Motley Fool Money - The Future of Cars and Search

Episode Date: October 11, 2024

Investors get their first glimpse at Tesla’s robotaxi ambitions and how regulators might be looking to break up search giant Google.  (00:42) Jason Moser and Andy Cross discuss: - Why Jamie Dimon is trying to get investors past the rate story in banking. - Tesla’s splashy We, Robot product event, and how the company’s new Cybercab offering might fit into the company’s long-term strategy.  - Earnings updates from Delta, Pepsi, and Domino’s. (19:03) The DOJ’s taking a much closer look at Alphabet’s Google and its online search empire. Andy and Jason talk through what a Google break-up would mean, and why it’s a bit weird to be talking about Google the monopoly as its power seems to be waning. (32:06) Jason and Andy field a question from a listener on following earnings and offer up two stocks on their radar: Netflix and Meta. Visit our sponsor at www.landroverusa.com Vote here to help Motley Fool Money take home Signal’s Best Money & Finance Show for 2024.   Stocks discussed: JPM, WFC, TSLA, DAL, PEP, DPZ, NFLX, META Host: Dylan Lewis Guests: Jason Moser, Andy Cross Engineers: Rick Engdahl  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Get ready to step into a cybercast. Motleyful money starts now. Everybody needs money. That's why they call it money. The best thing is. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Dylan Lewis.

Joining me over the Airwaves, Motley Fool's senior analyst, Jason Mozer and Andy Cross. Fools, great to have you both here. Hey, doing. We've got a monopolist under the microscope, a read on the activity in the skies, and of course, stocks on our radar.

We're going to get rolling this week, Looking at the big banks, though, J.P. Morgan, Wells Fargo, and Bank of New York all reporting on Friday. Jason, the question on everyone's mind, higher rates have been great for the banks recently. What is the outlook now that the Fed has begun to bring them down? Well, banks are funny. They can perform well in both rising and falling interest rate environments, depending on exactly how whichever bank kind of butters its spread, so to speak. So we've obviously seen J.P. Morgan and Wells Fargo to an extent perform well here. J.P. Morgan, I think, on the net interest income side of things, chalked up some better results there.

I mean, they definitely have benefited from these rates. Net interest income rose 3% to $23.5 billion for the quarter. That was better than what was expected. They saw gains on investments in insecurities. They saw loan growth in the credit card business. And they also guided up on net interest income for the year, which is interesting. because we're now in this narrative of, well, rates have only one way to go, and that is down. I, you know, we'll have to wait and see there, right? I mean, we did see an inflation report this week that was a little stickier than maybe some had hoped.

But all in all, I mean, J.P. Morgan revenue up 6%, earnings per share up just a little bit there, just just maybe about 1%. Not terribly bad. I think with JP Morgan, I think it's more the language from Jamie Diamond, just in regard to the big picture, the macro picture, right? And he's always, I think, very fair and balanced. Like he comes into this, he's not too far one way or the other, right? And he's talking about the positives there. Inflation is slowing. The economy is resilient. But, you know, he's chiming in on these fiscal deficits that infrastructure needs,

restructuring of trade globally, remilitarization of the world. So he says we're hoping for the best, but there's still a lot of uncertainty out there. So I think all things consider. it was a good quarter for J.P. Morgan, but it's going to be very interesting to see how these these next several quarters play out with interest rates starting to tick downward. I think Jamie Diamond may be as measured as Fed Chair Powell when it comes to the statements that he is going to make and the signs that he is going to be showing to the market. Looking at some of the commentary that we got from him, Andy, anything jump out to you?

Well, he got a little bit frustrated, I think. Just the focus on net interest income, considering that their commercial investment banking business was so good with revenues increasing 8% year over year. Interesting that their net income climbed 13%. So they continue to see a lot of excellent performance in the non part of the segment, the consumer side that is so tied to net interest income, which everyone compares about, talks about. He talked about how it's going to be probably about 87 billion next year. It'll probably be like in the 91 billion this year. So that will be a drop. That's not really surprise anyone now. So as Jason kind of went through. So the other parts of the business, same with Wells Fargo,

because their other parts of their business continue to do pretty well with their trading activity up 14%, investment advisory fees, up 11%. Investment banking up 37%. And the total consumer banking revenues were down 5% on that lower net interest income. But the non-interest income was up 12%. So I think that is one thing that shareholders, traders saw in Wells Fargo results that was encouraging. It wasn't just about the net interest income. It was about the other parts of the business too. Now, of course, a great stock market helps in that regard, too.

