Motley Fool Money - The Race to $1 Trillion

Episode Date: November 3, 2017

Apple posts blowout earnings, pushing its market cap closer to the $1 trillion mark. Facebook shares record profits and plans to spend more on security. Starbucks closes the books on its online store and Tazo Tea. Ron Gross, Jason Moser and Matt Argersinger analyze the latest from MercadoLibre, Tesla, Under Armour, Activision Blizzard and more, and share a few stocks on their radar. Plus, Chris talks about the battle for the living room with NYU Professor Scott Galloway, author of The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google. To check out the latest from Motley Fool Wealth Management just go to http://Personal.Fool.com. Learn more about your ad choices. Visit megaphone.fm/adchoices

This message comes from NPR sponsor Paramount Plus and the new original series The Madison. Taylor Sheridan's most intimate story yet. The Madison follows a family raised in a world of digital distraction, forced by tragedy to truly see one another and come together. Starring Michelle Pfeiffer and Kurt Russell. The Madison, new series streaming now only on Paramount Plus. Everybody needs money. That's why they call it money.

But you can give them money. From Fool Global Headquarters, this is Motley Fool Money Radio Show. It's the Motley Fool Money Radio Show. I'm Chris Hill and joining me in studio this week from Million Dollar portfolio, Jason Moser and Matt Argusinger. And from Total Income, Ron Gross. Good to see you, as always, gentlemen. Hey, it's earnings paloza. We've got the latest headlines from Wall Street, and as always, we'll give you an inside look at the stocks on our radar.

But we begin with the biggest public company getting even bigger. Apple is closing in on a market cap of $900 billion after a blowout. about fourth quarter, revenue and profits coming in, higher than expected, and guidance that their next quarter could be even bigger, Ron? You make this easy for me, Chris. Where do you want to begin? Profits up 24%, 46.7 million iPhones sold. Mac revenue up 25%. When I just have to say Mac revenue up 25%, China increased for the first time since 2016,

up 12%. India up 39%. The watch. Remember the the watch up 50%. The 8 and the 8 plus became Apple's two top selling products at launch. I don't think people were expecting that. The iPhone 10 or X, depending on how you read or think about it, is coming out this week, Friday. And there's a lot of expectations around them, especially for management, who offered strong guidance and think the future looks bright. And you look at the coverage Friday morning, Jason, of just the line. Tim Cook. I out there joining one of the lines of people lining up for the brand new phone. What do you mean? He couldn't get like an inside track to get an early model.

You'd think you'd be able to get one. No, I mean, I think it's always funny to me to see how granularly people look at these phone releases right there. Will the eight sell more than the 10? What's the 10 going to do now that the 8's out there? I mean, at the end of the day, it's just, listen, the iPhone sells a lot, like period, whether it's the 8, 5, 10, whatever. So to me, I think it's really interesting to consider the the prospects for this company, now that they have so many different models out there, we know that Apple has a very strong presence here domestically. Globally speaking, has always been sort of the challenge there.

Now, as they introduce more models of phones and can introduce more price points, I think that opens them up to a bigger market, potentially. We always talk about how hardware is a raise to the bottom, and Apple's not immune to that either. I mean, their margins are coming down, but that's okay. They're also selling a phone for $1,000. Precisely. And not only that, they are doing a great job and growing that services side of the business.

And I think that in looking at that opportunity, globally speaking, to get more iPhones into more people's hands, I think that really gives them a chance to boost that services revenue a lot, which is higher margin, really attractive stuff. Up 34% this quarter. Yeah, hard to pinpoint anything to criticize this quarter. Well, what's impressive is that Apple, despite our concerns for, I think, years, is that the iPhone and Apple as a brand is still aspirational. And people are still, they want it.

And to Jason's point, the demand internationally and China growing is it shows you that people want those products. And pricing power, Apple should probably hold on to that pricing power for longer than we think. This is one that in hindsight looks easy, and I know it's not. But at $100 a share when we were saying, this looks like a value investment and people should really be buying it. And here we are at 170.

