Motley Fool Money - Rise of the Machines, Jobs, and Earnings

Episode Date: August 5, 2022

The U.S. private sector has added nearly 6 million jobs in the past year. (0:30) Jason Moser and Matt Argersinger discuss: - The unemployment rate falling to 3.5% - Demand for cold beverages driving Starbucks' latest quarter - PayPal getting back to basics - MercadoLibre's blowout earnings - The latest from Cloudflare, Zillow, and Twilio (19:45) Jason and Matt analyze Amazon buying iRobot for $1.7 billion in cash, as well as: - Simon Property Group's latest results - Uber's record revenue in the 2nd quarter - eBay's surprisingly profitable business - Two stocks on their radar: Procore Technologies and Stanley Black & Decker Sign up for Stock Advisor at http://fool.com/foolfest and you’ll get a complimentary digital pass to our 2-day investing conference August 29 & 30! (If you're already a Motley Fool member looking for details on the conference, go here - [http://foolfest.fool.com)]http://foolfest.fool.com) Stocks discussed on the show: SBUX, PYPL, MELI, NET, Z, ZG, TWLO, AMZN, IRBT, SPG, UBER, EBAY, CMG, HD, PCOR, SWK Host: Chris Hill Guests: Jason Moser, Matt Argersinger 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. Daredevil Born Again official podcast Tuesdays, and stream Season 2 of Marvel Television's Daredevil Born Again on Disney Plus. We've got a hot jobs report, the rise of the machines, and a whole lot of earnings. Motley Fool Money starts now.

That's why they call it money. The best thing. The global headquarters. This is Motley Fool Money Radio show. I'm Chris Hill, joining me, Motley Fool Senior Analyst, Jason Moser, and Matt Argusinger. Good to see you, as always, gentlemen. It's another big week of earnings. We will dip into the full mailbag to answer your questions.

And as always, we've got a couple of stocks on our radar. But we begin with the big macro. The U.S. economy added 528,000 jobs in the month of July. The unemployment rate fell to 3.5%. This makes nearly 6 million private sector jobs that have been added in the last year. Jason, let me start with you. The last two recessions saw huge job losses month after month. So if we're in a recession right now, this is unlike any recession I've ever seen or even heard of. Yeah. Well, and you said if, and I think that really is what kicks off this conversation here, because I feel like the biggest lesson we can learn from all of this, of course, will not actually be put into action, is that we need to come up with an objective definition for what a recession is.

Because at this point now, I mean, this just becomes a political football, right? I mean, are we, aren't we? I don't know that it really matters. I mean, at the end of the day, this jobs report is good news, right? But it is good news in a world where there are signs that there may be some small cracks forming that we need to pay attention to. And it's weird because when you look at what led the way here in leisure and hospitality, those, you know, leisure and hospitality sector saw the most jobs growth. Close to 100,000 payrolls added in July.

You know, it doesn't feel, as a consumer, it doesn't feel that way sometimes, right? I mean, you go places, there are long lines, they're canceled flights. It feels like the service industry, the hospitality industry, is hurting a little bit, is lacking a little bit. So it's weird to kind of see that, but I mean, it's good to see wage growth. It's not quite keeping up with inflation, but that's something. By the same token, you've got this interesting dichotomy of businesses wanting to do more with less.

We're seeing a lot of companies at their cutting workforces. So yeah, good news, but still makes you kind of scratch your head a little bit. I was just going to say, Maddie, I mean, the backdrop of some of the comments of CEOs of the biggest tech companies out there, Alphabet, meta platforms, talking very openly about not only freezing hiring, but also they may be cutting some positions here or there. Right. I think a lot of analysts would argue that, okay, this number was fantastic, but it doesn't reflect what you just said, Chris, which is you have these tech companies who have announced hiring freezes or at least slowing down their hiring, and that slowness isn't really reflected here.

