Motley Fool Money - Rates Going Down, Cava Keeps Climbing

Episode Date: August 23, 2024

The market heard the eight magic words from Fed Chair Jerome Powell: “the time has come for policy to adjust.” (00:21) Ron Gross and Matt Argersinger discuss: - The Fed’s path to lower rates and what kind of cuts investors can expect. - Cava’s blowout earnings report, and how its valuation stacks up after a stellar start to 2024 - Retail earnings from: Target, Lowe’s, and TJX. (19:11) MFM was on-site at Podcast Movement 2024 in DC – we give you a mini-keynote on the state of the podcast industry and why more video might be in the industry and Spotify’s future. (28:09) Ron and Matt break down two stocks on their radar: Papa John’s and Progressive. Stocks discussed: CAVA, CMG, TGT, LOW, TJX, SPOT, PZZA, PGR Host: Dylan Lewis Guests: Tim Beyers, Mary Long, Ryan Henderson Engineers: Tim Sparks, Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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Rates are going down. and falafel keeps heading up. This week's Motley Fool Money radio show starts now. That's why they call it money. The best thing. Full Global headquarters, this is Motley Fool Money. It's the Motleyful Money Radio show. I'm Dylan Lewis.

Joining me over the Airwaves, Motley Fool senior analyst, Ron Gross and Matt Argersinger. Fools, great to have you both here. Dylan. What are you doing, Dylan? I'm doing great. We've got retail earnings. We've got a rundown on the state of the podcast industry.

And of course, as we do every week, we've got stocks on our radar. But we've got something that we don't get every week, and that's an update on the big macro from none other than the Fed chair himself, Jerome Powell. Matt, he offered up some of his latest thoughts on the Fed's direction in a speech at Jackson Hole this week, and the market seemed to get exactly what it was looking for. It certainly did, Dylan, and I'll say this. I got this one a little wrong.

I really thought stock market near records, kind of investor complacency everywhere you look when it comes to asset prices and valuations. The fact that treasury yields have already fallen about 100 basis points just in the last few months, I really thought Powell was going to come in and kind of just pump the brakes a little bit. And even if he didn't, I thought this would be more of a kind of buy the room or sell the news situation for the market. The market's just been ramping to this moment, super confident in a September rate cut, the beginning of an easing cycle, that this would be a great excuse if Powell said anything that was sort of like, you know, slow down here, pump the brakes.

very data dependent that they would sell. That certainly did not happen. And the market got, and investors got exactly what they wanted. He all but confirmed a September rate cut. He discussed that the direction is clear in terms of interest rates and in terms of inflation trending down. And I think most importantly for the market, he acknowledged that there are signs of weakness in the labor market. We've seen the monthly jobs numbers come down over the past four months. We got that large downward revision, about 818,000 fewer jobs were added between April of 2003 and March, 2004. And, you know, so acknowledging that, as Powell put it, the time has come to begin easing

rates. And there really was nothing for the market not to like in this speech. So I'm not surprised stocks are moving higher on Friday, and especially seeing areas like small caps and real estate really surge. I completely agree, A, with everything you said, Matt, but also about the part about buy on the rumor, sell on the news. We could be telling the exact same story, but with the market down. Yes. And there's honestly no way to correctly predict it, because it could be the exact same data and you never know which way traders are going to take it. I think, you know,

comments like the time has come for policy to adjust just gets people excited. It even gets the algorithms excited, which are responsible for so much of the trading nowadays. We saw sectors that we figured would be strong follow through with that strength. Technology stocks, growth stocks, which so much of their valuations rely on future growth. When interest rates are lower, that future growth looks more attractive. Small caps are on fire on Friday, up more than 3% on the Russell 2000. We probably could have predicted that as well. Powell did not go as far as to say how, what magnitude, we're looking at for rate cuts, either in the near term or even after that. I think because the labor

market is still relatively strong with 4.3% unemployment, despite the revisions that Maddie talked about, I don't think the Fed is going to feel the urgency to cut 50 basis points. I think, don't quote me, but you can if you want. I think we'll see a 25 point cut in September and then probably several more times going forward, and then the cuts will ramp in magnitude if the data turns south, and they need to. They'll keep that powder dry. So if they need to go more heavy, they will. But I don't see the need for them to do that right now. So there it is. Ron just laid out his own dot plot for rates over the next several months. That's right. And I mean, you guys drop the eight magic words that Powell said. The time has come for policy to adjust. We've been waiting to hear it.

