Motley Fool Money - Surprising Earnings, Conservative Management

Episode Date: February 24, 2023

There's a lot to analyze in this episode, including revenue to the upside, CEOs waving the caution flag, and Hobbits.  (0:21) Emily Flippen and Jason Moser discuss: - Nvidia's results and place in the AI universe - Block surprising Wall Street with strong 4th-quarter revenue - Mercadolibre's enviable free cash flow - The latest from Walmart, Home Depot, Booking Holdings, Etsy, and Wayfair (19:11) Emily and Jason continue the earnings analysis and discuss: - Warner Bros. Discovery growing subscribers and cutting costs   - The latest from Intuit, Teladoc Health, Domino's Pizza, and Shake Shack  - Their most recent stock purchases - Two stocks on their radar: Adobe and ANSYS Looking for even more stock research and recommendations? Check out the details on our Epic Bundle membership at Epicstart.Fool.com Stocks discussed: NVDA, WMT, SQ, HD, BKNG, ETSY, MELI, W, INTU, TDOC, WBD, DPZ, TWLO, SPOT, NKE, SHAK, ADBE, ANSS Host: Chris Hill Guests: Jason Moser, Emily Flippen Engineer: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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It's the Motley Fool Money Radio show. I'm Chris Hill, joining me on the show. Motley Fool Senior Analyst, Emily Flippin and Jason Moser. Good to see you both. Hey, hey. Hey, morning. We've got the latest headlines from Wall Street. We will dip into the full mailbag. And as always, we got a couple of stocks on our radar. But we begin with a tech company on a hot streak.

Shares of Invidia popped on Thursday after the chipmaker's fourth quarter results were better than expected. Year to date, Emily, shares of Invidia are up more than 60%. Is it that good? Or was this just a stock that maybe got oversold? Well, a 21% decrease in quarterly revenue and a 55% decrease in earnings. per share is apparently enough to warrant that type of reaction, Chris. No, this isn't a company that is just performing that incredibly, but it is, as you mentioned,

coming off of a lower base of expectations as this company has really struggled to keep up post-pandemic growth as a result of massive expansion in their gaming business. As a reminder, this is a company that makes best-in-class GPUs. So gaming has been a consistent source of demand for them. But as it has come down, obviously sales have come down too. In fact, gaming revenue was nearly cut in half over what it was last year for some context behind those numbers. But the big story here is data centers and AI.

Data centers are one of the few segments of NVIDIA's GPU business that is still growing. It was up 11 percent last quarter, 41 percent for the full year, so still a lot of growth there. And management spent a lot of time in the call talking about chat GPT and AI. And I know that this is kind of a hyped industry. And we've talked about that in the show in the past. their processors are vital for any type of machine learning or AI processes that are happening at organizations across the world. So to the extent that there is any increase in demand for these types of programs, Nvidia is definitely a type of business that will appreciate as a result.

They're seeing an increase in demand, which is part of the reason why the shares are up so much this week. They're an Nvidia A100 is really just the flagship chip for AI and their GPUs make up the massive lion's share majority of machine learning market. So, you know, machine learning AI, it's table stakes in a lot of industries right now, which means Nvidia is table stakes for a lot of industries. Jason, Emily mentioned how there was a lot of talk on the conference call about AI. Invidia, they're not the only ones. I mean, pretty much every major tech company on their latest earnings report. So much of the call is dominated by AI. It seems like That's also table stakes in a way that Wall Street wants to hear from these tech companies,

what is your plan in this arena? Well, Chris, I have a new routine here at home whenever I get up in the morning. Before I even say good morning to my wife and my kids, I just mutter the words, artificial intelligence, right? Immediately it sets these expectations, right? There's this more glass-half-full perspective on me and how my day is going to shake out. The excitement is just palpable. And so it works beyond industries. Try it. I promise you, you'll see a difference.