both talked about that. But still, that parts of the business mean asset management and wealth management AUM assets under management at JPMorgan were up 23% year every year. Yeah, and I think it's, you know, I'm glad you brought it because those numbers that Wells Fargo recorded, I think that was really encouraging, right? And that interest income aside, which was disappointing. But Wells has really worked on diversifying that business out and becoming a little bit less reliant, right, particularly on the mortgage side of things. The other thing that I think investors are starting to maybe see a little bit of light at the end of the tunnel with Wells. They're still dealing with this asset cap that regulators slapped on them. They're basically cap, right? They have this cap on

their total assets of $1.95 trillion as they work to show up the risk management. This is dating all the way back to 2016 with that fake account scandal. In September, there was regulators found that there were safeguards against money laundering and other illegal transactions were still too lax. So they're still working on kind of getting that risk management back under control. But we're starting to see signs that they're doing that. And when you compare that $1.95 trillion in assets to JP Morgan, something like $4.2 trillion dollars in assets, you can see the disparity there. And I think it really kind of offers some opportunity for Wells Fargo to grow here in the coming years. Interesting on the credit losses, J.P. Morgan's really saw a spike. I think that gets to their

card side of the business, where in Wells Fargo, they actually lowered slightly too. So some of the differences in the business showed up and on the credit losses, just kind of like watching the consumer. What is the consumer doing? How are they spending? Are they able to be able to handle those rates? Certainly if rates move lower, that's going to be a good side for the consumer spending side. And the provisions for credit loss is probably improving. All right, this week, we also had Tesla's Wii Robot event, Elon Musk unveiling Tesla's Cybercab product. It's long awaited Robotaxie. Also got a look at the cyber van and the company's humanoid robot optimists, to paint a picture for listeners, Andy.

The cybercab looks like a next-gen Tesla from the outside. On the inside, two seats, no steering wheel, no accelerator, no brakes. Very clearly, an autonomous vehicle. Yeah, I mean, there's a lot of PT, Barnum, and Da Vinci in this kind of release. And by the way, it is we, not like, we as in tiny robot, but like we robot as in, hey, we're all in this together, hosted this event in Los Angeles, had a Warner Brothers studio a lot, maybe a new part of business line for Warner Bros. brothers there. But it really did solidify Elon Musk's vision towards more fully autonomous

transportation. And then also the robotic world, because he talked a lot about and they showed and they paraded out the optimist robots, which again, as my daughter said, was, well, that looks a little bit scary, but also very impressive along the ways too. But as you mentioned, the real cyber cab. That was the announcement. He came out of the cybercad. They paraded, I think maybe 20 or 50 around there. Picture your mind of a driverless two-seat car inspired from any Hollywood movie and there's a good chance that you're picturing the cyber cab two batwing doors no steering wheel no pedals as you mentioned Dylan the big monitor in front inductive charging which is really interesting so no cables needed so kind of like when you put your phone maybe

on a charger that inductive charger Elon Musk says he will they will get the cost down to 30,000 below $30,000 in production before 2007 that that's very ambitious for them to be able to do that they're testing that full self-driving in Texas and California. They're kind of a little bit behind the curve when it comes to Waymo, while Tesla has loads and loads of data, especially on the AI side. You know, Waymo and Cruz have been doing a lot of miles testing inside California. So they continue to have to fight that uphill battle, which they will, obviously. And Musk lastly believes that the operating cost for the driverless transportation will fall

to somewhere around 20 cents, maybe a little bit higher when you start adding fees. but that's based to compared to about a $1 per mile for bus transportation today and will be 10 to 20 times safer. So Dylan, there was definitely a lot of vision and a lot of show there, but there was no mention of a ride hailing app and there was really no mention about pushing that $3,000 car lower than the price point of $3,000, $30,000 car for just the current version, like getting what right now a typical Tesla down to that. And that's really what investors kind of want to see right now. So very interested to see and just continued to solidify Elon Musk's vision for what he wants Tesla to do. Yeah, I think the market pessimism maybe showing up a little bit, shares were down about 7% after the event.

