In this podcast, Motley Fool analysts Ron Gross and Jason Moser and host Dylan Lewis discuss:
- CrowdStrike's eye-popping quarter and the strength of cybersecurity spend.
- Target's rebound and how it might get back to growth.
- The stories behind rough earnings from Foot Locker, Campbell Soup, and Nordstrom.
- Two stocks worth watching: UiPath and Titan International.
Film critic Nell Minow provides an update on the state of the movie biz and some of her favorite films from 2023.
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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This video was recorded on March 8, 2024.
Dylan Lewis: Cybersecurity keeps flying and legacy retail continues to struggle. Motley Fool Money starts now.
It's the Motley Fool Money radio show. I'm Dylan Lewis joining me over the airwaves, Motley Fool senior analysts, Ron Gross and Jason Moser. Gentlemen, great to have you both here.
Ron Gross: Hey.
Jason Moser: How you doing Dylan?
Dylan Lewis: We've got another strong sign for cybersecurity, a sneak peek at next week's Oscars and of course, stocks on our radar. We're going to kick off though with a look at the continued great run for companies in the cybersecurity space. Jason, last week on the show, we talked through Okta's earnings and the strength of cybersecurity spend, seeing that trend continue this week with results from CrowdStrike.
Jason Moser: It sure does seem like it's CrowdStrike's world these days and everyone else is just living in it. We've talked about both Zscaler and Palo Alto recently, a lot of focus on the spending fatigue comment that came out of Palo's call specifically talking about is adding incremental point products is not necessarily driving better security outcomes. It really doesn't seem like CrowdStrike is witnessing that same dynamic. Now it's a little bit of a different model.
They have this Falcon platform that ultimately offers these 27 modules and customers can subscribe to those modules based on what they feel like they need. Into that, 0.64% of CrowdStrike customers now have adopted at least five of those modules, 43% have adopted at least six, 27% have adopted at least seven. Altogether we're just seeing this company continuing to sign new deals and then expanding the relationship that they have with those signed customers. We saw dollar-based net retention rate held steady from a quarter ago at 119%. This really all resulted in strong revenue growth, 33% for the quarter in annual recurring revenue, which is really a number you want to focus on with these cybersecurity companies, that was up 34% to 3.44 billion. I think that's a big deal, particularly when you look at a competitor like Palo Alto in the space, they're clocking that in at around four billion right now and see this ultimate market opportunity maybe to get that recurring revenue number up to 15 billion. It'll be interesting to see where CrowdStrike sees that going. There's no question, Ron, you're going to love this. CrowdStrike is absolutely a business that is firing on all cylinders.
Ron Gross: Woah.
Dylan Lewis: Jason, the markets certainly like the result, shares were up over 20% following the company's update. One thing I wanted to check in on was a little curious to get your take on is they announced that they were buying flow security in a cash and stock deal. This has generally been a period where we've been seeing a lot of businesses clamp things down, clamped down spending and focus a little bit more on optimizing. What do you make of them going out there and being acquisitive right now?
Jason Moser: Well, it's a very competitive space that makes a lot of sense when they see something out there that they feel like will be additive to the business. Their balance sheet is in terrific shape, somewhere in the neighborhood of $3.5 billion in cash versus just about $750 million in long-term debt, so they have the financial means to do something like this. I think it has resulted in a lot of optimism for the stock. I think really to me that's the biggest risk for investors interested in CrowdStrike today. It just a valuation, this is a wonderful business. Clearly, it's performing very well, but it's at 26 times sales now, a 160 times free cashflow. That's after adjusting for stock-based compensation, of course, but still it just goes to show you that there is a lot of enthusiasm behind this company right now. But I think that as time goes on, we'll see the big players in the space continue to consolidate, CrowdStrike, absolutely being one of those.
Dylan Lewis: After a year of inventory woes, it appears Target might be climbing its way out and getting back on track. Shares up over 10% this week and at a one-year high, following the company's holiday quarter results, Ron.
Ron Gross: Yes, still 33% off from its COVID high in mid-2021, but that's really where the problems started, where they were dis-merchandised, let's say, they did not have the right inventory on hand. It has taken quite some time for them to right-size into what people are looking for a way from the big ticket items away from the more expensive things. They're making progress, but we're not there yet. They did report higher holiday quarter earnings in this report on a smaller than expected sales decline, that's [laughs] progress. It's like a backhanded compliment, but progress is progress. Comp sales traffic trends improved sequentially for the second quarter in a row, I like that. Total comparable sales did decline 4.4% and that's a result of store declines of 5.4% and digital sales decline of 0.7%. We're still seeing declines at both the store level and at the internet, the digital level.
