Shopify, Roblox, and Other Reports Investors Are Interested In

In this podcast, Motley Fool host Dylan Lewis and analysts Ron Gross and Andy Cross discuss:

  • Disney's path to streaming profitability.
  • Warnings from Shopify and Roblox that growth in the back half of 2024 might be a bit lighter.
  • The Trade Desk's relative strength in a tough earnings environment.
  • Airbnb bracing for some travel slowdown.
  • How drinkmaker Celsius continues to find the energy for growth.
  • Two stocks worth watching: Toast and Trex.

And Motley Fool co-founder David Gardner provides some timeless advice for college grads.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

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Dylan Lewis: Disney's woes continue and Shopify and Roblox paint a hazy picture for 2024. This week's Motley Fool Money radio show starts now.

But you can end up doing from Fool Global headquarters. This is Motley Fool Money. It's the Motley Fool Money radio show. I'm Dylan Lewis joining me over the airwaves, Motley Fool senior analysts, Andy Cross and Ron Gross. Fools, great to have you both here.

Andy Cross: Hey Dylan.

Ron Gross: How are you doing Dylan?

Dylan Lewis: This week we've got advice for college grads, stocks on our radar and some tough reactions to company earnings. We're going to kick off there, Ron, the House of Mouse, shrinking a little bit this week, shares of Disney down 9% following earnings. To me, really the sign of the times for the company was, this is the fourth quarter in a row Disney has posted results below expectation.

Ron Gross: Don't be a hater, Dylan. This is Disney we're talking about. It had been having a nice rebound this year. It survived Nelson Peltz is proxy fight. Things were looking up. But this, as you say, was a rough week for the stock. There was a lot of good in the earnings report, but also a fair amount that spooked investors. Let's hit the good side first. Management said it is close to making its streaming business profitable, and the streaming unit lost only $18 million in the quarter versus $659 million for example, this time last year. If you exclude ESPN Plus it actually earned a profit of $47 million. That's positive. CEO Bob Iger said the company is on track to achieve streaming profitability in the final quarter of the fiscal year that ends in September. Disney Plus added more than six million customers in the quarter that beat expectations. Theme parks look pretty solid, up 10% on the revenue side, operating income was up 12%. But that actually was a little weaker than investors had been expected. Management raised its full-year guidance for EPS growth of 25% from previously 20%. Now if we turn to the more concerning side, that traditional TV business that we've talked about time after time continues to suffer from declining viewership. It was hurting the quarter-by declining ad revenue. Domestic operating income at ESPN fell 9%. If we look at the theme parks, they're seeing some what they're calling "Moderation" in this peak post-COVID travel that they had been enjoying. But what really got investors spoke was the guidance for the streaming business, which offset some of the other positive remarks. They said, we're forecasting a loss for entertainment direct-to-consumer in the third quarter that is mostly tied to its platform in India, but still. They said they do not expect to see core subscriber growth at Disney Plus in the third quarter but we'll return to growth in the fourth-quarter, investors did not like to see that sold the stock off at a pretty healthy clip.

Dylan Lewis: One of the things that's interesting to me with this is we have the financial story of streaming and what's going on with entertainment business. We also have the strategic element of how they are approaching their IP library. We got some updates from management talking a little bit about their content slate and basically saying, when it comes to their Marvel franchise and streaming shows, they are going to slow things down. They are going to be limiting the number of Marvel films to three per year and to Disney Plus shows per year. Andy, when you look at that, do you feel there's an acknowledgment that maybe we overinvested and maybe we stretch some of these franchises a little thin?

Andy Cross: It's definitely that, Iger has talked about that. You can't go from a 650 million loss to an 18 million loss without cutting back some corners here. So they stretched way over on the Marvel side. I continue to think that's a good move for them. Ron laid out the pros and cons from the quarter, but there's just a lot of pros in there. They can't get it all right. The subscriber estimates, forecasts for that for the next coming quarters might be a little bit light, but just looking at the free cash flow line continued to improve. The earnings per share is going to be up 25% this year. They think they continue to make lots of progress and making that streaming business much more profitable and not the sinkhole than it used to be. I applaud that I think as the biggest checkbox, the theme park business is going to be a little cyclical. If the consumer is a little bit tight right now. We're hearing that across the board from some other company. I'm not too surprised by that but overall I thought it was a pretty solid quarter and another one that Bob Iger can flip up, put behind them.

