Motley Fool Money - The Netflix of Video Games?

Episode Date: February 8, 2019

Jeff Bezos squares off with the National Enquirer. Chipotle sizzles. And Alphabet ramps up its spending. Our analysts discuss those stories and dig into the latest from Disney, Electronic Arts, Take-Two Interactive, Hasbro, Mattel, Papa John’s, Skechers, Spotify and Twitter. Plus, on Satya Nadella’s 5th anniversary as Microsoft CEO, tech journalist Mary Jo Foley talks about Nadella and the future of Microsoft. To join our live Q&A on February 13th, subscribe to our YouTube channel with one click of a button at www.YouTube.com/TheMotleyFool. Thanks to LinkedIn for supporting The Motley Fool. Go to linkedin.com/fool and get $50 off your first job post.   Learn more about your ad choices. Visit megaphone.fm/adchoices

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They hate you. We've got the latest earnings from Wall Street. We will dip into the full mailbag, and as always, we'll give you an inside look at the stocks on our radar. In two weeks, we will celebrate the 10th anniversary of doing this show, and in all these years, I'm not sure we've had a more unexpected lead story. On Thursday evening, Amazon founder and CEO Jeff Bezos published an open letter in a blog post. In it, Bezos accused AMI, the parent company of the National Enquirer of attempting to blackmail him with graphic photographs, including nude selfies. Guys, this was astonishing, not just for the content, Ron, but for the fact that Bezos basically said to the National Enquirer, yes, this is personally embarrassing for me, but no, you are not going to blackmail me.

Well, good for him for standing up and not being pushed around. How can you not admire that? This wasn't an easy time for him and his family. But this story has kind of a bit of everything for everyone. You've got politics, business, intrigue, media, sex. But what does it mean for Amazon? I think in this case, probably not too much. I think the business of Amazon remains exactly what it is. People continue to love it, use it.

And I don't think this will have any impact, really. I mean, we always talk about it. We love to hitch our wagon to leaders, like Bezos. I'm sure that people will figure out a way to make it political, but the bottom line is, I think most people can agree that rags like the Inquirer. I mean, the world's probably better off without him anyway. And this seems to be part and parcel with the way they do business based on what we've seen historically. So I understand perhaps the concerns for investors saying, oh, you know, people are going to, they're going to choose Amazon or

not Amazon. You've got to remember, I mean, this is going to fade away from the public conversation very quickly. Humans are very, very predictable. Amazon is just too darn convenient and easy to use. People are going to keep on using Amazon. I don't think that's going to be a problem. Yeah, humans are just a bunch of gossiping monkeys, and this is just a bunch of present company. And honestly, like, publications like this should have learned their lesson from watching Peter Thiel just completely destroy Gawker a couple of years ago. But yeah, I mean, This tells us a bit about Bezos. It humanizes him. It partially proves he's a baller. Whatever the case, this doesn't really affect Amazon. The one concern I would have is if this somehow distracts Jeff Bezos. But this still seems less important than the larger divorce story, too. I agree with all of that, especially that last point. I mean, we've talked before about headline risk in so much as being a distraction for leadership, Ron. And the longer this plays out, the more of a distraction it becomes, if only because it takes part of his.

time. For sure, it's a distraction. How could it not be? This is a very big deal for him in his personal life. And it could go past his personal life into investigations and lawsuits and even perhaps the FBI or law enforcement getting involved. So it will be a distraction. Let's hope it's not too big a distraction. Alphabet's fourth quarter profits and revenue came in higher than expected, but shares of Alphabet falling a bit this week because you tell me, Aaron, it sounds like if nothing else, 2019 is going to be a year where Alphabet's going to be spending more money? I think so. I mean, the results themselves was pretty much everything to be expected. Revenue grew 22%. Operating margins were down a little bit, but still were 21%.