But I do want to go back to JMO's comment about the hospitality and leisure industries, because I think that's a key point. And I think Steve Leasman said it almost best this morning. He said the difficulty of finding labor is overwhelming the fear of the actual slowdown. In other words, and I think the hospitality industry is perfect for that, which is everything I read, looking at hospitality reeds or looking at even individual hospitality landlords and developers, they can't find labor. They can't hire fast enough.

and they're offering bonuses, you know, wage, big wages, incentives, and they just can't hire. And that's why you have those long lines. And I think the job number is outstanding in that industry. They're still looking for a million jobs. And so it's a weird, it's a weird economy we're in, right? In certain industries, there's just, there's so many job openings that can't fill them in certain places like big tech. As you mentioned, Chris, we're seeing, you know, we're seeing a slowdown. We're seeing too much capacity.

But overall, I think it's really hard to argue. I don't know where the football lands on this, but it's really hard to argue that we're in a recession with these kind of numbers. All right. Let's get to some of the big companies reporting earnings this week. Starbucks same store sales in China fell 44%. But U.S. demand for cold beverages in the third quarter helped make up for lower results overseas. Interim CEO Howard Schultz said Starbucks pricing power helped push the average ticket higher, Maddie. Yeah, you know, Chris, I don't know how you feel about iced coffee, but I like mine hot. Yeah, not a fan, but as a Starbucks shareholder, I appreciate the people who are out there buying

the cold beverages. That's right. Well, I think my takeaway is thank good. Goodness Starbucks is still mostly a U.S. story because if you look at the U.S. comparable store sales, they were up 9 percent, really strong. The international comparable store sales down 18 percent, and that's because of a 44 percent drop in sales in China. So, obviously, the COVID lockdown is playing a big role there.

and Starbucks still has roughly triple the number of stores in the U.S. than they do in China. Meanwhile, profit-side earnings per share were down 15%. Coffee prices are higher, wages are higher, and Starbucks is raising prices, but not enough to offset those increases. So, you get operating margin come down, came in about 16.9% versus 19.9% a year ago. But even if you think things will level out on the inflationary front, I think, and maybe China starts to reopen their economy, so those, sales come back to those stores. I'd still worry about having roughly 16% of my stores in China. I think going back a few years, we would look at that. We would look at Starbucks China

position and say that's a position of strength. It's a position of growth. And that's where the growth is going to come from for years ahead. And Howard Schultz, Starbucks executives, they built these long-term relationships in the country. But I think China-U.S. relations aren't exactly great at the moment. I'm a Starbucks shelter just like you, and I'm looking at North America Comps that were great. I'm looking at active Starbucks reward memberships that were up 13%. But I'm not banking on making money in Starbucks if I think China is going to be the growth story going forward. I think there's just a lot of risk there. And so it really does have to come from the domestic business, the North America business.

And it is, which is great. And I think their quarter reflects that. Three months from now, when we get their next quarterly report, do you think part of that is going to include an announcement of who the new CEO is going to be? Or do you think it gets pushed off a little bit further? I think, you know, I think given the current situation, I'd say it gets pushed off. I think Howard Schultz is in this top spot for at least the remainder of this year, if not maybe into next year by a meaningful amount. I think they recognize that his tenures of the company have been really great for shareholders, really great for the business. For whatever reason, just haven't been able to find that great successor, and he's always had to come back.

So I think he sticks around a little longer. Shares of PayPal up 10% this week after second quarter results were better than expected. An activist investor, Elliott Management, has taken a $2 billion stake in the company. Jason, it seems like PayPal is getting back to basics. Yeah, yeah, and that's good news. It does feel like the good news here for investors, as far as PayPal is concerned that management perhaps has some self-awareness of the unfortunate. worst errors they've committed over the last several quarters. And ultimately, they're doing what they said they would do to rectify the situation. You remember back in April, CEO Dan