Doesn't sound great, but it is progress. Total revenue up a total of 1.7%. The bright-spot, and this is a continuing trend is same-day services, in-store pickup, drive up, and shipped, which they acquired several years back. Those represent more than 10% of sales and they were up 13.6% in the quarter. Continuing investments in same-day services, I think, is definitely things that we're going to continue to see. Operating and gross margins widened, less markdowns. That's good to see, which means inventories coming down back to where they need it to be. Earnings benefited from a reduced tax rate and earnings per share were actually up 58% as a result of all those things, despite a somewhat anemic report. They're getting there, they've made some really interesting moves. We can talk about a loyalty program they are putting in place, store remodeling. This is one that I've said for quite some months. It's a nice turnaround play and it looked pretty inexpensive six months ago. I still think it has room to run.
Dylan Lewis: Ron, you mentioned ship there and the focus on same-day delivery and logistics. They are highlighting that in their new membership program, they're adding more tears and they're refining a little bit of what members are going to be able to do. But they haven't circled 360. This is a paid membership program looking to compete with Amazon Prime and Walmart Plus. I look at this and I say, this is probably one of their solutions to those inventory woes and some of those traffic flagging issues that they've been seeing.
Ron Gross: It's also a retail law that you must have a loyalty program. [laughs] They're just complying with law. But no, I think it makes sense. Members will pay $99 a year. There will be an introductory rate of 49 for anyone who joins relatively quickly. You'll receive free two-day shipping as well as unlimited free same-day delivery in as little as an hour, they claim, as long as orders are over 35 dollars. More of this, I want it now mentality, I think there were certainly be some takers. I do think we all have monthly fee fatigue, whether it's Netflix, or Disney Plus, or Apple, or Target. Monthly fee spending fatigue is a real thing, at least it is in my household. Whenever somebody hits me up with another one of these things, I say, but I do think it's going to be popular.
Dylan Lewis: You're saying death, taxes, and retail membership programs, those are the constants in life, the inevitables.
Ron Gross: All inevitable.
Dylan Lewis: Perhaps death by retail program, it turns out with that spending fatigue. We're going to take a break from earnings and check in on Twilio. Jason, the cloud communications company reported back in February. But this week we have an update on their plans for its segment business, which has been in the cross-hairs of a lot of shareholders over the last couple of months.
Jason Moser: We've seen some activist interest here and we talked about this letter, but we covered earnings a few weeks back. With this company, the focus has moved from growth no matter the cost, to now making sure the company can grow with more fundamentally sound financials. As a shareholder, I'm absolutely on board with that. I think if you want to hold these shares, you need to be patient and understand that with a new CEO in place, we're going to have to give Khozema Shipchandler some time to try to execute this vision. But the big question really was with the segment section of the business and that used to be the data and applications business. They are going to keep that part of the business. There was some questions to whether they might try to spin it off. They feel like ultimately the juice wasn't worth the squeeze there. They believe that with their plan, they can get more out of it if they sell it. Time will absolutely tell there. Looking at it with just through a lens of more operational rigor, trying to innovate a little bit more and incorporated a little bit more into their communications business so that they work in tandem.
That really does make a lot of sense, but this all really comes back to an acquisition that was made a few years back that just hasn't really worked out so well yet. Remember folks, segment accounted for only about 7.5% of the company's total revenue in 2024 and ultimately resulted in an operating loss for the year. It's not like it's some big moneymaker. Understandable why activists might want to see them, maybe get rid of it and focus on the core communications business. But management clearly thinks that there's still something there. Worth also mentioning, they did announce an additional two billion dollars share repurchase authorization. In addition to the original one billion dollar authorization, which is almost completed. The target is to complete that buyback by the end of this year. They've got four billion dollars in cash on the balance sheet so they can afford it
Dylan Lewis: Jason, I'm curious, this is a business that has generally had shares outstanding, moving up into the right. How do you feel about the management team being authorized to spend another two billion dollars on repurchases?