And it doesn't look like things are slowing down. And the stock is only 18 times right now earnings. in a market that's 24 times. This was, this was, there's no no-brainers out there, but this was a good one. Anyone think that a company other than Apple hits the $1 trillion market cap? Eventually, yes. First, no. You know, at this point, though, I'm still stubborn on this. I think the last hundred billion is going to be tough for Apple. I think it's always the last $100 billion.

I think Amazon is still, it can sprint ahead, maybe it can catch them. Facebook shares falling a bit despite third quarter revenue growth. going nearly 50 percent year over year. Profits up big too, Maddie, but Mark Zuckerberg's comments on the call scaring off at least a few investors. Well, they've been warning for a while that revenue growth was going to slow down, especially in the second half of 2017. We're still waiting for that. As you pointed out, the revenue is up almost 50 percent, 47 percent actually in the third quarter. That's up from 45 percent growth in the second quarter. And then the, you know, the revenue is up almost 50 percent,

And then the operating margin expanded from 44% to 50%. There are a very few number of companies, let alone once as big as Facebook, that can have it 50% operating margin and be growing as fast as they are. And so net profits were up huge. On the engagement level, the daily active users up 16%, monthly active users, up 16%. What I think they're concerned about, as you point out, is they're going to be stepping up investments, especially in 2018. team. And a lot of that's going to go to content, connectivity, AI, ARVR stuff that they're doing. But a lot of it's going to go to the security stuff to ensure quality and abuse prevention. I think that's going to be critical, especially when 2018 is an election year. I just, you know, are we going to be talking about this in six months, nine months? I don't know. I mean, I'm glad they're taking these steps. I think it's important. I don't think Facebook is a company that understands its own influence and how big it can be. But, you know, and so that's a a medium to long-term worry for them. But I don't know. The results are just so impressive that growth is really going to take care of a lot of these problems, I think.

Well, and again, the investments that they're going to make, as you said, particularly in security, I think that's what has a few investors saying, well, the margins have got to come down, right? Unless, of course, the ad platform in six to 12 months is even more robust, even a better experience for everyone involved. And therefore, Facebook has pricing power. the margins not only stay the same, but possibly even get better. It's possible. They've been warning about the ad load problem for months now, almost a year, actually. And that hasn't been a problem if you look at the advertising revenue that they're pulling

in. It's just so impressive. Starbucks' fourth quarter report was a lesson in looking beyond the headlines. Revenue was down slightly. Earnings per share was flat. But the stock up on Friday, Jason, and among the things that I think were missed by the robots that were selling this stock just on the headlines was the fact that they basically had the same results in terms of revenue compared to a year ago. But a year ago, there was one more

week in the quarter. So the results are a little bit better than expected. Yeah. And you know, you'd sort of question why it went from down so much, you know, and after I was trading to up. I mean, I just don't think the bot spotted the fact that they said laser focus on the call, Chris. I mean, these guys are laser focused. I mean, for me, listen, I know there are a lot of growth concerns out there regarding Starbucks in relation to where the stock is. It's so big, and we're talking about building more Starbucks instead of Starbucks and whatnot. But I really do feel like this is an investment that virtually any investor can own today and feel comfortable holding for many years to come. I think the

interesting news here, we know that they were selling off a lot of the Tevano brand stores closing that stuff down. Now it's really interesting to see that they're actually going to sell a Tazzo brand or Tazzo. and really place all of their chips on Tevana. And I think that makes sense, really, because I think Tevana probably carries more brand equity today than Tazzo T does. It's hard to point towards anything here where I have a question or concern. I mean, food mix was over 21% for the fourth quarter, and they're on track to hit their goal of 25% by 2021. We always talk about the fact that they just don't really ever nail it on the food side.

One question, I guess I have. I mean, they're talking about this partner's Starbucks credit card, this visa card. I guess that could be kind of cool, but I'm not sure it really is that big of a needle mover. I don't know that that really matters as much for them. I'm surprised to see they only have 13.3 million rewards program users domestically. It just strikes me that they should have a lot more if you figure they probably have a market opportunity here domestically. I don't know, 250 million people that would be in their target. So, for me, I don't know that that's something that's really going to last.

And just give you some real-time data here. I snuck a poll out there on Twitter today. Asking people the hard question. If you can only choose one, the Amazon Prime Visa or the Starbucks visa, which one are you going with? 90% of 150 votes, mind you. 90% are going with Amazon. So take that for what it's worth.

