Motley Fool Money - Money & The Average American

Episode Date: November 8, 2022

Rough years for Lyft and Tripadvisor get even rougher. (0:21) Ron Gross discusses: - Lyft disappointing Wall Street in one key metric - Why Uber's diversification is currently an asset - Tripadvisor's guidance pulling down the stock (10:54) Alison Southwick and Robert Brokamp talk with Jack Caporal and analyze data around average American salaries, savings, and what it means for your financial goals. Companies discussed: LYFT, UBER, TRIP Host: Chris Hill Guests: Ron Gross, Alison Southwick, Robert Brokamp, Jack Caporal Producer: Ricky Mulvey Engineers: Dan Boyd, Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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Rising tide lifts all boats, but today's a reminder that a rising market does not lift all stocks. Motley Fool Money starts now. I'm Chris Hill, joining me in studio. It's Motley Fool Senior Enlist Ron Gross. Nice to see you. Great to see you, Chris. How are you? I'm good because I'm not a Lyft shareholder. Oh. I'm sorry. I'm sorry for the Lyft shareholders out there. So, Lyft's third quarter results, It seems like people are focusing on the fact that active riders are down.

I don't know if that alone is enough reason to justify why the stock is down 20 percent. But certainly the overall narrative of, hey, the world is opening back up. People are going back to people. People are traveling more. Whatever else is going on with your business, you're active riders. number of people actually getting in a lift vehicle, that should not be down. You're saying that's important? I'm saying that's important. But you tell me. Is that entirely what we're seeing here?

Because it seems like that is all of the conversation. How are their active riders down? Because it's late 2022, not late 2020. Right. They're up, but they're down still compared to 2019, which we can get into. The one thing with the stock, I'm getting a little fatigued when companies get hit 20, 20, 25%, and the narrative is always like, that seems like too much. This is an overreaction. How could it possibly be? In many cases, in some cases, I guess we should say, it's warranted. When investors stop believing in what the future promise of a company could be, they no longer want to own that, and that can create incredible volatility. It can go the other way, too.

If you start to believe in something, you can see stocks shoot up. But I don't want to just dismiss a 20% drop in a stock by saying, overreaction. I think that's a little too simplistic in some cases. In this case, adjusted earnings, I always put adjusted in quotes, were actually fine, but revenue growth, and as you say, the number of rioters were disappointing. On the face of it, revenue up 22%, not too shabby, and active riders up 7.2%. Also not too bad. They ended the quarter with about 20 million riders that was short of analyst prediction.

So, again, it's expectations versus reality. That's the game we sometimes play here, at least in the short term. But more importantly, it's still below the 23 million riders that they had before the pandemic. So 23 million before, 20 million now. You can contrast that with Uber, who said their rider kind of had bounced back, actually, to pre-pandemic levels. So especially when you have kind of a pretty much close comparison, although at this point Uber and Lyft are not really the same. But when you have a company that's a comparable company, and you can see one is saying things look pretty good now compared to pre-pandemic, and the other is saying we're not there yet.

That's another indication of why would you want to own Lyft, perhaps, if you could own Uber instead. There were some positives. Revenue per Active Rider was up almost 14%. They did have 66 million in adjusted earnings. But if you stop with the adjusting and you just look straight up at what they reported, they reported $420 million of losses. That's largely because they're issuing new stock to employees to make up for the falling share price. That's not something you really want to see. As someone who would prefer to see the business really firing and doing quite well, instead,

they're trying to make up for the fact that their business is not doing well, and the stock is falling. So that's not great. Outlook was kind of in line with Wall Street expectations, so not too bad there. predicting adjusting earnings between 80 million and 100 million for the coming quarter. Reiterated guidance of a billion dollars in adjusted earnings for 2024. That's kind of far out. Did they say anything about 2023?

You know, one thing at a time. We'll go out. We'll go to the out years first, where give us time to right-size the business. If they could do that, then obviously, that would be pretty neat trick. That seems aggressive to me. They did announce last week they're going to cut 13% of the staff, so they are right-sizing some of their operating expense structure, which is appropriate for this time. It wasn't all terrible. It really wasn't. It's a business that is profitable on an adjusted basis, and they look like they're making headway.