Shulman said on a call that they needed to get back to, like you said, basics, and focus on three things, reassessing the thought process behind forecasting. Ultimately, don't get out over your skis, right? It's better to kind of under promise and over-deliver. Do fewer things and do them well, right? PayPal started spreading itself a little thin, and then ultimately, giving the teams room to run and innovate and own the successes in the business. And so, you know, we saw signs that the business is getting back to good order here. With revenue, $6.8 billion. It was up 10 percent on a currency-neutral basis. Earnings per share down a little bit from the year ago, 93 cents versus $1.15 the previous

year. But they are starting to talk about whittling down the cost structure, right, becoming more efficient. And to that end, we should see, as investors, $900 million in cost savings that should be expected, should be realized this year. I think what was encouraging with the Elliott management side of things is that's kind of helping management get their eyes back on the ball. They announced a $15 billion share repurchase authorization, and they should execute around $4 billion of that this year, and they will continue to work with Elliott there in finding the best ways to return value to shareholders. And it just, it did seem on the the call. If you listen to it, there was a level of contrition in Dan Shulman's voice that

kind of, he felt like, okay, listen, we're going to own up to some mistakes and get this thing back in order here. And so the priorities going forward are going to be on checkout Venmo and PayPal digital wallets in the Braintree operations there. And a good example, they're no longer going to be sinking money into that stock trading capability they were talking about building out. That was just one small little part of it. But I mean, to me, there's no reason ever do that. There are million brokerages out there already. There's nothing that really differentiates them. It's just nothing but pure expense, risk, and opportunity cost involved with that. So it's nice to see them focusing back up, and I expect we'll see that continue here.

Another blowout quarter for Mikado Libre. Second quarter revenue for the Latin American e-commerce company rose 57%. Their gross profit margin expanded and shares of Macado Libre up nearly 30% this week, Matt. Yeah, gangbusters there, right? I think this story here is that most e-commerce companies reported really extraordinary results in 2020, 2021. You had a result, you know, the pandemic surge in online shopping. Now that we're in 2022, things have reopened. People are shopping a bit less online. So those year-over-year comparisons have gone a lot harder. So if you look at results from Etsy, eBay, Shopify, even Amazon to a certain extent, looking at their retail business, marketplace businesses, growth has slowed way down this year, as you'd expect. Not the case

from Riccato Libre, which is incredible. If you look just to just at their commerce business, gross merchandise volume was up 22% in US dollar terms. Their biggest market, Brazil, was up 28%. Mexico up 30%. And they reached a record 40.8 million unique buyers in the second quarter. That breaks the record in Q4 of 2021, which of course is the seasonal holiday shopping season where you have a lot of people shopping. So really incredible results. And of course, Melanie is a lot different today than when I was talking about it a long time ago on the show. It's not just a marketplace business anymore. It's got a fast-growing advertising business. It's got third-party fulfillment business. Most importantly, it's got a payments

business that saw volumes reach over 30 billion, 72% growth year over year. You've got point of sale transactions, money transfer, credit offerings. And I think in a region like Latin America where you have different currencies, many of them very volatile, customers and businesses that don't often have access to traditional banks, Mercali is filling that role. And It looks like they're executing really well. And I think when in the U.S. and other places where shoppers have that sort of brick-and-mortar infrastructure to go back to, they don't necessarily have that in a lot of places. So I think a lot of sellers, especially, who join the Mercado Libre marketplace and their

payment system over the last couple of years, they're sticking to it and using it even more. After the break, we've got the latest in cybersecurity, and we will check in on the home buying market. So stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. Chris Hill here with Jason Moser and Matt Argusinger. Shares of Cloudflare up 25% on Friday after the cybersecurity firm's second quarter revenue came in higher than expected. And maybe Wall Street

should start adjusting their expectations, Jason, because this was the eighth quarter in a row that Cloudflare's revenue grew by more than 50%. Yeah, yeah. It's been a tough year for Cloudflare and companies like it, you know, growth stories that are still working their way to profitability. And perhaps Cloudflare, the share price got a little bit ahead of itself earlier on in the story there, but you could make the same argument that the pessimism is a little bit overdone as well. To your point there, I mean, 54% revenue growth is just nothing to sneeze at. Now, it's worth noting they did make a small acquisition of a company called Area One recently, and that did contribute a little bit, but not much.

This was mostly organic growth, which is really encouraging. I think one of the big parts of the story here really is large customers, the customers that spend more than $100,000 a year with a company, that's a nice indicator for Cloudflare. It says that they're doing something right because they're bringing these big customers in and growing the relationships with them. That becomes very sticky over time. But the numbers there, I mean, they now have 1,749 total large customers. That's up from 188 a year ago.