It's wonky, but it is inspiring when it comes to the market. There was another quote that I think kind of got at a little bit of what Ron was talking about there. The direction of travel is clear, and the timing and pace of cuts will depend on incoming data and the evolving outlook and balance of risks. Matt, I think that some people trying to look into the crystal ball here are saying, you know, maybe there's a little bit more room than 25 basis points. Maybe we can get multiple cuts this year. Yeah, I agree with Ron. I think there will be multiple cuts this year. I think if they go 50 in September, that's because something has happened in the data to force them to do that.

And I almost think it would be a little bit alarm bells for the market if they decided to do that. So I agree with Ron. I think 25 is right on the table. Anything more than that, we'd have to see some kind of shift in the data over the next month. Maddie, as our resident real estate expert here, do you think mortgage rates follow the 10-year and we start to see refinancing in a pretty big way. Yes. I mean, I think we've already sort of seen that as rates have come down from a high of 8%

to 6.5% last I checked, you know, if we do get sort of a confirmed easing cycle here over the next year or so, easy to see mortgage rates fall below 6%. Traditionally, they trade around 250 basis points above the 10 year. Last I checked, the 10 year is about 3.8. So you're right in the low 6s right now. If that keeps trending lower, I expect we'll see. see a big pickup and housing activity as mortgage rates go below 6%. In addition to the Fed updates this week, a large slate of earnings updates coming in as well.

And Kava really stealing the show with what I'm going to classify as some spicy red Harissa level earnings here, Matt. Market absolutely loved these results, continuing the winning ways for this restaurant stock. You dug it in the numbers. What did you see? Spicy red is absolutely right, Dylan. I mean, results were outstanding. Revenue up 35%. They opened 18 new restaurants in the second quarter, 22% year-over-year growth in store count. But really, if you focus on the same

store sales, they were up 14.4% in the second quarter. And that includes traffic growth of almost 10%. I mean, there's just not a restaurant company out there other than Chipotle, maybe, that's putting up those kind of numbers right now. Restaurant level profit was also very strong, up 37%, and net income company-wide tripled year over year. Not surprising as the company scales and is able to kind of distribute more costs over a greater store count. And if that weren't enough, the management kind of hit the trifecta. They raised guidance for the full year. Now targeting same-store sales growth of 9% versus previous guidance just three months ago of 5.5%. That is quite a big pickup in same-store sales. So impressive all around. And look,

I'm excited about this. I'm a shareholder. As a shareholder of great companies, I like to let my winners run when I can. But boy, has Kava had quite a run? If you look at when they came public in June of last year, June 16th, 2023, it closed that day at $38 a share. Last I checked, the stock is trading around $123. So it's more than tripled since its IPO. It has a market cap north of 14 billion last I checked on Friday, which means Dylan and Ron. Each of Kava's 341 restaurants are currently being valued at more than $41 million a piece. Just for some context, I mentioned Chipotle, very similar business when we talk about all the time, albeit a more mature business with more than 10 times the number of stores, and with superior unit economics, by the way,

the average Chipotle is much more profitable. Chocolay's average restaurant is valued. right now at around 20 million. And I think that's pretty high. So there is just a ton of growth built into Kava's share price right now. I just think if you're an investor like me, any kind of stumble there, you might watch out for a big drop in the stock. That's pretty aggressive, to say the least. As a value investor, I will be the first to admit that I sell stocks often too quickly. I'm too early. Chipotle would be a good example. The valuation years and years and years ago just seemed too expensive and that was a miss. And so you want to be careful to not make some of the same mistakes, now $41 million per restaurant. What would that mean? That would mean if your management,