Making tons of money, no surprise. Google is monopoly. YouTube is a monopoly. Cloud in the play store are scaling. The growth makes sense. But yeah, they are spending a lot of money, and I think that is causing alarm for some people. My guess is that Alphabet spending is completely valid. The problem that has analysts, angsty, is just how untransparent it is. They don't break out YouTube from the business. They don't break out cloud. There's essentially no detail other than a big negative number about other bets. So it's really hard to know exactly what's going on and where the money is flowing. And so for me, just as an investor, an alphabet, what I have to remind myself is that transparency is helpful. It helps us as analysts, but it actually has very little to do with

returns. And what we know versus what we don't know doesn't actually affect the outcome of the business. So I think it's important for investors to not, you know, overthink, overlook the obvious. But it does require trusted management, and I think more than usual right now. Wasn't that part of the rationale of going to the alphabet structure, though? At the time, they said, look, we're going to this new structure in part because we want to provide more transparency. Maybe. I think it's just as much an internal decision as an external one. I think it helps them, dividing up into business units, be able to look internally at their own accounting and be able to push money around the way that makes sense. But they don't have to be transparent with us.

It doesn't matter to them as much. Yeah, I mean, I like transparency, obviously, as an analyst, as an investor. Too much transparency is not actually needed. The one thing I don't like is when public companies, public CEOs start to operate their companies as if they are private. And if you want it to be private, you should have stayed private. You owe a certain amount of information to your public shareholders. Yeah, you can be private. You don't have to take the money. It's also worth remembering that regardless of the investment, every time we invest, we're taking a leap of faith.

Some of those leaps are greater than others. But I think it really also goes back to why we focus so much on leadership, because we want to feel like that leap makes sense. And, yeah, perhaps we don't get that level of transparency that we might like with Alphabet. I mean, I'm a shareholder, too, a happy one. But I do feel good about leadership and the things that are doing. doing, and the results of the business tell us that they're doing some good stuff, too. Shares of Chipotle up more than 10% this week on a strong fourth quarter report. Ron, traffic is up, and Chipotle's same store sales continue to go in the right direction.

You know, I knew peripherally that Chipotle had kind of turned the corner from a stock perspective, but I had no idea the stock was up 115% over to last year. That's a lot of credit to CEO Brian Nicol who came in and really kind of righted the ship here. And then this quarter was pretty strong, 6.1% comp growth. And you saw an increase in average check that includes a 3.3% benefit from menu price increases, a 2% increase in comparable restaurant transactions. So you got both increased transactions and prices, which usually give you a nice double whammy lead to increasing margins. Interestingly, digital sales, which are app and online orders that include delivery

partners, was up 66% in the fourth quarter. now make up 13% of total sales versus 11%, which is where it was last year. So this all led to stronger margins, which feeds to the bottom line, profit up 11% company executing well. Worth noting, too, I mean, this is a materially different story than the one we were telling three, four years ago. Because we were talking about the potential of things like shophouse and Pizza Relo Cali and maybe even burgers, but all of that stuff is now off the table. I mean, this is a Chipotle story, and that is going to be the point of focus. for this team for the next decade, really. So at least we understand fully what the strategy is and the decisions, how they're going to be making their decisions.

First quarter profits and revenue for Disney came in higher than expected, but that was not moving the needle for Disney's stock. Jason, the growing subscribers on the ESPN Plus app, but Bob Eiger and his team continue to push off a launch date for the Disney streaming app that consumers and shareholders, especially this one, are waiting for. Well, Mac always loves it when we leave with our strongest statements. So how about this? And this is from Bob Eiger himself on the call. Direct-to-consumer video is Disney's number one priority.

So don't doubt that at all. We talked about it before on the show. They need to make sure they've nailed that, right? And the Disney Plus offering has a lot of potential. I think it's going to be a good one, but I also don't want to see them rush it to market. There's no reason to rush it. They're already late to the game anyway. So they might as well make sure they get it right.

But ESPN Plus, as you said, 2 million subs doubled from just five months ago. Disney Plus out sometime later this year, and they'll build that out slowly over time. And it really is all about just giving consumers options. They ultimately want to be able to give you the choice to subscribe to Disney Plus or ESPN Plus or some other offering perhaps with Hulu. And hey, down the road, they probably will offer an opportunity to bundle something and discount that relationship. it's always worth remembering to along the way, all of this stuff that they're doing with video and media and content, they've got this little parks and experiences of business that keeps on chugging along,

brought in $2.2 billion in operating income for the quarter up 10% from a year ago. That's the beauty of this company. Just so many different ways that they win, and I think investors should remain encouraged. Coming up, we've got video games and pizza. What more could you possibly want? Stay right here. This is Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in studio with Jason Moser, Aaron Bush, and Ron Gross.