And maybe they wanted a little bit more detail and strategy here. I will note, I mean, targeting that 30K or less than 30K amount feels like it's somewhat in line with what we've been seeing where they've wanted to focus on that sub 25K range in the EV market, Andy. They have to get there. I mean, they just, they have to get there. The China producers are getting there. Competitors are pushing in that direction. So that's the, I don't want to maybe call it a holy grail, but it is where the market is going.

So they have to get there. I think people were investors maybe just from when I'm reading, hearing, and caught a couple of videos where, yes, it was really impressive to see, but they really wanted more details. That's not really Elon Musk's strategy. He really comes out, big vision. You know, this is, when you tie together, the energy, you tie together the AI, you tie it together the robotics, you tie together the FSD, the full self-driving,

and the Robo Fleet. You can just see where Elon Musk wants to get there. It's just that he's not leaving breadcrumbs for us to follow. And for analysts and investors, sometimes that might be a little bit frustrating. Jason, I'll put it to you. Cybercab shows up outside your front door. Are you getting in? Not yet. I think this thing needs to develop a little bit more of a tracker. It's always fascinating to me with these events, the disparity between how the public is viewing it and maybe the public on Twitter or X or whatever you call it versus how investors are viewing it, right? And just look at the behavior here. Tesla shares down considerably. You see what Uber shares are doing today? Up around 10%. And it's not on any real news there, but the general consensus is that investors were just left wanting more here.

And so we know Musk puts out these audacious timeline goals. We know he rarely hits them. But clearly, one of the greatest innovators out there, and he's not slowing down any time. time soon. All right, coming up after the break, we've got updates on Pepsi, Delta, and Dominoes. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Dylan Lewis here on air with Jason Moser and Andy Cross. Banks aren't the only ones with fresh results for us to make sense of. Got quarterly results from Pepsi, Delta, and Dominoes this week. We're going to start out in the friendly skies, new numbers from Delta giving us a look at the impact of the crowd strike outage and what to expect with holiday travel. Jason, where do you want to start?

Well, yeah, it's been a really good year for Delta shareholders so far. And you look at that and you think, well, it was a pretty tough quarter. The crowd strike outage really, really threw a monkey wrench into things there. But it seems like they've recovered from it fairly well. There's some litigation going on there. We'll see how that all shakes out. But they certainly are guiding for a strong holiday quarter. I mean, the quarterly report itself was okay.

I mean, earnings per share of a $1.50 just a little bit below. expectations, revenue just a little bit below expectations as well at 14.6 billion dollars adjusted. But they did. They took a 45 cent per share hit to earnings due to that crowd strike outage. And so that's something that clearly impacted results by refunding customers, canceled flights, providing customer compensation in the form of cash and Sky Miles. I mean, they really scrambled to recover from that. I think encouragingly, corporate travel could continues to improve. That was up 7% for the quarter. Total revenue per available seat mile, which is an important metric in the airline industry.

That was down just modestly at 3%. But again, going back to the December quarter of this current quarter, they really, they see earnings growing 30% for the quarter, which would mark one of the best, if not the best fourth quarters in the history of the company. So that's encouraging. Yeah, revenue per seat mile, Jason, I thought was a, you know, that was a little bit surprising. I thought that would be maybe a little bit stronger. But I think it also gets to some of the concern they're seeing from some of the consumer on the spending side. They talked a little bit about that around travel, around the election as well, too. So it is good to see that future quarter, but it is the revenues and maybe some of the margins aren't, I don't think we're as quite as

exciting as some members or as investors thought. And that's why the stock maybe was selling off a little bit. Speaking of the consumer, consumer flies, the consumer also snacks. Why don't we check out what's going on with chips and drinks? We got results from Pepsi this week. Shares up 4% on the results. Andy, what did the market like? Yeah, not a whole lot. The earnings. and sales, they lost some fizz going into the quarter here, Dylan and Jason. The organic revenue was up 1.3%, bear with me, versus 8.8% a year ago. They talked about subdued category trends in North America. They had a Quaker Oats recall, mostly of its bars for some salmonell and some products earlier this year, so that had some effects. And they talked about persistent geopolitical tensions

that are affecting some performance. Earnings per share fell 5%. But they increased 5%, Dylan, on earnings and constant currency. So if you add those in the strong dollar in effect, the gross margins improved by about 110 basis points, operating margin improved a little bit. They expect to deliver 1 to 3% organic growth versus 4% for the estimate from the prior quarter. So their expectation for the growth, Dillon is tightening up and lessening. They still expect earnings growth to be good because they are managing costs and continuing to watch how they are spending the dollars. They say a lot of strength international. with Europe and Africa and Africa and Africa in the Middle East up both 6% on core growth.