you probably would open up as many as you possibly could. Even if it's 30 million, 20 million, 15 million, you would want to be aggressive there. So I think they're already anticipating tripling their footprint, maybe to a thousand restaurants. Do they go more? And if they're more, then how does that impact the valuation, and are we being too short-sighted if we get out now? I would say getting out now probably wouldn't be necessary. Just keep an eye on how big a portion of your portfolio it is, because this is bound to be volatile. One same store sales miss in any given quarter, and it'll be one of those 20% down days. So just be careful that you're comfortable with the allocation as part of your portfolio. All right, coming up after the break,

We've got a rundown on retail, who's up, and who's down. Stay right here. This is Mountlyful Money. 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.

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Explore Enhance offers at Rangerover.com. Welcome back to Motley Full Money. I'm Dylan Lewis here on air with Matt Argusinger and Ron Gross. A busy week for retail earnings. We got updates from Target, Lowe's, and TJX. Kind of a nice cross section of discount retail, big box, and specialty. Ron, let's start out with Target. Results on the top and bottom line came in ahead of expectations.

Market clearly happy to see Target returning to growth this quarter. Yeah, as a shareholder, I've kind of been waiting for them to get their act together because they were unmerchandized, shall we say, wrongly merchandise for quite some time coming out of the pandemic. They're seemingly getting their act together here, Brian Cornell, a noted very strong CEO, seemed to be getting it done. Consumers are seeking out value. I think that's a theme. It could be McDonald's with $5 meals or Target with lower prices here. I think that's what we're seeing very widely across. the board. So this was a nice pop on better than expected results. Com sales were up 2% that reflected store increases of 0.7% and digital sale increases of 8.7%. So that's pretty strong there on the digital side. That follows four consecutive quarters of declines. They lowered prices on 5,000 items, which helped propel a 3% rise in shopper visits for the quarter. That's largely the story.

same-day services, same-day delivery were big as well. Now, margins were up. Margins widened. If you're lowering profits and you're widening margins, that's hard to do. That's actually pretty impressive. There were obviously some costs that they were able to ring out of the system here, is my guess. Freight is lower as well. There's some other things that probably helped. So you boil that all down and you get adjusted earnings per share up 42%. Really, really impressive in this environment that allowed to to increase full-year guidance. Trading only 16 times with the 2.8% yield, I'm a happy shareholder. Ron, for a while, Target was really plagued with inventory issues. You called it mismerchandising or unmerchandising. They wound up having to do some heavy discounting to move some of that

inventory along. We have a different focus now, with them being a little bit more value-oriented on purpose for the consumer. Do you feel like they are past some of those inventory problems? It took them a little longer than I would have guessed. They were really focused on being very promotional and getting that inventory out the door, and it did take several quarters, but I think it looks like we're likely, mostly behind that now. All right, a bit of a different story over at Lowe's. The company posted its sixth straight quarter of year-over-year sales declines. Matt, the home improvement space continues to struggle to find its footing. Right. If you look at Lowe's results, they were unfortunately very similar to the

Home Depot's, which we discussed on the show last week. In fact, they're actually even a little bit worse comparable store sales down 5.1% for lows. If you recall, comps were down about 3.3% for the Home Depot. And I think the real difference there is that Home Depot caters far more to professional customers and contractors. Because if you look at the breakdown for lows, comparable transactions were down 5.9%. But that would have been a lot worse if it wasn't for pro transactions, which were up a little bit. So extrapolate that out, you can see why the Home Depot's comps held up better in the quarter. Otherwise, the conversation is very much the same. Lowe's CEO, Marvin Ellison.

He talked about the lack of spending on big ticket items, lack of spending on renovations. He talked about higher interest rates being an impediment. He also talked about the lock-in effect, which is the same thing that Ted Decker was talking about, in that, you have a lot of homeowners, millions of homeowners with very low fixed rates. They just aren't willing to sell or move up, and that's really kept a lid on housing activity. one interesting note from the conference call is that Lowe's is currently piloting a program where customers can come in, put on an Applevision Pro, and kind of visualize or customize their kitchen remodel.