In all seriousness, I mean, to your point, it is exciting times. No question to be a tech investor with all of the different things that are going on out there. I think we talked about this on a Motley full money, a weekly, one of the shows during the week, a couple of weeks back, just in regard to AI and sort of where we stand with all of this. I think it's worth everybody just taking a step back. pull back those expectations just a little bit, right? I mean, this is all, we're seeing the mentions of artificial intelligence every day, all across financial media, but it's still not abundantly clear exactly how this is going to play out,

how companies are going to be able to benefit, how ultimately consumers will be able to benefit. No doubt that there will be profound ways that it impacts our lives, but I think it's going to take us a little while to ultimately realize that. So I definitely do not blame any of these companies for talking about it, for touting their investments in it. I think it's also worth just remembering. This is still very early days where AI is concerned. And so it's going to take some time to really see exactly how this changes the face of technology

in our everyday experience as consumers. Yeah. To play devil's advocate a little bit though. I mean, AI is already being used on a day-to-day basis for organizations across the globe. In fact, you talk about companies in CrowdStrakes, a great example, who has built their entire Falcon platform based off of generative AI and machine learning models. And that helps people and organizations on a day-to-day basis. And I do think that the moves NVIDIA is making here, they're partnering with big cloud providers to provide AI as a service, which you can't really acronym without saying something inappropriate.

But the idea is here that they can provide access to generative models or supercomputing powers that can actually meet the needs of companies looking to integrate AI and machine learning without them needing to own the GPs themselves. And to the extent that that becomes widely available, I think it provides a lot of accessibility so these large corporations that are already incorporating it gives access to smaller organizations to do smaller moves themselves. But you're right. We're still very early. You wouldn't know it from its share price, but Walmart's holiday quarter was a strong one. Fourth quarter profits and revenue came in higher than expected.

Same store sales in the US were up more than 8%. But Walmart's guidance for the year ahead had shares down just a little bit this week, Jason. Yeah, I was a little surprised by that because the guide, at least relative to so many of these other companies we've seen, the guide was actually pretty reasonable, I thought. But I mean, it's not surprising to see the company perform so well during the holiday quarter, right? In an environment where value is becoming more and more valued by the consumer, well, low prices is what Walmart is all about.

And that's certainly working out well for them. When you look at the numbers, total revenue of $164 billion, that was up 7.9 percent, excluding currency effects. U.S. Coms up 8.3 percent. And they continue to bring down those expenses. The operating expenses as a percentage of net sales fell 44 basis points. So they're maximizing efficiencies, continuing to push traffic through those stores. And really, with Walmart, we don't talk about it enough, I don't think, but it really is grocery is such an important driver for this business. They continue to gain share in grocery over the past year.

You look at the grocery, health, wellness sales, those have a lower margin than general merchandise, but those sales have increased 330 basis points as a portion of their mix. So people are buying more stuff in that grocery segment, which I think just really speaks to one of the dynamics we've seen over the last couple of years, really, is just the higher income households are looking more and more to Walmart, to get their groceries, to buy those everyday household items. They're just seeing it as a valuable option there. And it's also playing out on Sam's Club. I really was impressed to see the Sam's Club numbers here with Comps and Sam's Club up 12.6% for the quarter, 21.5 billion dollars in sales for the quarter, right? And they

continued to grow that membership-based membership income growth was better than 7% for the quarter. And so ultimately to that guide, guiding for 2.5 to 3% revenue growth for 2023. I mean, And given everything we know, I don't think that's all that bad. When you look at the earnings growth there, it's going to moderate. The stock is not what I would call cheap today. I think that 24 times full year projections likely reflects some continued tailwinds from value seekers and those grocery share gains. But I think all in all, the company performed very well.

Signs of Life at Block, the company formerly known as Square, posted fourth quarter revenue of more than $4.6 billion, higher than Wall Street. Street was expecting and shares a block up just a bit after the report, Emily. Signs of life, Chris. Wow. Block didn't go anywhere. I will say the crypto market is certainly responsible for a lot of, probably the negative perception this company has amongst investors, retail and Wall Street, because Cash Apps dependents upon cryptocurrency. But Square itself in the company is still performing incredibly well. Growth has slowed, but this is one of those companies that has kept up an incredible rate of growth over the long term.

