Motley Fool Money - Rising Unemployment, Rising Investor Optimism

Episode Date: April 17, 2020

More than 5 million more Americans file for unemployment as the monthly total surpasses 22 million. Abbott Labs gets a boost on optimism over its coronavirus testing. Gilead Sciences gets a boost on optimism over its coronavirus treatment. Procter & Gamble reports its biggest U.S. sales gain in decades. Amazon hits an all-time high. Comcast launches a preview of its Peacock streaming service. And Verizon buys BlueJeans Network, a videoconferencing company. Motley Fool analysts Jason Moser and Ron Gross discuss those stories, take stock in the banking and airline industries, and weigh in on some dividend hikes. Plus, the guys share a few stocks on their radar: Spotify and CRISPR Therapeutics. And Okta co-founder and COO Frederic Kerrest talks cloud-based security software, password protection, and misconceptions about entrepreneurs. Learn more about your ad choices. Visit megaphone.fm/adchoices

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What? Oh, boy. Fantastic. You guys go hard. Daredevil Born Again, official podcast Tuesdays, and stream season two of Marvel Television's Daredevil Born Again on Disney Plus. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money Radio Show. It's a Motley Full Money radio show. I'm Chris Hill joining me this week, Jason Moser and Ron Gross. Good to see you on my screen, gentlemen.

You as well. How you do? We've got the latest headlines from Wall Street. Octa co-founder Frederick Karris is our guest. And as always, we've got some stocks on our our radar, but we begin with the big macro. An additional 5.2 million Americans filed for unemployment this week. That brings the total over the last four weeks to 22 million Americans unemployed. And yet, gentlemen, the Dow, S&P 500, and NASDAQ all up this week. And Jason, I know there are some bright spots out there and we're going to get to them. But just the unemployment number and a rising stock market really seems like a discount. It really does. I think this portends what is going to be really a tale of two recoveries, right? I mean, we're going to see the recovery for Wall Street and we're going to see the recovery

for Main Street. And I think it's fair to assume we always talk about the market being forward-looking. I mean, the market is going to get ahead of the actual recovery, right? And so, I mean, at least we're seeing, we came out of a really bad stretch in March where it seemed like every day there was nothing but bad news. And now here in April, we're starting to see some glimmers of better news. And it does seem like the curve is flattening. Maybe there's a finish line here. And I think that's ultimately what the market is taking into consideration, at least partly,

is that there is a finish line here at some point. We're talking about opening the country back up here, step by step, little by little. And that's encouraging. But it is going to be, I think, the tale of two recoveries. And Jamie Diamond, CEO of J.P. Morgan noted in his most recent J.P. Morgan shareholder letter, around 100 million Americans' own stuff. stock. And that's an impressive number from one perspective, but from the other perspective, it also shows that most Americans don't actually own stock. And I think that's where that

other side of the recovery is going to be a bit of a bigger question mark is we sit here, we talk about these market conditions and enjoy the fact that the market's maybe recovering a little bit, but we can't ignore the fact that most people out there aren't participating in this, and there are some real ramifications of this shutdown that are going to play out for a while to come. But there is a finish line. This isn't something that's going to last forever. It's not going to be a lost decade. And perhaps that's something that's playing into these numbers today. Yeah, great. And I agree. It's all about the market being forward-looking. I think what the market is telling us is that they see the stimulus packages as a bridge to what will one day be a new normal.

And the new normal will include antivirals and vaccines, which are also at the same time, we're getting good news about these coming out. So a flattening curve, a stimulus program as a bridge, antivirals and vaccines kind of gets you back to where, at least somewhere closer to where you want to be, and the market is showing us that right now. Yeah, I mean, we definitely saw some encouraging news, let's call it. You look at Abbott Labs and the COVID-19 tests that they're working on. Gilead Sciences, that stock was up about 10% this week on reports of a clinical trial of Gilead's antiviral drug that could be promising in terms of treating COVID-19. So, yeah, I think that there are definitely some bright spots that investors are excited.