Oh, wow. I don't know if that's going to gain any traction, but it just shows you Lowe's where they can are trying to innovate. So maybe that's a reason to get people in the stores. We have been waiting for a use case for the Apple Vision Pro. It has arrived. Here we go. I'm not sure this one actually sticks, but yes, it is one.

small test, I guess. It sounds like a hazard to me to have people walking around Lowe's with goggles on. Two-by-Far, it gets smack in the head. One of the things that's interesting to me looking at the home improvement space is with Lowe's and really with Home Depot two, two businesses that are struggling, and then you look at the returns and how the stocks have performed, they've actually held up fairly well. And so there's a part of me, Matt, that says, okay, a business is struggling, maybe a buying opportunity, but I don't think I'm quite getting the deal I would expect to get based on all the numbers I am seeing from these companies. That's right. I've been surprised at that as well, Dylan. And I would say what's going on here is I think there's an anticipation. There's an anticipation

of lower rates. And as rates come down, we talked about earlier in the show, if the Fed really truly does embark on an easing cycle, you're going to have those mortgage rates continue to come down. You're going to see that pickup in housing activity. And I think for whatever reason, the market and investors are already anticipating that for Home Depot and lows. Ron, when you were hitting the results from Target earlier, you mentioned a focus on value in retail. We got results from TJX this week, and a value hunting consumer is a treasure hunting consumer, which is a good thing for TJX. Company posted a beat on the top and bottom line with earnings.

Seems like everything's going pretty well over there. Yeah, SACA's now trading at an all-time high, and this company is literally all about value. It's a value proposition to the consumer because of their business model. they're able to buy large discounted inventory of all different types, if you ever have been in a T.J. Max store, you will see a lot of different types of merchandise, some on the floor and some on the hangers. But it is clearly a value proposition, and consumers have liked it for many, many years. And it continues to go well. Comparable store sales were up 4%. That's above the company's plan. And they were entirely driven by an increase in customer transactions.

Marmax is their largest division. That's Marshalls and T.J. Max. They've about 2,500 stores there. Com sales were up 5% in that division. Their home goods say... My wife loves home goods. They're there too much, I would have to say. Up 2%.

Not bad. International was up 2% in Canada, and then the other parts of the world were up 1%. So pretty good. Not knocking the cover off the ball, but it's pretty strong for a retailer, a fashion retailer, especially.

They've kept prices low to attract shoppers who are worried about an inflationary environment. That's the whole story we're seeing, but they've done that through different business cycles, and they continue to do that. Gross margin, as we saw with Target, was also up, a little less, just 0.2 percentage points. Pre-tax margin was up 50 basis points, and they did benefit from lower freight costs and stronger sales, which pulls everything down to the bottom line. So earnings per share were up a nice 13% when net sales were only up 6%. So that's the benefit of widening margins. Management did increase their annual guidance. They think they're off to a strong start for the third quarter. They just announced a definitive

agreement to acquire a 35% stake in the United Arab Emirates retailer, the Brands for Less Group, for $360 million, an interesting kind of expansion overseas there. We'll have to keep an eye on that by no means. It's not going to close any time soon, so we'll just keep an eye on that. Stock trading it 29 times. That is not cheap for a company of this nature, but they're really putting up great numbers. Matt, we've talked about a couple different themes here in retail. One of them is a focus on value. The other is the struggle to get people to pay for some of those higher-priced,

maybe a little bit more discretionary items. As we're heading into a very important season with retail, back-to-school and holidays, Is anything in particular you want to see from retailers? Not so much for retailers, Dylan. I think watching the employment picture is actually going to be the more important thing going forward. That is going to dictate consumer spending. Jobs stay strong, rates come down. I expect big ticket purchases will certainly come back to the market.