It's just that the stock price didn't really support where they are right now. It's down, what, 80% from its 52-week high really has been decimated. probably appropriately. Let me go back to Uber for a second, because as you said, they're, on the surface, it seems like, oh, these are the same businesses. They're not. Uber has diversified much more. Do you think that's part of why we're seeing shares of Lyft get whacked today?

Because it's essentially Wall Street saying, hey, you made the decision to essentially just be in the business of riders, and that's not going well. for, if you can't make that work, whereas with, you know, there are other ways that Uber makes money, and certainly the investments they're making in Uber Eats, seems to be, if not paying off right now, moving in the right direction. Yeah, if you wanted a Pure Play ride share investment, then Lyft was the place to go. And as you said, Uber is much more diversified. If the pure play's not working out and you could still get exposure to that in a big way

with Uber still. In Wall Street terms, why wouldn't you rotate out of Lyft into Uber? And I think we're seeing that happen quite a bit. Trip advisors adjusted profits in the third quarter were solidly below what Wall Street was hoping to see. The executives at Trip Advisers say that travel demand remains strong? Okay. Okay. Then why aren't you seeing better results if the demand is there? It was a pretty big earnings miss, for sure, and guidance wasn't great. So those two things, I mean, you're going to get the stock kind of whacked. There were some positive.

All segments delivered sequential revenue improvements, so there are things that are improving in general. When you look at just the numbers, comparison to COVID periods make the numbers look way better than they actually are, so we have to just realize that. For example, total revenue up 51%. But when you look at them versus 2019, they did not exceed 2019 levels. So again, things have not recovered. Average monthly unique users on the TripAdvisor branded websites were up 8%.

That was about 82% of the comparable period in 2019. So again, another indication that we're not there yet. There was pretty decent recovery in the other two segments, which are the smaller segments. V8 and the Fork segments. That was somewhat encouraging, but not enough to offset their core revenue, which is those branded hotels. That's 62% of revenue. That was up 34% reaching 88% of 2019 levels. The V8 segment was up significantly, and that's 179% of 2019 levels. So making progress there. The Fork, which is restaurant reservations, slightly higher than 2019 levels. So making some progress there. But again, not in the core business.

They did report $25 million in net income, so profitable, which is good versus the alternative, and a 60% increase in a Justin D. Patu, $115 million. They still have a billion dollars in cash. I think guidance was lackluster. Consolidated revenue in the low single-digit increases from 2019 levels, which does imply a modest slowdown from this quarter that we're just disgusting. Discussing. And disgusting.

Disgusting. Ebit dollar margins, 10% is the guidance. They were 25% in this last quarter. So, you know, we're not seeing a rebound, for the most part, from 2019 and guidance is not that exciting. And again, that's why people sell off the stock. Yeah, the stock is down almost as much as what we're seeing with Lyft. Where do you think the value is in TripAdvisor's business? Because this stock has fallen to the point where the market cap for TripAdvisor is less than $3 billion. You can look at TripAdvisor and think, okay, maybe it's a takeout candidate, maybe someone buys them.

I guess my question is, if someone were to buy them, what would they be getting? What would they want TripAdvisor for? I mean, it's probably the core business still, the TripAdvisor-branded websites and the core hotel business. Forget, it is profitable, and it is cash flow positive. But just in the same way that investors don't seem to want to own the stock today, you would say to yourself, well, who wants to own the whole thing tomorrow? And at a certain price, there is an answer for that. It's still probably 20 times forward earnings at this level, which is higher than the S&P 500

for a business that is not all that exciting. So I still think it's too expensive. for someone to take it out entirely in an acquisition. But if the stock keeps coming down, then there could potentially be a price for that cash flow that they are generating. But if they did that, your expectation is they're buying it for the core business, and therefore they are selling off or just getting rid of the ancillary parts. It's hard to say because right now, those are the higher growth parts, but they're also the smaller parts. So you could maybe keep both of them.