But it was like Quaker foods that really hit the profit side with that, with the recall they had, profits fell 20% and sales decreased 13%. So I don't think it was a great quarter for Pepsi. Kind of is a little bit of what we expect for a company this so this large and is seeing kind of like gross or signed kind of GDP level growth with some improvements on the cost side, get to a little bit of earnings growth, but nothing, nothing to be super. excited about from Pepsi. One of Pepsi's answers to that slowing organic growth has been to look out in the food

landscape, get a sense of what people are interested in, and maybe buy up some brands in that space. We also had the announcement recently that they're acquiring Sete Foods for $1.2 billion. The company is known for its tortillas, chips, salsa, and other fixings. What do you think Pepsi sees with this property? Well, I think they just get to expand their lines, right? They have that partnership with Celsius, which Celsius has had a rough go of it because some of the energy drink, and they talk a little bit about that in the quarter.

But I think just be able to continue, they have the leader in snacks to be able to continue to grow their brands across the different categories, to be able to expand their opportunities, to be able to sell more products to more spots. And frankly, they have to kind of do that. Like they have a fairly decent, strong balance sheet. They generate lots of profits and cash so they can make the investments. But if they don't, just on the margin, the consumer now is looking for so many. different options, that if you're a large $200 billion company like Pepsi is, you've got to be able to expand outside different core brands. We've got a fresh delivery from Domino's here to wrap

us up on earnings. One of the better run companies in fast food and quick serve, Jason, what did their results show about what's going on in food? Yeah, well, I mean, we've talked recently about the challenges that restaurants are facing these days. Domino's has been able to hold its own in a market where value has become front and center for the consumer. Now, the results, were okay, same store sales rose 3%. That was a little bit below estimates and earnings per share of $4.19. Essentially flat. So, so, you know, nothing right at home about there. But they will continue opening stores. Now, they did ratchet down the guidance on how many stores they'll be opening this year. And they ratchet it down a little bit on the global retail sales growth. But they

did maintain their operating income guidance. So that shows that they are doing a very good job at bringing things down to the bottom line. But I think, You know, when we talk about Domino's, we wonder what are they doing well? Why? This is the company that's performed well over long periods of time. And I think when you, when you look at the totality of things like the investments they've made in technology, that to me stands out first and foremost, is they had the wherewithal to build this app early on in the game when we were just starting to do things on our phones, right? And I'd put Papa Johns in that same boat. It may seem silly, but frankly, now, when you think about it, every day, we're conducting business, we're doing commerce on our phones. And these

companies had to work with all to really build that out early on. They're benefiting from that. And again, going back to that focus on value, Domino's continues to do a good job of really staying in touch with the consumer there, whether it's a campaign for the morphlation campaign, which I thought was tremendous, just because we've been talking so much about shriekflation, they're really able to combat that. We're talking about morphlation. That worked out very well. The emergency pizza campaign, they can turn these things off and on like a light switch, sort of like Amazon does with Prime Day, right? And lastly, I will just say, and again, this is a business.

They've had a tough year. But, you know, Maddie Arger Singer, he's got this dividend nights list. And the criteria there, looking over the last 10 years, this is companies that have paid a dividend each year, that they've grown that dividend by at least 10% annually, and that they've outperformed the S&P 500. And Domino's is a dividend night. So, again, a tough year, but over a longer stretch of time,

this has been a rewarding investment. That tough year showing up in kind of muted year to date returns for the company. He shares up about 4% well below the S&P 500s, 20%. Jason, sounds like you're not too worried about that. I'm not. I think it's going to continue to get a little bit better as inflation continues to come down. But we talked about it in the McCormick discussion last week. These QSRs are witnessing some headwinds and folks are thinking a little bit more about cooking from homes. So that focus on value, I suspect, a little bit more. I suspect a little sensation in the nation pizza boy USA. He's the flying saucer in.

innovation pizza boy USA. All right, listeners, we'll be back in a minute with a breakdown on a monopoly under scrutiny and what it might mean for a very shifting industry. Stay right here. You're listening to Motley Full Money. The pizza boy, look at it fly. Toss a pizza roll a pizza up and all around a pizza boy. Oh, what a guy.

