding that type of market cap to Google Alphabet's, you know, stock

today, no, this is only the second milestone that Google has laid out toward their quantum computing commercialization roadmap. I think there's seven of those milestones. There's really no guarantee that it ever gets there. I mentioned defense really being at the cutting edge, the DARPA program manager that's in charge of quantum computing. It's said their basic position here is skepticism. They're skeptical that will ever reach a quantum computer with enough of these qubits that are stable enough for this to be built. So it's really a question of whether we're actually reached commercialization, although this is a huge breakthrough for Google. That said, I think some of the movement in the stock is less about,

hey, we're about to have quantum computing tomorrow. It's renewed confidence in Google, their leadership, and their technology position. You mentioned AI earlier this year. A lot of concerns that AI could disrupt that core Google advertising business. And we've seen some really exciting announcements from Google, Jim and I, their AI tool in recent weeks, that at least have given me some confidence in the AI business. And, you know, while quantum computing is a long way off as far as these frontier, technologies. I do want to mention one breakthrough technology that is actually finally gaining traction

for Google and that's self-driving cars. This is another technology that started out as a defense program 20 years ago. DARPA, the Defense Advanced Research Projects Agency had their 2004 grand challenge, which is really kicking off the quest for self-driving cars. Now we are 20 years on, and Google is finally reaching commercialization of these. According to data from California's Public Utilities Commission, Waymo did 312,000 rides per month. California in August. That's double what they'd done three months before. And just in recent weeks, Google has announced plans to expand rapidly across the U.S. in Austin, Atlanta, and Miami in 2025, announced partnerships with Uber to expand that into some of those new cities. And this is an area

that you really don't hear mention that often as a real value driver for Google. So do I think quantum computing as loan is enough to move Google? No. But do I think there's a good argument that we should be more optimistic about Google and that the company has brighter days ahead of it and isn't under deep threat by some of this disruption folks were worried about earlier this year. I think that's true. And I think there's a good argument to you made that Google is fairly valued here. The one thing in Google at about 25 times earnings right now, one thing on the self-driving stuff that I'm waiting for is someone out in Colorado, Nick. You mentioned the three cities, Austin, Atlanta, Miami, San Francisco.

These cars are already cooking. None of those cities get snow or ice a lot. And I'm very much looking forward to seeing these self-driving. driving cars artfully work in icy in winter conditions. That's when I think that's going to be sort of my transition point to saying this is really going to roll out across the country. But I'm ready to get in self-driving car. Yeah, you left out L.A. there, Ricky.

But yeah, there's no accident. All those cities have favorable weather to the technology. Let's say that. So, you know, we're not there. We're not there where this is going to be commercial in every city, but we're getting there where this isn't a science project anymore. This is a real commercial business. Let's go to Warner Brothers.

So Warner Brothers Discovery, maybe taking a note from Comcast last week, announcing that it is separating its cable and streaming division. This is a week after Comcast announced that it was straight up spinning off most of its cable assets. Cynically, you could say, hey, it's telling private equity firms, you can easily cut here if you want to hive off this part of the company. For Warner Brothers Discovery, its global linear networks division will house its cable brands. Streaming and studios now will include Macs and other streaming assets. You're seeing Warner Brothers Discovery investors get excited about this.

Stock is popping more than 10% as I was looking this morning. Why are they so excited about a little restructuring, Nick? Yeah, it's been a tough run for Warner Brothers Discovery down about 50% since the merger between Warner Brothers and Discovery back in 2022. And I think the market is excited about potentially new strategy for the business. CEO David Zazlov has really been pounding the table on the need for more transactions, more consolidation in the media space. And perhaps with the change of administration,

maybe those deals are a little bit more easy to do. You look at Warner Brothers Discovery today, just over $40 billion in debt. The past couple years, the companies really had to focus on cutting costs, laying off workers to focus on cash flow. The main driver of the business continues to be cable networks. About half of the revenue close to 90% of the EBITDA comes from the cable networks.

But these are really no growth businesses. As ad dollars continuing, you leave traditional media streaming still on the ascendancy. Just had to take a $9 billion right down on its cable assets in August. If you look at the streaming business, there is some growth there, and that business has reached break-even, although you have to take those numbers with a grain of salt. But still, HBO Max, a little bit of a mess if you compare it to some of these other streaming companies, combining HBO's content with discoveries, reality TV and that sort of thing has kind of led them to be a little bit behind some of the folks in the market.