Obviously, you have a billion in cash that you have to factor into, which is not too shabby. At the right price, you probably keep all three segments, I think. Ron Gross, always great team. Thanks for being here. Thanks, Chris. How much does the typical American make and how much have they saved? Alison Southwick and Robert Brokamp. Look at the averages and what they could mean for your financial goals. The meditation music, Rick.

I am on my own personal financial journey. I don't need to compare my wealth to my neighbors. I make decisions about saving, spending, and investing that are right for me and my situation. I am on my own path. But still, I want to know how I compare to everyone else. I can't help it. It's in our nature to want to compare ourselves to the herd and see how we fare. Is it healthy?

No, probably not. Is it what we're going to talk about today? Yes. And joining us to help with that is Jack Capriol. He's a researcher for The Ascent, a sister company of the Motley Fool, that rates and reviews financial products like brokerages, mortgage lenders, and more. Thank you for joining us today, Jack. Thanks for having me, Allison. So you're going to be sharing a lot of research done by The Ascent and then other organizations. So let's get started. The first one is income. Yes. So as of 2021, which is the year most recent data is available for, the average U.S. income was around $98,000, while the median U.S. income was around $70,000. And so the median is considerably lower than the average. That usually happens when there are outliers at the top end. So a bunch of people are making a ton of money, and that drags the average up. So $70,000 may be a more accurate representation. of typical household earnings. Income does peak in some interesting places,

so Americans age 45 to 64 years old, tend to make the most, as do families of four? That makes sense. Those Americans are in their prime earning years, and they also understand the level of income that they need to support a family. One thing that we did notice with average and median income is that the gender pay gap persists throughout the economy

and the U.S. geographically. So overall, the median male salary, in 2021 was about $50,000, and that's 27% higher than the median female salary of about $37,000. So in every state, also throughout the U.S., men made more than women, and they made more regardless of what part of the economy they worked in. So they made more in the private sector and the nonprofit space, if they were self-employed, or if they worked for government. And we also see major disparities in income among different races in America.

as well. All right. So that's how much money is coming into the average household or the individual. But what about average expenses and what is going out? So the average monthly expenses for American households is about $5,600, according to the most recent consumer expenditure survey, which is done by the Bureau of Labor Statistics. And where does all that money go? So no surprise, housing is the largest average expense at $1,885 per month on average. It makes up about a third of your typical spending. We tend to spend around $700 on food per month, about two-thirds of that being spent on groceries, and the other third spent on eating out. Transportation is pretty expensive, $913 per month on average, and that's largely due to the intermittent nature

of these expenses. You have your regular car expense, if you have an auto loan and you have a your regular auto insurance expense, but sometimes you get hit with a huge maintenance bill that can really direct the average up. Healthcare spending is another big category that averages out to about $450 per month. And somewhat concerning is the fact that the average single person spends about $200 more per year than they take in in terms of income on average. So folks need to be worried about their budget, it seems. One other note, these are numbers collected over the course of 2021.

So inflation, as everybody knows, has been hitting the cost of housing, groceries, and transportation particularly hard in the last year. So it's likely that Americans are spending even more in those categories. And those three categories, housing costs, groceries, and transportation, they already make up over 50% of the average household expenses. All right. So as you mentioned, the average single person spends more per year. than their take-home pay, which means they're probably racking up debt like credit card debt.