You mentioned they sold off TASO to Unilever for nearly $400 million. What are they doing with that money? They are using most of that money. to reinvest in the Tevana brand. They are also closing down their e-commerce operations and sinking some more of that money into investing with their channel partners. So, while you probably won't be able to get coffee from the Starbucks website anymore, I imagine they're going to come up with alternate ways to get it. I wonder if Starbucks, because it's underreformed, you know, over recent years, I wonder if

it's gone under a little bit of a transition on the shareholder side. In other words, I think you go back several years, I think there was probably a lot of growth investors who were following Starbucks, looking at those 5% comps and looking at what they're going to do in China and elsewhere. And I wonder if it's transitioned a little to, hey, these are investors who are looking for a steady business, looking for a growing dividend, a company that's going to spend $15 billion on shareholders, either dividends or buybacks for the next three years. I feel like maybe it's undergoing that shareholder-based change, and now it's probably set to succeed a little bit, at least on an investment level.

I think that's an excellent point, and I use myself as an example. I've never owned this stock. I never thought about really doing it back in the day when it really was a growth story. I said, there's too many Starbucks. There can't be so many on each block. Obviously, I was completely wrong. But now, actually, I'm actually thinking about maybe getting in and not thinking it's too late for the type of investment I'm looking for. Third quarter revenue for Macado Libre rose 60 percent, much higher than analysts we're expecting. Shares of the Latin American e-commerce giant up more than 10 percent on Friday. Maddie, those fears of Amazon moving into Brazil, we can put those aside at least for one day.

I think you can put those aside for maybe for a little while. Now, as you mentioned, the Amazon thread and shares sold off after second quarter results because they missed earnings expectations. They kind of ramped up their spending and free shipping initiatives, which hurt margins. But after this quarter, I'd say you can bet those investments are starting to pay it off. I mean, units sold, which is what I use for currency-neutral revenue growth, a proxy, accelerated for the second consecutive quarter growing 56% year-over-year. Unique buyers climbed 31% to 16.3 million.

added 10 million new customers, now over 200 million registered users. Payment transactions were higher. If you had any thoughts that Amazon was going to be a big competitive threat, and it certainly is, but just look at the Mexico segment for Mercado Libre. Amazon came into Mexico about two years ago. In Mexico, their units sold there have accelerated for eight consecutive quarters. Unique buyers are up 67 percent, and the purchase frequency among those buyers has nearly doubled over those two years. So if Amazon, if you're going to, if you're going to, if, you Investors are worried about Amazon coming into Brazil. Look at Mexico. Mercala Libre's business in Mexico is as strong as it's ever been. I expect that to play out in Brazil as well. And even if Amazon

becomes a big market share leader in Latin America, undoubtedly they will. I feel like Mercala Libre is still going to be a big player. Coming up, earnings paluza rolls on. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in studio with Jason Moser, Matt Argusinger, and Ron Gross. Tesla's third quarter report featured a loss of more than $600 million and production problems of its Model 3. For more on this, we turn to the guy at the table who knows firsthand how long it takes to get a Model 3. Ron Gross. Oh, so rude. Because I'm a weird contradiction with this one. I own the stock. I have a deposit in for the Model 3, and yet I think the whole thing is completely ridiculous.

Especially from a... You got a delay notice, right? Yes, I just got a delay notice that my Model 3 would... I should think more 2019. That would be better. Early 2019. As you said in the readup, it's a Model 3 production delay. Their complication with the manufacturing process, specifically the Gigafactory was having trouble with their battery manufacturing process. So, you know, Musk's very lofty goals. He's very quick with the goals seems to not becoming true. That pushes things out. And yet, the stock really doesn't get hit that much on these things, because if you're a believer in Musk and you're a believer in Tesla, you just are. But at a 50 billion market cap, with GM at a 60 billion market cap, and

BMW at a 60 billion market cap, and Ford right in line at a 50 billion market cap, it doesn't make sense to me. Tesla is not going to be the only winner of the electric car business. Everyone is moving to electric cars. I don't see how the numbers can support the valuation. Well, and particularly if you want a new car, you know, soon. Detailed. Shares of Under Armour falling 25% this week after the company's third quarter report featured the first sales decline as a public company. And on top of that, Jason, they cut guidance. Woof, woof. Man, I've seen better. You've got the double. Better quarters out of the Cleveland Browns this year, right?