Jason Moser: Well, that is absolutely something that has been a question for a lot of investors and analysts and management has responded by making sure to commit to bringing that stock-based compensation number down. They are doing that, I will give them credit for that. But you make a very good point there. These repurchases ultimately need to bring that share count down. But there's no doubt this is going to offset some of that stock-based compensation.
Dylan Lewis: Coming up after the break, we've got three companies with so-so outlooks. What does it mean for retail? Stay right here. This is Motley Fool Money.
Welcome back to Motley Fool Money. I'm Dylan Lewis here with Ron Gross and Jason Moser. We're going to check it on three household names that have the market down after earnings. Ryan, let's start with Foot Locker shares down 25% after the quarter came in above expectations. But it didn't seem like outlook was to inspiring.
Ron Gross: No, the stock just got slammed. That stock has been a mess for a while now as they really tried to reshape the business model. Things actually look like they might be on track at least from a stock perspective, starting maybe around last September. But this is just another setback for a company that has had many setbacks for the last several years. The quarter ending of itself, as you say, wasn't actually that bad sales were up 2%, though comparable sales fell slightly 0.7%. The Champs brand for those familiar remains the weak spot amid, what they're trying to do is reposition that brand toward athletes and away from fashion. They're not seeing traction there yet, so that continues to be a weeks gross margins are down significantly 350 basis points as a result of higher markdowns needed to clear inventory.
Inventory is now down 8.2%, so that's a good thing, but it's at the cost of margin. If we adjust for some non-recurring charges, always a dicey thing to do, but earnings were down 60%. They've got some work to do. CEO Mary Dillon noted the company's fourth-quarter results were above its own expectations, but things are pretty weak. She said they did see meaningfully accelerated sales trends relative to the third quarter. Guidance was relatively lackluster. I think investors did not like that, they ran for the doors. The company will be investing heavily in digital. The store experience loyalty programs, brand-building. Most importantly, they delayed by two years their EBIT margin guidance, they're operating margin guidance. You have to wait another two years to get where you hope they were going to be by 2026. It's even later now and that is not good news for people who own the shares.
Dylan Lewis: Ryan, we're about a year into Mary Dillon's time at Foot Locker and she is someone who really had the magic touch over at Ulta. A lot of what you're getting at there with loyalty programs and those types of things to bring people into mix was her forte. How would you grade her time so far at Foot Locker. This is a tough business, so I don't want to put it all on her back. She was a star at Ulta, she was at McDonald's for five years before that I believe. She's a top-notch CEO. This is a tough business that was relying on brick-and-mortar and Nike for so long. They're trying to move to multi-channel, omni-channel. They're trying to move away from Nike. It's going to take some time. If anyone can do it, Mary Dillon can, but it's a tough business.
Dylan Lewis: Over the grocery aisle, we've got an update from Campbell's this week, not an aim in any of our portfolios, but Jason, accompany we look to for a sense of what's going on with the consumer.
Jason Moser: Yeah, exactly. I think this is an interesting one to look at, not because it's a great opportunity for investors because let me be clear, it's not. Not trying to be mean here, sorry, Campbell. But the fact of matter is in five and 10 years, this thing is just woefully under performed the market. Now with that said, it is a low margin business. We know groceries very difficult, so I'm not really holding that all against them, but I do believe looking at this call, it gives you a glimpse into what the consumer is dealing with it in that light. Management said in the call, consumers continue to prioritize value. Not terribly surprising. A lot of focus on home cooked meals, purchasing who that helped them prepare what they call stretchable meals and smaller and less frequent shopping trips. It'll be interesting to see how that trickles through the grocery stores, for example. Organic revenue down 1%. Not terribly surprising there. There are two interesting dynamics to this business that I think are worth keeping an eye on. Now one is near and dear to my heart, and that is the snacks segment.
We can't forget the value and snack still. Ryan, I know you guys like snacks and you love them as much as I do. Now you got brands like Lance and snack factory, late July, they reached five-year highs and volumes share and this is basically half of their business. It is material it matters. When you just look at the overall snacks market, it's a big opportunity statistic data says revenue in the US snack food market is set to hit $114 billion this year and grow about 4% annually through 2028. There's opportunity there.