I think their compound annual growth rate for the last three years and the last five years is north of 50%. So really incredible growth from this business, but you're right in the sense that this business has struggled with profitability. And the cryptocurrency is just one aspect of that. Operating expenses in the quarter despite the revenue beat still grew substantially. And what I found really interesting is that CEO and founder Jack Dorsey changed his commentary around how they're gauging performance for this company, largely, presumably in response to investor feedback. This is a company that has always gone after what's called the Rule of 40, which is they're defining as they want their gross profit growth plus their adjusted EBTA margins to be north

of 40%. And there's been a lot of backlash from investors about the fact that these adjusted EBTA margins don't include stock-based compensation, which has been crazy at Block and Square. So they adjusted that. And they said, now we're targeting the rule of 40, but we're going to start using instead of adjusted-ebita, adjusted operating income. That's going to include the stock-based compensation and the depreciation for the rate of for the business. And that was 23% in the most recent quarter, so not to that 40% that

they're aiming for, but you have to appreciate that they've kind of changed the line here in response to feedback about how they're going to gauge financial performance for this company moving forward. Similar to Walmart, Home Depot's guidance for 2023 was on the conservative side. Throw in the fact that fourth quarter revenue was the company's first and miss since 2019 and shares of Home Depot down 7% this week, Jason. Yeah, certainly more understanding. for me, the near term concerns with this business versus something like a Walmart. I think management is setting very modest expectations on the assumption that we're going to see flat real economic growth here in consumer spending in 2023.

They also expect to see transactions continue to normalize as spending shifts from goods to services, right? And they're really going to benefit more from the goods than the services, though there is the services dynamic of the business. No question there. But I don't think this should deter investors willing to take the longer of you here. The numbers, I think, very respectable sales for the quarter, $35.8 billion that was up three-tenths of a percent. You saw overall comps and U.S. comps both down three tenths of a percent.

And ultimately, earnings per share grew just under three percent to $3.30 per share. You look at some of the metrics that matter for a business like this. The comp average ticket increased 5.8%. So spending did grow. That was offset by a decrease of about 6% in transactions. And I think something that we always pay attention to with Home Depot is lumber costs. Lumber costs on average were down over 50% year over year. And so that hurts that comps number for them.

And they quantified that at the tune of about 70 basis points. Now I think it's also worth mentioning that typically that's going to help them on the margin side in gross margin of 30. 33.3% was up seven basis points. A lot of threes in this quarter from Depot. I think they're making a very smart investment in their employees. They're going to be increasing annualized compensation by approximately $1 billion for the year. And I think that matters because ultimately the customer experience is where they can really differentiate themselves. I'm not saying it's the same everywhere. You run into some stores where people know what they're doing and you run into some stores where people don't. But I certainly appreciate them investing in

in that base because ultimately that is, it can be a competitive advantage. It's good that they recognize that and they're trying to invest in it. But yeah, it does feel like 2023 is going to be a bit of a reset year for Home Depot. We'll probably see that consumer spending continue to shift over the services side. But if you're taking the longer view, I mean, this looks like a time where you want to get the stock on your radar. It was a big week for e-commerce companies. Details after the break, so stay right here.

This is Motley Fool Money. I'm on vacation every single day because I love my occupation. Welcome back to Motley Full Money. Chris Hill here with Emily Flippin and Jason Moser. Before we get to the e-commerce, let's hit travel. Fourth quarter revenue for booking holdings rose 36%. CEO Glenn Fogle says travel demand is high and that what they're seeing at booking holdings is people continuing to spend

on higher-priced hotels. Emily, the pent-up demand that we've been talking about for a while, it seems like it's still there. No kidding. Fogel would be upset with you saying, before we get to e-commerce, let's talk about booking because booking has been on this multi-year venture to try to turn themselves into a more e-commerce focused business. The more they're able to actually handle the payments on their platform themselves, the better they have in terms of both bookings and margins. And that's actually exactly what we saw in this fourth quarter report. Revenue rose nearly 30 percent. Gross bookings also

rose and beat expectations. But more importantly, 42 percent of those gross bookings were handled by booking holdings during the quarter. That's their highest level ever in terms of customers. So that helped expand their margin profile as well. So despite their resurgence and travel, higher prices, all of those things benefiting booking, they're also benefiting from just more and more of those transactions coming onto their platform. Etsy's fourth quarter profits came in higher than expected, but cautious guidance from management kept shares of Etsy from moving higher this week, Jason. Seems like a theme here with the cautious guidance.