They love him so when he flips that dough, he's Pizza Boy USA. The old adage goes, it isn't what you say, it's how you say it, because to truly make an impact, you need to set an example and take the lead. You have to adapt to whatever comes your way. When you're that driven, you drive an equally determined vehicle, the Range Rover Sport. The Range Rover Sport blends power, poise, and performance. Its design is distinctly British and free from unnecessary details, allowing its raw agility to shine through. It combines a dynamic sporting personality with elegance to deliver a truly instinctive drive. Inside, you'll find true modern luxury with the latest innovations in comfort.

Use the cabin air purification system alongside active noise cancellation for all new levels of quality and quiet. Whether you prefer a choice of powerful engines or the plug-in hybrid with an estimated range of 53 miles, there's an option for you. With seven terrain modes to choose from, terrain response two fine-tuned your vehicle for the roads ahead. The Range Rover event is on now. Explore enhance offers at rangerover.com. Welcome back to Motley Full Money. I'm Dylan Lewis. The DOJ's battle against search giant Google continues to heat up after a judge ruled earlier the summer that Google had illegally monopolized search and ad markets.

This week, the Justice Department proposed some remedies to fix Google's search dominance. There is a lot to unpack here, Jason. The reality is the DOJ is considering behavioral and structural remedies to prevent Google's monopolistic positioning. We are used to a lot of very euphemistic speak from executives. the translation here, they're looking at how the company operates, but also what Alphabet owns and maybe whether it should be broken up. You say behavioral and structural.

I feel like I propose to those to my kids as they were growing up. Yeah, I mean, listen, this is, this is I think, this is something I think we're going to be talking about for a while, right? I mean, the Justice Department basically alleging that Google has used unlawful tactics to stifle competition of lock advertisers and publishers into its suite of tools. And there may be something to that. I think a criticism we have often when these types of cases come up is that the end result is usually just some kind of monetary fine that is more or less meaningless to the business, right? It's a drop in the ocean compared to the cash that these businesses generate and the balance sheets that they hold. And so if you really want to change behavior, then you have to make that remedy a bit more meaningful. Now, this is something where, of course, the DOJ will make its proposition.

It'll go to the courts, and the courts will let me decide. And if the courts decide to pursue or rule that some sort of a breakup is in order, well, then you know that certainly Google is going to appeal that. And so then it proceeds through the appeals process. And I can just drag on and on and on. So I guess, in short, Dylan, I think we're going to need to pack a lunch because this is going to take a while. But with that said, I do understand where they're coming from. Now, Alphabet will counter that argument by saying,

hey, the reason why we're doing so well is because we have the best stuff. And I think there is something to that as well with a caveat that there is this narrative now of AI and AI as it pertains to disrupting search and how Google makes its money, how Alphabet makes its money. And so I think it's going to be very interesting to see. over the coming years, how that plays out as well, because we've certainly seen in Google search, for example, I mean, they are trying to incorporate that AI dynamic more and more and more. And, I mean, as someone who uses Google fairly frequently, you know, I think it works pretty well.

I mean, I think it just really boils down to is it going to give them the same opportunity to monetize or a better opportunity to monetize and time will tell there. But, yeah, I think this is something we're going to be talking about for a while. Yeah, I want to dig into the AI dynamics in a second. I'm curious, Andy, because I have heard people talking about what the DOJ has proposed here as kind of throwing spaghetti at the wall. There have been a lot of different ideas of what a breakup or what a behavioral change might mean here for Google. Some of it is divesting the business. Some of it relies on data collection and perhaps sharing data with customers.

Some of it is the default status that they earn by paying Apple to be the default search engine on the iPhone. when you see some of these different things being tossed out there, are there any in particular that you think this would actually be very damaging to Alphabet's business? Well, I wasn't going to go on that damaging side, Dylan. So I'll get to, let me just kind of circle back to that a little bit. But you're right. There are so many things, like maybe requiring Google to designate a senior executive to report to the court on compliance, like very simple, I think basic stuff to all the way going.

Like, I think that Apple arrangement they have and they pay Samsung as well. Apple they have is maybe renewing in a couple years. So when that comes up to renew, if this is all going on, maybe they can't pay Apple $25 or $30 billion, which if you're an Apple shareholder, that's like free money for Apple shareholders, then they go right to the share buyback. So that's something to pay attention to.