Oh. Listen, I'm trying to find a light of the end of tunnel here and just not seeing it right now, unfortunately. I mean, it is a strong brand. And perhaps that's it. international business continues to perform well. But we put this on hold in MDP because of this quarter in a lot of red flags that we're seeing in the business right now. It's in a state of chaos. And I think Kevin Plank's leadership is being questioned, and I think that's a fair point. Internationally, they're doing okay. But North America, they've run into a real buzzsaw in this massive retail shift. Their wholesale revenue is down 13%. You see all of this trouble with Sports Authority and Dick's sporting goods. The investments in direct-to-consumer are

working out for them, and that's ultimately what's going to have to lead this business forward. But we are looking for some key points here in order to be able to hang on to the stock. We want to see that this new leadership team they have in place is still there a year from now. We want to see that they can really sort of stanch the bleeding of this wholesale leak. And if they can really work on turning their balance sheet back into a source of strength as opposed to the weakness that it is due to some reckless spending, then I think there is a light at the end of this tunnel. But it's going to take a lot of time for them to get it straightened out.

and I think a lot of patience from investors. It's remarkable to talk today about Kevin Plank as a liability. I think for years, we kind of said, oh, well, you buy Endorme. You're buying Kevin Plank. He's an owner and founder, CEO. He's great. He's going up against Nike. He's succeeding.

And now it's kind of like, well, gosh, I hope the executive team around. We can keep him alive. It was a real dilemma when we batted this back and forth to add it in MDP because we said just that. We were like, Plank is a tremendous asset, but he's also one of the top three. free risks in owning the shares. And that's certainly playing out on the company today. If you're negative underarmor, are you positive Nike as just a matter of a rule? But we own both in the portfolio. I think that clearly Nike is a better run business today.

And I think that Plank made a lot of reckless investments in the name of growth, as opposed to making smart investments and letting growth sort of be the byproduct of that. So let's hope he can get that straightened out. Activision Blizzard's third quarter report was a lot like other recent reports from the video game giant. Profit higher than expected. and they raised guidance. Shares actually down on Friday, Maddie. Is that simply a valuation thing? Because 2017 has been a great year for this stock. It's had such a great run. And as you mentioned, they just basically raised annual guidance almost every quarter this year.

The results have been a bit lumpier this year because they had so many big releases last year. And when big video games come out, it really kind of shakes up their results. But I think they're going to finish the year strong because Call of Duty World War II actually comes out today. That's always their big holiday release every year. They're kind of going back to the World War II period, which is kind of what made it called to be the big hit that it is. I think that's going to be huge. But overall, just the business itself, you know, 49 million active monthly users at

Activision, 42 million at Blizzard, 293 million at King Digital, which is their candy crush. And those users, those millions of users spending an average of 50 minutes per day playing Activision games, which is a tremendous number. I'm really excited for 2018 because I think that's the year where e-sports is we're going to break out in North America. And Activision is kind of kicking that off in January. with their Overwatch League.

How is their marketing spend? Because you mentioned the new version of Call of Duty. I'm seeing a lot of ads on TV for that one. Yeah. Their marketing spend is always huge. But the value that they have, of course, is that these brands, these franchises, have such huge followings. And so, I doubt they're spending a lot more than they do have in previous years. AutoNation's third quarter profits came in higher than expected. You tell me, Ron, is that why the stock was up 15% on Friday? No, I do not think so. Because it was kind of a blah. It wasn't that good. It was a block.

quarter. They beat estimates, but the adjusted profits were down 3 percent. And the adjustment is for the Hurricane Irma, which took about $8 million after-tax dollars off of the bottom line. And for the most part, it was a rather lackluster quarter. The reason the stock popped, I think, is that they announced a multi-year service agreement with Waymo, which is Google's autonomous car division. And AutoNation is going to provide long-term vehicle maintenance and repairs for Waymo's self-driving fleet. It remains to be seen how that translates, you know, what level of revenue and income that translates to. But I think everyone got pretty excited that these traditional car dealerships are going to have a place in the autonomous world.