Yeah, I was going to say, as many companies right now, that is the big point of focus. It's in guidance. In management does remain cautious, right? They noted they're seeing so far into 2023 as it pertains to consumer spending. They're seeing these shifts and the pressures in the macro environment. It makes them, quote, very cautious, end quote. And so take that for what it's worth. But the quarter itself, I think, was encouraging.

We did see consolidated gross merchandise sales. It was $4 billion, down just slightly. But they set a pretty conservative table for revenue that they easily exceeded their revenue, consolidated revenue, just over $800 billion, was up better than 12%. Habitual buyers, I thought interestingly, those were six or more purchase days and over $200 in spend over the trailing 12 months. Those habitual buyers fell 9% year over year, but a lot of that was because of a tough comp. We saw that COVID tailwind fall off this quarter.

And if you look out over the last three years, you go back to December 31st, 2019, those habitual buyers are up 194%. It's a very encouraging sign that this House of Brand strategy is really working out for Etsy. And we're also seeing them monetize the platform better. The take rate continues to improve. Consolidated take rate of 20% was up 17.1% a year ago, up from 17.1% a year ago. They'll continue to invest in personalization, making it smarter and more catered to what each person is really looking for, which I think is the right call.

Macada Libre continued its hot start to the year. Fourth quarter results were much better than expected in shares of Macada Libre ticking up this week. One point three billion in free cash flow, Emily. That's a pretty gaudy number. Yeah, it must be nice for Mercado Libre. I know a lot of companies who would kill for these types of results. Nobody's really surprised that Mercado Libre is doing as well as they have.

2020 has been so far a record year for them in terms of both revenue. But here's what really grinds my gear. We're coming out with fourth quarter results. And I was really hoping that Mercado Libre would start breaking out the difference between their e-commerce business and their payments business. It's almost like Amazon not breaking out AWS from their own e-commerce business because you have to look at the growth in Mercado Libre's payments business and then also see the earnings of more than a billion dollars or EBITs of more than a billion dollars.

And think to yourself, there's probably some correlation there between the expansion and payments and the expansion and their operating income. And I wish that we as investors had a lot more color as to what's driving these operating results. Because if I had to guess, I think it has a lot to do with their consumer loan book. Shares of Wayfair down 25% this week after the online home furnishing companies' loss in the fourth quarter was bigger than Wall Street was expecting. Jason, was Wayfair's quarter that bad? No, it wasn't really that bad, but I do think, as with this, as with this, this is a lot of

sort of prevailing narrative. It is all about what's to come. And right now, this is a business that really needs to get its income statement back in order. We saw a lot of the potential of what they could offer here over the last couple of years. But again, pandemic tail wins. They can only ride those for so long. Management did set a pretty conservative table as well for the quarter. They didn't quite take, Reddit didn't quite take the hit that they were modeling for. at revenue $3.1 billion. It was down 4.6% from a year ago. And they are seeing more pressure on the international side of the business. They noted they're seeing those inflationary pressures start to revert, which is having a positive impact on order volume. And that's good. Gross

margin, 28.8% that was up from 27.2% a year ago. The company's still losing money, hand over fist, though. They've got to change that. And I think that's really what this all boils down to. And so they are working on. on figuring out ways to pass through more cost savings for the business model. They're around $750 million today. That is something that should continue. Again, I think that you're seeing just a return to sort of normalcy for this business, right? And so we're kind of back to square one.