Shares of Skechers up 15% on Friday after the shoe company posted record revenue of just over one billion in the fourth quarter. 2018, a tough year for Skechers, Ron. So they kind of needed a hit. They needed a hit because even with this pop, the stock is still down 20% over the last 12 months. So this is an up-and-down story. We'll end with an up and we'll see what next quarter brings. but as you said, sales were strong up 11%. International wholesale sales up 18%. The story is about growing margins, which led to a 50% increase in operating income.

So that's what people are focusing on. That really will pop the stock. That's a very big number. Management highlighted strength in their delights collection, their go-walk, their new men slip-ons, which actually look rather intriguing to me. I might pick up a pair. They bought back some stock.

So things look bright. But this, you know, specialty retail, footwear, it's so tough. One quarter is good. One quarter is bad. It's up and down. You've got to buy the stock right. Let's move to a tale of two toy makers. Mattel and Hasbro, both reporting fourth quarter results.

Hasbro shares falling a bit on Friday after coming in a little lower than expected. Mattel's holiday quarter certainly better than Wall Street was expecting, Jason. Mattel stock up 22 percent on Friday. Yeah, I mean, this is really a shining example to me of how silly the whole expectations game is to be. to be honest with you. I mean, if you see the headline out there that Mattel crushed it and Hasbro with it, do yourself a favor and don't read it because they both, I think, are suffering from just really faulty expectations. Mattel has been a business in decline for so long. I mean, the hurdle was really low. So, I mean, it wasn't like it was a good quarter. It was just

better than expected. It wasn't good. Hasbro, maybe it wasn't quite what was expected, but there's still clear signs that Hasbro is a good business that continues to do well. So it's not to say that Mattel can't see better days. Perhaps they will. They have some pretty strong properties with Barbie and Hot Wheels and things like that. But toys are a very tough business. Both companies have suffered from the demise of Toys R Us, but only one of these companies is really well-prepared to deal with life sans Toys R Us, and it's not Mattel. So I think when you look at it from the investor's perspective, if you're interested in this market, and it's an interesting one for sure, you have to look at Hasbro. The risk-reward just doesn't make sense for Mattel.

Good to see the stock having a good day, but don't get ahead of yourself here. It's interesting when you think about the home improvement industry and Home Depot and Lowe's and their competition. And past 15 years, there have been stretches of time where Lowe's was outperforming Home Depot, vice versa. There was a point in time when Mattel was a much bigger company than Hasbro, and Hasbro is now at least two times as big and has never looked back. It absolutely was. As a matter of fact, I mean, I had Mattel for a time in my rising stars portfolio on Fool. years ago, because the business was performing well. But they let the relationship with Disney deteriorate. And a lot of these companies' success has really come from getting those partnerships with the big content providers. Disney is one of the best. And for whatever reason, Mattel let that

relationship deteriorate. And then they obviously had big ton trouble in the executive suite, which just steer this company off course for a while. From toys to video games, electronic arts, and Take 2 Interactive, both reporting third quarter results this week. Both stocks getting hit and Aaron, Wall Street analysts seem to be placing the blame for both sets of results squarely at the feet of Fortnite. Well, they're idiots, Chris. Straight up. You really feel. EA unsurprisingly had poor results.

They're going through several issues. Take 2, though, beat expectations, raised guidance. But somehow that guidance still has people worried. I'm not. But people are stupid because it seems like every analyst, every writer is blaming Fortnite for everyone's problems. And really, that's just a bunch of groupthink, and it makes absolutely no sense when you dig into the numbers. So if you take a step back, you have to realize that there are almost 2.5 billion gamers in the world. That's a lot of people.