They represent 60% of total revenue now versus just over 50% a year ago. And ultimately, that results in a dollar-based net expansion rate of $1,000,000. 126% versus 124% a year ago. So, again, it speaks to growing that relationship with meaningful spenders. As a business, that's what you want. They're continuing to win versus their competitors in zero trust. They're relatively new to that zero trust security game, so that's really encouraging as well. I saw modest improvement in gross margins.

They're guiding for 48% revenue growth for the full year. This is a really strong business doing a lot of great things. Back to the big macro and just sort of the condition. on the ground in regard to the economy. I will say they note enough call, and I quote, in Q1, our pipeline generation slowed, sales cycles extended, and customers took longer to pay their bills. We watched those metrics closely throughout Q2 and saw them at least stabilized. They're not where we throw up, hooray, yet, but the metrics are trending in the right direction.

Well, and we've talked on this show about companies looking to pull different levers to save money, and one of the big ways that a lot of companies do that. is by pulling back on marketing. I have a hard time believing companies are going to be ramping, like really pulling back on their cybersecurity. I fully agree. It's just, it's a top priority of any and every business out there today. Zillow's second quarter results took a backseat to its lower guidance for the third quarter and the fact that after getting out of the eye buying business, Zillow announced a multi-year partnership with open-door technologies, which Matt really seems like a way to get back into the business of eye buying.

That's right. I think the market hated when they got out of it last fall. I kind of thought that was the right move. I'm pretty skeptical of the eye-and-buying business in general, the model, and I thought Zillow stepping away from it probably proved fairly smart, considering what we've seen happen to the eye-buying industry this year. But it's big news. And I think you're marrying kind of Zillow, of course, which is the biggest brand, biggest website, biggest mobile app in real estate, certainly in the U.S., S, 234 million average unique users, and an open door, which is the leading I buyer by volume now that Zillow's exit the business.

There were many details on the conference call about the deal, but it's an exclusive deal. It goes for many years, apparently. And I think at the base level, what it does, if you're a Zillow customer, you now have the ability to get a cash offer on your home through Zillow, or you at least have another potential buyer in the marketplace for your home. if you do the traditional way of using a listing agent. So I kind of like the idea of Zillow, you know, using its reach, its brand, and going back into Ibuying, but in a capital light way, they're not going to be in the business of actually buying and selling homes like they were.

They're going to let Open Door handle that. And so I feel like it's a win from both, but I think for Zillow, it's a great capital light way to get back into it. And I'll have to say, even though Zillow's business is kind of hurting right now, you know, their premier agent revenue business, their premier agent revenue, which is their largest revenue item line now, was down 5%. And as you mentioned, Chris, they gave kind of bad guidance for the quarter. But you do have a business that has almost $2 billion in net cash, pretty big with a market cap of just $9 billion now. And you're kind of shifting the business to more of a capital-A business model, which

worked really well in the past. And so I can't say whether Zillow is done going down the tubes, which it has been going for a year now. but it's a right step in the direction for the business, and I kind of like the deal with Open Door. Twilio's second quarter revenue grew by more than 40%, but guidance for Q3 was weaker than Wall Street was hoping for and shares the Twilio down 15% on Friday, Jason. Yeah, I mean, sell-off notwithstanding. I think you need to look at the bigger picture and note that management rain still remains very confident in their growth, trajectory, and profitability goals for 2023 and beyond.

So the stock is certainly feeling the impact of at least one big downgrade today. That happens. It's much more short-term in nature. So for investors like us that take the longer few, you need to get used to that kind of stuff happening. It's not a testament to the business. And to that point, organic revenue up 33 percent from a year ago, easily surpassed their own internal guidance. And second quarter revenue dollar-based net expansion rate, 123%. That was down a good bit from 135 percent a year ago. That is due to a few things. A little softness here, and there was some consumer with some of the, you know, with some of the, some customers and also bringing in some new business. So nothing terribly concerning there.