It's not to say that the demand isn't there, but they really do need to focus on the financials there and start to exploit the profitability, the potential of this business model. It's the weekend, so after the break, we're going to relax with some pizza and entertainment earnings. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. Chris Hill here with Jason Moser and Emily Flippin, hitting some of the big stories

in the investing world this week. Just in time for tax season, shares of Intuit up after second quarter profits and revenue came in higher than expected. The parent company of TurboTax also announced that their chief financial officer, is retiring after 20 years within to it. I've said before, Emily, it always gets my attention when a CFO leaves, but in this case, you know, it's someone who's been there for a long time. They're promoting from within, so it seems like it's going to be a smooth handoffer into it. Yeah, famous last words, Chris, you should knock on wood. But if you had to guess,

this is the type of handoff that you expect from a company of Intuit size. And if you're waiting for a sign to do your taxes, this is your sign. Intuit's reporting. They're feeling pretty good heading into tax season. They beat expectations in the most recent quarter, but even with the expectations strong around tax season, their guidance is still a bit weaker than the market expected. Part of that, or a majority of that, is really how Intuit expects business to shape up for credit karma. Credit karma makes a majority of their revenue for referrals, for things like personal loans, auto loans, mortgages. As you may assume, by the weakness in the economy and rising interest rates, consumers don't really want that stuff as much as they did in the past.

Credit Karma has had a particularly weak quarter expected for that to stay weak for this foreseeable future. The good news is that into its bread and butter, which is their small business segment, that's still expected to perform pretty well. They saw revenue rise 20 percent in the most recent quarter, which is really impressive. My big question mark for the business note, though, is how CEO, Cizan Ghazari is going to think about the growth within Credit Karma because management reiterated their guidance that they expect Credit Karma to grow 20 to 25 percent a year for the long run. That's extremely aggressive growth. It's the same guidance they had out when they made this acquisition. You have to wonder if that original guidance was created in an economic

environment that we're not likely to see for at least the foreseeable future, if not many, many more years to come. So I think that guidance for credit karma is possibly overly aggressive. And if there is weakness and Intuit in the future, it's probably going to stem from having to pull back guidance for Credit Karma as opposed to into its really strong core business. that still generates so much cash, they're buying back shares, they're, you know, paying a small dividend. That's a strong business. Credit karma is still this wildcard. Teledoc health's revenue was higher than expected, but the telehealth company still posted a loss in the fourth quarter and shares of Teledoc down 10 percent this week, Jason.

Well, as we often say in investing, Chris, it's never a straight line up and companies go through challenging stretches. These guys are putting it to the test, to be sure. On a positive note, did hit the targets they reiterated in an investor conference at the beginning of January. The numbers revenue up 15% to $638 million in Justed-Ebat, up 22% to $94 million. The balance sheets in good shape. Chris, that's good news. You know, another massive goodwill write down this quarter. I mean, honestly, Chris, at this point, this is getting kind of amusing.

I mean, it is borderline laughable. I mean, how much could they have overpaid for Livongo? It is astounding. I just don't know that I'll ever fully be able to get past that. The only thing that helps, I try to remind myself the better help acquisition worked out very well. So we got to take the good with the bat, I guess. It's interesting. They're going to start reporting their business now in two segments.

They'll have the Teledoc Health Integrated Care, and that's primarily the B2B distribution channels, right? business sold through employers and health plans and providers, and then also the better help side of the business. And that's the mental health services that they sell through their direct-to-consumer distribution channels. I think it makes a lot of sense based on what their customers are telling them they want. It's a growing desire they say from their clients to shift away from just point solutions and toward multi-product integrated virtual and digital platforms. So that's kind of the North Star. That's what they're trying to build. They are doing that, But they've done that to this point with a growth at all cost mentality.

And that's cost them big time. It sounds like they're starting to shift away from that. That'll be something you want to keep an eye on here in the coming quarters. It just feels like a lot of opportunity left on the table from a business like this for sure. You know, if this keeps up much longer, this is starting to rival back in the day when Bank of America, just quarter after quarter, we'd talk about how they're still writing down the countrywide acquisition. It reminded me too of Microsoft for a time as well. It felt like Microsoft kind of ran into that same problem.