Fortnite has about 70 to 80 monthly active gamers, which is an incredible. Somebody to 80 million? Yeah, 70 million. Sorry, a little bit of a difference there. And they're doing really cool things. but they're not the only ones that are doing this. League of Legends operates at the same scale. And if you look at those numbers, that still is a tiny slice of the overall gaming world.

Activision, for example, serves about 350 million players. It's a big world. Now, if a publisher does want to go head-to-head in the Battle Royale realm, then yes, there is pretty steep competition. But the reality is that there are more gamers spending more time and money playing all sorts of games than ever before. And I think it's also important to keep in mind that Take 2, at the same time as Fortnite is having its craze,

just had the largest entertainment launch of all time. Red Dead Red Dead Redemption 2 made over $700 or about $750 million in its opening weekend. So the moral of the story there is that great games will always find a man. And what's important to publishers is that they continue to innovate and they continue to turn out incredible games. And those with the most money, the largest publishers will be the ones to most regularly do this, even if not every game or if every quarter is a success. That doesn't mean to say that Fortnite isn't,

causing competition. They are. EA's Battlefield franchise is performing poorly. They were always second-filled to Activision's Call of Duty anyways. Call of Duty is more competition before. But I do think right now we are at peak video game pessimism. Fortnite won't be number one forever. Companies will probably solve their cultural issues and more people will continue to buy great games. And I think this is how you beat the market. When the masses are dumb and you can just look at easy numbers and point to it, I think you can feel good. And I feel like, and I feel particularly good about Take 2 right now. And I do want to say that EANN Respond did just launch a Battle Royale game called

Apex Legend, and it has popped up in my home, and that's why I know about it. 10 million players in only three days. It took Fortnite two weeks to get there. Shares of Papa John's up 10% this week after Starboard Value invested $200 million into the struggling pizza chain. Do you think John Schnatter, the founder of Papa Johns, is going to let this one go? I think he's going to have no choice. He put out a competing bid. It wasn't accepted. Starboard has a great track record, even in restaurants. Back in the day, I did know these guys well. We did a number of transactions together. I highly respect them. Jeff Smith of Starboard is now the chairman. CEO, Steve Richie, is now on the board as well, and they brought in a third. So there's three new folks on the board now. They're going to use half of that money to pay down some debt. The other half to kind of revive the brand. I think we have a branding issue here, obviously, more than anything.

else, whereas Domino's back in the day, I think had more of a food taste issue. And I think actually Starboard's going to be successful here. Although, I think the bar is a little bit higher for this one, just because when they went in on Darden restaurants, they had more levers they can pull, one of which was selling off Red Lobster. They're just dealing with one restaurant chain here. Correct. And there was a lot of cost cutting they did on the Darden one. This is not really about cost cutting. This is about improving the brand, doubling down. on their fresh, great ingredients message and seeing where that goes. Twitter's fourth quarter revenue came in higher than expected, but shares down 12% this week.

Jason, you tell me, was it the guidance for 2019 or was it something else? I think primarily it was the guidance. I think guidance for the first quarter of 2019 was a little bit lighter than maybe Wall Street was expecting, but I've already told you how I feel about that expectations game, Chris. It's nice, really, to see, actually, this business make it to the stage where we can talk about it without that speculative, tone that we've had to sort of use over the past few years. And that's really because now it is a real business that is making money. It's profitable. There's a future there. They brought in almost $1 billion in revenue in the fourth quarter alone, which is just really impressive.

Jack Dorsey, I think, is doing a very good job of getting the talent there. He's splitting his time, obviously, with Square and Twitter, but it seems like it's working. The biggest change is going to be the metrics they're using to indicate success. They're getting away from that monthly user number and going to a daily user number, which I think makes more sense anyways because Twitter is a daily platform. Case in point, Jeff Bezos's tweet last night that just kind of lit the whole internet up. He wasn't going to one publication to launch that. You tweet it, and it's out in front of everyone immediately. And I think that's really the point here. Twitter is a network that is just too valuable at this point. It's not going away. One last example here, stock-based

compensation, that thing was around 25% of total revenues. Now it's going to going to be around 10 more in line with their peers, a promise that he made back in 2015. A promise fulfilled. I like where they're going. All right, guys. We'll see you later in the show. Microsoft's been having a great run for shareholders. We'll dig into that next with tech journalist Mary Jo Foley.