They did sign their largest Flex deal ever in the second quarter, an eight-figure deal with a Fortune 100 retailer. And Twilio Flex is a cloud-based contact center, essentially enables our customers to create the on-the-channel contact center experience they want. So that's encouraging. And modest gross margin weakness as they take on new business, still calling for organic revenue growth here around 30 percent for the current quarter. I think you need to be a lot of the current quarter. I think you need to to be optimistic about this business for a number of reasons. But I'd put the market to serves right there at the top. It's in communication, kind of like security. Communication is just essential. And Toledo does it really, really well. So I think that, again, it's all

of notwithstanding. You'd feel pretty good about this. We are one step closer to the rise of the machines. And right after the break, we'll explain why. So stay right here. You're listening to Motley Fool Money. Welcome back to Motley Full Money. Chris Hill here with Jason Moser and Matt Argusinger. Amazon is buying I-Robot, the parent company of Rumba, the robot vacuum cleaner. It is an all-cash deal to the tune of $1.7 billion. Shares of Amazon down a bit on Friday, while shares of I-Robot up nearly 20 percent, close to the buyout price of $61 a share.

Jason, we were talking before the show. You're not a fan of this deal. Well, it's like the Larry David. You know, that gift of Larry David kind of like, maybe. I'm not sure. I mean, it seems like every Amazon acquisition, and listen, I've been an Amazon shareholder for years. It's been a tremendously rewarding investment. Their acquisitions always kind of leave me just kind of on the fence, I guess.

I'm still there with this one. I mean, this is clearly another shot at the grander vision of owning the smart home. I get that. I think this is the best outcome for iRobot shareholders, absolutely. Which is a shame, really, for those who bought it as it was on its way close to $140 per share, just about a year and a half ago. But their growth has hit a wall, and it could be argued that they've not really delivered on innovating beyond the vacuum cleaner. Now, with that said, going back to the smart home, earlier this spring, I will quote myself because I needed to make

sure I check myself on this. I called the smart home a cluttered, incoherent mess. It turns out the light switch and just a modicum of accountability are a bit tougher to disrupt than people thought, And part of that just comes from my frustrations of telling Alexa to turn on my light, and it didn't work. And I'm like, what's your point? What are you even here for? Other than to play podcasts. Now, you fast forward to what they're going to try to do with Roomba, with IRobot. You feel like they're going to incorporate this into their Amazon ecosystem. They'll probably connect Alexa to it. You can control your vacuum cleaner with your voice. It sounds great until it doesn't work, which is probably going to be the case. And I think you need to get your expectations in order here. I think the other thing to keep in mind, too, there are competitive. out there in this space that I think produce better products. And I can speak from personal experience. We have a D-Bot robo-VAC at our house, and that's made by EcoVax. And I view

these vacuum cleaners as not necessary and not essential. They're nice to have. If you have pets, it can kind of help keep ahead of the mess. But I dug up some reviews online here that they really supported my experience. It's just that D-Bot is a far superior vacuum cleaner to the Rumba for a number of reasons. So I just kind of wonder, I mean, maybe this is something where they can play a little bit on the pricing and really start selling a lot of these vacuum cleaners. Perhaps there's some IP there where they can innovate and expand that product line. Again, probably the best case scenario for iRobot shareholders, but for Amazon, I mean, at least for them, it's just a drop of the bucket. Lost in all this, Maddie, is you go back to last year, Amazon comes out with Astro, the $1,500 robot, which is I just sort of looked at, and I thought,

This looks like Alexa on wheels. But to Jason's point, it does seem like another move by Amazon toward the smart home. Well, it just occurred to me as you said that, that it wasn't Astro the Jetson's dog? Yes. Yeah. I have like Jason trouble wrapping my head around this, except on the idea of what you said, kind of your last point, Jason, which is just, it is a fairly well-known brand. It's popular.

There are a lot of people with, I think, smaller apartments where they love their I robot. They said to go. And I'm wondering if this is just a way for Amazon to enter that market in a more direct way, get some patents, I mean, some technologies and some expertise, and then maybe flood the market with cheaper products, although the Astros certainly isn't a cheap product. So I have trouble seeing, you know, with Amazon, I think every acquisition they make, we think it's sort of this grand vision that they might have. What are they building towards five or ten years from now?