You know, Ron, since you're waiting on a new car, there is an auto nation, not too far from full HQ. We could hit that after the show if you want. So rude. Hit a man while he's down. I'm trying to help you. You know, Tesla says they don't think people are going to cancel and ask for their refund. back, but I've got to admit, I'm thinking about it. I haven't pulled that trigger yet. A couple of weeks ago, I saw a story on MarketWatch about a secondary market opening up where people are essentially selling their place in line at a profit. So you plunk down $1,000. Yeah. And you can sell that for $2,000,000, to someone who wants your spot in line.

Twitter me. Ron Gross 144. Let's talk. All right. Jason Moser, Matt Argusinger, Ron Gross. Guys, we'll see you later in the show. More earnings as earnings ploosa rolls on. Stay right here. This. is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. A couple of weeks ago on the show, I talked with Scott Galloway, professor at NYU's Stern School of Business, and author of the new bestseller The Four, the hidden DNA of Amazon, Apple, Facebook, and Google. And we ended up talking for so long that we couldn't include everything in a single episode. So this week, we wanted to share the rest of that conversation, starting with Amazon's acquisition strategy.

You predicted that Amazon was going to buy Whole Foods, and you've also said that the next logical acquisition in the retail space is Nordstrom. Why is that? So they now have license. Amazon's strategy, it appears, is to have really great intensity across the 60% of U.S. households that have a prime membership. It's probably going to 70%. In two to three years, it's likely that more people will have a relationship with prime than they have. have cable television, already more people have primed than a landline phone. To get that sort of intensity, you need fluidity, and you can't be an episodic relationship. And the only way you can be in a consumer's household once or twice a week is with grocery. And now with the acquisition of Whole Foods, Amazon has licensed access and permission into the wealthiest refrigerators in America. However, they still don't have license permission or access to the wealthiest closets or medicine cabinets or beauty cabinets.

They've had trouble getting official distribution from luxury and fashion brands. And the acquisition of Nordstrom's would give them that. Nordstrom is in Seattle. Nordstrom has outstanding locations. They have outstanding management and operations. It's a very well-run company. The X-factor here is this is a family-controlled company, and these decisions are made over the Thanksgiving dinner table

as opposed to in shareholder or board meetings. So you just don't know what could happen here. Most likely, it'll be a series of little acquisitions around the fulfillment side, and the dark horse for acquisitions from Amazon would be a Scripps or an AMC. I think Amazon is frustrated that despite having the second large content budget and original TV, HBO still wins more Emmys with about 40% of the original content budget, and Jeff Bezos doesn't strike me as someone who's – I think he's willing to make big bets. I wouldn't be surprised if they go after a couple of these cable stations to get from

D to letters D to M really fast with content. And they can also pay a lot because they can monetize this content by selling paper towels in the household. So a lot of different things, I think with the next six to 12 months, they likely stay quiet and just digest whole foods. But there are some very interesting opportunities for Amazon. I want to move away from the four for a second and get your thoughts on a couple of other topics.

And you mentioned Uber, and I'm curious about where you think Uber goes from here. because, as you said, a year ago, Uber was looking every bit like the next great dominant company and for investors the next great potential stock, and that has obviously changed. Where do you think Uber is right now and where is it going next? Yes, so three or four years ago, I said publicly that I thought Uber was a huge threat to Amazon, and I was wrong. I thought Uber perhaps could be the artery or the circulatory system for last mile delivery, and it could be turned into these flexible delivery trucks, and that just hasn't happened.

Uber has probably lost $10 or $20, maybe $30 billion in value because of some of the cultural issues. And also the fact that, and I didn't recognize this a few years ago when I made this statement, you and I could start a ride-hailing company with $20, $30, or $40 million in Los Angeles, because we need the money to create awareness, but we can create demand and supply, and that is we can create drivers and we can create riders in one city. Whereas a company like Airbnb not only has to have local demand,

it has to have local supply of apartments, it has to have global awareness and global demand because everyone descending on L.A. is from different parts of the world. So, for example, I would predict that Airbnb's value is going to surpass that of Uber, in the next 12 months because their moats are bigger. And if you look at Uber, what's become clear is their Amazon strategy of trying to spend everyone into the ground hasn't worked.

