Motley Fool Money - The Stock of the Summer

Episode Date: June 3, 2025

Which stock will have the best ice cream and beach season? (00:21) Anand Chokkavelu, Jason Hall, and Matt Frankel discuss: - Jason’s and Matt’s picks for the stock of the summer. - “News or Noise” with Dollar General, Disney, and Meta. - “Buy, Sell, or Meh” with the same three companies. Companies discussed: EPR, AMD, SNOW, DIS, META Build your Range Rover Sport at www.rangerover.com/us/sport Host: Anand Chokkavelu Guests: Jason Hall, Matt Frankel Engineer: Dan Boyd Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, "TMF") do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Superman, you're listening to Motley Pool Money. I'm on in Chaka Balloon, I'm joined by two of my favorite fools, Jason Hall and Matt Frankel. Today we're talking news or noise with Dollar General and Disney. We'll play buy-seller meh with Disney, but first, we're talking the stock of the summer. Lilo and Stitch is in the early lead for movie of the summer. But that's with movies like Superman, Jurassic World Rebirth, and of course the Netflix-only Happy Gilmore 2, yet to come. But who cares about movies when you can talk stocks? Jason, what's your call for the hottest stock this summer? You can't say Nvidia. That would be boring. Okay. Yeah, I wasn't going to say Nvidia anyway. But Anand you already brought up movie blockbusters and EPR properties is America's

biggest theater owner. And they told us back in early May that the box office is up 17% this year already. And like you said, man, the biggest releases are probably. still yet to come. Here's the good news, though. We don't have to count on a healthy box office for EPR to be healthy. It's also one of the largest owners and managers of experiential properties in the country. That includes part owners of, that includes being a part owner of an irreplaceable asset like the Santa Monica Pier and growing categories like eat and play, casinos, water parks, amusement parks, concert venues, fitness centers, museums, zoos, you name it. On it, that's a hundred billion dollar market, even if we don't include movie theaters. Chances are if it's a part of your summer

plan, EPR may own it and lease it to the operator. Lastly, we got to talk valuation. We got to talk opportunity. The stock is up a lot over the past few years, but it's still below its pre-pandemic highs. The dividend is in growth mode, though. With a yield above 6%, I say EPR is my hot stock for the summer of 2025. I'm glad Jason took EPR because that's the one everyone expected me to take after Anand was talking about movies. I do love EPR. One really interesting thing, you mentioned the box office is up, I think, 16% this year. The leases that they just renegotiated with Regal, which is their third largest tenant, have a performance component baked in. So good box office means they get more rent. It really was resolved favorably, the bankruptcy over there.

But for my hot stock, I know I can't say Invidia, but I'm going to say Nvidia's younger cousin, AMD. AMD is the most recent addition to my portfolio. I know the stock is up recently. It's up about 15% in the past month, but for good reason. They've had a few big wins recently. For example, their latest gaming processors are being compared to as better than Nvidia. They're saying they're kind of a direct shot at Nvidia's business. I know that AMD is a distant, distant second when it comes to things like data center GPUs, but the momentum is going to, in the right direction. The stock trades for 28 times forward earnings, even though its revenues growing at 36% year-over-year rate, data center revenues up 57%. So if you think Nvidia is the only

player in that market, think again, I think there's a lot to like about this company that embedded segment, which includes their autonomous vehicle chips, has a lot of opportunity. I think AMD could be a very hot stock for this summer, and for years beyond. honored, are we allowing this on a technicality, or is this a clean pick? I think it's fine. I think Jason, both of us moved into to be like, all right, fine. I think everyone wants to hear a little bit about semiconductors. Let's move on to news or noise. A Jason Hall hat tip here. In a classic beaten raise, the largest dollar store in the U.S. is up about 14 percent as we're taping. Dollar General beat its sales and its earnings guidance

and raise its outlook for the year. We'll give thoughts on Dollar General as an investment soon, but for now, Jason Hall, news or noise? Consumers flocking to dollar stores is bad for the economy. I think it's noise. The news is that it's happening, but honestly, it's because Dollar General has struggled with inventory and delivering on what customers want and need in prior years. Not that there's really a macro reason that's happening here. This is more a case of maybe a company just doing a better job. You could almost say a company that was doing bad. Maybe just kind of doing less worse. I would agree with that. I mean, same store sales were up 2.4%. That's like exactly in line with inflation. So it's not really that things are spiking. I mean, if we do

see sales spike, it's a sign of consumer caution, but not necessarily a terrible thing. I mean, like Jason said, the company hadn't been executing well. So this is not like Walmart in 2008 when sales shot up from a great, perfectly run company. This is more of a rebound story than anything. Next one. Roiders is reporting that Disney is laying off several hundred employees in film, television, and of course, corporate finance. That's on top of 7,000 Disney cuts in 2023, about 200 a few months ago. Matt, are the Disney layoffs, news or noise? I mean, I think it's news in the sense that it shows how Disney's focusing on its most valuable businesses, the theme parks, the cruise line, and the streaming business.

Because you mentioned there have been three rounds of layoffs, including that massive 7,000 people layoff. Not one layoff had to do with the parks or the cruise line. The first round was very streaming focus. Bob Eiger definitely right-sized the streaming business. I do think it's news. It shows that Disney is being very, very cost-conscious like Bob Eiger set out to be, but it also shows what areas of the business they're prioritizing. To Matt's point, you have to really invert it to see where the news is, and the news is not that they are eliminating a few hundred positions. It's like Matt said, it's where they're not acting that talks about where their focus is. Beyond that, I think it's largely just noise, but if you're a Disney shareholder, it's a reminder that they're focusing on certain parts of the business.

And just to put it in perspective, there's in the neighborhood of 200,000 Disney employees. So what we're talking about, even if you add all those together, is less than 5%. Tell that to the people that got the pink slips. Absolutely. And we don't want to miss sight of that. These days, I'm all about quality over quantity, especially in my closet. If it's not well-made and versatile, it's just not worth it. That's honestly what I love Quince.

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Quince.com slash motley. Let's move on to meta platforms. We've got two pieces of news. We're going to see which one's the bigger piece of news. Facebook's aiming to allow full AI automation of its ads by the end of next year. Second story is Meta's 20-year deal to buy nuclear power from Constellation Energy to help power its data centers.

Matt, which is the bigger story? They're both bigger. For consumers, I definitely think the ad automation is bigger. That really favors small and medium-sized businesses that don't have the big ad budgets to really create what they want to create. Basically, the idea is that a smaller business will be able to upload its logo, answer a few questions, and set its budget. and Facebook will create a stunning ad campaign for them.

So I do think it could boost the ad business. The data center need power is going to have to come from somewhere. The focus on nuclear is definitely news for the industry. I mean, both Google and Amazon have had similar nuclear deals announced in the past few months. So it's not that big of a surprise, I'd say. But I definitely think the ad automation could be the bigger story for Facebook's bottom line. Yeah, I don't even think the power deal is news for constellations. Well, I mean, maybe that it's going to get, it's going to be, it's going to, it's going to be, it's going to, it's going to, it's going to be, it's going to, it's going to, it's going to be, it's going to. It's going to make consolation this great investment because of all this deals they've signed with with tech companies for power.

They're not going to change the unit economics for that business that hasn't been a great business for a long time. I definitely think the AI automation is a bigger deal. Meta is an ad business. and anything they can do to do a combination of driving out cost and improve the results of the ads to make them more valuable is a win for shareholders and a win for the bottom line for Facebook. So that's definitely news. Well, there's a big race going on in the ad space to get the best ad technology. I mean, Pinterest was just upgraded today because of their improving ad technology. You have companies like PayPal that just launched an ad platform.

You have a bunch of companies launching ad platforms, stealing ad executives from other companies. It's really a race, and meta sounds like it's one of the winners of the race. That's what they're best at. If Pinterest could monetize like Facebook could, oh my gosh, watch out. But I think I did hear Matt say both stories were bigger, but we'll move on. We'll move on to buy sell or man. Pick aside, Matt. Come on.

I didn't know. I said the ad automation is clearly bigger. The energy deal is big for Constellation. Okay. Okay, fair enough. Fine. Another, on yet another technicality for Matt. I just got back from vacation. I'm rusty. I'm rusty. Buy, sell, or me? Let's take news or noise one step further with this round.

For each of these companies, see the three we were talking about. Let's start with Dollar General, Matt. Buy sell or me? For me, it's a man. Like, I'm kind of in waiting C mode about it. I mean, it doesn't seem like a great value. The quarter was definitely a strong one. They're opening stores fairly aggressively right now. I'm in wait and C mode. I mean, as Jason mentioned, the dollar store story hasn't been doing great for a little while, and one quarter doesn't make me totally change my mind about it. I'm very close to calling it a buy. Improving comps and margins are positive, but you're really lapping a period where it was kind of

the end of some negative comps and bad inventory issues, so just kind of less worse. On the positive side, again, the stock also trades for about 10 times its prior peak earnings, so maybe it's cheap, but then you start digging in a little closer. Operating costs are still rising, and I don't know if we can continue to count on higher gross margins offsetting that in a year where the company is going to spend a lot of money fixing thousands of broken down stores. And it actually, in the first quarter, was a net closer of stores, but by the end of the year, it will have opened a few hundred net new stores.

So right now, I'd say it's me. But can I get a technicality too on it and get a watch list, ma'am? You're behind like five technicalities on Matt. So go ahead, Jason. We'll go to Disney. Matt, Disney, buy seller, ma'am. I bought it in my own portfolio lately. So I'm going to say buy. It's one of my favorite stocks to buy right now. I think it's a very underappreciated business. I think people overestimate how recession prone it is. People still go to Disney World. when there's a recession. The cruise industry, which Disney is going very all in on the cruise business with new ships, has been surprisingly resilient. Even like the 2022 bear market, it held up really well. Management's buying back stock aggressively. I think they're still in the pretty

early stages of figuring out monetization of streaming, and that could be a really big deal. So I think Disney is a buy right here. Hey, Matt, who's replacing Bob Eiger? Probably someone named Bob. That seems to be the plan. Maybe they can get another good Bob this time. But to my point, I'll be the first to acknowledge that Disney has the most valuable entertainment IP on Earth. There are some things they're doing really well. They're expanding that IP.

They might be closer to unlocking the cash cow power of ESPN as they bring it over the top service. But again, no succession plan. The stock trades for 23 times earnings, I think there's just still uncertainty. in the C-suite and in its growth ambitions, the stock basically is within 5% of 2015 levels. That either sounds cheap or a business that still has a lot of work to do, and I lean towards the has a lot to work to do. So I'm going to call it a man. Jason, I wish I've historically agreed with you. I bought Disney in, I think, 2008, and I've added to it since. Oh, I've never sold a share. It's not been great versus the market, at least.

Let's move on to the last one. Meta. Matt, buyseller, meh, meta. I say, it's not my favorite of the Mag 7 stocks by any means. It doesn't look expensive. They're executing really well. It trades for, I think, 26 times earnings right now. The aggressive capex of not just meta, but most of the big tech companies,

kind of gives me pause. But I think Amazon and Alphabet are my two favorite mag seven stocks. So I put it in the map pile. Meta's not expensive. I agree with Math. It's certainly not cheap either at 26 times earnings. They continue to find more people on Earth to get active on the social platforms, which is incredible with the billions that they already have. The ad business is the most valuable in social by far because you have access to the largest, most diverse audience, and you get the best return on that investment, it seems. So that continues to work extraordinarily well. We talked about automating. more of it, and that's probably going to unlock value there over the long term. But I do think that because of the scale of the business, the continued cash burn on the next phase things, next leg of growth rings around the metaverse and around artificial intelligence, that we haven't seen a clear transition to those things being profitable. We see growth shoots.

There's things like they're doing things with the enterprise now for Lama, right? That could be future monetization, that could be big money. But those things are less clear. And without that clarity, I don't want to pay full price for this business. And I think at 26 times earnings, you're paying, you're paying full price. You're buying the market. I don't think you're getting anything that's going to be supercharged returns. So I'd say it's meh right now, too. We talked earlier about hot stocks this summer.

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sponsored content and provided for informational purposes only. If you're full advertising disclosure, please check out our show notes. For Jason Hall, Matt Frank, and the entire Mountlyful Money team. I'm on in Chalka Blue. We'll see you tomorrow.