I think it's fair also to look a little bit more for it. I mean, we're getting into this earning season now, which I think is going to be pretty interesting. And all we know going into this earning season, it's going to be bad, right? But it's going to be really bad. And that's all we can really say, right? It's very difficult to quantify this because we haven't been through some. something of this nature before. I mean, those unemployment claims are phenomenally large.

And I think you have to go all the way back to 1982, I believe, to see the last stretch of time where it was something of this magnitude. But for me, I mean, I am actually looking to next earnings season, because I think that's actually going to be a bit more telling. It's going to help put this earning season more into context. So while the market is reacting pretty positively today, I certainly wouldn't read into that and think, oh, we're out of the woods now, because it's very, very possible that in the next three months, as the next earning season starts to hit, we're going to get a little bit more context as to how bad things either are or were, and we, I think, will know a whole heck of a lot more three months from now.

And unfortunately, I don't think we're going to flip a switch and get back to some more close to normal. There's too many people unemployed, and there are too many small businesses that, unfortunately, I think, are going to go out, even though there's a paycheck protection program and other stimulus programs for small businesses out there. So not everyone is going to go back to work quickly. Some folks are going to have to switch careers, I think. They're going to have to find other places to work. This is going to take a while. So while the economy will look better probably six to 12 months from now than it does today,

it's not going to go back to where we were six months ago. Not anytime soon, I don't think. Well, let's move on to retail because we got the monthly report. for March and sales fell nearly 9%. That was the worst drop in history, although groceries were a bright spot, consumer goods as well. And Ron, we saw that on Friday with Procter & Gamble's third quarter sales up 10% because among the brands in the Procter & Gamble Empire, you've got Charmin toilet paper and bounty paper towels. Yeah. So two things. Don't extrapolate that March retail sales as something that looks not that bad at eight or nine percent down because it's a short period

of time and things are actually much worse than that, I think, if you broaden out the lens. And I think we'll see actually numbers come in that except for grocery and beverages will just continue to be really, really weak. On the other side, I wouldn't extrapolate too much out of Procter and Gamble because that strength is more of a one-time, perhaps a two-time hit because people were stocking up on consumer staples. Theoretically, that's not going to continue into the future, at least not at this pace. So while PMG had a real strong report raised their dividends and, you know, kudos to them

and what they're doing, I would be careful not to extrapolate those results into the future. And Jason, Amazon shares hitting another all-time high-desper. Well, I mean, that does make a lot of sense, right? We're seeing, I mean, clearly a lot of businesses struggle in this market. But, I mean, as we as we note, I mean, in times of, of, trouble. This is when the leaders typically gain more share and come out on the other side of the recovery even stronger. And so whether it's an established business like Amazon, and that sort of makes a lot of sense there, look at some of these other businesses that are

participating in the digital economy. And it's understandable why they're performing a while do a docu-sign hitting 52-week highs here. Well, that makes a lot of sense. I mean, we don't have to sign papers in person anymore. We can do it digitally. Teladoc Health, obviously, telemedicine gaining traction. Look at Shopify. I saw a data point. here now where Shopify's network is essentially handling Black Friday level sales or Black Friday level traffic every day, which is just amazing to think about. But the fact of the matter is that Shopify is a business that helps people set up their e-commerce presence. So that makes a lot of sense there. And then you couple that with what we saw news this week where Stripe,

the payments company just raised some more money at about a $36 billion valuation. Now, understanding that private valuations are a bit more nebulous than the public values, But that puts Stripe at a 44% premium to Square. And Square's done an awful good job as well. Now, the reason why Stripe matters is because Stripe is the payments provider for Shopify. And so Shopify's success, to a degree, begets some of Stripe's success. So if we do see a point in time where Stripe does go public, there's going to be a lot of interested parties there as well. So there is an opportunity here for a lot of companies, and we're seeing some really capitalize. Yeah, I think the crisis exacerbates the opportunities for the market leaders, right?

Amazon's, the Costco's of the world, they're going to be the winners here. There will be a retail shakeout. There will be a restaurant shakeout. We're not going to be left with the same amount of retail and restaurants out there after this is over. We saw earlier in the week, JCPenney finally perhaps talking about some kind of bankruptcy, although I think it should be a liquidation, not a reorganization. How long can we drag this one out? But that's just one example.