Stay right here. This is Motley Full Money. Making the perfect hire can help set your team up for success in the new year. But where are you going to find that person? That's why when it comes to posting your job, you want to go where you have access to an engaged community that people visit every day. LinkedIn. Most LinkedIn members are not checking job boards regularly, but nine out of ten LinkedIn members are open to and are interested in new opportunities like yours. With most of the U.S. workforce on LinkedIn, posting on LinkedIn is the best way to get your job opportunity in front

of more of the right people. It's no wonder that a new hire is made every eight seconds using LinkedIn. Find the right people for your business this year at LinkedIn.com slash fool and get $50 off your first job post. That's LinkedIn.com slash fool. Terms and conditions apply. Welcome back to Motley Fool Money. I'm Chris Hill. It was this week in 2014 that Satya and Nadella became only the third CEO in Microsoft's history. In the five years since then, Nadella has transformed not just Microsoft's business, but it's stock price as well. Tech journalist Mary Jo Foley has spent her career covering Microsoft. She joins me now from New York City. Mary Jo, thanks for being here. Thanks for inviting me.

I want to get to the sense of Microsoft in a minute, but let's start with the underlying business. In pragmatic terms, what has Nadella done for Microsoft? I'd say the biggest thing he's done is gotten them back on track. I feel like under Balmer and a bit under Bill Gates as well, they were trying to be a company that they weren't. Under Balmer, they were trying to be Apple and they were trying to be Google. And what Nadella did when he came in was say, hey, what are our strengths?

What's our core business? And it's productivity, applications, and services, and that's what we're going to focus on. Are you at all surprised at what he has done? Because five years ago, my recollection is that Nadella was largely seen as a good choice to replace Steve Bomer as CEO. But he was also an insider. Nadella had been at Microsoft for more than 20 years. And some of the reaction was people saying, you know what?

They really should have picked an outsider. I was surprised. I almost felt like he was the consolation prize at the beginning. Like nobody else wanted the job because Microsoft was seen as a hazman at that point. And I was surprised they went with an insider because everybody was telling them you should go with an outsider to shake up the business. But instead, what happened was he was an insider who ended up being able to shake up the business. So I think they get the best of both worlds. How do you think he was able to change the perception of Microsoft?

because for years when Bill Gates was running the company, people literally referred to Microsoft as the evil empire. And when Balmer took over around the turn of the century, it was still the evil empire. It was also at some point it became kind of the boring empire. And I'm wondering how Nadella changed all that. I think it was a combination of things. I think one of the best things he did for Microsoft right from the outset was decide to be a partner instead of an enemy. So a lot of the companies that Microsoft used to compete head to head with and talk about cutting off their air supply

and wanting to make sure they wiped them out, they started partnering with them. I mean, they partnered with Red Hat, one of the Linux companies. They partnered with Adobe, SAP. They just started forging all these partnerships. And each one, everybody was like, wow, I thought they were their competitor, not their partner. So I think that was a really smart move right from the beginning,

was change the perception by being the nice guy instead of the bad guy. I don't want to gloss over what you said there about Linux, because for a lot of people, this is sort of in the weeds. But I think for the sake of context, Linux was, I believe, once referred to by Steve Bomber as cancer. He compared it to cancer. So the fact that Nadella is out there saying, no, we want to partner with all these different outfits. I have to believe that while that may have been a hit with people inside the company, the regular workers, if you will, at any point, did a delegate blowback from the board of directors? I don't know if the board was against doing that or not, but I think, again, back to him

being very pragmatic, he saw that many Microsoft customers, including some of their biggest customers, we're using Linux in some way, well, in a very substantial way in commercial operations. And instead of just kind of drawing the line in the sand and saying, we're not going to work with open source, they're the cancer, they're the enemy, he instead said, hey, what do you guys, you customers out there want? They wanted Linux to run on Microsoft's cloud. They wanted Microsoft to do more open source application work. And developers who are one of Microsoft's core constituencies,