All right, Matt, Ron, we're going to see you guys a little bit later in the show. Up next, we've got a look at the state of podcasts with some reflections on podcast movement 2024 and a sense of why industry-wide download declines. aren't necessarily something you should be worried about. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Dylan Lewis. This week, the Motleyful Money team was on site at Podcast Movement in Washington, D.C. It's the world's largest collection of podcasters and folks in our industry,

folks like our network partner Airwave Media, advertisers, and a lot of companies offering tools and technology for the audio industry. We didn't find ourselves on stage presenting during the conference. But after attending panels, chatting with industry pros, and mixing it up a bit with my fellow co-host, Ricky Mulvey, and Mary Long, I put together a bit of a snapshot of the state of the podcast industry. Consider it a mini-keynote for those who couldn't make it and want to get a feel for where audio and ad dollars are going,

in a sense for what it all means for some of the biggest companies in the space. I'm going to tentatively call it three numbers to give you a picture of the state of podcasting, ads, and where the industry might be going. My first number, negative 15%. This is the year-over-year look at downloads, across the industry for early 2024. And while it's down, it doesn't necessarily mean that less people are listening to podcasts.

But it does require a bit of explanation. If you go back to the fall of 2023, Apple put out an iOS update, as they do pretty much every year, essentially refreshing software for the iPhone and bringing in some changes that go through all of the Apple apps. Most of those things were like security updates, changes to the home screen, and some functionality within those apps. But in this update, the company also, changed the way that auto-download activity works within their podcast app for users,

particularly those who haven't listened to a show in more than a few weeks. The net effect of those changes was that a listener returning to a show and having to play an episode for the first time would trigger fewer auto downloads on the back catalog of episodes, and they may or may not wind up actually listening to those episodes. Downloads are the lifeblood of podcasts, and for daily shows like ours, there was a hit, but it wasn't as bad as across other parts of the industry. Listeners tend to be pretty engaged when it comes to daily shows, but for weekly, biweekly, and monthly shows, you have listeners who take a gap in listening, and this wound up being a much more pronounced impact on them. Even as far as the industry has come, Apple is still the 800-pound gorilla in the room when it comes to podcasting.

They are the biggest source of downloads for most shows, including ours, where they make up about 60% of our overall listening activity. So when Apple makes changes, the impact is huge. The industry is still sorting through some of the wreckage of those changes, but overwhelmingly downloads were down year-over-year, and that meant that ad contracts had to be revalued based on new and lower numbers costing the industry millions. This was a tough blow for podcasting overall, and it'll continue to affect year-over-year numbers throughout the rest of 2024. It was also a very advertiser-friendly move.

Downloads are not exactly a perfect metric, because they're a sign of delivery. They're not a sign of actual listening. To put it one way, a download to me is mailing you a letter. I sent it to you, but I don't know if you've opened it and read what was actually inside that letter. That's good if you're the Postal Service, because you're getting paid other way, but it's not so great if you're me and I paid to create something and then actually paid to send it to you.

The podcast industry is generally moving to streaming, which is a bit more tied to actual listening and helps fix for a lot of this, but this was a major move to line up metrics with reality and remove some of the download activity that wasn't actually listening activity. Now, advertisers have a much truer sense of the profile of shows and the reach of their messaging, which leads me to my second big number. $2 billion. That's the amount of money that will be spent on podcast ads in 2024, at least according to IAB.

That's up around 12% year over year from 2023 and an acceleration of where we were a year ago at 5%. And there's a couple things I think are worth noting in that number. One, the ad industry overall took a breather in 2023. So it's not that surprising to see a dip and then a return to growth. You look over at places like YouTube, another major source of digital ad spend, revenue dipped to 8% from 10% the year prior, and a lot of companies, frankly, were just much more careful with their advertising budget. I think there's a couple things that you want to pay attention to here.

One, there were predictions made after the download changes from Apple, showing double-digit growth for next year. I think changes coming to the industry are actually going to drive more advertisers in and to confidently put ad dollars to work in podcasts, which is great for the industry. I'll also caution, though, that while we're seeing accelerating growth, if there is a slowdown in consumer spending, we are probably going to see advertising pull back again, and that will probably hit podcasts first among digital channels that advertisers put money to work. In the grand scheme of digital advertising, podcasts are down at the bottom.