Yes, companies are furlowing workers, and yes, they will bring them back online at some point, but they're not all going to come back online and not all these businesses will survive. Let me tie two things together that we've been talking about here. One is market leaders and the other is the earnings season that we are entering into right now. Because Facebook and Alphabet make a ton of money off of advertising. And we're starting to see more and more data come out about advertising spends being slashed. Barry Diller, the chairman of Expedia, came out this week and said, Expedia normally spends around $5 billion in advertising.

This year, they're not even going to spend $1 billion. Now, I get that they're in the business of travel. Not every business out there is necessarily going to slash their ad budget by 85%. But that's going to be interesting to see what color we get from Facebook and Alphabet. Yeah, I mean, I think that's exactly right. I think when you look at these platforms, whether it's Facebook or Google, I mean, I'll throw Twitter in there as well. These are platforms that all see, they're all seeing tremendous boosts in engagement. The dilemma is that engagement really is more about what's

going on with the coronavirus and COVID-19. I mean, that is really what is covering these networks wall-to-wall. And advertising partners don't really want to be advertising in the midst of that news cycle, right? I mean, you don't want to be throwing your advertising dollars towards a platform that's really focused on probably the worst news we've been dealing with, you know, maybe in our lifetimes. But, I mean, it is something that will pass. Another interesting point, you know, Pinterest recently updated their numbers, I think withdrew guidance. But they noted even despite the weakness across the entire advertising market, their exposure

to some of more, there's some of the more affected segments like travel and automotive and restaurants, that their exposure is a little bit lower in those segments. And those segments have been hit a little bit harder as well. So it is interesting to see how some networks like Pinterest, which cater to a little bit more of a specific audience, are a little bit more protected in a time like this. But you're looking at Google and Facebook. I mean, they're going to come out of this just fine. Yeah, but I will add, you know, you would expect to see companies pull back on marketing

and advertising because those are variable expenses versus fixed expenses. And that's the lever they can pull to kind of rein in expenses. and costs as they need to wait this out. So that is one place, the revenue is not going to be there anyway. So to pull back on marketing and advertising is almost a no-brainer, bringing those costs down, buy yourself some time. Before we go to the break, Jason, the big banks kicked off earnings season this week as an industry. The big banks typically go first, Goldman Sachs, Bank of America, JP Morgan, Chase, Morgan Stanley.

what stood out to you when you look at them as a group this week? Yeah, I mean, to me, the headline really, the headline could be summed up in two words, and that's lost reserves. And, you know, I've been thinking about this. I think one of the byproducts of the Great Recession, it could be argued, is that it did put our major financial institutions on firmer footing from a capital perspective. It certainly gave them the mindset to come into something like those a little bit more prepared. But they're doing the things that they need to do.

They're going to continue to pay dividends until that becomes something that is more concerning. Buybacks are suspended. But back to the reserves. I mean, we look through these calls here. J.P. Morgan built their reserves up by $6.8 billion this quarter. Bank of America built theirs up by $3.6 billion. And since year end, their reserves are now built up by $6.9 billion. Wells Fargo built theirs up by $3.1 billion. And, Chris, you know, I love to go through these earnings calls and just sort of search for some language there. talk about that word reserve. This quarter, J.P. Morgan mentioned the word reserve, and they're called 31 times. That was six times a year ago. Bank of America used that word 46 times this quarter versus 10 times a year ago. So there's a clear trend there, and these banks are very focused on making

sure that they are in good capital positions, and that's what we want to see. Agreed. Now, that's interesting research. Counting the number of times, I love that. Hey, the data is king, Ron. You got to go where the data tells you. The other trend I saw that pretty much across the board, the only bright spots for all of these companies were their trading divisions, whether it's Bank of America up 33%, JP Morgan, up 32%, Golden Sachs, up 28%. We're relatively large numbers, only bright spot pretty much across the division. Citibank, more focused on consumer, not getting it done pretty much anywhere yet at this point,

but trading strong, everything else week. Coming up, if you're a fan, of the Fast and Furious movies. We've got some good news. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. Chris Hill here with Jason Moser and Ron Gross. The airline industry getting a little bit of good news this week, Delta, American JetBlue, and Southwest, all coming out saying they've reached agreements with the Treasury Department on that $25 billion plan for payroll grants. So, Ron, we were talking earlier in the show about companies getting a bridge. This is certainly a bridge for the airline industry.

A badly needed bridge. And it's interesting. From a stock perspective, it looks like analysts were hoping for more. I'm not sure what more they were looking for because the stocks didn't react as one perhaps would have expected. But this is very important. $25 billion, as you said in payroll grants. No furloughing until September 30th.

limits on dividends, sherry purchase, executive comp. One of the interesting parts of this is it gives the government's warrants to acquire stock. So it's likely that when this all shakes out, we're going to end up with some government ownership of the majors here. And folks like American Delta, United JetBlue Southeast, participating in this program. So that will be interesting to see. I don't know if this is going to be enough, quite frankly.

I think the airline industry is going to get back to some kind of. kind of new normal very slowly. 25 billion, and there's another 25 billion on the other side and stimulus as well. We may have to go back to the well here depending on how long this takes. Yeah, and the more you hear from the CEOs in the airline industry, the more you get a clear picture of just how they are cutting capacity to the bone. Yeah, United came out and said demand won't come back quickly, expect demand to remain repressed for the remainder of 2020 and into 2021. That's sobering, but it's realistic. Even when we do get back to travel, planes will be nowhere near capacity.

Maybe there'll be at half capacity if we social distance. International travel will certainly take a while to come back. So, you know, this will take a while. Prices obviously are very, very low, as they should be. And if we can get back, let's call it a year or two from now, or even three, gains from a stock perspective could be strong enough to make up for the time it will take to get us back on our feed here. This week, Comcast started a soft launch of its new Peacock video streaming service.

Comcast is the parent company of NBC and Universal. So, Jason, there's obviously a lot of content there with the office and Parks and Rec and the Fast and the Furious movies and the Despicable Me movies. Interesting, though, that they're doing this soft launch. This is not what Disney did with Disney Plus, where they delayed the launch and did everything at once. This is starting now just for sort of the high-end subscribers of the Xfinity services, and then into 2021, it's going to get the full push. Yeah. I mean, I guess I'm on the fence about this service. I mean, I understand what they're doing. I wonder what their end goal is here

with this. I mean, is it to have a presence in the streaming space? Is it to build a streaming empire, so to speak? And this is one of the first bricks that they lay in the founding. So I think it really does boil down to, are they going to have that arsenal of content that ultimately will attract viewers that keeps them around and then maybe affords Comcast the ability to raise prices on that service as time goes on? Because it really does boil down to having content that people want to watch. And so one of the comparables there, I look to, I see what Disney is done with FX on Hulu, for example.

And as a Hulu live subscriber, you know, that's essentially kind of your skinny bundle, right? cable, but it's not cable. But they've rolled FX into that Hulu family, and it gives them the opportunity to continue monetizing on the advertising front while also monetizing on the subscriber front in the context of a bigger offering. And so it feels to me like consumers are starting to become a little bit exhausted with all of the streaming services that are out there. Peacock is definitely late to the game. I just don't know how many eyeballs it's ultimately going to attract. The goal is obviously 24-7 law in order. So what else is there?

No, but you know, they're all reasonably priced, you know, in a vacuum. With ads, $5, no ads, $10, that's great. But how many of these are going to show up on my credit card statement every month? I've already got four, five, six. There's too many. We have to, we're going to go back at some point to some kind of bundling, some kind of partnerships, or there's going to be just big winners and lots of losers. And that will be interesting to watch.

All right, guys. We'll see you later in this show. Up next, a conversation with Octa co-founder Frederick Karris. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. It was three years ago this month that Octa went public.

Octa is a software business that helps companies manage identity and access. The stocks risen more than 500% since the IPO. And earlier this week, Motley Fool CEO Tom Gardner and Succaulteful, Tom Gardner and senior analyst Bill Mann talked with Frederick Karris, CTA's chief operating officer and one of the company's co-founders. They discussed cybersecurity and tips for setting up a good password. Frederick Karris kicked things off by sharing Octa's origin story. So we started the company just over 11 years ago.

It was me and another guy at Todd McKinnon. We still work together after 11 plus years. I've spent more time with him than I have with my wife. So I know all of his little pet peeves. Today the company's got about 2,400 employees, about 8,000 enterprise customers. We've been public for three years on NASDAQ, so that's 12 quarters. Not that I'm counting, but if I were, it will be 12 quarters. And I think it's about a $600 million revenue run rate business grown in the high 40 percentage.

So look, if you'd give me all those stats when we started the company 10, 11 years ago, I would have taken them in a heartbeat based on where I am sitting today. And what I think is ahead, obviously the COVID crisis notwithstanding. I think the opportunity is great in the next three, five, ten years. And I'm excited to talk with you with you guys about it today. So Frederick, I'm pretty good at math. And so if I go backwards 11 years, yeah, you are founding your company. You're at Salesforce in 2008 and 2009 when you were talking about this,

which was really the last real. financial crisis, obviously very different from today. It was a real leap of faith, I think, for you all to go out during that time. Are there some things that you feel like you got right from the outset by virtue of being forged in steel, so to speak? Yeah, well, certainly I think that, so a couple of things there. The first one is, if you look back historically over the last 20, 30 years, large technology companies have successfully been founded oftentimes in these moments of crises. So whether it's Google that happened on the previous one, you look at our whole generation of cloud technology infrastructure companies that were built in 2009, 2010. Why is that?

Well, first of all, when you're building a company like ours, it's infrastructure, its identity, it's security. It takes a couple years just to get the core of the platform up and running. So there's nothing going on in those first couple years other than building the software, trying to put the first team together, spending a lot of time with potential customers or not even customers, you don't have any customers, but just talking to people about what kinds of problems you would help them solve. And so by the time you've actually built up that first base of product and feel like you're good enough to get out there and get going, people are actually starting to buy again. So I wouldn't be surprised if we see that happen again this time around. I think

entrepreneurs are a very resilient bunch. Certainly, I think there's a lot of, there's a lot more, there's a lot more focus put by venture capitalists on the types of businesses that they're going to fund without a doubt in the coming times here. But I think for those who really find the right product market fit or opportunities, you're going to see a whole new host of companies that are built that way. Now, for us, we also kind of lucked on the timing, right? Because if you just look at the data on what's happened in enterprise IT spend over the last 10, 10 years, yeah, you would say, well, you guys are geniuses. It's not like I could have foretold that in my crystal ball when we were building the company in 2009, right? Software as a service cloud security was a

very small business. We kind of took this leap of faith that it was going to go to where it was going to go. I could have never, never hoped for these kinds of results. So we've been very fortunate that way. So can you just describe, define for somebody who's now encountering OCTA for the first time? Yeah. What is the OCT identity cloud? What does that mean? Yeah, absolutely. So what we do today very practically is we help with two main things. We help in what we call workforce identity management, which is for employees, contractors, consultants. If you're a new employee, you come to the company, a very easy way for you to access all of your applications, whether they're cloud, whether they're on premise, it's a very simple dashboard. It's a very easy way to go. It could be two-factor authentication, which is a one-time SMS on your smartphone so that you get that quick code to put in. So the idea is to improve the NU. user experience while also enhancing security. Something that's never been done. In the past, it's always like, you jacked one up, the other one went down, or you flipped

them around, but you can never get them both right. So we like to think, because of course, we're perfect that we got them both right and that you can do both things. What does that mean for IT? It means there's one central place they can manage all these things. So if I work for you, you let me go. There's one place you can take away access to all these publicly available internet services, so I can't go home and log in the Salesforce and take the forecast across the street to