I think this transaction, I don't know if you're transaction, I guess, this reorganization sets the company up to separate perhaps some of these bad linear assets from the studio and streaming assets, although they have problems, have a long-term future. And, you know, Zazlov on the press release said, we continue to prioritize ensuring our global linear networks business is well positioned to drive free cash flow while our streaming and studios businesses focus on driving growth by telling the world's most compelling stories. Our new corporate structure, better aligns organizations, and this is the big part, enhances our flexibility with potential future strategic opportunities. across an evolving media landscape.

We've just reached, I think in April, we reached two years since that merger between Warner Brothers and Discovery. Now that we're two years on from that, those transactions can take place. And I think hiving off these two businesses sets that up. I think what you're likely to see is either spinning off these cable assets and kind of attaching a lot of this debt to those assets. You can kind of have a good co-bad co-spin-off or perhaps you see some. Perhaps you see some consolidation with some of these other struggling cable businesses out there, whether that's the spinoff from Comcast or Paramount is out there and is under new leadership, perhaps, is going to be looking to sell off some pieces.

Yeah, and a lot of these companies with these cable assets seem to be making moves in 2024 that maybe they know they should have been making in the mid-2020s. I think Paramount is one example. We were chatting before the show where you wanted to talk about the BET Network. where the valuation falling from about $2 to $3 billion, having bids for that to $1.6. Now, I'm talking about a different company, but bringing this theme together, do you think these companies, Paramount Warner Brothers Discovery, have they really just missed the boat to sell these assets at a good price?

Are these distressed sellers right now? I think they are distressed sellers. These companies are in a tough spot where you're heavily indebted and you need to be able to support that debt burden. However, your assets that are generating the cash flow to do that are in a difficult position, a shrinking business. And as you mentioned, the valuation of these cable assets is moving down into the right. If you just look at BET, best case scenario, we're looking at 20% decline in valuation over

just the course of a year. And we could expect these assets to continue going down. They're no longer prestige properties that folks would be excited to buy and own, notwithstanding the Ellison family getting involved with Paramount earlier. this year. I think now we're looking at kind of vultures trying to bid up these assets and run them for cash flow. I think there's still quite a bit of cash to be squeezed out of these businesses, but the market has certainly come to the conclusion that the growth days are over. As you see, things like sports abandoning cable for some of these streaming platforms, the things that

were really holding the cable bundle together are finally leaving. Yeah. And if you're waiting for Netflix to come in, you had co-co-CEO Ted Serendos at a UBS Media Conference on Tuesday. saying, quote, we're better builders than buyers, implying we're not going to come in and take a lot of these distressed cable assets off your hands. And in some cases, you're seeing these companies pick and choose how they do it. We were talking about Comcast, where they spun off pretty much every cable channel they had, with the exception of the Bravo network, which has a lot of their reality programming that does quite well on Peacock. So you wonder, what are they doing this for,

and who do they expect the buyers to be? Let's get into the valuation a little bit. Because Warner Brothers Discovery right now trades at about six times free cash flow. The earnings are a little funky depending on how you add in the depreciation. And we heard from Yasser al-Shimmy on the show a couple weeks back

that he likes this as a value play. You have a lot of properties in there that are valuable. You have the HBO brand, which for at least me and my household, that's a must-have along with Netflix. you have a cyclical theater business that's a little bit down this year

because they don't have a Barbie-type movie on their hands, but maybe it can make a profit again. But when you look at this through your stock analyst lens, are you looking at a value play here or a falling knife? So for me, I wouldn't call Warner Brothers Discovery a value play. I'd have to put it in the falling knife category, just in the sense that the cable network, as I mentioned earlier, heading to zero over time.

There is cash flow to squeeze out of this business, but the long-term trajectory this business is going to be down. If you look at streaming, they've got a great library of assets. HBO Max is great, but they're far from the leader in the space. Netflix really forced everyone to follow them towards profitability a couple years ago, really set the terms of engagement in streaming. If you look at Amazon, they really seize the lead in advertising in streaming by pushing all their prime members to an ad-supported platform. So you're behind the leading subscription video on-demand company. you're behind the leading advertising video on-demand company. You're also heavily indebted and kind of backed into a corner with some of these better resourced, more diversified companies. So for me, is there a future for the Warner Brothers movie division? Of course. I think they're

going to have a long-term future. Does it need to be an independent company? No. I think long-term, I think these assets end up being held by a number of different larger companies as opposed to remaining an independent media business. So who wins from these content arms dealing games? Yeah. I mean, so we're talking about companies in the streaming race. If I had to pick a place to invest, I mentioned the diversified players in a much better position than the pure plays on kind of cable assets.