Dylan Lewis: Tweak again,20 what pay 21 times for Disney. It's Disney. That seems OK to me. Plus you get it back a little dividend. Now that that's back little bit under 1%. This is a company. I have one for probably two decades and have no intention of selling it.

Andy Cross: I think maybe we get a little bit of an increase in the dividend and maybe a little bit more on the share buyback. But it's, it's not the worst thing in the world for them to continue to focus on building out that business. But then when you're right on the properties, they got to get that slate right because that's a, that's a big driver of all the future value of Disney.

Dylan Lewis: Shopify also having a bit of a rough week, the eCommerce in a Box company logging its worst day ever dropping 20% following earnings. Andy, over the last year-and-a-half, it seemed Shopify was really battling back from the post-COVID slump. Shares have gone on quite a run. Seems like the company had gotten itself back on track with growth story. This earnings report feels a little bit more like a setback. What's the story?

Andy Cross: Well, it is a little bit, however, it just looking at some of the numbers, the quarter, the gross merchandise value grew 23% versus 15% a year ago. But as you had talked about some of the profit picture, I think has some investors a little bit to concern. I think it's a little bit of an overkill that 20% drop was significant. I'm an owner and I know many listeners are out there too, so that's painful. But if you look at the revenues were up 23%, up 29%. If you back out the logistics business, they sold out subscription revenues up 34% versus 21% a year ago. Merchant Solutions up 20% versus 31% a year ago, that subscription revenue is higher-margin, so it's good to see that then the Merchant Solutions that's going to switch a little bit over the next quarter, which is going to impact a little bit the margins. The monthly recurring revenue got a lot of conversation deal and that was up 32% to 151 million versus just 10% growth a year ago. So they're making progress on that. That was actually a deceleration from last quarter's growth. That monthly revenue investors want to see continued grow over time because that is a good forecast of the future growth, obviously. That deceleration happens, they didn't like that. However, the company talked about how it's a little bit of a change and how they're recognizing some of the trials. They think most of the deceleration is due to that recognition less about the business is slowing because they continue to think businesses are very positive. Gross payment volumes of 32% gross margin, as I mentioned, improving. Operating expenses 4% lower. All the things have Shopify has been doing over the last year or so continued to show here. It's a little bit with the growth story as you mentioned and a little bit of the free cash flow margin not improving as much for the rest of the year. That has invested a little bit concerned that the growth picture is slowing. That's a little exaggeration. The stock that's sold off was a little bit too dramatic in my mind.

Dylan Lewis: We're going to stick with big movers, shareholders of Roblox knowing exactly how Shopify shareholders are feeling, shares down 20% post earnings. Ron, on the surface, things look pretty good. A lot of strong user growth and usage numbers coming in. But it seems what Roblox management is saying is somewhat similar to what we're hearing from Shopify and a little bit from Disney here, we're expecting a little bit of a slowdown here with the consumer.

Ron Gross: Slow down and when you're priced the way the stock is priced, slowdowns do not go over very well. The stock really did get slammed on this report, a result of a softer outlook for the current quarter that we're in now, worse than analysts had expected. The company lowered their guidance, but the report itself had strong numbers taken in a vacuum, revenue up 20%, bookings up 19%, average daily users up 17%. But you got to put up even better numbers than that probably for a company that is priced this way. Company's still losing money, management lowered their guidance, so we've got to watch out for how this company is priced. There's a lot of stock-based compensation here. They're only cash-flow positive if we back out a billion dollars worth of stock-based comp. While a lot of my colleagues really liked this stock, it's very hard for me to get my head around from a valuation perspective.

Andy Cross: Ron, you hit it right on the head with the stock-based compensation. I hate to see that. Wish they would really try to get that under control to drive actual real earnings growth. That's been one of my criticisms of them. April and May they saw daily active users and U.S. and Canadian bookings back above that 20% mark deal. That's the magic line for Roblox. They got to stay above that 20% mark there. See that at their older than 13 cohorts, age 13 cohorts growing above that level, they got to get there. There were some encouraging at the end of April and into May. But they are being very cautious for the rest of the year but that growth is going to be a little bit harder to come by. That's really gotten the concerns from the investor community.