they said, we need open source tools. And so instead of just saying, you know, we've always been against Linux and we consider them the enemy, he embraced it. And now it's not so surprising to see something like Microsoft by GitHub, an open source code repository. If that had happened under Steve Ballmer, people would have just freaked out. Instead, now it makes sense as part of Microsoft strategy. I'm curious for people who are in your line of work if Microsoft has also become a more open company, because it really does seem like, at least compared to the likes of Amazon, Apple, and Alphabet,

from a media and public relations standpoint, it really does seem like Hunter and Adela Microsoft has become more open and less secretive. Or am I wrong about that? Sadly, you're wrong. Oh, wow. I think they want people to think of them that way and they want to look like they're being very open and showing all their cards. But I can tell you as a journalist, it's still kind of business as usual. So to the extent that people are bearish on Nadella, what is the biggest criticism of him? Well, there's a group of people, and they're not Microsoft's biggest constituency,

but they are a sizable group. The people who consider themselves consumers as opposed to commercial customers, they kind of feel abandoned right now because under Nadella, there have been cuts to products had a lot of enthusiast love. So things like Windows phones and groove music, the Microsoft band, which is their competitor to Fitbit, even Cortana, which is their competitor to Alexa, all of these things either were cut outright or scaled way back. And so if you're a normal average enthusiast slash consumer, you're feeling kind of abandoned

right now. And those people understand why they're focusing on the enterprise, but they also are against it because they feel like it's driving them into the arms of Apple and Google, and they feel like they can't be Microsoft fans. So the people who are really big enthusiasts of the Zune, they're upset with Nadella? All nine of those people? Right. All those Brown Zune users, they're really mad.

But seriously, though, I used a lot of Microsoft consumer products. I mean, I had Windows phone myself for a long time because I considered it. the best phone. And it makes me nervous now to think about buying any kind of a consumer product or service from Microsoft because I am not convinced they really want to stay in that market. Well, one area where I think they have legitimately succeeded with consumers is when it comes to gaming. And there's been a lot of talk recently of companies looking to be the quote-unquote Netflix of gaming. Do you think Microsoft has a shot at something like that? Or is that not a not a business they're necessarily looking to pursue?

So contrary to everything I thought would happen when Ndala took over, they went all in on gaming. I was in the camp that thought they were going to sell off Xbox and kind of retreat from the gaming space. And instead, they've done the exact opposite. They've bought a ton of gaming studios. They've been assigning more people to work on different parts of Xbox services and Xbox, the hardware platform. So they're 100% in on gaming. And I think of all the companies talking about becoming the Netflix of video games, they have maybe the best shot.

And the reason I say that is they've got the experience in running streaming services on the cloud. And that's what gaming will be when you talk about Netflix of video games. It'll be some kind of a gaming service like Xbox Live running on Microsoft Azure streaming to devices of all. types, iPhones and iPads and Windows PCs, everything. So I think they're actually in a really good place for that. Over the next few years, what is one thing that you think investors should be watching to judge the health and the growth prospects of Microsoft's business? So right now, they've done a really good job at managing this transition to the cloud.

They somehow have found a way not to kill off all their products that are not cloud products, things like SQL server and Windows server and even Windows on PCs, they haven't killed those off, even though they've been really stepping up their work to move more things to the cloud. So I'm watching to see if they can keep going with that. Because at some point, you think they're going to cannibalize their own business by moving more things to the cloud. But so far, they've managed to keep the on-premises business growing and the cloud business growing at the same time. Microsoft stock has tripled in the past five years. Nadella is only 51 years old.

If I'm a shareholder, I want this guy in the corner office for another 10 to 15 years. Do you have a sense of how much longer he wants to keep doing this? No, I do not. But I would be very surprised if he retires anytime soon because I feel like he's having fun doing what he's doing. And he's been very successful at it. So I don't see why he would quit. She writes all about Microsoft on ZDNet. You can follow her on Twitter.