The other thing that I think is worth keeping an eye on the acquisition of Sovos, which is going to bring the Rao's brand under their umbrella and I think a lot of people are familiar with that sauce and the restaurant concept and whatnot. I think Rao's, I think is an opportunity. They just announced they'd surpassed one billion dollars in annual net sales. Those sales were up 16% from a year ago. So for a company that's turning in such anemic growth, it's nice to see they're bringing in another little acquisition here in Sovos that could help boost that. I think that between the snack side of the business and this Rao's side of the business. There's the opportunity at least for them to try to push those organic revenue numbers up here in the coming years. But I don't know that necessarily changes this into a buy or any kind of a compelling thesis. But again, you get a good window into the state of the consumer.
Ron Gross: I think they should change the slogan to Rao's is good food [laughs], because it's quality sauce in my opinion.
Jason Moser: [laughs] Since snacks are close to my heart so is that sauce. I've never had Rao's sauce but I'm a big it up, we read a lot of Italian food in this house and I make all of my sauce, but you've convinced me Ryan, I really I need with intention, go to the store and buy this Rao's sauce to at least try it because that could work in a pinch if you don't have enough time.
Ron Gross: If you don't like it. I'll pay for it.
Jason Moser: [laughs] Good deal.
Dylan Lewis: You know, we're talking Campbell's results, but we're talking a lot about snacks and Rao's here. It is not out of the realm of possibility that they revisit the company name at some point. We've seen a lot of businesses [laughs] refocus on what has investors excited. We're going to wrap our earnings takes looking at Nordstrom, Foot Locker, not alone Ryan, on the retail struggle bus shares in Nordstrom down over 15% this week.
Ron Gross: The struggle bus, they were also reversing some positive momentum they had been enjoying. It's not that the quarter was so bad, but the guidance is really what got investors spooked though I think the share price decline seems a little bit of an overreaction to me. For the quarter sales grew only 2.2%, primarily due to the winding down of Canada operations. Not at fault here in the US, the Nordstrom branded stores were plus 3%. Growth was particularly strong at Nordstrom Rack, which is their off-price brand where sales were up 14.6% or 8.8% if we exclude the extra week in the quarter. Now interestingly, Macy's said they're going to focus on Bloomingdale's, their higher end brand, whereas Nordstrom is seeing success with Nordstrom Rack their off-price brand, digital sales down 1.7%, that's not great. You don't want to see that, that's 38% of total sales during the quarter. Earnings per share was up 11%. Guidance was fine, but not great and they seem to want to continue to be cautious as a result of the macro economy.
Dylan Lewis: Ron Gross, Jason Moser, appreciate the earnings rundown. Fellas we're going to see you guys a little bit later in the show. But up next, we've got tips for your Astralpool and where it'd be putting your money. Stay right here. You're listening to Motley Fool Money.
Welcome back to Motley Fool Money. I'm Dylan Lewis. The Oscars are next week, head of the awards and the red carpet, we caught up with Nell Minow. Motley Fool Money's go-to movie critic and corporate governance expert for a look at the movie biz and some of her favorite films of 2023. Before we got into taping, you mentioned that you were fresh off of your Disney proxy vote. This is a company that has, I think had a rough year and maybe one of the easiest or simplest ways to put it. Certainly, there are a lot of opinions from shareholders on the direction of the company, leadership and some of the major initiatives. When you were thinking about Disney and looking at some of the issues, what was in your mind?
Nell Minow: I voted in favor of the Disney candidates. Yes, there are a lot of concerns about Disney, but there are more concerns about the people who are challenging Disney. Peltz keeps promising that he's going to come up with a detailed proposal about what he thinks the company should do. But his background has nothing in it to suggest that he understands this industry in any way. He is offering up so far financial engineering and that's not what a company like Disney needs. A company that's in every industry, they're in the hospitality industry, they're of course in the entertainment industry, they're in television. That's an industry that requires a lot of creativity. They're not putting things out on a conveyor belt and he's just one step away from suggesting they moved to AI. He has not persuaded me of anything whatsoever. I am cautiously optimistic that a vote in favor of the Disney insiders is the way to go.
Dylan Lewis: You mentioned AI there, so I'm going to take the bait [laughs]. As we start looking at content companies, whether they're in the film industry or traditional publishing. Thinking about using AI, how're you as a shareholder, looking at those types of decisions and the strategic direction that companies are looking to go with AI?