Dylan Lewis: One of the things I was curious about with this report and the management team is this is a business that is relatively new to the guidance game. I think they only started providing guidance a quarter or two ago. How are you as investors looking at the commentary you're getting from management, the expectations you're coming from management, knowing that it's something that's relatively new in terms of disclosure for them?

Ron Gross: I liked that there'll be more open disclosing. They talked about their advertising business not being material, but they're making lots of investments, including that partnership with PubMatic and a real-world test with Walmart. I'd like to see all that, but that's not going to be anything happening this year until next year, at the best. They're still working through these metrics around daily active users and bookings. Now we're seeing bookings grow faster than the users numbers and the growth numbers. You want to see that the other way around because eventually, those bookings will catch up. They still have some work to do to be transparent and to be a little bit more accurate and clear. Right now they're taking a very cautious approach for the next quarter or two.

Dylan Lewis: Coming up after the break, we've got a little more commentary on advertising, energy drinks and the state of travel. Stay right here. This is Motley Fool Money.

Welcome back to Motley Fool Money. I'm Dylan Lewis, joined on air by Andy Cross and Ron Gross. The earnings beat continues. We have updates from Airbnb, Celsius and Trade Desk. We'll kick off with TTD. Andy, we had some big moves in our first segment, more of a muted market response to Trade Desk's results. Company revenue rose to just under 500 million, showing some strong growth this quarter. Seemed like in a lot of ways, a business-as-usual quarter.

Andy Cross: Well, Dylan business as usual but there's a lot of change going on in the advertise market if you believe the Trade Desk and I do, there's a big strategic shift toward Connected Television and a cookie-less world that they've been investing for and preparing for the last few years. As you mentioned, strong revenue growth up 20% year-over-year. That's an acceleration from the 21% a year ago. Profitability, they had their operating cash flow, they're operating profit at 162 million. That was a margin of 33% versus 20% a year ago, connected TV remains the fastest-growing channel for The Trade Desk. It's contributing significantly the company's growth and they're really excited around some of the partnerships like with Roku that could leave to open up significant CTV, Connected TV inventory, the retail medium, that's the advertising through retail channels that continues to see strong momentum. We're hearing that from the likes of Amazon and others and that's a big growth opportunity for The Trade Desk, international expansions, all good. The UID 2.0 initiative in this cookie-less world is an investment they are very positive on, they are using AI to invest in Kokai. That's their platform from AI, continue to make all the right investments and Trade Desk, which is leading the way when it comes to connected television and advertising tech.

Dylan Lewis: Andy, last segment, we were talking about several companies painting a little bit of a down picture for 2024 and the rest of the year. I would've expected that to materialize and some of the advertising commentary from The Trade Desk, but that doesn't seem to be the case.

Andy Cross: It's not Dylan and I think we're hearing a lot of positive commentary finally coming from some of the ad tech companies and we're seeing in some of the results from the likes of Meta and Amazon and others, when you look at what all the spend going on in advertising, especially when it comes to things like connected television and like I said before, Trade Desk is innovating and now they're doing a lot into the AI world, which is helping their clients get more efficient. I love those investments.

Dylan Lewis: We're going to stick with companies in the red Airbnb down 7% this week after reporting earnings that on the surface, Ron didn't look too bad.

Ron Gross: Agreed some good things to like about this report and the stock didn't get smacked, still up 8% for the year so they had been having a nice year, I gave a little back as a result of this report. But as we said, some good metrics here, revenue up 18%, that's better than expected. Gross bookings rose 12% and that was driven by 9.5% increase in nights and experiences booked. Number of active listings in the first quarter grew 15%. Supply has continued to grow at a double-digit pace across all regions. We need supply to continue to come in strong in addition to demand. Profit 264 million, that's up from 117 million, so making good headway there. Now the disappointment was in the future guidance, as let's face it always seems to be, specifically revenue was light and the reasons given were what management called quote, significant sequential headwind, timing of the Easter holiday, inclusion of Leap Day in Q1 and the impact of foreign exchange rate changes. I think we are seeing some just general weakness, we saw it when Marriott reported as well. Not that surprising. They did reiterate to 2024 guidance though, so nothing too dramatic going on. They expect the Paris Olympics, the Euro Cup in Germany to help in the third quarter. We'll see if that comes true.