I mentioned that $2 billion spend number earlier. Digital video spend alone is ballparked at $60 billion. That includes connected TV, social video, and online video. You also have places like Google Search, which is even higher when it comes to overall spend. Those are established channels where advertisers have a very clear sense of their ROI. And if there are any hiccups along the way when it comes to consumer spending and overall retail numbers, we will probably see spend get reduced in podcasting before some of those more established. channels.

All right, my third number on the state of the industry, 52%. I listened in on a talk that Tom Webster, the CEO of Sounds Profitable gave. His firm is focused on the audio industry and provides research on the state of play. And he broke down the different ways that people discover new podcasts. 52% of listeners said that YouTube was the main source for finding new podcasts. It was by far the most popular answer. One of the major themes at this year's podcast movement was video, and that metric is a huge part of the reason why. YouTube is a place for podcasters to meet people that do not listen to podcasts, and in the United States, that's still about a third of the adult population.

It's also an incredibly powerful search recommendation and discovery tool and a great place for creators to meet new audiences. And so it's not surprising that we are seeing a push for creators to spend more time there to get outside of the core audiences that are already listening to their shows. But the push to video isn't limited to creators and podcast networks. It's being encouraged by YouTube and also by other major distribution points like Spotify. Back in June, Spotify announced that they had over 250,000 video podcasts on the platform and that over 170 million users have watched a video podcast on Spotify. We generally think of Spotify as a place for music, but over the past five years, it's expanded to audio with a focus on podcasts and more recently

to audiobooks. If I were to throw out a reckless prediction, it's that in a decade we will think of Spotify more as a media hub with content ranging from music to podcasts to video, including video from non-podcast creators like traditional YouTubers and other creators and influencers. Right now, Spotify has over 600 million monthly active users. That is a huge and highly loyal base of users. Roughly 40% of them are paid users, but the majority of them are free. We've seen businesses build user bases and digital distribution and then take. take that relationship and the loyalty that comes with it and work more functionality into it over time.

It does a couple things. It makes the offering even better for customers, and for the business, it opens up new monetization opportunities. Think Uber, starting out with ride-haling, and then rolling into other mobility options, like scooters and bikes, then meal delivery services like Uber Eats. A similar playbook is there for a company like Spotify, and as a shareholder in that company, that's incredibly exciting to me. There's optionality with the business and a lot of ways to expand that are related to the main reason that users are already using their service.

But, as I mentioned, reckless prediction. In the meantime, expect to see more of your favorite podcasters playing with video. One of the other most popular ways for people to discover new podcasts, hearing about them from a friend or coworker. If you've got someone in your life interested in money and investing, tell them to check us out. And I'll take this chance to give a shout out to some awesome folks that I met at Podcast Movement. in particular, Jill Chacha at herm podcast. Well, that's interesting, a show that blends comedy and science to cover weird stories that just have to get your attention.

And listeners, if you have a podcast, we should check out, or podcasters that would make great guests on our show. Let us know. Shoot us a note at Podcasts at full.com. We're going to take a quick break, but up next, Matt Argersinger and Ron Gross return with a couple stocks on their radar. Stay right here. You're listening to Motley Full Money. 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 I'll buy or sell anything based solely on what you hear. I'm Dylan Lewis, joined again by Matt Argusinger and Ron Gross. Jens, we are going to head over to stocks on our radar in a moment, but we've got a few very different news items out from some major fast food chains, and one of them really has me scratching my head. I've got to be honest. First up, Chick-fil-A is apparently getting into the streaming business. According to Deadline, the company is working with studios to develop several