And this is one of those key stepping stones. And I've trouble seeing that this is a stepping stone other than maybe they feel like they can do a little better job on the marketing and product and cost side of things and really grab a lot of market share. And what they still think is kind of this emerging market of sort of automated tools and cleaning supplies and things like that. Just to wrap up, Jason, as you indicated, Amazon is not buying this business. business at its peak. They are arguably getting a nice discount if this is something they've

been looking at for a while. I don't know, it's not going to shock me if a year or two from now, they come out with an upgraded version of Astro, and it's like, hey, now Astro is also going to vacuum your home for you. Yeah. They're getting this thing for essentially one-time sales. I mean, it is a business that is, it needs Amazon more than the other way around. So again, this is a nice bailout for iRobot shareholders. And I'm sure that given Amazon's expertise in the space, they'll be able to do something with it, and they'll be able to attract, I think, more customers on the pricing side. But I don't think it's going to be anything meaningful to the business.

From robots, we go to commercial real estate. Simon Property Group's second quarter profits came in higher than expected, and guidance for the full fiscal year was increased. But even with that, Matt, shares of Simon Property Group down a little bit this week. Down, yeah, down a little bit, but I think what's not down and not dead by any stretch, Chris, is the mall. The mall is not dead. I mean, I know the stock price is down, but I think it was an impressive quarter by Simon. Net operating income across their entire portfolio was up 7% year over year. Occupancy across its properties was 93.9% as of June 30th. That's up from 91.8% a year ago. That might seem like a small number, but you're talking tens of millions, hundreds of millions of square fees. and to see an uptick and occupancy, especially for a mall, primarily a mall owner, is really

impressive. You mentioned they raise guidance for funds from operations per share for the year. They increased their dividend, by the way, by 3%. And you now get a nice 6.5% yield on the stock. So, the stock is down, but you're certainly getting a nice dividend payment, which is more than sustainable. And I think investors might want to start thinking a little bit differently about Simon. Yes, most of its properties are traditional shopping malls, outlets, but they are far away the highest and most profitable malls on a square foot basis in the country. There's just no second to Simon, and these are a lot of malls that people still want to go to.

And I think on the newer development side, it's much more of a mixed-use variety of properties they're going for. So it's not just retail shopping that Simon is buying or developing, but you've got properties that will now have residences, hotels, experiential properties. so where people can live, work, and play. And I think this is one real estate company, I was really doubting, especially after the pandemic. But now coming out of it,

I think it's their competitors that have gotten a lot weaker. And then Simon is now in a position of strength, just with a great portfolio of assets. They can now develop those assets now, really targeting more of experience, services angle with a lot of their properties. And I think things look pretty good from here. Do you get the sense that,

based on the size, As you said, they have so many properties across the country. Do you get the sense that they are also somewhat nimble? Because it seems like they could test different concepts in different areas, see if they work, and then start to accelerate them in other parts of the country. I think that's, yeah, I think that's a good point. I wouldn't say they're probably the most nimble of companies when it comes to real estate development. Because to move the needle, their properties have to be fairly, fairly large. And so they take years of planning, it takes years to get permitting and zoning. And then, you know, construction, of course, is a process as well.

But I think Simon, their management team is really smart. They've proven that they can kind of know how to maximize the profitability of any given development and target those markets where their properties are going to do the best. And so that's one, I think if there's one retail reet out there that you want to bet on, I think Simon's probably the one. Uber posted record revenue in the second quarter, and despite losing money on its investments, shares of Uber up 35 percent this week. Jason, is this company actually on its way to becoming profitable? Well, I mean, they are free cash flow positive asterisk, if that makes any sense.

I'll get to that in a minute. So, I mean, what sets Uber apart to me? I mean, from its competition at least, its ability to piece together multiple complementary business lines, which make the entire business stronger. So as the world becomes more digital and more connected, this basically opens up Uber's market opportunity on all fronts. Ultimately, they're playing a big role in helping transform transportation. So it's kind of a big deal.