Dylan Lewis: Ron, when we were talking Disney earlier, it seemed like there was a pent-up demand for travel and in their case, the amusement parks that really helped the business about a year ago and that we are now lapping that and maybe some of that demand has been satisfied. Is it a similar story here with pent-up travel, just starting to moderate a little bit for Airbnb.

Ron Gross: I think that's fair and I do think we saw that in others as well. Marriott for example, international remains really strong but their US seems to be, I think the word was cooling. We're seeing that across the board in some of these travel-related companies.

Dylan Lewis: Love a euphemism, cooling. Always great. We cannot be all down this week. We're going to wrap with a positive earnings story. Shares of beverage makers Celsius feeling the energy this week up 15% and Andy, if I'm not mistaken, you are fueling the energy a little bit next week sipping some Celsius as we take.

Andy Cross: [laughs] Yes, that is true, having a little bit of Celsius as we're going to tape this. But the emerging energy and fitness beverage company that is continuing to take and grow the market for energy and fitness beverages showed off the profit scale in the business as it continues to grow and take that share gross profits up 60% and earnings per share more than doubled on revenue growth of 37% and now the revenue growth was a little bit maybe shy and there some concerns about some of the inventory issues with their key partner, Pepsi is their biggest distributor, handles about two-thirds of the distribution here in the United States and it will in North America. Some concerns, some destocking. Meaning that a year ago they ramped up some of the stocking and into the fourth quarter and now they're not building out those inventories as much and maybe that's going to slow a little bit of the growth. I think that all washes out overall they've a very strong partnership with Pepsi as its largest distributor deal. Dylan, Celsius represented 47% of all growth of the category during the quarter. That's up from 31% last year and up from 22% the year before. The energy and fitness health beverage market is continuing to grow and really Celsius is the big driver of that. Gross margins moved up 7.4% points, 740 basis points to 51.2%. Now mostly on lower freight and raw material costs. They don't think that's a trend that they can bake into their forecast and they're not. They still think they're going to be lower than that but still very impressive. They're going to have little bit higher promotional period during the summer, that's their big period and that obviously helped operating margins. They've 3,000 now branded coolers with Pepsi partnership and their kids unit build that out. Everything is going quite well for Celsius and clearly it showed in the stock over the past year-and-a-half.

Dylan Lewis: This is one of those companies where if you don't know them. I would say take a stroll down the drink aisle at your supermarket and find them because they are continuing to grow. They're continuing to show up and that is advice if you are in the United States. One of the things I wanted to tap into with this is 95% of the revenue for Celsius coming from the U.S. Of A. How are you thinking about the international opportunity for them?

Andy Cross: It's great, when you think about the international expansion, they are now in Jim's in the UK and Ireland. Celsius has a lot of business with tied to Jim's, that's how they got their start and they're rolling out in Australia, New Zealand and France later this year. The international market has a really big opportunity for Celsius.

Ron Gross: Is this whole category just about branding? Is there anything different or proprietary or unique about the different brands?

Andy Cross: Very quickly, if you open up a Celsius can, which I have here and just look at the ingredients, they are much different than what you may find in the others and they built their brand and the existent around the fitness market and the fitness world. That's the big difference than compared to the other energy companies in the space.

Dylan Lewis: Most importantly, Andy, how does it taste?

Andy Cross: It tastes not bad. I'm not a huge energy drink. I got these for research and now I'm just like tastes and some.

Dylan Lewis: We appreciate you going out into the field.

Andy Cross: [laughs] Thank you.

Dylan Lewis: Andy Cross, Ron Gross, guys, we're going to see you guys a little bit later in the show up next, we've got Foolish advice for college grads. Stay right here. You're listening to Motley Fool Money.