I think those exclusivity arrangements are going to be challenged and changed. Will we have to, every time we go to do a search into any system, whether it's an AI system or a typical search system, depending on how that business evolves evolves and we'll get to there in a second do we have to select our default search provider do we have to do it every time do we have to do it one time like this this seems to me you mentioned spaghetti against a wall there's a lot of kitchen sink in here there is tossing everything out using this as an opportunity to the DOJ to get a lot of stuff out there

a lot of proposals undoubtedly something's going to have to give Google's going to go to appeal the August verdict that will be tied up in the courts then they're going to so this is going to be a multi-year. I mean, I think it was four or five years ago. This case first started to get, was filed under the previous administration. So as Jason said, it's going to take a lot of time to unwind. I think a breakup of Google is unlikely. I think a separation of them, maybe their ad tech business is probably unlikely unless they decide to do it themselves. They have a chance to give their own proposals, Dylan, like to say, hey, okay, we're going to do this, this and this. I think within the next few months to get ahead of the curve if they want to, obviously they're going

to fight a lot of this. But I think Apple's very happy with that deal. Like they paid a lot of money. As Jason said, Google is the leading technology. Now, maybe they got that through these arrangements, or maybe they just had the best technology and they had the best system in place. We'll have to see how that plays out. So I think some of it will be, I don't think it's going to be massively disruptive, but I think we'll see some changes on the margins that are going to be noticeable to consumers, if not to investors. It's interesting because there has not been a very sharp market reaction to all this, because, as you guys have talked about, it has been speculative, and this will probably take

a long time to play out. I would make an argument that while this could be disruptive to this business, it is probably not the most disruptive thing facing Google and its properties at this moment. And it's really an issue of how does this company react to increasing pressure and having to react all these AI entrants coming into the way that people access information. I want to throw a data point at you, Andy, and just get your reaction here. Google's U.S. search ad market share is forecast to fall below 50% for the first time in more than a decade, according to e-marketer in 2025.

I think that's probably right. You're going to see it's 90% or 85% or 80% now by some estimates, and it's probably going to trickle down. The search world in general is going to be disrupted, has already been disrupted. It's interesting, so much conversation, Dylan, coming out about it, SearchGPT. SearchGBT works a lot like Google search does, using bots to crawl different publisher sites. A lot of those publisher sites are blocking SearchGBT, and they're allowing Google SearchBot to still crawl their pages because they don't want to be used to be completely put

out of business by By GBT in general and OpenAI. So there's a lot to be said with this. Google has competing products. Jason said, I have right here. I have notebook L.M., which I'm using more and more now. That's been getting a lot of publicity. From a usability perspective, they are still a lead. I don't think they're going to just sleep on it,

but clearly it's a much different environment with AI than it was when the DOG first brought those cases. And I think that's going to have to play. In fact, the judge had mentioned that, Josmetta had mentioned that it's going to have to play into the proposals and whatever they agree with with the courts for the ramifications of what this means for Google. What is the impact of AI now?

Jason, earlier you were talking about how the product that users consume from Google has changed a little bit. We've seen these AI summaries very different than the 10 links that you would get on a search engine result page just a couple of years ago. There's the issue of can Google stay relevant as the big place that people go when they are seeking information. There's also the issue of what does Google's business model look like as how people access that information changes? What do you think about that? Well, I mean, I think, so, you know, I tend to agree with Andy. I think that a breakup is probably unlikely. And I think one of the reasons, I mean, you pointed out that data point from e-marketer, right?

That market share is poised to come down actually below 50% for the first time in a decade. And that's telling us something, right? That's telling us that there are competitors in the fray there that are starting to really push a little bit harder and make Google work a little bit more for its money. I think it's important to note also that with Google, with Alphabet, the money that they make still comes predominantly from advertising. Now, you look at their 10K. In 2023, they noted that they generated more than 70% of total revenue from online advertising. Now, that's a lot, right? It's worth remembering, too, that that number has come down fairly considerably over the last decade. It used to be a lot higher. So they are diversifying a little bit with things like subscriptions.

their cloud services, whatnot. But at the end of the day, this is still really an advertising company, and it's going to be that way for a while. And I appreciate that they're trying to enhance their search results. I mean, I think it's neat. You can see that AI summary at the top, but if you're looking for links, all you got to do is scroll, and they're down there, right?