So you think about the odd companies out here, Warner Bros. and Paramount really, I would say, distressed assets, kind of better companies on that. that kind of layout, Comcast and Disney in a better position given that they're more diversified. They have the parks business to fall back on. Comcast, in their case, has the cable business. Those companies are a really better position. But if I'm going to invest in the kind of media, in the content space, as I've said before, I think the company that my favorite is is TKO Group Holdings, TKO is TKO. It's the parent company of WWE and the UFC. And the reason I, I, I, I think they're in a good spot here as they're the arms dealer to these kind of competing streaming platforms.

They've had the ability to just to see the amount of folks are paying for their content move up and to the right. For a long time, WWRWA has been the highest rated program, episodic cable program on TV. They've made that jump from cable to Netflix in January of this year will be the lead live element of Netflix's, you know, ad-supported. Business, you've got next year, their rights deal for the UFC is set to expire. Likely to see that be re-uped with ESPN. They're looking at a 10-year deal. I think that's going to be significantly higher. So, you know, this is a company that all these potential players in streaming are looking for access to the audience that TKO brings. You look at what's happening in sports where basically everybody wants a piece of this and they have the ability to kind of sell

into this market. So I think, you know, if you invest in a company like TKO or some of these other folks that are kind of selling scarce content into these, you know, competing streaming businesses, I think those are the folks who are, you know, most best position to benefit from what's going on in streaming while all these other, you know, streaming competitors fight it out. Also, you got two top dogs in the WWE in professional wrestling and the UFC in mixed martial arts. The folks in those organizations, certainly people, I don't want to bet. against or be against in any type of fight. Nick Seiple, appreciate you joining me here on Motley Full Money.

Thanks for breaking it down. Thanks, Ricky. Happy to do it again. Anytime. All right, holiday shipping season is upon us, and my colleague Mary Long is taking a look at a few of the key players. She's starting off with FedEx with Motley Full contributor, Lou Whiteman. The old adage goes, it isn't what you say,

it's how you say it, because to truly make an impact, you need to set an example and take the lead. You have to adapt to whatever comes your way. When you're that driven, you drive an equally determined vehicle, the Range Rover Sport. The Range Rover Sport blends power, poise, and performance. Its design is distinctly British and free from unnecessary details, allowing its raw agility to shine through. It combines a dynamic sporting personality with elegance to deliver a truly instinctive drive. Inside, you'll find true modern luxury with the latest innovations in comfort.

Use the cabin air purification system alongside active noise cancellation for all new levels of quality, quiet. Whether you prefer a choice of powerful engines or the plug-in hybrid with an estimated range of 53 miles, there's an option for you. With seven terrain modes to choose from, terrain response to fine-tuned your vehicle for the roads ahead. The Range Rover event is on now. Explore enhance offers at Rangerover.com. Lou Whiteman, it is shipping season. People are ordering gifts, most likely over the interwebs, and those gifts have got to get from point A to point B, potentially with a few stops along the way. So today, we're going to shine the spotlight on a company that kind of plays big role in moving stuff around the world. We're talking FedEx. On the one hand, this company

kind of needs no introduction, but on the other, I do think that Amazon and like how speedy prime delivery is has kind of warped our understanding of how packages move. So let's kind of focus on that and set the table here. If the majority of packages arriving on your doorstep are from Amazon, it can be kind of easy to forget that there are actually other movers and shakers that are playing a really massive part in this logistics puzzle. Break it down for us. FedEx splits its business into the express segment and the freight segment. What's each of those do exactly? Yeah, okay. So for years, they actually had broken down further between the kind of a network for express and a network for non-express. As you said, this year, they combined that into one operation, which should make it

more efficient. But basically, there's the parcel service, which is packages and everything coming from retailers. And then to use their old slogan, the absolutely positively has to be there overnight stuff. So yeah, they used to kind of break that separate from the can wait a few days, but now they're trying to bring that together. Frayed, on the other hand, that's just an LTL trucking business, less than truckload. Those are the big stuff. Those are the stuff you need a forklift instead of just dropped off at your door. So out of those two newly split segments, which is more interesting to you as an investor? Where's the big story with this company? Consumers were probably more familiar with packages shipping back and forth to each other,

but where's the money being made? So the parcel business is 85% of total revenue, whether it's Express or it can get there whenever. That's also where there is the higher potential for higher margins. Definitely that is where your focus should be. Express actually still makes up more than half of parcel revenue. It isn't mostly just gifts from Grandma. There is still a big business shipping overnight business.