Welcome back to Motley Fool Money. I'm Dylan Lewis. It's earnings season, but it's also graduation season. Around the country, students are donning their caps and gowns. This week we went into the Vault for Foolish advice for college grads. My colleague Mary Long gets some timeless guidance from Motley Fool Co-Founder David Gardner about the merits of time-traveling, advice for his past self, and a gentle reminder that if you're collecting a diploma this year, you're part of the smartest generation ever born.

David Gardner: Wherever you are as you graduate, ask yourself, where are the bleeding edges of new technology in our society, in our culture. It almost doesn't matter what job you do. I would get to a company that's working in that space. So for example, genomics, that's an exciting area. I'm an English major, but I would be telling myself, just go answer phones over there at the genomics company or if you're a product manager, project manager, those kinds of experiences can be taken to any one of a whole bunch of different organizations. I would really focus on where is the future and be there today.

Mary Long: If you're trying to get to the future which you give yourself any stock advice or is that insider trading if you go back to talk to your younger self?

David Gardner: I think first of all, that it should not be considered insider trading. I definitely would give myself a few stock tips. Let's be clear. Time travel clearly has not been invented because no one has been passing through our time as far as I can tell or any other time. If it was invented in the future, we'd know it by now.

Mary Long: When you're starting out in a job in, in your career, you're young and ambitious. What's the difference between being a rule-breaker and more of a bridge burner?

David Gardner: Well, first of all, a bridge burner to me implies that you are just thinking mainly about your own career. If things don't work, you're just going to burn that bridge and move on. I hope you wouldn't burn the people that you leave behind you. I think even if in our early jobs we don't stay very long as we get to know ourselves what the world wants from us, I hope we're building good relationships with people all the way through. But I think part of being a rule breaker is that you are realizing it's not about you. It's actually about the rules that are being broken. It's about what's happening in our society in a good way that you can contribute to. I know a lot of people, especially younger people were hearing, have not been as positive. Understandably, we had our college interrupted by COVID, not as bright eyed and bushy tailed as maybe graduates of the past, but that's very temporary. I think more than anything, the key to happiness and thriving is when you feel like you are aligned with a purpose in the organization for profit or not-for-profit that you're working for that fits who you are, that you're excited to get out of bed each day to go to work. That's such a good indicator.

Mary Long: It's no secret that you're a die hard optimist. What's your advice to someone who's graduated or is about to graduate and they're feeling down and out? Maybe it's because they are struggling to find a job or they know where they want to be, but are afraid that that job might be replaced by ChatGPT. Or they're just scared of leaving the structure of academia.

David Gardner: Well, I have two thoughts for anybody who is feeling a little down and out. The first is if that's tied to loneliness, and I could easily understand that, in fact, the surgeon general's said earlier this month that there's an epidemic in America. It's not cigarettes anymore, it's not three packs a day. That was an earlier era. It's loneliness. So if you are down and out, that might well be part of how you're feeling. What I would say to then is, let's make sure we're getting out and connecting and building friendships. It helps a lot if you do have a job and you meet somebody who cares about you at work, your boss, or somebody older than you, really value those relationships and look for those relationships. But of course, your friends from college or making friends at work, making an effort, even if you're in a hybrid or remote work situation to get to know people, even if you're working at a hybrid company, you can still have coffee with people. You can still go out to happy hour. So I think loneliness is a big problem right now. I really just think the antidote is obvious. Spend more time with others face-to-face. On the other hand, if it's not loneliness, it's just a sense of not knowing what you want to do. I would say that this is the smartest generation ever born. Part of how smart younger people are these days is they're so caring about what they want to spend their lives on. The degree of angst felt by many in terms of what job you take and what that says about who you are or how you're spending the precious time we have on this earth. I think there's one aspect of it that can be a little bit over weaning, that we might be overthinking things sometimes and just get out there get your feet wet, get active. Again, meet people.

Mary Long: Yeah. You kind of started to touch on this just in pushing the idea of meeting people, even in a virtual first-world. But beyond like friendships at work, how would you suggest someone like a young person go about finding a mentor in the virtual first-world?