To the numbers, revenue, $8.1 billion. Gross bookings up 36 percent in constant currency to $29.1 billion. Now operating on an annualized run rate of $116 billion. Now, a lot of that growth is coming from mobility gross bookings. That's what we like to see. That was up 57% from a year ago. Delivery gross bookings, up 12%. Trips during the quarter grew 24% to 1.87 billion.

Now, going to the actual business at hand, yes, still losing money. No question there. Working towards that profitability target. But they are on their way, right? Re-cash flow is really a metric you want to target with a business like this, because as you noted, the investment side of the business really does play out on that net income. When you talk about the actual losses, this business chalks up, net loss of $2.6 billion. That includes $1.7 billion in the form of headwinds relating to their equity investments

in companies like Aurora, Grab, and Zamato. I don't know about all those names. Maybe they deserve to be losers. What are those companies? Sure. But when I said free cash flow positive asterisk, I mean, it is worth remembering that stock-based compensation does play into that metric. So if you account for that, they're still working their way to it, right? Free cash flow is a good metric to judge this business by, and stock-based compensation is something that continues to come down as a percentage of revenue,

albeit slowly. I'd like to see that speed up a little bit. One last thing to watch this business is membership. And I know a lot of people don't think about this, but if it's successful, this could be a very nice long-term driver. They're at about 10 million members now. They've got this Uber 1 program. It's been launched in seven markets globally. About 23% of their overall gross booking come from members, and it's around 32% for delivery. And ultimately, members have about 2.7 times more gross bookings on Uber than non-members. So I think that's an interesting lever they can continue to pull. But all in all, a business that keeps on progressing. It's nice to see. eBay's second quarter profits and revenue came in higher.

than expected, but growth is slowing for the online marketplace. Matt, when you look at eBay's business, what leaps out at you? Well, I think with eBay, it's not so much about the top line growth anymore, really. They'll be able to grow, and they've made some, I think, some smart acquisitions that'll pay off down the road. But I think with eBay, it's really about you've got a high margin, capital-light business generates a ton of cash. On a normalized basis, you know, on a normalized basis, And they expect to earn roughly $4 a share in earnings this year. So that's an incredible earnings power.

And that makes the stock traded for about 12 times forward earnings, which just seems like a bargain to me. So we spoke about Mercado Libre earlier, where they're not seeing those sort of year-over-year down comparisons that a lot of e-commerce companies are. Well, eBay is, their revenue was down 9%. Gross merchandise volume was down 18%. Active buyers, still strong on 138 million. eBay is still a pretty big marketplace.

But that number was also down about 12%. So it's a business that's not growing. It's not going to be near the market share champion in e-commerce that we thought they might have been in the previous decade. But it is a company that generates a ton of cash, pays a growing dividend, which I like to see. And I think that is probably as an investor, what you want to focus on the most with eBay going forward. After the break, we will dip into the full mailbag. Plus, we've got a couple of stocks on our radar.

Stay right here. This is Motley Fool 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 ourselves stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Matt Argusinger. You can email us a question about stocks.

Podcasts at Fool.com is the email address. Or you can call the Motley Fool Money Hotline, 703-254, 1445. Let me go to our man behind the glass, Dan Boy. Dan, we got a question? From Minneapolis. My question is, they always talk about inflation as being transitory. And I feel like everything's been kind of played out on that. We all get that point.

But my question is, when you see a company raise its price, is there ever a chance that in the future, even given all other supply chain issues, is there a chance that they'll lower those prices in the future? My thinking is that they wouldn't. But I'm curious to see what your guys would take it. Thank you. Thank you, Kyle. Jason, what do you think? I love that we have a Motley, full money hotline.