That's the business where they really can, and we can break down a little more just inside that business, but if they're going to generate plus margins going forward, it's probably going to be from that business and not the trucking business. Yeah, so let's break that down a little bit more. Like, what levers can FedEx pull to grow here? If you look at average daily package volumes, the number of packages being sent,

that's been pretty flat over the past year. Is increasing that number a big priority here, or is it more about pricing power? So part of that is out of their control. Part of it is just the economy. You know, you can't forge, to your customers to ship things. It is sort of a demand-based business, and all across the board, the transports, we've seen volumes fall. It's just been a weak market. They can't really control

that. What they can control and what they are increasingly trying to do is get to those premium services and focus on that. Refrigeration is a big one. Whether it's produce or medical, refrigerated shipping is a highly specialized thing. Amazon trucks don't have refrigerators in it. So you can't really compete there. There is specialized competitors, but the big guys, they're focused on things like this where they can drive higher margin. It's a lot better business for them than just kind of getting the toys on time for the holidays or something like that. Between 2020 and 2022, FedEx saw some decent growth. And maybe this goes back to this kind of like, okay, stuff that's out of their control, more macro factors that you just mentioned. They had $69 billion dollars in revenue in

2020, $83.5 billion in 2021, $93.5 billion in 2022. So decent movement. But since then, revenue has been on a downward trajectory. Is it just the macro picture that caused that? Or are there other things that kind of are within FedEx's toolbox that they can use to address that? It's very much a macro story and specifically a pandemic story. You know, we all started buying everything at home and getting it shipped, right? So the demand for shipping services went up. And that echoed through the system for a few years, but we've seen just like I said, this broader transport slump. For one thing, e-commerce hasn't disappeared post-pandemic, but it has normalized. So you have seen sort of just regression to the mean. But as importantly, this macro idea, like we've been talking

for years now about hard landings, about recessions, about what's to come, that causes large corporate customers to scale back on inventory and scale back on just what they have in their warehouses, which means less demand for shipping. There has been some move around the edges. They have new, FedEx has new management, and they're sort of trying to get rid of some of the more marginal business. So a little bit of it might be by choice. But mostly, like all across the board, you will see the stocks reflected to this.

This has just been a bad year, 18 months for these companies, FedEx included. So FedEx got a new CEO a couple years ago. He'd been with the company for a long time, but more recently, in this new role, he's implemented some cost-cutting measures. That initiative was called Drive. deliver results through innovation, value, and efficiency, what kind of innovation value and efficiency are we seeing? What's, I think, most recently, this drive program led to $1.8 billion in cost savings over the 2024 fiscal year. So what are we seeing cut and what are we seeing kind of come out on the

other side as a result of those cuts? So the overall goal is about $4 billion a year. So at $1.8 billion, you're right. They're about halfway there, which is on track. We talked at the top about consolidating business units. Some of it is as simple as that. But part of it too is just as you consolidate these things, you can use your warehouses more efficiently. At some places, these networks had separate facilities. You can better use your jets and other big asset, things like that. So a lot of this is just the kind of the slow and steady of making the network more efficient. It is a new management team, Raj Subramanian. You know, you really have to give him some credit. He has been there forever, but he took over for Fred Smith. Fred Smith is the guy who founded the business. Smith has a reputation for being,

shall we say, opinionated. He believes in himself. He is still the executive chairman of the board. It isn't easy for someone to come in following the founder and say, you know what, we need to change a lot of things here and we need to cut a lot of things. Basically tell your former boss, I know better. It's working, and it's to his great credit that they have come in and sort of done this. I think it'll benefit him over time. What is Fred Smith's unwritten role within the company now? You mentioned he's still executive chairman. He's still involved. But is this like a Howard Schultz type of situation where he's still got the era of management? What's the unwritten situation there? I can only guess. I mean, Fred has a lot of different interests, which probably helps Raj do his