shows for a streaming platform. I'm going to repeat that. Chick-fil-A is interested in lining up shows for a streaming service. It plans to launch this year. Ron, make this make sense for me. Well, listen, Dylan, I love me some Chick-fil-A. You get me a number one with waffle fries and a diet Dr. Pepper. I'm in. And it's actually a very well-run company. The throughput is very, very impressive. but this just sounds wacky to me. I don't think it's not necessary. If it ain't broke, don't fix it with a streaming service. The only tie you can see is that Chick-fil-A is owned by the Kathy family,

and they do have an investment in a studio, which has done some work for Marvel. So they have some expertise there, so that lends some credibility to what seems to be a rumor. But I would implore them to focus on the chicken. and a little less on the streaming. As you noted, I generally think of Chick-fil-A as a very disciplined, very well-run company. I look at a news piece like this, Matt. This feels like a top-of-the-bubble-type idea where cash is available. It's very easy to just spin some new things up and try things.

This is not the type of thing I would expect the company be going after when we are talking about budgets being tighter across the board. That's right. This reeks of diversification. You know, just exactly. A top company with too much money, too much cash flow, you know, not enough better ideas on how to improve the restaurants. Because as Ron said, they're already run so well. But my only question is, will you be able to stream Chick-fil-A films on Sunday? Or will the streaming service be shut off?

Shut down, baby. I feel like it's a worthy question, right? I mean, I'm using a Chick-fil-A business on Sunday if I want to watch a show. Man, they don't have good mascots. Like, I would watch like a Mayor McChese. grimace kind of thing, but they have like cows, right? Do they have a mascot? They have to eat more chicken cows, right? Right. That's not doing it for me from the streaming. No, they don't eat like a chucky cheese kind of character or something. Maybe we'll see them build out their IP library over

time, bring in some more familiar faces and maybe become a little bit more relatable. One place they could look, maybe be the Burger King King. That could be something that might be interesting. Maybe would get Ron to watch. Kind of scary, though. Kind of scary. Yeah, they've had some frightening ad campaigns. And we have some updates from Burger King this week as well. Walmart announcing that it has a new partnership with Burger King, where Walmart Plus members that order Burger King through the BK app will get a discount on their order. And this isn't exactly a natural pairing for Me, Ron, but it seems to be a better combination than Chick-fil-A and streaming. Yeah, I'm okay with it. Anything, I mean, Walmart is around $98 a year. The subscription, the subscription, the subscription, the subscription,

description plan. So any little value add to that makes it more attractive. We are seeing that with Amazon continues to, I think they have a DoorDash relationship is one of their more recent things. They continue to add value propositions to these because it's so important for those to be, have strong retention. It's the whole business. If you can have strong retention at 1295 a month, month after month after month, it's an amazing fall right down to the bottom line. So anything they can add that's not too expensive or that doesn't eat into margins in any significant way is probably a good idea. We have seen Walmart Plus experiment with some other things. I think they've seen Paramount Plus plans being able to brought into the Walmart app for free access

for members. This seems like a natural extension of a strategy that we have seen companies try before Matt. And it's basically, how can we make this as sticky as possible without really costing us too much money? That's right. I mean, as Ron mentioned, Amazon's been doing this with their Prime service for years, just sort of adding incremental value, experimenting, seeing what attract customers, seeing what boosts retention. This makes a heck of a lot more sense than investing in a new streaming business. So I kind of like this deal from Walmart Plus. Not to be outdone in the food space, Subway out with their own announcement this week, they are offering discounts on their footlong sandwiches to bring things down to $7. This is a limited

time offer. And I have to be honest, guys, I saw this news piece. And my first reaction was, wait, the sandwiches cost more than $10? I thought we were in a $5 foot long world. But, Ron, that is the point we are at with inflation right now. Did we mention it's a full foot? Oh, yeah. They got in some hot water for that. This is one of the things we were talking about earlier. Consumers are looking for value, especially when the story is that inflation is still quite high. And it is in certain areas of the market, like housing still, but for the most part, it's moderated quite a bit. So it'll be interesting to see how long kind of this clamoring for value lasts. Subway is a little bit, I think, more in trouble than some of the others. They're doing

this really to bring traffic back. I think they're struggling just a little bit. And they're, they have pretty good commercials now with various sports figures, and they're experimenting with their menu and their side dishes, but they do need to do something to kind of bring traffic back. All right, let's get over to stocks on our radar. Our man behind the glass, as always, Dan Boyd is going to hit you with a question. Matt, you're up first. What are you looking at this week? All right. I'm sticking with food, and I'm going with Papa Johns, ticker PZZA, appropriate. I just started looking at this company as a potential idea for our dividend investor service at the fool. So in this month, to much, much less fanfare than was given to Brian Nicol. Todd