And both Lyft and other competitors, including OLA, have been able to kind of go toe-to-to-toe with Uber and are now punching in their weight class. What do they need to do? I think they're doing it. They've cleaned up their corporate governance. They've got a new CEO. And at the end of the day, the only way they're going to maintain the current valuation, which I believe is greater than Airbus,

is they're going to have to become the operating system for travel, and that is you not only push on Uber to get a car from uptown to downtown, but you push on Uber to get wherever it is you need to go, whether it's a car to the airport and then the plane to Minneapolis and then the hotel in Minneapolis. I think this company needs to become Expedia before Expedia becomes Uber, and I think the new CEO has a lot of experience of travel portals, but look for Uber to make some acquisitions in the travel portal space

and try and become the operating system for all the travel. You've said that the new battlefront in business is the home and that no one has been able to really pull it all together. I have to say I'm a little surprised at giving Google's acquisition of Nest and for all the talk of the smart home over the last few years that Google, among others, really hasn't been able to pull it all together. Is there a market leader right now? Is there a betting favorite for who is best positioned when it comes to the connected home?

Yeah, and the answer is the same across almost any sector, if you said, who's the favorite. It's Amazon. The most exciting thing happening in the home is voice, and about a third of all computing now is going to take place without a screen, and the place where that's most obvious in terms of maybe being 50% of all computing will be without a screen is in the home. And you're right, no one brand has really locked it up. But Amazon's Alexa is now kicking the crap out of Siri in full view of everyone else. It's sort of leapfrog Siri, which still has market share from a total installed base because of the iPhone. But in the home, Alexa now has a 70% market share of voice in the home.

So the comfort with voice and with the operating system, I just got an Amazon show, and it's just incredible. The odds on favor right now, I would say are Amazon, who would have thought two or three years ago that the hardware innovation of 2016 and 17 wouldn't be the Apple Watch or the Apple Pods, but it would be Amazon's Echo. So the odds on favorite here is Amazon, but there's a lot of companies that could pull it off. Samsung is potentially a dark horse here. Google, you never want to count Google out of anything. But right now, an Apple, everybody wants an Apple logo on everything they own. But right now it looks like Amazon has the most momentum. 20 years ago, there were about 10,000 public companies, and today that number is down to about 6,600. You took a company public? What's the best part about being a public company, and what's the worst part? That's a really interesting company. I can name a lot of the worst part.

The best part, you know, if you're an entrepreneur, having a company go public is very gratifying. It's great to see employees and investors get some liquidity. It's nice to have potentially the currency to go acquire companies. But you can understand why, as you jointly pointed out, the two-thirds of public companies are no longer around because the private markets now have liquidity and the reporting requirements. And so the vagaries of the market or the short-term pressure of the markets make it more tempting to stay private, longer, and longer. And unfortunately, this creates an environment where retail investors can't participate in some of the most interesting and exciting companies. But, yeah, I don't have any desire to take another company public.

Once that was my first and last time starting a company that gets taken public would be my guess. Your day job is being a professor. How are your students feeling these days about the economy? and their ability to just make their mark in the world. So if you have the right skills, if you're a talented kid who gets a degree from a credential from a good university and kids who graduate from the top 20 business schools have both those things, are really well set.

They're outstanding. And this has never been a better time to be outstanding, but it's never been a worse time just to be average or good. So those kids I don't worry about. It's the kid coming out from not a top 20 school, but a top 100 school that maybe has a little bit of debt that these technology or new economy companies don't recruit at. And that maybe comes out of school with debt and doesn't have access to this sort of innovation economy. That's the scary part. My observation of this economy is it's never been easier to be a billionaire.

I do believe there's some kids in my class every year that are going to become billionaires likely through alternative investments or hedge funds or getting very lucky in a tech startup. but at the same time it's never been harder to be a millionaire. And that is just a solid citizen who gets a good job, goes to a decent university, gets a good job, plays by the rules, and expects at some point in their life to be a millionaire. I think that's getting harder and harder. The rewards for being outstanding are immense. The rewards for being average are good have not been this bad in a while.