job. But I can only guess that Fred knew about a lot was coming before. I mean, you know, good corporate governance, as you should tell the board chairman. But I would think that they're not going to want to be surprising, Fred, at any meetings right now. We kicked off this segment by talking about Amazon. Kind of tough to talk, logistics, package delivery without mentioning Amazon. Once upon a time, FedEx was partnered up with Amazon. That relationship ended in 2019. FedEx initiated that breakup saying, hey, Amazon's developing its own delivery capabilities,

and now they're a threat rather than somebody that we want to partner with. In January of this year, FedEx announced it was launching a data-driven commerce platform called FDX. Is that supposed to help FedEx better compete with Amazon in kind of a different category? What's the state of play of that particular competition right now? So the platform, if we're honest, is kind of table stakes in 2024. You'd be shocked at how this business works and how much of logistics is still done by the office phone with a whiteboard, with just kind of getting things done that way. But increasingly consumers and especially these corporate customers are demanding a digital platform. So this is FedEx trying to join

the century and kind of get on board with the rest of us. As for Amazon and FedEx, in one sense, yes, it hurt FedEx because it was a huge shipping customer, and at the end of the day, you want full trucks. You make money when you have volume. But it tended to be the lower margin volumes. I mean, I don't know many people who have partnered with Amazon who are like, oh, this is the high margin side of our business. And most of Amazon's retail competitors aren't real keen to hand Amazon the customer data that comes with having them do their shipping form. So there's plenty of business here. Yes, you lost a major customer, but they are coexisting. They went from being frenemies to just rivals. But really, FedEx, there's plenty of

business for FedEx and UPS and everyone else just to serve everyone not name Amazon. And it's really hard for Amazon to get that business from the retailers that they are competing with. Amazon also is not FedEx's only competitor. There's also UPS, which I'll be. be talking with Aunt Chavone about later next week. There's D.HL. Within this whole logistics landscape, what grade does FedEx get? Where does it kind of stand and stack up against its competitors? So I'd say a solid B-plus. And, you know, the comparison with UPS is a great one. And Ant will have great thoughts on that. UPS has a much better dividend, which I'm sure Anthony would love to talk about. It's a powerful competitor. Over time, there's plenty of room that both to win. I know UPS is much

more unionized, which kind of gives less flexibility. They would argue it gives them more kind of, you know, predictability on cost, but costs are high. FedEx can hold its own as an investment as a more nimble company, even though it's a mature industry. They've been around for decades, but they still, over the years, have done a good job sort of getting out ahead of trends. I think they still sort of have that entrepreneurial mindset, and I grade them pretty well on that. Okay, so before we wrap up, an increasingly important part of this business is reverse. logistics. So apart from mere direction, how is that so different from just old, regular, everyday forward logistics? Yeah, it's very literally. It's returns, which, you know,

returns is a reverse logistics is a fancy way of saying returns. It's a huge pain for retailers. And, you know, you're dealing with the customer. The customer, you don't want to make them angry in this process. You have to deal with restocking. You have to deal with just the uncontrolled from your warehouse shipping something, putting the label on it, very controlled environment. There's a lot more chaos when the consumer brings it back and how it's packaged and all that. The estimates I've seen indicate it can be three to four more times more profitable for these reverse logistics specialists than just sending out the original shipment. So it's a business you want to be good at.

We talked a second ago about FedEx being more entrepreneurial. FedEx bought a company called Genco Distribution, a huge player in reverse logistics, all the way back in 2015. It was a great deal then, and it has made them a huge player in the space. If you, as a consumer notice, a lot of shipments did you get from UPS? If you have to return it, the label that they email you will say FedEx, they are a huge player in the space. It's one of these areas where the business is less commoditized

and you can make margin. And it's certainly the kind of thing that they're looking to expand versus, say, just getting the package there in four or five days. With that Genco acquisition, has that made FedEx the key player in reverse logistics, or are there others that are maybe beating them at this game? There's a lot of them. I mean, some people do it, a company I love to talk about GXO logistics. They do a lot of reverse for customers. But of these big shipping companies, I think FedEx, I probably get some nasty phone calls about this, but FedEx is the one that you're going to see getting a lot of that business among these kind of third party working with lots of people.

Lou Whitman, always a pleasure. Thanks so much for joining us today on Motley Fool Money. Thanks for having me. As always, people on 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 yourself stocks based solely on what you hear. All personal finance content follows Motleyful editorial standards and are not approved by advertisers. The Motleyful only picks products that would personally recommend to friends like you.

I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow.