Motley Fool Money - Netflix, Tesla, China's Growing Auto Industry, and Apple's Rise in India

Episode Date: April 21, 2023

As earnings season heats up in the U.S., investors had good reasons to keep their eyes on China and India. (0:21) Andy Cross and Jason Moser discuss: - Tesla's challenge with margin pressure - Intuitive Surgical's stock rising on strong 1st-quarter results and guidance - American Express continuing to catch on with Millennials and Gen Z - Shares of D.R. Horton, America's largest homebuilder, hitting a new all-time high - The latest from Netflix, P&G, Johnson & Johnson, and Lululemon (19:11) Motley Fool senior analyst Bill Mann discusses China's rise as an automotive exporter, Apple's growing presence in India, and why he's keeping an eye on mining companies in Brazil. (33:17) Andy and Jason discuss the growing business of tiny snacks and share two stocks on their radar: Tractor Supply and Amazon. Stocks discussed: NFLX, TSLA, ISRG, PG, AXP, JNJ, DHI, LULU, AAPL, GIS, TWNK, PEP, TSCO, AMZN Host: Chris Hill Guests: Andy Cross, Jason Moser, Bill Mann Engineer: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone, I'm Charlie Cox. Join us on Disney Plus as we talk with the cast and crew of Marvel Television's Daredevil Born Again. What haven't you gotten to do as Daredevil? Being the Avengers. Charlie and Vincent came to play. I get emotional when I think about it. One of the great finale of any episode we've ever done. We are going to play Truth or Daredevil.

What? Oh, boy. Fantastic. You guys go hard, man. Daredevil Born Again, official podcast Tuesdays, and stream Season 2 of Marvel Television's Daredevil Born Again on Disney Plus. earning season is heating up, so let's get to it. Motley Full Money starts now.

That's why they call it money. Full Global headquarters. This is Motley Fool Money Radio show. I'm Chris Hill, joining me in studio, Motley Fool Senior Analyst, Jason Moser, and Andy Cross. Good to see you, as always, gentlemen. Hey, hey, hey, Chris. We got the latest headlines from Wall Street. We will talk international investing with Bill Mann.

And as always, we've got a couple of stocks on our radar. But we begin with earning season heating up. And first up is Netflix. First quarter results were mixed with profits a little higher than expected. Overall revenue a little lower. The company also announced it is delaying the rollout of its plan to crack down on password sharing. Jason, a lot of focus on Netflix this week. But for the first time in a long time, there wasn't really a lot of talk about something that we typically hear, which is their subscriber number. Do you think Netflix is moving into a new phase here? No question about it, I think. I mean, in the past, to your point there, the focus was always subscribers, subscribers, subscribers, right? That is absolutely taking a backseat now, and the real story for this quarter revolved around the page sharing and advertising, but in regard to metrics that matter. I mean, the company is now encouraging us to focus on revenue growth and operating margin, right? That's going to be the indicator of success and profitability for the business.

And its subscribers, it's almost like a footnote in the release now. I mean, to that point, they did bring in 1.8 million subscribers, so that's good news. And revenue when you exclude currency effects grew 8%. Operating margin down a little bit, but they really based that on currency impacts as well. Now, to the page sharing and the advertising, first page sharing, it is slow going. This seems to be deliberate on their part. They want to make sure they get it right and maintain a positive member experience. So what that's going to do, it's going to push growth out a little bit.

And I think that is probably what has investors on edge right now. but they see that accelerating in the back half of the year. And the reason why is because they've already rolled this out in Canada, and they're seeing positive signs. But it's kind of like one of those things. It got worse before it got better, but it did start to get better. So I think that gives them reason to believe that domestically here, the page sharing will pay off.

On the advertising front, I was a little bit taken back by a point they made in the release there. In the U.S., the ads plan already has a total average revenue per person. member, which is the subscription plus the ad component there, it's greater than the standard plan that they offer. Now, that's $15.49 per month. So I think that goes to show that while Netflix was a little bit late to the ad game, clearly the consumer has got some tolerance for advertising, right? Because I think most other streaming services have that dynamic, or at least that offering. So while that initial target of 40 million ad clients or ad subscribers might have seemed a little bit glass half full when they stated that, now it kind of seems like maybe they could probably get there by the end of the quarter of the end of quarter three or maybe by the end of the year.

Jason, that really caught me well too, and I was very surprised by that and encouraged as a Netflix owner and a follow of the stock. Their target for their free cash flow, this is becoming what Netflix, it is becoming a free cash flow growth story. they're being more disciplined on the movie launches and the creation of the content and on the cost structure, I think. So understanding that this is a real free cash flow generating business and maybe not like what it was over the past few years. And I think that's what investors are now starting to realize this is what the power is of Netflix. And that free cash flow, I think, is what's going to drive the stock higher. Yeah, you're right there. And I think something to note there is, too, is that they've pulled back a little bit on content spend this year.

and that impacted the financials positive. Like, cash flow was a little bit better than I think what we're anticipating now. The flip side of that is they anticipate getting back to sort of that normalized budget in 2024, budgeting for around $17 billion in content spent. So that'll probably play out on those cash flow numbers a little bit next year. But I think that they can counter that with the accelerating performance there in paid sharing as they continue to roll that out. Tesla has been cutting prices on some of its vehicles.

and that price cutting showed up in the company's first order results. Earnings per share, net income, and lower margins combined to send shares of Tesla down more than 10% this week, Andy. Chris, like any business, it's coming down for Tesla down to pricing into volumes and making sure that mix is right. And clearly, Tesla this quarter is leading with the volume game. As Elon Musk said, we've taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin. However, we expect our vehicles over time will be able to generate significant profit through the autonomy business. So they delivered 423,000 vehicles this year. I was up 36%.

But the Model 3 and the Model Y drove most of that growth. The higher margin Model S and Model Y made up less than 11,000 of the deliveries, Chris, and that was down 27%. Revenues up 23%. Three of the last four quarters, though, we've seen slowing revenue growth. They've lowered prices several times somewhere between 15 to 25% or so just this year, although just interestingly, I think they just increased them right after the earnings call to boost them up back a little bit. Operating margin, which is the really metric that I think so many investors are following,

both on the car side and overall, the total company operating margin fell to 11.2% versus 19.2%. And the gross margin, the automotive growth margin, and fell to that 20 percentage range. And that's where investors, I think, are getting a little bit nervous because that's the one they want to see higher. Interesting, though, on that, they still remain on the operating margin, well, the highest in the industry, and more than double the other major car makers.

So they have the profit room and the business model, and this is really now a land grab. They are being very aggressive in the market, very aggressive on pricing, to drive the volumes, to be able to continue to drive towards 1.8 million cars delivered this year, would be up about 37%. Finally, Chris, interesting. The storage and the energy business continues to gain momentum. The energy storage deployed was up 360% to 3.9 gigawatt hours now versus less than 1 gigawatt hours a year ago. And they expect the storage deployment growth to really exceed the volume, the growth in the vehicles over time. So we can't forget about that energy business.

It is a growing part of the Tesla story. But overall, I think this is what we kind of started to expect when we saw the aggressiveness that Tesla was being in the market price on their prices or their cars. Shares of Intuitive Surgical up more than 10% this week after first quarter results were highlighted by more procedures. And Jason, Intuitive Surgical Management forecast that they expect that trend to continue throughout the year. Yeah, good news indeed. It's been a bit of a bumpy ride over the last three years, but Intuitive Surgical is absolutely benefiting from this return to normal. If you look at the numbers, it certainly bears that out, excluding current. impacts. They saw revenue for the quarter up 17 percent. Modest earnings per share growth as well.

You mentioned procedures. Worldwide procedure growth, 26 percent that came in well above management's own expectations there. And ultimately, when you look at a lot of this company's money is made on instruments and accessories because of those procedures, that revenue grew 22 percent. And so really, they are seeing more and more being done with their equipment, which is great. average selling prices remain stable and that's good. And, you know, Intuitive is really well known for the Da Vinci system, right? The other system they have, the ion system, which is focused on bronchoscopy, they placed 55 systems for the quarter versus 34 one year ago.

And back to the procedures thing with ion, procedures were up 159%. So clearly physicians are finding use in that platform there. One of the neat things about this company is one of the reasons why I recommended it in our immersive technology service is the virtual reality angle there. They saw simulation, subscriptions grow 36% as the virtual reality training continues to gain traction. I think one thing to keep an eye on with this company, I'm going to ding them a little bit here, AC. We like to see companies buying back their shares because they feel like there's value there. And to be clear, I mean, intuitive surgical has bought back a lot of shares from the beginning of 2020 to the end of

the first quarter this year. They repurchase 12.6 million shares. The problem is you go all the way back to 2018. Share account's actually up 2%. That's not what you like to see. That's tough to pull off. Well, it's easy if you're not issued shares. But I think all in all, I mean, that does not outweigh all of the good that this company is doing. I'd love to see those repurchases ultimately bring that share account down. That'd be one thing I'll pay attention to. The hits keep on coming for Procter & Gamble. Third quarter profits and revenue came in higher than expected for the consumer products giant. The company also raised sales guidance for the full fiscal year.

And, Andy, the pricing power that we've seen from P&G over the last year or so is starting to show up in the form of higher gross margins. Well, gosh, this is kind of the anti-Tesla here. They are all about pricing increases. Another boost, they've increased prices 10% this quarter. I think that was on top of a 10% increase last quarter. And like you said, Chris, throughout the year. The revenue is up about 3.5%.

earnings up about 3% to $1.37. Operating margins, this continues to be a very profitable company at 21.2%. That's about flat from a year ago. The volumes are not all that, the volume growth, not all that impressive. When you look across it, it's basically in fabric and home care, which is like tied and Downy and Swiffer, down 5%, but they were up 13% in pricing, baby and family care, which is like loves and pamper's down 4%, but up 8%. percent in pricing. That's the story we saw, and that increased on that that helped really drive a lot of the gross margin growth of 150 basis points. They are spending more in marketing, Chris, sales and marketing expenses as a percentage of the sales was up 100 basis points. So here you go

with Procter & Gamble, sells a 25 times earnings, earnings growth of about 4%. You get a little 2.5% dividend yield. They generate more than $3 billion in free cash flow, buyback stock. And so you have a very low, volatile stock that is probably, I think, going to grow in the mid-single digits. And if that's what you're looking for, that's probably going to be fine for the Procter & Gamble story, but don't expect too many fireworks. They've got to pay close attention to the pricing, though, right? Because if consumer spending starts to dip, if we fall into a recession, they've got to ratchet that back. I think so. But they do have some levers on this side, Chris, and they count on whether the expense management or basically, hopefully, drive volumes because the pricing now is not nearly what it was

when they are increasing price. After the break, we've got the latest in healthcare housing and the war on cash. Stay right here. This is Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in studio with Jason Moser and Andy Cross. American Express posted record revenue in the first quarter, but higher costs kept the profit line lower than Wall Street was hoping for. Andy, this is yet another quarter where we see the trend of Amex gaining popularity

with Millennials and Gen Z? Yeah, gosh, Chris, travel and entertainment spending overall up 39%. But what was interesting from the results is Millennial and Gen Z makes up 60% of all new consumer growth. And the millennial and Gen Z spending on the platform was up 28%. That was the highest growing group of all the groups, all the cohorts at Amex tracks.

Revenue is up 32%. The international spending up 29% cost up 22%. So that kind of kept a little bit of a lid on the profit margin. They're seeing higher customer engagement and the increase in the usage and travel benefits. I know I've been using them for that personally, but that's actually starting to impact a little bit of the profit picture. The biggest news is the increased loans and card receivables. That was up 19%. Now, that was the slowest growth.

We've seen in five quarters. But they're starting to see more and more provisions for some of those losses as the economy starts to go into a point. of a little bit more uncertainty. So they continue to affirm the guidance of 15 to 70% revenue growth, a little bit less on the earnings per share growth, but still pretty attractive. You're paying 15 times for a business for a dividend yield of 1.5% for American Express. Probably won't get the same kind of growth you're going to see this year. But overall, that's not a bad price for a business that buys back a lot of stock and returns a lot of cash back to shareholders. Do you think that's a demonstration of the power of that brand?

Like, AMX is almost like an aspirational brand in some ways. So with younger generations seeing that, I don't know, it just strikes me that maybe that's sort of an aspirational brand. It just seems to demonstrate the power that American. Yeah, and 70% of their new cards growth was from a fee-based card. So it wasn't like they're just taking a whole bunch of like no-fee card. Johnson and Johnson's first quarter profits and revenue came in higher than expected. They raised guidance for the full fiscal year and boosted the dividend. And despite all that goodness, Jason, shares of J&J still down a bit this week.