David Gardner: Well, I think that for me a lot of it is either going to come from new relationships that you have. Virtual first still means real second, I think. I prefer virtual second and real first, I think that's going to be the healthiest version of me and for most people. But if you do find yourself in a truly a virtual first environment then you either have two choices finding a mentor. The first is finding somebody new in that virtual or real environment. But the second is, if you're somewhere around 21 years of age, you have 21 years of relationships that you've built up. I bet there are already people, school teachers, someone from church, somebody from a past summer job, parent's friends, uncles, aunts. There are lots of opportunities for us to get to spend time. If you feel that you want to with somebody who has some wisdom for you. I would say, try to seek out people who have a genuine interest in you. That's easy to assume from family members or from past coaches, let's say. But if you're talking about new relationships, makes sure that this is somebody that you trust is really thinking about your best version of yourself. That's easier said than done. But I think that's really important that best mentors are going to be people who really want the best for us on our terms, not on theirs.

Mary Long: Any parting advice for someone who's just recently graduated?

David Gardner: One other bit of advice that occurs to me is my experience with my first job and that is I quit it within about four months of getting it. In a lot of ways as sort of the oldest child in my family and the classic duty-bound elder child, I thought this is not what I should be doing. You shouldn't be taking a job and then not even nailing down your first year at that come and that's not going to look good on your resume. The punch line is, I had to help start a company instead of getting hired by anybody else's at that point. But I will say it was one of the best decisions I've ever made. After four months, I just let my employer know. It didn't feel like it was for me. I didn't really like the office culture very much. I didn't talk about that with them, but I just realized it was a creatively deadening job. I sometimes asked myself, had I decided I should give it the old college, try and stay there a minimum of two years, etc., I might've missed ever helping start the Motley Fool.

Dylan Lewis: If David didn't leave his first job, I wouldn't have mine. So for Fools everywhere, I'm happy things in workout with that first job out of school and he went on to start the Motley Fool. We're heading to break but stick around up next on Motley Fool Money. We've got stocks on our radar.

As always, people on the program may have an interest in the stocks they talk about. The Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Dylan Lewis joined again by Andy Cross and Ron Gross. We've got radar stocks coming up in a minute. But first, a little buy, sell, hold. I've got a couple of stories to round out the week. Andy and Ron, I want your take first one up. It's going to get a little bit more expensive to get into the Judgment-Free Zone. Planet Fitness, raising the cost of its legendarily cheap classic membership from $10 to $15 for new members this summer. Andy, buy, sell, hold the price hike for Planet Fitness.

Andy Cross: I wonder if that's because they're putting all the Celsius' into Planet Fitness now, I don't know Celsius actually in Planet Fitness. I think it's a good move. Costs are definitely going up. Now the question is whether their clients are going to be able to continue to afford that and willing to pay that. That's been iconic at 10 bucks and they talk about that. Definitely a change, but if they're making some investments, if you just look at on a percentage basis, Dylan. But if my math is right, that's a huge percentage increase from $10.

Dylan Lewis: I think it's about a 50% increase.

Andy Cross: That math balance out, almost exactly rounded to the nearest dollar. [laughs]

Dylan Lewis: Ron buy, sell, hold the price hike. I want to say, I think this is one where they are right there with Costco in terms of the hotdog being the same price. Now Costco might be the last vestige of pricing permanence.

Ron Gross: I'm buy, not a sell here. I think even though it is 50%, it's a reasonable hike after 26 years. I do think most of the client base, if not all the client base will be able to swing it. It is still a relatively good deal. But this is where we'll find out what pricing power they have. I think it's going to work out for them. I don't think it's dramatic enough to anger anybody or to make it a stretch for anyone. But time will tell.

Dylan Lewis: For what it's worth, the market slightly cheering this one shares up 3% on the news. I think like cautiously optimistic about the price hikes. Our next buy, sell, hold. If you are a fan of Sriracha, you might want to stock up, reports out that the manufacturer needs to stop production for several months because they're pepper supply is was too green and it would be affecting the color of their iconic sauce. Andy, buy, sell, hold Sriracha as the best condiment on the market.

Andy Cross: Oh, I'm going to sell that. I've never been a big Sriracha fan, got a bottle of it in the refrigerator, we never really use it. I love hot sauce but I don't really consider Sriracha that kind of a hot sauce, saying they're better brands out there. If it goes away for a few months it's not going to hurt me, but maybe some other people will be hurt, but I'm calling that a sell.