So you get a little bit of the old Google experience with a little bit of the new Google experience. And I think really it's going to come down to making sure that they are able to stay relevant by giving the best results and making sure that the information, that they're lobbying up to customers is correct in, you know, the most pertinent. But, but yeah, we talk a lot about if it were to break up, you know, what type, what part of the business would be the most attractive to you.

I don't know, man. I mean, this is still an advertising company at the end of the day. They do it well. It's worth remembering. You get your TikToks and your Amazon's of the world that are getting in there and taking some share. But I also, I always love to look at my kids and their friends. friends, their behaviors, how they're doing things. Because I think that's a little bit of a window

into sort of where consumers are headed, right? New generations, how they're doing things. Boy, howdy, I tell you, they still use Google an awful lot. And so I like all of these AI tools, chat, GPT, notebook, whatever it may be. Those are interesting, good stuff. And I think that's the direction we're headed. But it doesn't mean that Google can't participate in that. And clearly, we're seeing that they're making the investments to at least have a role in that space. And we need the business model, Jason, right? Like at the average model at Google essentially created earlier in the 2000s and disrupted, I mean, just tons and tons of business, certainly the newspaper business and the ad advertising business. But so many small,

medium-sized businesses, large business, businesses like the Motley Fool, depend on the Google ad system to be able to drive clients and prospective payers to their sites. And if GPT and advertise in and that world the the AI world is not supporting that advertising market that's a huge disruption to that side not just to google but to the actually so supporting the ecosystem and that's why i mentioned a lot of publishers are still welcoming google bot not necessarily search gbt's bot per se how it impacts the ad business dylan i think it's really fascinating i think this speaks well for google and gives them that potential they'll probably have to make some changes sharing data maybe not having exclusive contracts or deals

and giving more flexibility and opportunities for clients to be able to maybe use different systems. But I do think the advertising market is going to have to be a key player when it comes to supporting the business models of artificial intelligence, including OpenAI and including ChatGBT. Perplexity is going to be testing out advertising,

so we'll see how that works. Same thing with SearchGBT. And in that world, in that business, Google still has a nice lead. Putting a bow on this one, Alphabet is not alone in its quest for a portfolio of integrated digital tools. We have seen the regulatory scrutiny on some of these big tech companies that have accumulated a lot of properties, a lot of integrated properties really start to heat up. There's meta, Amazon, Apple, Microsoft,

Jason, safe to say, investors should probably expect a little bit more scrutiny going forward. I think that's safe to say. I mean, we're seeing certainly that narrative continue to gain steam. I mean, I know there can be some politics involved here, depending on administrations and whatnot. I don't think they're faced with existential threats today, which then would imply that they should continue to grow and continue to get stronger because they can make their money so many different ways. So, yeah, I think continued scrutiny should be expected. All right. Coming up after the break, we've got stocks on our radar.

Stay right here. You're listening to Mountainful Money. As always, people on the program, they have interests in the stocks they talk about. and The Motley Fool may have four more recommendations for or against Snow Pire Selling Anything based solely on what you hear. I'm Dylan Lewis, joined again by Jason Moser and Andy Cross. Jens, we've got stocks on our radar coming up in a minute, but first, I got a listener question that felt timely and I wanted to get your takes on. We had Jeremy right into the show at Radio at Fool.com with this one.

He wrote in, hey, fools, love the show. I'm in the process of building out my portfolio as a relatively new investor. I've gotten to over 20 stocks, and it's starting to take shape, but as I've been adding, it's been a little harder to stay on top of the companies I own. With earnings season coming up, curious what your processes are for staying on top of results from all the companies that you follow. You got any tips for me? Thanks. I'm going to send this one over to Jason first. What do you think, Jason? How do you do it?

Well, I mean, this is a great question. And unfortunately, the answer may not. It's a little unfair because we, as we work here, we have access to a number of different tools that really make this easy. These are platforms that just give us constant updates, and you know, you can have, you get earnings calendars just galore, and you can keep it going. I think for just the individual investor, the individual everyday investor, don't fret. The information is all out there. And so I think one way to go about it, it could be as simple as just, you know, maintaining a Google sheet where you have your company and then you're looking up when the earnings date is. And so you have an idea of

when those earnings releases are. Oftentimes, they can be kind of staggered out so you're not getting hit with everything at once, but sometimes you do get hit with everything at once. And then from there, I think if it starts to feel a little overwhelming, there are some companies where I don't think you necessarily need to be so on top of like quarter in and quarter out. There's some companies where you might just be able to say, well, Home Depot, for example, maybe I'm just looking at Home Depot every six months instead of every three months, because relatively stay business, pretty reliable. We know what it's doing. And so,