the other guy. So that's the first business. Workforce identity management. It's at scale. It's in large deployments, you know, large insurance companies, large parts of the government, Fortune 500 companies are deploying it to their employees and their contractors and their partners. It's on any device since it's basically off, since it's on the web, it's on any device, of course. The second part of the business is customer identity management. So if you fly on JetBlue, you have a true blue number. Or if you go to MLB.com, you're one of 60 million consumers every year who logs in to watch their identity management. baseball games, or you have one of the 27 different properties at Albertsons, the retail chain,

that you go and shop at. We run the identity infrastructure for all of those. So that when you go to Albertsons, if you have three different parts of the Albertsons business that you actually buy from, you actually have one username, one password, one number, make it very easy for you. And on the backend, Albertsons can actually track Tom and say, oh, Tom shops at these three places. Let's make it really easy for him to shop at this fourth one. Let's get him a bunch of coupons and things like that. So those are the parts of the business. Some of them, in a lot of cases, very transparent.

People don't even know that they're using the Octa service. Millions, tens and millions of users authenticating every day on the service now. So it's really starting to become a big part of the economy as we're out there. And we're fortunate. Things have gone well. And when you think about the single point of failure for any security situation, it is always the individual.

So having, leaving the individual off the table for you in some ways creates different vulnerabilities for whatever systems you all are working with. Yeah, that's totally right. I mean, if you look at these, you know, it's not like when people, you know, when you get one of these unfortunate articles that are on the top of the Wall Street Journal, you open it, it's above the fold, so-and-so just got breached. It's not like hackers cracked AES 256-bit encryption. What happened is one of the system administrators was using a weak password on some basic travel website, got compromised, they reused the password and got into a bunch of administrative credentials, and then bingo they were in. Now, that's not what happens all the time, but that's actually what happens a majority of the time. So you're totally right. And that's why just like basic password hygiene is just something that I cannot emphasize enough to all of your listeners. Just do the basic things. Don't reuse password. use complex ones, use passphrases, just all those little tips and tricks, and then multi-factor authentication. I mean, multi-factor authentication should be everywhere. It should be seamless. It's a very, very easy thing for people to do, and it really gets rid of all of these

types of problems. For somebody who has no idea what multi-factor authentication means. So multi, obviously more than one, factors for authentication. Very simple, when you go to the ATM machine. You have two factors. You have your card and you have your pin. So it's usually something something you know and something you have. So in this case, it's like when you go to your bank website, something you know, your bank password and something you have, your telephone, where it sends you an SMS with six digits, that's a version of multi-factor authentication.

I want to know about your podcast. Yes. Zero to IPO. Yes. So you were just, when we talked to last- I'm an accidental podcaster, yes. Now, when we talked to you last time, you were just getting ready to start it.

And I love it. Thank you. What are some of the things that you have learned from? You've had, you've had amazing guests on. And I mean, not just necessarily from a profile perspective, but you've had incredibly interesting entrepreneurs come through.

What are some of the main things that you are learning from them that you are reapplying to your work at Octa? Yeah, that's, that is, man, there's a lot of layers. in that. I love the question bill. So first thing is zero to IPO. I started getting a lot of when we were fortunate when the company went when octa went public. You know, we were helped a lot by

entrepreneurs who were ahead of us in the journey as we built octa. So I want to make sure I was giving back. I'm on the executive advisory board of the MIT Entrepreneurship Center. So I want to make sure that we're helping entrepreneurs. And I started getting the same question over and over as entrepreneurs would come ask me. And so finally I said, hey, you know what? Maybe I should just write a number of articles about this. And then people said, well, will you interview some folks? So I became an accidental podcaster. We did season one last year.

We actually just kicked off season two with Eric Yuan from Zoom a couple of weeks ago. We've got a few. We've got season two is going to be rolling out through April, May, and June. So there's more coming there. The idea is just to help everyone else debunk the myth of what happens in building these companies. And it feels like a lot of the information, first of all, I understand why, but the media tends to hype up massive success stories like Elon Musk, for Jeff Bezos or the ones that are complete failures.