Now, that's okay. They have a little bit of a spinoff coming up here soon, Chris. But it was a very encouraging quarter for the company. Adjusted operational sales, which is ultimately just revenue excluding currency effects, we're up across all three segments. Consumer Health up 11.3%. Pharmaceutical up 7.2%. MedTech up 6.4%. That all translated to adjusted earnings of $2.68.

cents. If you remember, they acquired Abiomed, which closed in December, that gives the Medtech segment now 12 platforms that generate over $1 billion in sales every year. So, I mean, this is as steady of business as it gets. Management approved a 5.3% increase in the dividend. That makes it the 61st consecutive year of dividend increases, and that ensures their dividend king status remains in place. The big question, though, does really remain in the spinoff of the consumer business, which will happen by the end of the year. That will ultimately be called Kenview. Not really sure the impetus there, but we can look forward to December 5th where they will have an investor day where we'll get a lot more information on how these two new companies will function.

DR. Horton's first quarter profits came in higher than expected. Couple that with encouraging guidance and chairs of DR Horton up more than 8% this week and hitting a new all-time high, Andy. It was that guidance, Chris. The net sale orders was up. 73% from the first quarter. This is their fiscal second quarter from the fourth quarter. So the trend is continuing to be very healthy looking ahead. I guess some very uncertain environment, even though the stock's up 44% for the past year. Homes closed was just shy of 20,000, down 1%. Still very attractive in this kind of a market. Home building revenue at 7.5 billion flat to last year, net income at 942 million. Pre-tax margin fell to 15.6 from 23.5% a year ago.

driven by lower home sales margins because they've had to offer some incentives and they've had lower home prices on average and lot costs are up 5%. So overall, cancellation rate up a little bit, but still within a very respectable manner. They wrote down some of their inventory and impairments, but overall, D.R. Horton continued to get it done and you have a stock that sells at less than 10 10 times earnings with a little bit of a 1% yield. So it's a pretty good stock when I look at, the opportunity for a home building leader. This is the biggest home builder in America. Am I wrong to be encouraged by what that means for housing in general?

Well, I think you should not be wrong. They are not wrong. I think it is encouraging when you think about the amount of home building that we need to see in this country to handle the demand. I think it's very attractive for the market. And overall, the stocks have all run from their very bottom low, but still long term, and probably an attractive place to put some capital.

In 2020, Lulu Lemon bought Mirror, the at-home fitness company for $500 million, an acquisition that has gone so badly Lulu Lemon has had to write down almost the entire cost. This week, multiple outlets reported that Lulu Lemon is now looking to sell Mirror to Hydro, a private startup company that sells connected rowing machines. Jason, how much do you think Hydro is willing to pay for this thing that they had to write down? It's one of the things I love about Chris. He's just not afraid to mince words. I mean, in the words, Ron Burgundy, that escalated quickly. I mean, this was something that happened, I think, very quickly.

Now, I don't know how optimistic we all were with this acquisition in the first place. It happened in a very abnormal time. In hindsight, it's not that big of a surprise seeing that they're doing this, given how the rest of the fitness home thesis has played out. I mean, we've seen Peloton with very much the same trouble. the flip side of that, we're seeing companies like Apple really doubling down on the digital fitness experience. And that ultimately looks like what Lulu Lemon is trying to do as well. This reminded me a lot of Under Armour's acquisition of My Fitness pal and Endomundo back in the day,

which they ultimately sold to an investment firm for $345 million. They acquired it for about $500 million, sold over $345 million. It wasn't a total loss. I'm not so sure that Lulu Lemon is going to be able to get away with this one because they've already written off close to $450 million of this deal. And so, I mean, they're clearly kind of a desperate seller here. And so it's something that doesn't really jive with their business. They're more of a desperate seller.

I'd be very interested to see what they fetch for this. All right, Jason Moser, Andy Cross, guys. We will see you a little bit later in the show. But up next, we're going to take a closer look at Apple CEO Tim Cook's trip to India with our guest, Bill Mann. Stay right here. You're listening to Motley Full Money. My bills are all due, and the babies need shoes, but I'm busted. It's down to a...