Dylan Lewis: For what it's worth, I am a Cholula guy when it comes to hot sauce and a Ketchup or a Chick-fil-A sauce guy when it comes to pure condiments. Ron, what about you?

Ron Gross: Cholula for sure, I think of Sriracha has being different, more of a condiment Ketchupy kind of a thing. This has happened before and it created this great buzz like we're talking about it right here. But I wonder if there's a little bit of happiness behind the buzz that creates and allows them to charge more to. There was a while back, you had to pay $100 for a bottle on eBay if you really wanted it. It'll be interesting to see if other manufacturers of similar condiments take the same tact and have trouble, or are they going to gain a little market share for the time being. If the actual brand name, Sriracha, that were mostly used through the iconic rooster on the bottle. I believe. I think it's going to all be fine so we can buy this.

Andy Cross: It's interesting, you are seeing a lot of these raw material cost, cocoa, going into the chocolate and talking this about Hershey's, it does impact how companies do you think about their pricing. You can't fault the makers of Sriracha for thinking about this if the lack of peppers is leading to increasing costs for them to try to get some of that money back. We are seeing that more and more with some CPG companies.

Dylan Lewis: Can I be honest? I love seeing a company insist on quality and maintaining what they're trying to do even at the expense of availability. I think it's always worth it. Our final story for buy-sell-hold, selling a little bit more focused on the big picture, fresh jobs data out showing first-time applications for unemployment benefits are up this week to the highest level in almost a year. Pair that with April job additions coming in a little bit below expectations. Ron, buy, sell, hold the strong labor market we've been seeing for the past few years.

Ron Gross: I'm OK with this, so I'm still buying. It's a game of be careful what you wish for. The Fed has been trying to slow the economy, the labor market has been persistently strong, and the people who are saying interest rates will never come down as long as the labor market remains this strong. Here we are with some cracks in the labor market and everybody is now, of course, worried about recession. Its soft landings are hard to manipulate them, maneuver through. I think we still got a shot at it.

Dylan Lewis: Andy, what do you think?

Andy Cross: Uncle Jay Powell from the Fed is basically said they're trying to slow the labor market. For them any small increase like this is a win. I do think we're going to see some further cracks over the next year-and-a-half. We're just going to have to do with some of the slowing economic activity. But hopefully it's done in a way that doesn't disrupt complete consumer activity. That's a big thing we got to watch.

Dylan Lewis: As you guys are seeing headlines related to this, not hitting the panic meter, necessarily this is somewhat within the bounds of what you guys are expecting to see.

Ron Gross: Could lead to lower interest rates down the road, which the markets would probably applaud.

Dylan Lewis: Let's get over to stocks on our radar. Our man behind-the-glass, Dan Boyd is going to hit you with a question. Andy, you're up first. What are you looking at this week?

Andy Cross: Fools? I'm looking at Trex, symbol TREX, the number one seller of eco-friendly composite outdoor decks. Maybe you all have it in the back of your house, is back with an outstanding recent quarter that included revenue growth of more than 50%. The market remains really attractive with some 50 million US decks or so beyond the age of replacement, according to the company, it has great relationships with the contractors and professional builders. Ninety-five percent of the decks it makes our from recycled materials, and 100% of those products are made in the US. They have great relationships to be able to manage the recycled material. They have recycling centers that help take plastic bags and all different kinds of junk and turn it into some of these composite decks. The company and the stock goes through these cycles as building activity goes. But with more of a stain, our houses longer remodels continue to be an attractive market for Trex. The returns on capital for this business are north of 20%, with really an outstanding margin profile and the stock sells for around 40 times earnings for a company that I think can grow probably in 10%-15% range for the next few years, and stocks around 88, I think of a dips into like the low 80s, 70s then I think gets really attractive.

Dylan Lewis: Dan, a question about Trex.

Dan Boyd: Not really a question Dylan, more of a pair of comments, let's be honest. One, I have a Trex porch, nice screened in porch in my backyard, it is pretty fantastic, I'm a fan. I'm a customer of Trex, not a shareholder yet, but definitely a customer. Also, Trex is a Virginia company based in Winchester, Virginia. As a native Virginian, who Andy, you know I like that.