And we don't have to go through the names, but where they lose hundreds of millions of dollars and there's fraud and all these other kinds of things. And what the media, and I understand why, they're trying to sell viewers. But what happens to 99% of the people right in the middle no one ever talks about. And it's just day-to-day, hard work, going to work,

trying to get all these things going. And, you know, some of my favorite podcast episodes were when you hear from these people like Carl Eschenbach, The famous guy who built VMware from 200 people to 20,000, who's known as being a go-to-market magician. And he tells you the story of one in 2004, before they even had iPhones or anything, he's sitting there with his rep trying to close one big deal

at a big pharmaceutical company, and he has to just sit there all day, and he can't get the deal done. And he's like, the rep's starting to cry. I got to go back to my wife. And you're like, what do you mean? Like, this is the legend. And so what we just wanted to translate to everyone.

And so what I took back to, Bill, which is a little bit comforting, is that it's hard for everyone all the time. And anyone who thinks that you can just read the press and it's up and to the right and everyone's a hero, that you're just being misled. And so half of the thing was the folks who came on

and it was Patty McCourt, who built a culture deck at Netflix, or Ben Horowitz talking about how he's trying to go public with three weeks of cash left, or, you know, or Andre Aguadala talking about how he practices for hitting the big shot. Because once in a while, you're going to have that big shot

and you've got to hit the big shot. It's true for me now. Right when we go into earnings that morning, when we're about to get on the earnings call, Todd and I look at each other with Bill, our CFO and our head of IR, and we say, this is a big shot. You've got to hit the big shots. You've got to get locked in.

You got to get focused in. And, you know, I'm just trying to help. I think entrepreneurship is great. It's not a perfect equalizer, but it's a lot better than going and working at large companies. You have a lot of people who have the opportunity to start new companies in all sorts of different industries. And especially in today's, it's the driver of the economy.

So the more that we can simplify and debunk the myth of entrepreneurship and just share it, I think it behooves us all to do that. Coming up, we've got a couple of stocks for your watch list. Stay right here. You're listening to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about it. The Motley Fool may have formal recommendations for or against. So don't buy ourselves stocks based solely on what you're here.

Welcome back to Motley Full Money, Chris Hill here. Once again, with Jason Moser and Ron Gross. Verizon has entered the video conferencing fray, gentlemen. Verizon this week bought Blue Gene's network for less than $500 million. Blue Gene, unlike Zoom, Jason, they focus much more on the enterprise side of thing. They've got 15,000 customers, including some pretty big companies out there. It really is going to be interesting to see how this all shakes out. Yeah, you know, Verizon CEO Hans Vesberg noted that they've been looking at this company.

They've been looking at Blue Jeans for about a year and that he believes that Verizon's distribution will be a big advantage in helping grow that platform. Now, in theory, I agree. I mean, I think Verizon has phenomenal distribution and that there's a lot of potential there. You know, again, we talk about Comcast and Peacock and maybe being a little bit late to the game. Granted, a lot of this kind of happened very quickly with coronavirus concerns. and Zoom has taken off because of it. I honestly think there is going to be a real branding problem here, though, with Blue

Jeans. I just don't know that people are going to work that into the conversation very, very well. Like, hey, I'll blue jeans you, or hey, I'll see you on Blue Jeans. I mean, there is potential there, but when we look at all of the progress Zoom has made thus far, I mean, privacy concerns notwithstanding, I mean, they're digging into fixing that problem now. But what they did early on was just, they took this market by storm. And it's really become one of the phrases that pays here during this time. It's become a verb, right? I'll Zoom you.

So I do understand the sentiment there. I think that competing on the commercial side makes more sense. But they have to figure out a way to propose a better value proposition. They need to come up with a better value proposition and convince a lot of those customers out there that are using Zoom today, why they should be using blue jeans instead. I'm not certain that Verizon's distribution network cuts it, but we will see it seems like a relatively modest bet on the part of Verizon. I wouldn't be surprised to see this thing get written down in a significant fashion,

though, over the course of the next year or two. It is interesting for a company most of us haven't heard of and that is less than $500 million value. They do seem to have some real serious customers, whether it's Facebook or LinkedIn or Viacom and the large bank, a lot of them of the ones we just mentioned earlier in the show appear to be customers as well. So it will be interesting if we get some user data at some point to see kind of how much penetration they have here. Verizon also said they have kind of some kind of a future in their 5G offering.