Welcome back to Motley Full Money. I'm Chris Hill. Bill Mann is the director of Small Cap Research at the Motley Fool. He joins me now. Thanks for being here. Hey, Chris. How are you? I'm doing well. And the reason I wanted to talk with you is because it's earning season, My favorite time of year. But one of the things I do recognize about earnings season is, particularly as we are starting to ramp it up, we get so focused. It's easy to get focused on the companies that are reporting, particularly the larger companies here in the U.S.,

and because of that, we are inevitably as investors missing things, particularly outside the United States. And you're always the first person I think of on the investing team when I want to talk about investing opportunities outside the U.S. So let's start with China. Okay. For any number of reasons, but you mentioned something to me that sort of surprised me. Maybe I shouldn't be surprised that China has somewhat quietly become the number two exporter of automobiles in the world. Isn't that something? You tell me, because you can look at it, and say, well, wait a minute, you know, you look at the population, the manufacturing capability. On the other hand, yeah, it is kind of surprising, particularly when we think about cars outside

the United States, we think of Japan, we think of Germany. We don't necessarily think of China. Yeah, in fact, Japan and Germany, Japan, Germany, and the U.S. is kind of the list in terms of car manufacturers. You know, there's Swedish cars that we know about in English cars and French, but it really does seem like it is those three. And it is overstating to say that it came out of nowhere. But earlier this year, Elon Musk came out and said he expected that the biggest competition that Tesla would face in electric vehicles was going to be a Chinese company. So people who are in the industry have probably recognized that there is a threat coming

from China or a competitive threat because it's actually, It's actually kind of okay because a lot of the cars that are being exported from China, for example, are Tesla's and Volkswagen's and nameplates like that that you would not necessarily recognize as being Chinese. But China's capacity has grown about 60% over the last year in terms of number of cars. And it had never exported more than a million cars in a year. and it's just grown so quickly that I don't think that, yeah, I don't think that it is too much to say that it's something that snuck up on a lot of people. What do you think that means in terms of messaging from automakers like Ford and General Motors? You know, made in America is a tagline that works for a lot of businesses.

You made the point about Tesla and Volkswagen, a U.S. automaker and a German automaker, producing cars in China. Do you think that's going to matter in the automotive business here in the U.S.? Do you think where the vehicle originated is going to matter? You know, I would have to say that it probably doesn't, right? You don't really know. I mean, it's clear to you. They will tell you on the manufacturer's statement. But if you buy a BMW in this country, it is not abundantly clear whether it has been built in the U.S. or in Germany or even in a third country. So I'm not sure that it matters all that much. The thing to be that's interesting about the Chinese manufacturing push that we've seen is it has also come at a period of time in which for the first time, I don't know, let's

call it in a century that the type of manufacturing because of the type of fuel stock that's being used has shifted. And so China has had car manufacturers for a bunch of years, but what they have not been able to really get past was the fact that they didn't have a whole lot of credibility in internal combustion engine automobiles. But since everything seems to be moving to electric vehicles, and that is the majority of their exports are in EVs, that there isn't really a country that they are competing with. anymore, right? You don't have an enormous amount of German EV credibility. You don't have a whole lot of U.S.-based credibility, except for this massive thing called Tesla, which is not to say that the manufacturers aren't doing it and that they aren't good at it, but it's not what they're known for. So China, in some respects, is coming into a little bit of a vacuum for the first

time in this industry in decades. When you think about EVs, how concerned should people be with regards to the number of charging stations here in the United States? Because you hear anecdotally, well, it's a lot easier to fill up your car with gas than it is to, you know, to charge your car from 5% all the way up to 100%, that sort of thing. It doesn't seem to be problematic. now, but doesn't the number of charging stations have to keep pace with the number of EVs that are on the road? Because at the moment, that does not appear to be the case. No. And we haven't hit a point in time in which you have a huge amount of stress. Now, it bears reminding that several companies, primarily Tesla, have their own charging network. And that goes back to a point in time

when EVs were first really coming out onto the road in a large way, and Tesla had offered to share its technology and the other even potential manufacturers said no. So that's why there is, you know, in this country, networks that are kind of overlapping each other. Rivian is in the process of building its own charging networks. So it kind of depends on what you mean. So for long haul, driving, which is for most people in individual passenger cars, kind of a minority of what they do. Yeah, there is going to come a period of time in which a network will have to continue to grow, and there are going to be all sorts of transmission and distribution challenges that come to the utilities. these, but it bears remembering that with electric vehicles, unlike ICEs, you can actually

refuel them at home. So in a lot of ways, the network that is required is entirely different from the network of gas stations that were required out there, because I don't know if you know anybody who has a gas station at their house. I don't. I don't, but now I'm thinking, that might be a nice little feature. Exactly. It turns out you might not know this, though, Chris, that the stuff that auto fuel is made from is a little bit flammable. So there are other considerations besides this might be nice.