Nell Minow: Well, everybody is jumping on it, which always happens with fads. The question is, who is jumping at it in a thoughtful way? I think AI, to tell you, the very last thing I thought was going to be the first use of AI was plumbing through the footnotes and PhD dissertations to find out who has been citing everybody correctly. But apparently that's what people are like Ackman are doing with it. I think that AI is going to be less important in content creation than it is in digging through a lot of data. I want to see pharma companies using AI. I want to see other companies improving their products through the use of AI. I think it's a mistake to think that it's going to take over in the entertainment industry, although I do note that Tyler Perry has canceled his 800 million studio facility that he was going to build in Georgia after seeing a demonstration of AI film making. Now, I suspect that what he'll do is he'll spend that 800 million on something a little bit more advanced. But he's not going to give up on the idea that scripts for the indefinite future will need to be written by people and performed by people.
Dylan Lewis: Have you seen any of the demos that have come out from companies like Pika or any of the AI companies that are really focused on basically using prompts to create video?
Nell Minow: I have and they haven't quite leaked it, I'm sure that when we talk to each other before the 2025 Oscars, we'll see a lot of progress, but they still have these very odd things like six fingers on somebody's hand. It reminds me, I was listening to a video on YouTube and I only realized that the narrator was a robot or AI because they didn't know the difference between read and read. There are some fine points that it's going to take. Live and live was another one that they got wrong. It's going to take a little while before they sort that all out. But I think there are tremendous opportunities on companies that need to go through a ton of data for their products. Pharma is where I'm looking for right now.
Dylan Lewis: The Oscars are coming up and I think maybe more than any other regular guest on Motley Fool Money, you watch more movies than [laughs] pretty much anyone that I'll sneak comes on the show. Say, I'm giving you $100 to put on any film, any actor, actress, any major category. What are you putting it on?
Nell Minow: I think your surest bet there is got be Da'Vine Joy Randolph for The Holdovers as best supporting actress. Normally, the supporting Oscars are the toughest to predict, but she has one every preliminary award. Lord knows she deserves the award. She gave us a magnificent performance. She was so good also in Only Murders in the building, in the Dolemite movie with Eddie Murphy, I think she is the surest bet of the night. Then after that, I would say Oppenheimer is probably a very good bet for best picture and best director. The reason for that is not because I think it should be. There are two reasons. One is that they don't give Oscars for the best movie. They give Oscars for the most movie and that is the most movie. Hollywood likes to portray themselves as serious, as dealing with serious issues, as having a serious role in the cultural conversation. They like smart movies and it is a smart movie. But more important than that, you have to remember that the Oscar votes are by the people in that category. In other words, best director is only voted on by other directors. Christopher Nolan won the Directors Guild award, which means these exact same people that could change their mind between one vote and the next. I think that although the best picture is voted by the entire Academy, I have a feeling that Oppenheimer is going to make it.
Dylan Lewis: Knowing the history of how people like to vote, were you surprised at all to see Barbie in the best picture conversation?
Nell Minow: Not at all. It's impossible to ignore a movie that has broken so many records. It's done so well and everybody agrees. Again, it's a very smart movie, is a very entertaining movie. It's fun to look at. It's like eating candy, but there's a lot in it as well. I think that the surprise, even the Barbie people are surprised that it looks like I'm just Ken is going to win best song and I have to tell you why I'm happy about that. I get annoyed every year by the best song because they have the worst rules about the nominees for best song. They will allow you to have as best song, some song that a pop star wrote that only plays during the credits. It has nothing to do with the movie. I'm a big fan of a song that really plays an important role in the movie getting the award and certainly that song does. Plus I think it's very funny that in a movie that is entirely about Barbie and feminism, Ryan Gosling just did so brilliantly with that song that he's impossible to ignore.
Dylan Lewis: Well, I was right there in the theater tapping my foot along time [laughs],absolutely loved it. I'm curious. Are there any dark horses that you feel like you wouldn't be too surprised to see you have a pretty good night at the Oscars.
Nell Minow: Anatomy of a fall snuck its way into the best picture category, not just the best international picture. I think we will see it when Best International. But you never know. We did have Parasite winning a couple of years ago. That would be the dark horse, i think to keep an eye on.
Dylan Lewis: Outside of the Oscar field, a movie from the last year that you feel like didn't get enough attention and maybe you'd recommend for people to watch.
Nell Minow: I guess I would say, this is actually from the year before, but I would recommend The Outside Story. It's a very small movie about a guy gets locked out of his house in Brooklyn. But I thought and it's a first time movie and from first-time director and writer with a wonderful Brian Terry Henry and the lead role. That's just one that I really loved and really stuck with me, and I would recommend that to anybody.