Andy Cross: Bryan Fairbanks who's the CEO and we've had come to speak at the Fool. He's very humble, I think, and just continues to run that business. Like I said, it goes through these cycles, but right now, coming out of a very rough 2020 and 2023, things are looking brighter for Trex.

Dylan Lewis: I will say I have a wood deck and having just pressure washed and resale, that wood deck. I really wish it was a Trex deck. Unfortunately the deck is too new to make that change, so I'm just living with that. But if you're in a position where you can make that change much easier maintenance, maybe worth the upfront cost to go with Trex. Ron, what are you looking at? What's on your radar this week?

Ron Gross: I think Andy follows this one a little bit too. I'm looking at Toast, T-O-A-S-T. Helps restaurant owners simplify their business. It's software platform provides held with digital orders, delivery, menu management, point-of-sale operations, scheduling, marketing. It's a full-service application. It's good for sit down restaurants, takeouts, drive through delivery. They sell hardware which includes point-of-sale systems, self-ordering kiosks, handheld order taking tablets. They sell those at a loss. They make money by selling software subscriptions and financial technology solutions where they take a small slice of every transaction that they help facilitate. Results earlier this week were pretty strong, 6,000 net new locations in the first-quarter, annualized recurring run rate that they keep an eye on called ARR in their lingo up 32%, they're making progress on getting the profitability the net loss was only, I say only, $83 million for the quarter adjusted EBITDA was positive at $57 million. If you recall back in the September 2021 is when they went public, $40 a share stock surged by 50% on the first day, stocks sedans only now at $27. Down from the IPO, and certainly that first day has a $15 billion market cap. Hard to model this one since it's still very new, but they are doing well. They're on the right track and they're putting up strong results.

Dylan Lewis: Dan, a question or perhaps a comment on Toast.

Dan Boyd: Oh, this one's interesting because the people who interact with it most aren't really the customers, I guess, as restaurants are the customers have Toast. But as somebody who makes online orders, I'm forced to interact with Toast, maybe not the regular, but every now and again. The stock chart does not look very good, Ron, when you zoom out to the max, it looks pretty painful, but you're right in that it is a young company. I feel like ordering online is not going anywhere and it might be better to get in on the ground floor or maybe here on the first floor. But this one seems like from a consumer standpoint, it seems like I'm forced to deal with Toast, not necessarily want to.

Ron Gross: The company probably went out at a valuation that was little bit elevated, which you can't fault them for going out at the valuation as high as they can get it. But that was probably some expectations built in there. It's come back down to earth. More reasonable price.

Dylan Lewis: More reasonable price. Dan, does that sound interesting for putting it on your watchlist or you thinking Trex?

Dan Boyd: I mean, honestly it does sound interesting. However, I'm going to go with my home state and with the product they're already owned. Let's go Trex.

Dylan Lewis: Can't argue with that. Since we have a couple of extra seconds, Dan, favorite condiment, is it Sriracha or is it something else?

Dan Boyd: Oh man, Sriracha is pretty good, but I like a spicy mail.

Dylan Lewis: Sriracha is an ingredient in spicy mail if you want it to be. Dan Boyd, thanks for weighing in on our radar stocks. Andy and Ron, thanks for bringing them. That's can do it for this week's Motley Fool Money radio show. I'm Dylan Lewis. Thanks for listening. We'll see you next time.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Andy Cross has positions in Airbnb, Amazon, PepsiCo, PubMatic, Roblox, Roku, Shopify, The Trade Desk, and Walt Disney. Dan Boyd has positions in Amazon, Costco Wholesale, and Walt Disney. David Gardner has positions in Amazon, Costco Wholesale, Toast, and Walt Disney. Dylan Lewis has positions in Shopify and The Trade Desk. Mary Long has positions in Airbnb, Roblox, and Shopify. Ron Gross has positions in Airbnb, Amazon, Costco Wholesale, and Walt Disney. The Motley Fool has positions in and recommends Airbnb, Amazon, Celsius, Costco Wholesale, Planet Fitness, PubMatic, Roblox, Roku, Shopify, The Trade Desk, Toast, Trex, and Walt Disney. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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