That's a good tip. Let's move on to Apple because this week, Apple opened a store in Mumbai. It is the company's first store in India. CEO, Tim Cook, was there, was also meeting with the prime minister. Let's start with the opportunity for Apple, because at the moment, when you look at the smartphone market in India, Apple has less than 5% of the market share. I saw one analyst compared the opportunity for Apple today in India to the opportunity they had 15, 20 years ago in China.

Do you think that's a reasonable comparison? It's a little bit different because when they were going into China, it wasn't like they were going into a market in which smartphones already existed. So you're talking about an industry in which, or a market, I should say, in which they will have to displace existing smartphone manufacturers. Now, Apple is really, really good at doing that. And one of the things that it bears remembering about India is that it is 1.4,000. billion people, but it's got a middle class by some estimates of 300 million people, which is

essentially the size of the United States. So we tend to think of India as being a developing economy, and it very much is. It has a massive, massive amount of people who have disposable income, so for whom the ticket price of an iPhone is not going to necessarily be something, that they would not be willing to do. Part of this is marketing. Part of this is also manufacturing, as Apple has increasingly made moves to diversify its manufacturing base. And Cook has made no real secret about the fact that he's looking to take some of what

they have been doing in China for a long time and move it to India. What is a reasonable expectation for investors in terms of, of the timeline for making that happen. And what, if anything, it does to move the already impressive profitability needle at Apple? So, I don't think that there's any accident that Tim Cook also recently went to China. And he did it in a very visible way, met with leaders. And he was given an incredibly warm welcome when he came to China, very little. Apple to date has moved very little of its manufacturing out of China. And you might ask why it is that a company would be so careful because when they look at

China, it is in a lot of ways, as we learned during the pandemic, a risk because it became a single point of failure for them. But it's not like that logistics network and the supply network can just be lift-repeated into India right away. And if they manage to make the Chinese angry in the process, that's not good news either, because China does have the capacity to really, really mess with Apple. It doesn't seem like, it's not like China is threatening Apple right now. They have a very good relationship with the company. I would not expect Apple in any way. to get out of China. I think when people think that they are not really thinking through the actual advantages of manufacturing in China might be, what he is, the needle that he is trying

to thread is to say, we need to have some of this manufacturing elsewhere. So it's not this or that, it's this and that. So that's why I think the China visit and the India visit were so closely tied together. Last thing, and then I'll let you go. We've talked about India. We've talked about China. What's a really under the radar country that has gotten your attention over the last few weeks in terms of investment opportunities, whether it's an entire industry or just you found this little company in some little corner of the world? Yeah. So for me, it's hard because when I talk about Brazil, one of the quips about Brazil is that it's the country of the future and it always will be. But Brazil has a couple of things going for it. The one thing

that it has is it has incredibly sophisticated, incredibly healthy mining companies. And when you see a lot of people talking about zero emissions and a lot of the development that, that's going to have to happen. It's going to come with a huge amount of demands on mining companies and natural resource companies. And so I think people are really underestimating just how powerful a position that Brazil is in right now. This is why I always love talking to him. Bill Mann, thanks so much for being here. Hey, thanks, Chris. Up next, Jason Moser and Andy Krakh's return with a couple of stocks on their radar. Stay right here. You're listening to Motley Full Money. 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 yourself stocks based solely on what you hear. Welcome back to Motley Fool Money, Chris Hill here in studio once again with Jason Moser and Andy Cross. Guys, if you've been to the grocery store lately and you've wandered down the snack aisle or the breakfast cereal aisle, you might have noticed some of the offerings are getting smaller. Not the boxes, Jason, the food. Over the past few months, General Mills, Hostess Brands, and Pepsi's Frito-Lay Division have been rolling out many versions of breakfast cereals, twinkies, and Doritos. And it appears to be resonating with at least some consumers.