Dylan Lewis: Let's talk a little bit about the movie industry itself. 2023 felt like a pretty good year back at the box office. Barbie and Oppenheimer got a lot of headlines. Super Mario Brothers movie right up there in terms of worldwide box office, over a billion. What I do see when I look at the worldwide box office though, is a lot of franchise extensions, a lot of licensed IP. It seems like we are still in this period with movies where stuff that is bankable is really what a lot of studios are putting their resources behind.
Nell Minow: I'm going to go with a Mackenzie, best of times, worst of times response on that. I think you did not mention two key concerns. What is the of course, the strike really tied everything up last year and we had hoped that the production would hit the ground running and everybody would catch up, but that has not been the case. Sixty percent of the people who are on strike still have not been employed. That is a serious concern and related to that. But separate from it is the constriction of the streaming services, which for awhile there were just, anybody could walk in the door and say, I want to make a 10-part series with a lot of CGI and they would go, sure that's fine. Those are concerns. That's one reason that this year is off to a slow start until we just had the surprise hit, to me of one loved the Bob Marley story which has done very well internationally and in the U.S. Of course Dune which is going to be number one for the next few weeks.
But I think now that I have done the worst of times, the best of times is that there are so many opportunities for people who, for very little money create their own movies. They'd go to the festivals and they get a nationwide release. I think outside the studio system there ton of opportunities. But the fact is if you're going to spend $100 million on a movie, your risk assessment is going to be very careful and you're going to want to build it. I'm saying this as somebody who's going to see Kung Fu Panda for tonight [laughs]. Yeah. But I'm a big fan girl. I go to San Diego Comic-Con. I love superheroes, but look at how badly the superhero movies, the franchise movies have done lately. Madame Web was a disaster at the Box Office. The Marvels did not do very well. They spent a ton of money on those, Flash was a total failure. So it's not always the case that the IP pays off the way that they hope it will.
Dylan Lewis: Do you think we're running into superhero fatigue?
Nell Minow: I don't think so. I think that we have perhaps not continued at the quality of movies that we had for a long time. Robert Downey Jr., who I think we'll get the Oscar also for Oppenheimer this weekend was incredible as Tony Stark, they haven't found anybody in that category yet and they're just going to have to work around it. Kevin Feige, who of course is in charge of all the Marvel movies, has been really great about bringing in unexpected directors and people who are not normally known for action. That paid off for him for a long time and it is not lately. He's got to rethink that.
Dylan Lewis: How would you characterize the overall state of the entertainment industry at this point? Because we are past the strikes, but we're also past the period of easy money for a lot of these businesses that had content budgets. It seems like we are seeing a lot of the streamers past the easy growth period of acquiring users and customers. It feels like while we've figured out the labor side of things, there's still a lot of uncertainty brewing.
Nell Minow: There's no question about it. Partly it is because some of these big ticket movies have really faltered at the Box Office. I think we're in a time of retrenchment. But fortunately, as I say every January when I talk about the movies that are coming out this year, my favorite thing to look forward to is it by the end of the year there will be a writer, a director, a star I never heard of before, who is going to be my favorite by the end of the year. You have somebody like Pedro Pascal or Paul Mischelle, both of whom were not all that well known a couple of years ago and are now just really at the forefront. Wait to see what happens with the Sundance films, which got great response in January with Telluride, with the other festivals that are coming up. You'll see there's a lot of really, really great stuff coming.
Dylan Lewis: One thing I wanted to get your take on David Zaslav has been busy as the CEO of Warner Brothers Discovery, and as part of his leadership, they've decided to basically prevent several finished films from being released, notably Coyote versus Acme, featuring John Cena, written by James Gunn. But also Batgirl featuring Leslie Grace, Michael Keaton, Brendan Frazier. It seems there's been quite a bit of backlash from the creatives in the industry. What do you make of a company that size and someone of that stature in the industry like Zaslav, making those decisions.
Nell Minow: Zaslav is a nightmare. The only thing he has been busy at is counting his money because he has continuously been number one on the list of the most overpaid executives, meaning the worst ROI for every dollar you spend paying him. He knows nothing as far as I'm concerned about what it is to be a creative, what it is to create content that people want to see. If he thinks that he can make more money killing these projects than releasing them, then he has no idea what his job is. He sat just getting the creatives mad at him. He's getting the audiences mad at him. I'm hoping still that both of those movies will see the light of day at some point. When I think about the terrible movies that I have to sit through, its unthinkable to me that these movies which have a lot of good people behind them and which I think are worth saying, can't even go on streaming.