Beyond the books, beyond your curriculum, what are you trying to impart to them? So I think to understand the first year of business school is outstanding in the sense that we take human capital to make $50,000 or $60,000 a year and we turn it into human capital that makes $100,000 year by inculcating them in finance, operations, management, and marketing. And the second year is largely there so we can fulfill the teaching requirements of tenured faculty and charge them $120,000 in tuition versus $60. I think if we were going to betrude ourselves in terms of adding the same amount of value we add the first year, or adding the same amount of value of the second year as we do the first year,

I think we would steep these kids in a deep understanding of the businesses, the evolutionary anthropology benefit of these four companies, how they've dominated, what the complexion of their business activities are, but to really understand these four companies is to understand the intersection between technology, media, retail, information services. So what I'm hoping to accomplish with this book is the same thing. I'm hoping to accomplish my class. I hope the people who read it feel as if they or their kid have a slight economic edge over the competition

and have an easier time creating economic security for them and their families. The book is The Four, the hidden DNA of Amazon, Apple, Facebook, and Google. It is available everywhere you find books. Scott Galloway, thank you so much for being here. Thank you. Thanks for your time. Coming up, we'll give you an inside look at the stocks on our radar. Stay right here.

You're listening to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. So don't buy ourselves stocks based solely on what you're here. Welcome back to Motley Full Money, Chris Hill, here in studio once again with Jason Moser, Matt Argusinger and Ron Gross. Before we get to the stocks on our radar, more earnings, guys. Third quarter revenue for Wayfair grew nearly 40 percent,

but shares of the online home goods retailer down this week. They're in growth mode, Jason, and the stock is, had a great year. I'm just wondering if they're getting a little too frothy for some investors. Well, generally speaking, I think this business continues to do very well. You keyed in there on the revenue growth. And I think all of the metrics that really matter are moving in the right direction. But there are three problems, as I see it today. These guys are still not profitable. They're not cash flow positive, and they're not Amazon. If they were one of those three, the market probably gives them a little bit more credit. But with that said, let's look

at the bright side here, because I think there's a lot to unpack, that gross margin held the line versus a year ago, which is important, I think, because the cost of goods includes that shipping and fulfillment, which is really what these guys have to spend so much on year in and year out. And, again, percentage of orders from repeat customers continues to grow. It's now 61% versus around 56.5% a year ago. So, again, I think it's a good business. It's going to take some time and some investment and some patience, but I think another encouraging sign is they have millennials really starting to enter that key demographic customer that they focus on that 35 to 60, 65-year-old homeowner or you can be a renter for all that matter

as well. And I think that's going to resonate with a lot of these consumers that have kind of been raised in this e-commerce age. So there are a lot of tailwinds here. I think they're witnessing some success on the wedding registry front. And all in all, it's a good business. I like what they're doing. I would not bet against these guys. I think they have a great perspective in trying to build out something that lasts. Have they given any guidance on when they think they will be profitable, or do you as an analyst have any expectation of, hey, it's got to be by this point in time or they're really going to be in trouble?

I think that they're going to continue to string this along as long as the market will let it. I mean, it's sold off after earnings. It recovered a little bit the next day. I think the market still gives these guys a lot of credit because the bottom line, those numbers, the sales numbers, the customers that are ordering, that all tells the tail. This is a business that growing. A lot of people are using the platform. The Pizza Wars are heating up. On Wednesday, Papa Johns reported third quarter results, lowered guidance, and blamed the NFL for their struggles. Founder and CEO, John Schnatter said the NFL and its leadership hurt the company by not resolving the player protests that have been taking place during the national anthem. On Thursday, Young Brand's third quarter report featured strong results from Pizza Hut. And when analysts asked, Pizza Hut executives said the NFL is having no impact on their sales. I was fast. fascinated to watch this little drama play out, in part because I just felt like Papa Johns was kind of getting in over, getting ahead of themselves. It seemed like a not very great excuse. Put the politics of the issue aside. I just don't know why they would come out and say that because we're not talking about that many days in the quarter. I think they need to be careful of not to see, they're not seeing the bigger picture. And the bigger picture is that they've tied their wagon to the NFL for the last.

seven years as the official pizza of the NFL, and viewership is down, and viewership is not down because of this controversy here. It's down for many reasons, among them being that we're all watching TV differently nowadays. TV viewership in general is down, and if that's who their wagon is tied to, they need to rethink their marketing campaign, or they're going to continue to suffer. We're also living in the age of Grubhub, too. I mean, you can have anything delivered at this point. It's not just pizza anymore. I think that's playing out on not only Papa Johns, but Domino's pizza at all of them. I was just going to say Domino's seems to have no trouble putting up comps of, I don't know, 8% or higher quarter after quarter.