Penninger, he was recently named the CEO of Papa Johns. He comes over from Wendy's, where he was the CEO from 2016 and 2024. And during his time, Wendy's generated same source sales growth each and every year that he was CEO. Contrast that to Papa John's, which has really struggled over the past two years, Coms have come way down every quarter almost. Restaurant margins are way down. It's almost certainly lost market share to dominoes and other pizza chains in the markets where it competes. And the stock price has lost about two-thirds of its value from its peak in late 2021. But if you look at the company, sticky customers, you've got very depressed earnings right now, a dividend yield of 4%, a new CEO that probably has the right kind of

experience and the ideas that near needed to turn it around, you have a company with a fairly strong brand falling, better ingredients, better pizza. I know Dan loves that. I was a pretty big Papa John's junkie when I was in college back in Massachusetts. It's very popular in New England. I like the turnaround potential here. Dan, a question or perhaps a comment about Papa John's. Maddie, do you really expect me to want to invest in the worst pizza restaurant in every town? Wait a second. I thought Domino's was that. When we talked about Domino's, a few months ago. You said that was the worst pizza. Now it's Papa Johns. It's a race to the bottom with these two, man. Papa Johns is awful. All right. Dan, I'm going to give you the window here.

What's a pizza that you respect and love? Any local pizza generally. And also, Maddie, coming from New England, there's good pizza up there and you're choosing Papa Johns? I don't know, man. Hey, when I was a 20-something college kid with no money, Papa Johns was the go to. Ron, seems like you have a pretty low hurdle to clear here this week with radar stocks. I'm going to bore Dan to death here, though. What are you watching this week? I'm going to look at the Progressive Corporation, PGR. Progressive is obviously a well-known insurance company, 31 million policies in personal and commercial auto insurance, general liability insurance for small businesses.

I think most of us know the commercials starring Flo and her wacky friends. those are actually pretty good. They're ranked number one in commercial auto premiums written, and they've been very forward-thinking in using new technology to enhance their competitive position. For example, they were one of the first insurers to embrace telematics in vehicles to obtain information about driver's behavior.

Even Buffett has said Progressive is ahead of Geico with respect to the use of technology. And they've grown their net premiums and their revenue in each of the past, four years. Combined ratio is a very key metric for insurance companies. They're very strong at around 95% over the past three years. That's something you definitely want to see if you're looking at an insurance company. Stock has done really well. 25% returns average over the last five years significantly outpacing the S&P 500. But 19 times is what you got to pay for this insurer

when they usually go for 10 to 12 times. So I need to do a little more work on the valuation. Dan, a question about progressive. Well, you know, you're right, Dylan. I'm actually a progressive customer. So, yeah, pretty low bar to clear. I do have one comment, though. I don't watch a lot of TV, but when I do, it seems like every other commercial is an insurance commercial.

These insurance companies, they have way too much money. We've got to do something about that. Either pharmaceuticals or insurance, for sure. They should launch a streaming service with all that extra money. There you go. I mean, Dan, would it be possible? If there was a music streaming service or something like that as a part of the Papa John's pitch, would that have improved the odds? No, that's ridiculous. I'm sorry.

Dan is not here for franchise extensions, but he is here for radar stocks, and we appreciate him for that. And Matt and Ron, I appreciate you guys bringing your stocks to the table, being here with me on the show. That's going to do it for this week's Notful Money Radio Show. Show is mixed by Dan Boyd. I'm Dylan Lewis. Thanks for listening. We'll see you next time.