Dylan Lewis: Motley Fool Money listeners, what's your Oscars favorite? We want to hear from you, right in at podcasts.fool.com. Coming up next, we've got 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. 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 Jason Moser and Ron Gross. We're going to dive right into stocks on our radar, our man behind the glass, Dan Boyd is going to hit you with a question. Ron, you're up first. What are you looking at this week?
Ron Gross: Dylan, I'm going back to an oldie but a mediocre-y one. Titan International TWI manufacturer of large wheels for farming and industrial applications, a long term holding of mine years and years and years. The reason I'm going back is that they just announced a large acquisition for a company of its size. Prior to the acquisition, they were about a one billion dollar company. They announced an acquisition of Carlstar Group for 296 million. That's a pretty big acquisition for them to digest. Carlstar is a global manufacturer of specialty tires and wheels for a variety of end markets. It will get tighten into end markets that they're not really in. Outdoor power equipment, power sports, high-speed trailers. It's a way to diversify a bit. They paid only four times adjusted EBITDA. The company has profitable EBITDA of about $73 million. They expect it to be accretive or additive to earnings right away, which is fine. It's just that they only have $220 million in cash for Titan. They're going to use 127 million of it for this acquisition. They've got $425 million of debt. I'd rather the balance sheet was a little bit stronger for an acquisition of this size. But hey, Titan is only trading at four times forward EBITDA only 8.5 times earnings. I'm sticking with it for now.
Dylan Lewis: Dan, this sounds like a classic Ron company, Wheels.
Dan Boyd: Yeah, old economy Ron is back in action [laughs]. Other analysts, they bring in robots and AI and biotech. Ron, he's still thinking about the Wheel, Dylan.
Ron Gross: Let's see us all live without the wheel.
Dylan Lewis: Well, if you're hungering for AI, I think you might be getting it with your next stock, Jason, what's on your radar this week?
Jason Moser: Yeah. Taking a closer look at UIPath, ticker's P-A-T-H, they have earnings coming up on March 13th, next week. This is one of the companies that's bringing automation and computer vision to enterprises everywhere and in this day of AI and machine learning and automation and whatnot, it's clearly pursuing something where there are some tailwinds there. They ultimately build and manage automations and computer vision technology, does this through their UIPath business automation platform, which ultimately spans the full automation spectrum. They're trying to basically give their customers what they need in their automation and Computer Vision journey from soup to nuts, the whole kit and caboodle, as they say. Licenses and subscriptions make up the lion's share of revenue with both contributing fairly equally. They benefit from many of the drivers that we're focused on today in tech. Connectivity, automation, artificial intelligence, machine learning. They're playing a role actually even in the roll-out of 5G technology, they're helping telecom providers handled real-time challenges and personalized offerings ultimately get this 5G networks out and ultimately keeping customers happy. Because that's what it's all about. The thing is with this business, they've seen a lot of success. But it is one of those younger tech companies still working its way toward profitability and cash flow. It's valued at 10 times sales still. The valuation is what really has been on the side line here, more than anything. I'd love to see some pullback in the stock.
Dylan Lewis: Dan, a question about UIPath.
Dan Boyd: Yeah. I thought this was going to be one of those Jason Med tech stocks that has something to do with urinary tract infections, but I'm glad it's not.
Dylan Lewis: Dan, Wheel, Cutting-edge tech, which one's gone on your watch list?
Dan Boyd: I'm going with Wheel, baby.
Dylan Lewis: The old economy. Ron Gross, Jason Moser, thanks for joining me. That's going to do it for us. We'll catch you next time.
Dan Boyd has positions in Walt Disney. Dylan Lewis has positions in Twilio. Jason Moser has positions in Apple, Nike, Twilio, and Walt Disney. Ron Gross has positions in Apple, Nike, Target, Titan International, Twilio, and Walt Disney. The Motley Fool has positions in and recommends Apple, CrowdStrike, Netflix, Nike, Okta, Palo Alto Networks, Target, Twilio, UiPath, Walt Disney, Warner Bros. Discovery, and Zscaler. The Motley Fool recommends Foot Locker and recommends the following options: long January 2025 $47.50 calls on Nike. The Motley Fool has a disclosure policy.