So, real quick, before we get to the stocks on our radar, what is your go-to-pita, Jason? You know, at the end of the day, I think you got to keep the simple. We don't need to go for topics. You got to go with the Neapolitan margarita. Just sauce, some buffalo mozzarella, some basil, and let it rock. Maddie? I like Canadian bacon, but it's hard to find now and then. Really?

Oh, yeah, I'm all in Canadian bacon. What's wrong with regular bacon? I don't want to... There's something about the Canadian bacon. I don't know. Saltyness? Isn't that any ham? It's like sharp ham?

It's like ham on steroids, but not steroids. I get what he's saying. I just... I'm perplexed by what appears to be a lack of Canadian bacon in America. I can't find it. That seems like an opportunity for someone. Ron Gross? I'm a New Yorker, man.

Give me the pepperoni. All right. And you make it yourself, right? You're having it in the kitchen. You know, So we always say on this show that we can't offer personal advice, and that's because we can't. But here's the good news. Our friends at Motley Fool Wealth Management, they actually can offer personal advice.

So if you're interested in more details on that, just go to personal.com. That's personal.com. And check out our friends at Motley Fool Wealth Management. Let's get to the stocks on our radar. Jason Mosier, you're up first. What are you looking at this week? Yeah, dipping into the war on cash basket this earning season square, ticker, SQ. Earnings are up for next Friday, and these guys are actually really performing very well.

Not only are they growing a compelling business on the transaction side of the equation, but I like what they're doing in using all of their data to provide small business loans through the square capital wing of the business. Last quarter, the loan volumes were 68% there, and Jack Dorsey, I think, is dead set on growing that part of the business. And having worked at a bank and having originated a few small business administration loans, I mean, it was like pulling teeth process. And really, Square is simplifying that immensely. And I like that.

So I like what the company's doing. I like what they stand for. I love that space. And so I'm really going to be interested to see how their core is going, how they see the 2018 year coming. Ron Gross, what are you looking at? I wish Steve is here because I'm going back to Titan International. TWI. I've talked about this industrial wheel manufacturer time and time again, but it looks like this cycle might finally have turned.

This week's earnings report showed third consecutive quarter of year-over-year growth. Top line was up 21 percent. All segments up year-over-year on higher volume. Shares pop 15 percent on strong guidance for 2018. I beta are going to increase 50 to 100 percent in 2018. Don't let the pops scare you. Plenty of upside left. Yeah, Steve, I was... He made a little fun of me.

A little fun of you. A little shot. Last time we're on, Matt Argusinger. What are you looking at this week? I'm starting to sound like a homer on this one, but I'm sticking with Mercado Libre, M-E-L-I. Even with the pop. Even with the pop. Especially with the pop.

I mean, it's, we've been weighed, the Amazon threat is certainly real, but I think you have real evidence this quarter that Maca Lauder Libre's business has great sustainable competitive advantages. The investments are making in shipping, customer loyalty payments. It's really creating this sticky ecosystem for a lot of their users. Look, you have a $12 billion company that no matter what is going to have a significant share of Latin America's e-commerce. It's going to be a much bigger company in the future, no doubt.

And the ticker symbol? Oh, sorry. M-E-L-I. Yeah, it's a good point that they don't necessarily have to. They're in first right now, but they don't have to end up in first. They can be second and still do well. Yeah. Still be huge. All right, Jason Mozer, Matt Argusinger, Ron Gross. Guys, thanks so much for being here. Thanks, Chris. That's going to do it for this week's edition of Motley Full Money. Our engineer is Steve Broido. Our producer is Matt Creer. Rick Engdahl, helping us out behind the glass this week.

I'm Chris Hill. Thanks for listening. We'll see you next week.