That's like the coolest thing ever. Yeah, Kyle, great question. I think that you're thinking about this the right way. Now, it does depend on the company and the nature of what they're selling. Generally speaking, no, you're not going to see those prices come back down. For example, if you look at consumer-facing businesses, and I'll just use Chipotle and Starbucks as easy examples, they've passed along some price increases here recently for obvious reasons. they are not likely to bring those prices back down in the future, even though the commodity

inputs for the products they're ultimately producing might come down over time. Because you've got to think of everything that's tied to those price increases, right? Primarily, you look at something like raising wages along the way too, right? They're paying their employees more. Well, you definitely can't take that back. Now, the one thing these companies do, they're very clever. They give them room to pull levers on offers. So you look at Starbucks, they've done things with like the treat receipt or Chipotle's free

casso or Bogo offers. So the consumer at some point or another, they feel like they're getting something. We're very quick to forget those price increases that they pass through. Jason kind of hit it, which is on the commodity side. So if you're shopping for gas or maybe you're at the Home Depot, buy a lumber, you're going to see prices come down there because those prices will adjust. And they're not based on kind of value-ad activities that companies like Starbucks and are doing with products and services. And so you'll see it at the Kamaii level. It's really

rare to see it at the consumer retail level if you're buying something. All right. Quick word about Fool Fest. Our annual investing conference, it is a two-day event on August 29th and 30th. We've got a lot of breakout sessions, different investing strategies. We're going to be going over. And we have an awesome lineup of speakers, including Trek CEO, Brian Fairbanks, Motley Fool, co-founder, David Gardner, bestselling author Morgan Howsell. intra-capitalist, Jenny Abramson. Foolfest is free if you are a Motley Fool member. And if you're not yet a member, that's easy. You can just sign up for our Stock Advisor's service and get a complementary digital pass to the event.

Just go to fool.com slash Foolfest for more details. That's fool.com slash foolfest. All right, Jason Moser, what's on your radar this week? Yes, sir. A stock that my colleague, Tom King and I recently recommended the members, really proud of this one. And I've talked about it here before. Dan, you may remember, ProCore, ticker PCOR. Construction management software. Earnings came out this week on Wednesday after the market closed. Very positive reaction to what was a good quarter. $172 million in revenue that represented organic growth of 34% well above what they guided

for a quarter ago. They ended the quarter with 13,403 customers. That was up 20% from a year ago. They did see some increases. While these are pressures on the cost side, I think it's nice to see. at least increases in business travel. Chris, people are getting back out there. I love to see it. Some increases in cloud hosting expenses as well that give them a little pause. I think they try to be a little conservative as far as their guidance goes. And the material financing program

that I've mentioned is still in the very early stages of rolling from that. But expecting revenue between $690 and $694 million for the full year, business that is on its way, I think. Dan, question about ProCore? We're heading back to Carpinteria, California. with this one, Chris. Can't wait to visit. Jason, I don't know anything about this industry. Software for construction companies? What does this even look like? Well, you know carpentaria, Dan, so that's just where we got to leave it, I think. Now, hats off to you for getting that one. Matt Argusinger, what are you looking at this week? Dan, I think this one you'll understand a little better. I'm going with Stanley Black and Decker, tickers SWK. They make tools for customers and

various industries. You probably know some of the brands like Stanley. Black and Decker, Craftsman, Boss Stitch, if you renovate a home like I've done in the past. Dividend Aristocrat, 55 years of consecutive dividend increases. They've actually paid a dividend for 146 consecutive years. It's remarkable dividends 3.4%. They recently slashed guidance. Stocks came way down. I think it might be a bargain.

So that's on my radar right now. Dan, question about Stanley Black and Decker? You know, Stanley tools are pretty expensive, Chris. You'd think that the stock would be pretty expensive too, but with the recent dip, it might be at a discount right now. Hey, I love that, Dan. Love that thinking. What do you want to add to your watch list, Dan? I'll tell you, Chris, again, I don't know anything about ProCore. That just seems like a complete black hole of an industry to me.

But I do know a thing or two about Power Tools. So I think I'm going to go with Stanley Black and Decker this time. We'll leave it there then. Jason Moser, Matt Argusinger, guys. for being here. Thank you. Thanks, Chris. That's going to do it for this week's Motley Full Money Radio show. The show is Mixed by Dan Boyd. I'm Chris Hill. Thanks for listening. We'll see you next time.