It just goes to show you. I mean, acquisitions can be great. Acquisitions can also be bad. While having that Lavango capability, I think, is additive to this business. What they paid for it was simply unacceptable and borderline criminal. Warner Brothers Discovery continues to grow its streaming business. grew 11% in the fourth quarter, but profits and revenue were not what investors were looking for. And CEO David Zaslov continues to talk about how Warner Brothers Discovery is cutting costs,

Emily. Yeah, let's rewind on this company a little bit. So if you aren't familiar with Warner Brothers Discovery, we can forgive that because this company, I mean, the history of acquisitions that led to this strange combination of businesses is really something that could take an entire podcast on its own. But really, this company, as we know today, was born in early 20, 2020 as a combination of AT&T's media business, WarnerMedia, plus Discovery Communications. So you can think about all the different streaming and content platforms that own. So HBO, CNN, Discovery, HGTV, Food Network. That's this weird combination that now exists under the Warner Brothers Discovery brand.

And their recent focus has obviously, as you mentioned, Chris, been focused on monetizing its streaming services, HBO Max and Discovery Plus. That's especially important as the ad cable market has just been incredibly soft. So there's a little bit of a backdrop heading into fourth quarter earnings, but as you mentioned, revenue did miss expectations by about 3 percent, coming in at a hair over $11 billion in the quarter, but those losses just kept blooming. They have impairment charges and, you know, stemming from that 2020 combination. That's been weighing on the bottom line for this business.

And it doesn't help that they also weak in terms of studio. They're coming up against the backdrop of last year. They released Dune. So great year for them previously. Nothing really coming out this year. So things aren't great for Warner Brothers in this most recent quarter. all the focus has just been on, what are they going to do with these two streaming services? And apparently the solution that management has settled on is, you know, we should just combine

HBO Max and Disney Plus. And you do have to wonder about Discovery Plus. Discovery Plus, thank you. You have to wonder about the consumer that is going to subscribe to both Discovery Plus and HBO Max because out of their nearly 100 million subscribers, management expects there's only about 4 million current subscribers that own both. And if you're a subscriber to HBO, and suddenly you're being told that your price is increasing because they're giving you the food network and HGTV, you might naturally be a little bit irritated. So I'm interested to see how consumers respond to this switch as it comes up over, I think Spring 2023 is when they're targeting the switch.

It could be a good thing for them in terms of boosting subscriber growth, but they could also see some consumer pushback. Well, and it almost seems like the clock is ticking just a little bit in terms of when you think forward maybe 12 months or so, if they have not meaningfully grown their streaming businesses or done the cost-cutting job that they want to, we're going to hear more talk of acquisition, meaning Warner Brothers Discovery as an acquisition target. But to the case you just laid out, Emily, I sort of wonder who wants to buy everything they own. I can see wanting the intellectual property under the HBO Max umbrella, it's hard to imagine paying up for Discovery

Plus at this point. Yeah, you have to wonder if they're just going to reinvent cable here, adding on stuff that people don't want for the sake of charging a little bit more. It's a bit laughable. But in the near term, they did talk about relaunching Lord of the Rings, essentially signing a deal to make more Lord of the Rings movies. Excuse me, yeah, Lord of the Rings films. I mean, this is going to be something that I think is going to get some possibly negative pushback from a very loyal fan base, if not done correctly. Now, they are very good at The Last of Us. That's had great feedback.

But if they mess up Lord of the Rings, wow, that could be bad. Yeah, the Hobbit nerds are just going to, like, they're going to have their knives out or whatever weapons hobbits carry. Send all emails to. Podcasts at fool.com. We can take it. Domino's pizza closed its fiscal year on a down note. But fourth quarter revenue and same store sales came in lower than expected.