Yeah, so again, no surprise in the era of big inflation. Americans are turning to their credit cards more than ever. Total credit card debt, as of the second quarter of 2022, stands at about $890 billion. So that's up $100 billion from last year. That's the largest year-over-year increase in 20 years. And in the last quarter alone, it's up about $46 billion. So there really is mounting evidence that folks are leaning hard on their credit cards to deal with inflation. When it comes to individual balances, right, because we just talked about the overall credit card debt,

the average credit card balance is about $5,600. And that's according to the most recent data from Experian, the Credit Bureau. And again, that's an increase of about $300 compared to last year. And note of caution, with rates rising, you want to make sure you're paying off your credit cards, monthly balance, to avoid interest that can quickly snowball out of control. And for those who are spending less than they make, how much does the typical American have in savings? By which, I mean, like, short-term savings, not like retirement. Right. So we're just talking about your savings account at your bank. The Ascent,

again, Alison, like you mentioned, the Molly Fool's sister company, we survey folks about their savings balance every year, actually. And in our most recent survey, We found that the median savings account stands at about $4,500, and the median emergency savings fund stands at about $2,000. So the savings account is kind of just all of your savings, and then some folks divide that into an emergency fund that you would dip into if you needed out of the blue health procedure or if you lost your job, for example. Somewhat worrying, only 78% of respondents to our most recent survey said that they actually

have a savings account. 51% said they have less than $5,000 in savings, and 35% said they have less than $1,000. Different folks have different rules of thumb when it comes to how much you can save. I've always tried to stick with having enough savings to cover six months of expenses, like in case you lose your job. That can be really tough to do, though, speaking from experience. So I've always thought that building a budget is the first step in reaching whatever savings goal you have. Also, automating transfers to your savings account. That kind of a line when that paycheck hits your checking account is also a great way to make reaching your savings goal a lot easier.

All right. That covers short-term savings. How about saving for retirement? And for this one, it probably makes sense to break this out by age. Right. Exactly. Age, skis retirement savings, I think, for two reasons. People at the beginning of their careers have less money to put away for their retirement. They're just making less overall. And most retirement plans, younger folks are on, they're putting their money more heavily into investments, equities, et cetera, because ideally you're not touching that money for 40 years, give or take, so hopefully it matures and gives you a nice big return. So it makes sense then that the median retirement account for someone under 35 is around $13,000.

That number then shoots up to $60,000 for those between 35 and 44 years old. Peaks at $164,000 for Americans between 65 and 74, and that captures the average retirement age, which is around 66. And that's when you'd want to have those investments that you made when you were younger and throughout the rest of your career begin to pay off. All right. We just covered a lot of averages. And within those averages, as you mentioned, Jack, there's a lot of nuance there. But, bro, you've been sitting quietly this whole time in the back the class. I was wondering if you happen to have a big takeaway for our listeners. Oh, well, I do. And unfortunately, I've been kind of sitting in the back of the class, shaking

my head, because really, and I hate to end on such a downer. But the truth is, the average American is not in great financial shape, right? The personal savings rate now is 3.1% that's down from over 30% during the first few months of the pandemic. As Jack pointed out, some Americans are spending more than they make, which leads to more credit card debt. And that's always bad. But it's particularly bad now because the average credit card rate ranges between 19% and 27%, depending on which type of card you look at. It's at an all-time high and up three percentage points since the Fed began raising rates in March, and the Fed's not done yet. So the credit card rates are going to go up. And then you just look at the retirement savings, right, with that 65 to 74 age group having around $160,000 per household.

And when you consider that these folks are either retired or soon will be, and that this money is supposed to last for the rest of their lives, 160 grand is not a lot, especially when you consider that the average Social Security retirement benefit is around $20,000 a year. And then there are a few other ways that the average American household could do better. So, for example, the average 529 college savings account balance for kids ages 13 to 17 is around $27,000 according to saving for college.com, which is not chump change, but it's only enough to pay for one year of college or just a half a year at a private university. And according to Gallup, most American adults don't have a will, which is something everyone needs because one of the few certainties in this life is that your life won't last forever.

So you need to get an updated estate plan to make sure that everything you've accumulated over your lifetime goes to the people you want and as quickly and easily as possible. So if you're doing better than the average American, congratulations. That's great. But how you compare to everyone else actually doesn't really matter. What's important is how you compare to where you should be to protect your family and to accomplish your financial goals. 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 ourselves stocks based solely on what you hear. Chris Hill, thanks for listening. We'll see you tomorrow.