Mary Jo Foley. Thanks for being here. Thank you very much. Coming up, we'll give you an inside look at the stocks on our radar. This is Motley Full Money. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for Ghent. So don't buy ourselves stocks based solely on what you're here. Welcome back to Motley Full Money, Chris Hill, here in studio once again with Jason Moser,

Aaron Bush, and Ron Gross. Shares of Spotify down a bit this week, despite the company reporting its first quarterly profit. Spotify also announced it's spending a couple hundred, million dollars to acquire two podcast startup companies, Anchor and Gimlet Media. Aaron, let's just put aside the fact that if Spotify wants to get in touch with us about acquiring our podcasts, they can do so by emailing us. But what do you think? I mean, I think the acquisitions are the main part of the story here.

And I think it's a really big deal. So Spotify itself is not that great of a business. It's in a tough industry. has little differentiation from Apple Music, gross margins are slim, and scaling is hard when you have to play per song that you play. But yeah, I think these acquisitions could be pretty game-changing. And what this shows is that Spotify wants to become an audio company, not just a music company. And to break it apart a little bit, I think this is a big deal for a couple reasons. One, bringing exclusive podcasts, Gimlet Media will be the start. That will add different

differentiation, and differentiation is important because that should lead to gaining market share from players like Apple Music who just don't have their content. Exclusivity over time is what leads to pricing power, like we've seen with Netflix. Second, podcasts are fixed costs, which means that you don't have to deal with labels. It means that as they scale, they'll be much more profitable than music. When you look at Anchor, which is a platform for really anyone to make their own podcasts, I think they'll be getting much more supply, and it'll be much more. more profitable than what the music business is. And then lastly, I'll just say that there

still is a massive discrepancy between how much people listen to podcasts and how well they're monetized. The entire advertising podcast industry is about $300 million a year. And I think if Spotify does this well, that's going to exponentially rise. Part of the issue is data. Apple, which is, you know, the King of Podcasts, is not very helpful when it comes to data. However, I think the cornerstone of what Spotify is going to offer is data, and I think that that could accelerate their advertising revenues as they work on exclusivity, helping supply. And together, putting all this together, I think that it's pretty game-changing for Spotify's business.

It is going to be interesting to see, though, the pricing power piece that you mentioned, how that plays out. Because unlike, say, we were talking earlier about the ESPN Plus app, which I think is somewhere in the neighborhood of like $6.99 a month, that sort of thing. Spotify right now is already in the mid-teens on a monthly basis. So I feel like there are other monthly subscription fees that have more room to maneuver when it comes to pricing power than Spotify does at this moment anyway. Yeah, well, I'd just keep in mind still over half of their user base.

There's people who are listening without paying. They're being ad-supported. And so I do think that how that mix could change with some of their moves could move the needle. Earlier this week here at the Motley Fool, we did our first live Q! Q&A on YouTube. We had a lot of fun. We did not have time to get all of the questions. I wanted to kick one of them around here. Great question from David Strauss, who asked, Jason Moser, I've heard you say if SpaceX went public, you would buy at the IPO price. Are there other IPOs that you're looking to buy?

Well, so normally, I'd like to give those companies a quarter or two at least to report to get an idea of how the business is run. I broke that rule recently, as I said, on this show with Eventbrite. That's a recent IPO, and that was just because of my familiarity with leadership, and I like that market they're pursuing. A couple of IPOs coming up that I have on my radar. We talked earlier in the week on industry focus about Beyond Meat, and that is a really interesting company. You made that up. No, I didn't. I swear. It's just a fascinating company out there pursuing meatless alternatives. I mean, burgers and chicken, sausage. I mean, And people that I've talked to that have had those products swear by them.

They say they're really good. Need business. A lot of interesting people on that board. And then another one that's coming down the pike here soon is going to be Slack. And I think Slack is interesting from a number of angles, one of which that we use Slack on a daily basis here at work. So we certainly see the value there. I'll be interested to see what kind of a business that turns out to be, though.