And shares of Domino's down more than 10 percent this week. And Jason, it is close to a three year low. Well, the overly hospitable environment for Domino's and pizza delivery in general, it's starting to normalize. And that's definitely playing out on this business here. We're seeing that in the guidance as well. I mean, with that said, given Domino's position, the competitive position in the space, its size and its expanding menu, this pullback probably does.

represent an opportunity for shareholders who are taking that longer view. They may be down 25 percent of the last year, but Domino's is not going anywhere. Global retail sales, 5.2% for the quarter. U.S. same store sales up just under 1%. International same store sales up as well. They're adding stores. They grew the store base, 361 stores for the quarter. Ultimately, earnings per share, 4.2 percent. That was up 4.2 percent to $4.43. cents for the quarter. They do continue to gain market share as the greater QSR, the Quick Service Restaurant Pizza Market, has grown by about 10 percent over the past years. But seeing sort of an interesting little play here off the delivery and the pickup side of the

business now, carryout now comprises approximately half of the orders in about 40 percent of sales of the U.S. You go back just a few years, and those numbers were closer to 45 percent and 33 percent. They're seeing a lot of pressure in delivery. And that's partly due to people going back to restaurants. It's partly due to inflation. And so from that perspective, it's not just a domino's specific problem. I mean, we're seeing delivery as a challenging dynamic across the space. But it is, again, large company with tremendous resources there, boosting the dividend by 10%.

The longer term guide now just taking a slightly more conservative approach. They're talking about global retail sales growth in a range of 4 to 8 percent now down from 6 to 10%. And then store account, they're guiding for a range of 5 to 7 percent down from 6 to 8 percent. So modest, but it's enough for investors to feel like maybe they want to sit on the sidelines and wait this one out a bit. Where'd the cheese go? After the break, we've got stocks that we bought and stocks on our radar. You're listening to Motley Fool Money.

As always, people on the program may have interest in the stocks they talk about and the Motley Fooling 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 Emily Flippin and Jason Moser. Our email address is Podcasts at Fool.com. Got a question from Diane in Arizona who writes, I know you have trading restrictions at the Motley Fool, but to the extent that you can talk about it, what is the last stock you bought and why did you buy it? Jason, let me start with you.

Yeah, we used to do this bit on industry focus. Man, it was great. We would solicit from listeners asking the last stock they bought and why, and we would and we would just get endless replies. So I love seeing these tables turned. I had to double check this, but I did look back, and it looks like in November, right after Twilio had reported earnings in the stock cratered, closed somewhere around $42 in change. I tweeted out shortly after I was able to talk about it, that I had added to my Twilio position. And what I said, I said, I rounded out my Twilio position this week during the day of carnage

after his report. Clearly some near-term challenges for the business, but there's some near-term challenges. self-inflicted, completely fixable, and management's quite aware. It's a good business with good products and services, and I'm more patient than you. And you fast forward to today, and I think we've actually seen this play out pretty well, right? I mean, management very aware of these self-inflicted challenges. And now we've seen a far more clear path to ultimate profitability. They've set some targets there on stock-based compensation. They've set some targets there on operating profit for the year and beyond.

Obviously, some really big house cleaning going on there, cutting 10% from their workforce, and then another 17%, not much longer after. So all things considered, it feels like that was maybe a bit of an opportunistic purchase at a time where pessimism was pretty high. Emily, what about you? Yeah, I feel like mine is kind of unexciting because it happened so long ago. I'm going to find a way to sneak into every episode I do of Motley Full Money that I'm buying a house. So all of my savings have been not going into the market, unfortunately, even though it's been

an amazing time to buy. But the last stock I bought, I believe, was Spotify. The ticker is SPOT, as expected. And I really think Spotify is one of those companies that is just horribly misunderstood. There's a lot of negativity around the investments they've made into podcasting and the fact that their ad-based revenue streams have been incredibly weak. And that's totally warranted. But I think this is a company that can expand their gross profit much faster than the market expects. Their investments into podcasting have made them the number one podcasting platform very shortly after its launch in the industry where they were a decade behind the launch of Apple Podcasts. So they know what they're doing in terms of getting listeners. Engagement's incredibly high, really sticky premium

subscribers. And to the extent that they're able to turn around their ad revenue and the ad market is better than it is today, and that's impacting everybody, that I think Spotify could be one those companies that comes out and truly becomes like a titan, a behemoth of industry and music streaming, audiobooks, podcast, you name it. Mine's story is similar to yours, Jason. It was when Nike took a hit last fall after their quarterly report showed, inventories on the rise. Nike was a stock I had on my watch list for a long time.