quarterly, it might not necessarily be as big of a change there. I will say I am in a similar spot to Jeremy here. I have about 25 stocks, and I wind up splitting it out a little bit. I say I've got the bucket that I'm going to lean into heavily, and then I have the bucket that I'm going to kind of lean on other people's coverage. Andy, what's your approach? Dylan, I would say just quickly, if you have the chance to compare your allocation to a stock and the complexity of that business, if both of those are high,

those are ones you want to pay attention to first. And I think allocation and maybe attention to Andy, you know? You got to pay more attention to the ones that are obviously going to be driving the returns in your portfolio. Well, that's true. But if they're complex or volatile stocks, you definitely want to pay attention to do. If they're a little bit more stable, Berkshire Hathaway, maybe not as much. Yeah, if they're complicated, if they're complex and volatile, maybe just certainly the allocation probably shouldn't be that high, position size accordingly. Jeremy's note does remind me.

Motleyful Money is currently a finalist for Signal's Best Money and Finance Podcast for 2020. We are up against some great shows, and the winner will be determined by listener vote. So if you enjoy the show and you are listening to the podcast version of this week's radio show, I will drop a link where you can vote and help support the show in the show notes. Andy, Jason, how does it feel to be award-nominated podcasters? You really like us. It's all the people behind the glass. It is.

And we are going to turn to the people behind the glass with our stocks on our radar segment. Our man behind the glass, Rick Engdahl, is going to hit you with a question. Andy, you're up first. What are you looking at this week? Team, I'm looking at Netflix. They report earnings on October 17th. That's next weeks on Thursday. Of course, it is the leader in streaming. The stock is up 55% this year. Back to all-time highs. Huge global expansion in 190 countries with 270 million global paid subscribers. They generate $16 billion in revenue, $16 billion in gross profits, $7 billion in net income. That's a 2% earnings yield.

the forecast for the quarter is 13.9% increase in revenues versus 16.8% last quarter. The operating margin forecast, 28%, 28.1% versus 22.4%. An EPS growth estimate team, 36%. I really want to hear what they continue to say about the advertising. That's driving a lot of the new member additions. It's not going to have too much of a revenue impact at all in 2024, maybe a little bit in 25, although they're guiding against it, but I think actually they can deliver. some of that in 2025, so I'm really excited to hear what they're doing with their advertising business.

Rick, a question about Netflix. Yeah, I don't know how many streaming services I subscribe to, Andy. There's a lot. And yet, every time I turn on the TV, I go to Netflix first. Why is that? You just need one. It's simple. It's got all the thing. They spend a ton of amount on programming, and they know who you are because they have the data, Rick. All right, Jason, what do you have on your radar this week? Yeah, this week in small cats, looking at meta, ticker M-E-T-A, just kidding of course, it's not a small cap. But we've talked a lot about how we haven't really heard much from the Metaverse lately. And that's been a big deal, I think, considering where this company is placing its bets these days. We're coming about the third anniversary of its rebrand to Meta

and the Metaverse. And the Head Sense clearly just haven't taken off due to challenges they continue to present gaining mass consumer adoption. But I do wonder if their investments in glasses might not be a nice step forward here. We know they just released the prototype. of these Orion AR glasses. I think that could be something that maybe gain some traction. With a holiday season coming up, remember they also have this partnership

with Rayban with the smart glasses, things like language translation, recording and whatnot. And I think the price point makes a lot more sense too as well for consumers. So I just, rumblings now that Apple might be getting in that space as well, maybe the metaverses make it a comeback.

Rick, a question about meta. Yeah, I actually own the headset and admit I rarely use it. And yet I'm still excited for the next version. What's wrong with me? It's just that I've said it before. It's tough to use, but the tech is just magic, isn't it? It's amazing stuff.

Rick, philosophical questions aside, which one's going on your watch list this week? Oh, you know, they're both already there. So let's just, I'll go with Netflix. All right. Andy Jason, appreciate you guys bringing your radar stocks. Rick, appreciate you weighing in. That's going to do it for this week's about. Money Radio Show. The show is mixed by Rick Engdal. I'm Dylan Lewis. Thanks for listening.

We'll see you next time.