Ron, what about you? Yeah, a few that have gone public relatively recently within the last 12 months caught my eye. Not recommendations here, but maybe ones to dig into DocuSign, I think looks interesting. Upwork. ADT is another one, and finally, 10-cent music. Aaron Bush? I mean, for upcoming IPOs, the big ones I'd point to Stripe and Airbnb. Stripe, massive payment platform and Airbnb, the largest hotel company that doesn't own hotels. But I still want to, I think probably the hidden gems, some of the smaller companies that we're not talking about could be the big.

biggest winners. I'm surprised none of you mentioned Uber, which is, for a couple of years now, has been at or near the top of the list of anticipated IPOs. Yeah, it'll certainly be interesting, but it's also going to be so big, coming out at over $100 billion. The upside there is probably not as big. Lyft is probably the more compelling potential option there. I mean, I think Lyft is going to be going public as well in a much smaller valuation, so we'll see. Subscribe to our YouTube channel. That's YouTube.com slash the

Motley Fool because we're going to be doing another Q&A live on YouTube next Wednesday, February 13th. We love getting your questions about stocks. So join us. Go to the channel and subscribe. Quick shout out. Brand new affiliate, WLBR AM 1270 in Harrisburg, Pennsylvania, joining the Motley Fool family of affiliates. Let's get to the stocks on our radar. Our man, Dan Boyd, producer of our Market Foolery podcast, is behind the glass this week. He's going to hit you with a question. Ron Gross, you're up first. What are you looking at this week? All right, Danny. I got Next Terra Energy, N-E, operates the largest electric utility in Florida, and it's the largest wind and solar operator in the world. Huge and fast-growing backlog of renewable energy products, really strong

management team. They're great capital allocators, industry-leading margins. They aim for 12 to 14% growth rate in dividends through at least 2020, and that dividend yield is currently 2.5%. I like it a lot for income. Dan, question about Next Terra Energy? That's really interesting about their dividend their Iran. My question is a little divergent. Do you think Florida will ever get their act together? Just as a state in general? Yes. It's 50-50 proposition. Jason Moser. What are you looking at? Well, burning season is in full tilt now. Ellie Mae. ticker E-L-I, their earnings coming out next Thursday. And I'm going to be fascinated to hear the language in the call, because just a quarter ago,

it was a pretty dull sort of not-so-cherry tone. The housing market was a little bit troublesome. Tight housing inventory, rising interest rates was fueling low home affordability. Everybody had refinanced, so there was no real volume on that side either. and they pulled back on guidance. The stock got punished, but, man, low alone. I mean, so far this year, the stock's up like 30% of something has changed the market's mind about this thing. And I think it might be, it might have something to do with that conversation we were having last week about interest rates, possibly even going back down. If we have a market where home affordability is a little bit more attractive, some options for refinancing come up, that really is L.A. May's business. So it'll be a good quarter to see. How the year is shaving up for him. Dan, question about Ellie May? Which name do you like more?

Ellie or May? That's a very good question. I think I'd probably go with Ellie. Like if I got another dog, I would probably be named or Ellie as opposed to May. But, I mean, both quality names, no doubt. Aaron Bush, what are you looking at? I'm looking at Docu sign, which Ron just mentioned ticker D-O-C-C-U. And we all know this is the top dog in e-signatures.

We use it for increasingly more types of. of paperwork. They have over 450,000 customers at this point. They're growing revenue well over 30%. Why, I think it's interesting, though, one, the market is big, but two, they just acquired a small company called Spring CM, which will get them into other aspects of document management, document generation, contract lifestyle management. So I think when you piece all these pieces together, their brand, their scale, their new capabilities, I think it could be a much bigger company one day. Dan, question about DocuSign? Aaron, what is the last document you signed via DocuSign?

I think when I bought my condo, I went through so much docusign. And it worked very well, and I probably read way less than I should. I'll bet you there was an Ellie Mae fueled document or two as well. There probably was. Three stocks there, Dan. You got one you want to add to your watch list? Certainly, Chris. I...

Sorry, Ron. Your losing street continues. I like docian. I end up using it all the time here at work and in my apartment complex. I like it. Awesome. Aaron Bush. Jason Moser, Ryan Gross.

Guys, thanks for being here. Thanks, Chris. Thank you. That's going to do it for this week's edition of Motley Full Money. Our engineer is Dan Boyd. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening.

We'll see you next week.