And it was one of those situations where once it was cleared, I thought, oh, okay, here's the opportunity. So keep the emails coming. Thank you, Diane. Podcasts at Fool.com is the email address. Real quick before radar stocks. Next week, ShakeShack is turning 10 of its locations in major cities into fine dining establishments, complete with white tablecloths, gold utensils, and wine glasses. These shake shacks will feature a fixed price menu and table service. I am all for the experimentation, Emily, but I have no idea what Shake Shacks' Endgame is here. I had to say I was really excited. Look, the fake truffle taste, the truffle oil, I am all about it. So I saw this and I was like, this is great advertisement for their kind of new upscale line of truffle-based burgers.

I'm all for it. But then it didn't hit me. I was like, wait, didn't we do this before? Wasn't this a thing like five years ago? Is Shake Shack just five years behind a truffle trend? Because I feel like if you're going to launch something premium, you know, truffle was cool a half decade ago. What's the new premium thing? I don't think it's Truffle. Jason, can you see a date night in your future next week checking one of these out, maybe the one in DC? No, no, not all, Chris. I honestly can't.

Nope, not even going to go any further with it. All right, let's get to the stocks on our radar. Our man behind the glass, Rick Angdell is going to hit you with a question. Jason, you're up first. What are you looking at this week? Yeah, another earnings report this week. ANSIS, ticker is ANSS for those unfamiliar. Ancys is a simulation software.

and services company, they serve in markets, including aerospace and defense, automotive, electronics, energy, health care, even sports, Chris. I mean, they run the gamut. But the value proposition is simple. Simulation software is helping companies get things done more effectively, more efficiently, saving time and money, and everybody can get behind that these days. But revenue up 10 percent, excluding currency impacts, earnings per share of $3.9. compared to $2.81 from a year ago.

They achieved over $2 billion in annual contract value in 2022, which actually exceeds the target that they set from back in 2019. So that's just a good sign to see when management is able to hit their targets that they set. They're calling for 12 percent annualized growth in that annual contract value through 2025, so the growth looks poised to continue. The good news is this is not a growth. with at all-cause company. They're very methodical, just kind of one of those sleepy little slow

growers that you can keep in your portfolio, which incidentally, Chris, I do. I keep it in my portfolio personally and I've recommended the stock. I encourage investors to give it a look. Rick, question about ANCIS. What would you like to have simulated? Artificial intelligence. Does that do it? AI. Everybody's got to receive that well, right? AI. Everybody's excited about AI. Emily, Flippin, what's on your radar this week? Adobe's on my radar for a lot less positive reason than Jason's ANSys. Adobe has got reports out this week that the Department of Justice is looking into Adobe to block its $20 billion acquisition of design competitor Figma. And as a reminder, the announcement of this acquisition earlier last

year resulted in the largest drop over a decade for Adobe shareholders. So not only was it made at a lofty valuation above 50 times annualized recurring revenue, but it's also a big departure from Adobe's long-term strategy of making these smaller tuck in acquisitions. So I think Figma is an interesting company, but I'm kind of hoping that the DOJ blocks this because I think the acquisition was too expensive and too much of a strategy deviation for Adobe. Rick, question about Adobe? Speaking of AI, so I'm an Adobe user, and I see all these tools coming into the Adobe software now using AI to make my job easier, which I know is just a pre-examined.

cursor to eliminating my job altogether. So my question is, once that happens and people like me are no longer necessary, who's left to subscribe to Adobe products? I don't know. Hey, you and me both, Rick. What happens to my job when AI comes and takes it over? I don't know. I guess we'll both be begging. What do you want to add to your watch list, Rick? I don't know. I already own Adobe, so I will just keep an eye on it and I'll take that simulated Adobe company over there. Anciss, Rick. Anciss. That's the one, Anciss.

I knew it started with an A. That's going to do it for this week's Motleyful Money Radio show. The show is Mixed by Rick Engedall. I'm Chris Hill. Thanks for listening. We'll see you next time.