One company executive was quoted in the Wall Street Journal as saying, it's about the backseat of the minivan test. If you're handing something back in the car seat, you want it eaten, you don't want it smeared, and everywhere else. Andy, I think we can all associate with that. I like this move. I like that they're trying new things. I can definitely empathize with that quote. I first really saw this when Oreo cookies came out with thinner versions of their cookies. And I was like, this is just, this is made for me because now I can eat like a pack of it,

but not feel like I'm all that guilty. Chris, you are seeing it. It's like the opposite of the supersized days. They're just like kind of like continuing to shrink, not just the packaging and what's in the package, but actually the physical look and feel of the things that we're buying. So, hey, it's a margin game, and they're playing the margin game. Yeah, it's a little weird to me that it took this long. I mean, clearly the candy companies nailed this way back when with Halloween candy.

And I mean, Crystal nailed it with their little burgers, right? So, I mean, better late than never, I will say, while I am very fascinated, I got to believe those little mini-cinimmon toast crunch are just sublime, not terribly, I don't feel the same way in regard to Doritos, man. I mean, I just, I don't know. It feels like the Doritos could be messier, but maybe that's just... To bring it back to the margin game, I will just point out, shares of Pepsi, General Mills, and Hostess brands, all three of those over the past year

are outpacing the S&P 500 by more than 10 percentage points. I'm just saying it's not a coincidence. Size is innovation. Let's get to the stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with the question. question. Andy, you're up first. What are you looking at this week? Guys, I'm looking at tractor supply, symbol T-S-C-O. Listen, I'm a fan of the hit show Yellowstone, which should be back this summer to finish up season five. And I'm putting on my rancher

cowboy hat to look at tractor supply. Tractor supply commonly calls itself the largest rural retailer in the U.S., targeting the needs of recreational farmers, ranchers, and all those who enjoy the rural lifestyle. It's a $27.3 billion company founded more than $85. years ago, operates more than 2,000 stores across 49 states. Most of those stores are in rural locations, and they have done just a fabulous job speaking to a lot of people who have fled the cities and moved to the rural country or outside the cities to get a different environment. They can work remotely, and they can embrace their rancher or embrace their farmer.

They've been remodeling a lot of their stores under Project Fusion, which brings more of a contemporary and convenient experience to include more. digital tools and an improved layout. They're building out a distribution network with three new distribution centers announced on top of the nine. They already have an operation. They've grown for 30 consecutive years. So when I look at tractor supply, I think it's a really interesting and attractive. The stock is a little bit pricey at 24 times, 23 estimates, but you get a little 1.6% dividend yield with it. Dan, question about tractor supply? Absolutely, Chris. Andy, Do you think tractor supply is ever going to rebrand? Because honestly, I was confused when I learned

that tractor supply doesn't actually sell tractors, and it's more of a standard retail and almost lifestyle brand at this point? Do you think a rebranding is in their future? No, I do not think it's in the future. Jason Moser, what's on your radar? Paying attention to Amazon, ticker AMZN. They have earnings coming out this coming Thursday. Stock has had a strong start to the year up around 25%. There's obviously been a lot to talk here lately as to whether Andy Jassy is really up for the task. Should we expect to see Jeff Bezos stepping back in? I think that's highly unlikely, and frankly, Jassie's kind of cleaning up some of the mess that happened under Bezos's watch. But I think we're going to see a big focus on cost controls here in the call. And to put some context around that they

doubled their fulfillment center footprint that they built over the prior 25 years. And then they had to accelerate building the last mile transportation network that's now the size of UPS. And if you look at the fulfillment costs. Fulfillment was 16.8% of total operating expenses in 2022. You go back to 2017, that number was just 14.5%. So I think the cost controls will be a big

theme of the call. Dan, question about Amazon? Not really a question. Chris, more of a comment. Jason Moser, breaking new ground with a little known company, Amazon.com, here on Motleyful Money. You know, I love Dan's comments. The questions can sometimes, they can sometimes come out of

left field. The comments are always entertaining. That's why we love you, Dan. What do you want to add to your watch list, Dan? Well, I love you too, Jason. I think I'm going to go tractor supply, though, because, again, Amazon, a little bit of a household name at this point. All right. Andy Cross, Jason Moser, guys, thanks for being here. Thank you. Thanks, Chris. That's going to do it for this week's Motley Pull Money Radio show. The show is Mixed by Dan Boyd. I'm Chris Hill. Thanks for listening. We'll see you next time.