I don't necessarily know what that will be. That will be interesting to watch as well. But just on a step back kind of a note, it's interesting to see one of these tuck-in acquisitions starting to happen. We've been wondering if M&A activity will pick up. I think we were largely talking about if that will happen among public companies and that if Blue jeans is obviously private. But it's interesting to see Verizon putting some money to work here during a time where maybe Blue Jeans valuation was down because the competition is heating up, hard to say.

But I think we're going to continue to see lots of these little tuck-in acquisitions. Well, I think that's a good point you make there, Ron, too, is this acquisition happening now. They can say they've been looking at it for the past year. But this may have been about as attractive an opportunity for Blue Jeans as they were going to come across. I mean, you've got to figure that at this point, they're selling it, you know, a lower valuation than maybe they would have been a year ago. Or perhaps higher because the space is hot. That's the other side of the trade. That's true.

Hey, real quick, before we get to the stocks on our radar, Ron, this week, Johnson & Johnson, Costco, Procter & Gamble, they all raised their quarterly dividend. Not a huge amount, you know, sort of in the range of 6 to 8 percent. But in this environment, when all these big companies are either keeping their dividends and place or cutting them back, I feel like this is going to be a badge of honor down the line. It's a really strong signal to the market. It's showing not only is business strong right now and the cash flow generation is strong right now, but our balance sheets are strong and we can continue to do this and not only continue but increase them. Very strong signal to the market into investors. All right, let's get to the stocks on our radar. Our man is zooming in.

Steve Britta, we'll hit you with a question. Jason Moser, you're up first. What are you looking at? Yes, is the world's largest music streaming platform. I'm taking a look at Spotify. Ticker is S-P-O-T. They have earnings coming out on April 29th, and this is a stock we continue to follow here at the Fool in many of our services. Monthly active users is one of the key metrics for Spotify. They recorded 271 million last quarter. That was 31% growth from the year ago. But the more important metric is actually the premium subscribers. Last quarter, they chalked up $124 million there, and that was 29% growth. And so I want to see how they're growing that premium base, particularly in the face of this stay-at-home economy, so to speak, this is a time

where they should be shining. But they make their money a couple of different ways, advertising and subscriber fees make up the overwhelming majority of their revenue. And then finally, just want to get a little bit more insight as to how they view their acquisition of the Ringer family of podcasts, because they continue to tout this exponential growth in the podcast market, the opportunity there. And I tend to agree, I just want to see how they're exploiting it. Steve, question about Spotify? Sure. What makes them different than all the other streaming providers? Well, I think they really, when they were competing against Pandora back in the day,

it was more of a bespoke offering which gave them the leg up. You could go in there and listen to anything you wanted on demand. And that ultimately is what gave them a leg up. And now, as users continue to listen, the technology they recognize is what you're listening to. They have a very good recommendation engine. And they've incorporated a lot more into the offering as well. so it's become more of an entertainment platform. Ron Gross, what are you looking at?

Going back to CRISPR therapeutics, CRSP, down 32% from its December 2019 high. Gene therapy company focusing on the CRISPR-Cast9 technology to edit genes. Main partnership is with the Vertex, a $69 billion pharmaceutical company, a good partner to have. Importantly, their balance sheet is solid, $943 million in cash, only $52 million in debt, and they've had some really promising early stage data that they actually can cure a sickle cell disease. So looking forward to see more of that. Steve? I'm a CRISPR shareholder.

Ron, do you see them playing a part in the COVID-19 solution? Not in the near term, no. They would have to ramp up and start from scratch. So I think there are other folks who are much further along, and we should look to those folks for the next six-month, three-year innovations. What do you want to add, Steve? I think I'll go with Spotify. Hey now.

All right. Ryan Gross, Jason Moser, guys. Thanks for being here. That's going to do it for this week's show. I'm Chris Hill. Thanks for listening. We'll see you next week.