Chipotle, Spotify, UPS…Investors Review Some Big Names

In this podcast, Motley Fool analysts Jason Moser and Matt Argersinger and host Dylan Lewis discuss:

• The impact of the recent global IT outage, where it will show up financially, and how CrowdStrike responded.
• Why the market is down on Tesla‘s profitability.
• How Spotify’s stellar run is continuing and why dividend investors might want to keep an eye on UPS.
• Two stocks worth watching: Twilio and Coupang.

Motley Fool co-founder and Chief Rule Breaker David Gardner talks with Motley Fool analyst Emily Flippen about his best stock recommendation, some of his best investing lessons, and how to make sense of the nascent artificial intelligence space.

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.

This video was recorded on July 26, 2024.

Dylan Lewis: We’re sifting through the wreckage of the world’s largest IT outage. Motley Fool Money starts now. It’s the Motley Fool Money Radio Show. I’m Dylan Lewis. Joining me over the Air Waves. Motley Fool senior analysts, Jason Moser and Matt Argersinger. Fools, great to have you both here.

Jason Moser: Hey.

Matt Argersinger: Hey, Dylan.

Dylan Lewis: We’ve got some ideas for how to spot winners in the world of AI. A check in on our endless love for burritos and of course, stocks on our radar. We’re going to kick off though with one of the biggest stories of the week. Probably one of the biggest stories of the year when it comes to the intersection of Tech and business. The global IT outage related to CrowdStrike’s updates, started last week, but continued to dominate headlines and travel schedules. This week, Matt, how did your trip home from Boston go this weekend?

Matt Argersinger: Let me briefly relive this nightmare, my 5-year-old son and I experience. We flew to Boston last Thursday to visit my mom. Coming back, our flight was scheduled from Boston’s Logan Airport back to DC, Sunday at 1:30. We got to the airport around noon, and everything looked fine. But then our flight just continued to be delayed. It was delayed every half hour for I don’t know, 16 half hours until about 8:00 when it was finally canceled. It was a crazy situation. There were obviously a lot of travelers that had a much worse experience than us. But when our flight was finally canceled, they rebooked us on a flight for all the way till Tuesday evening. I took that, but then canceled it and decided to just get us a hotel in Boston that night, and we took the Amtrak home early Monday morning.

I will just say that experience was bad and frustrating, but not nearly as frustrating as some travelers who had been staying at Logan for days, trying to fly out. One of the most interesting things is when I talked to the Delta rep finally after standing in line for an hour to figure out our situation. I asked him about, can I get reimbursed for a hotel or a hotel night? He said, once we get reimbursed by the vendor, that’s when Delta will start reimbursing travelers. I thought, now take my experience, multiply it by several hundred thousand, if not millions of travelers over the past week who have had their flights canceled, had to rebook, had to book hotel nights. You can see why this could run into the billions, just on the Airlines alone, just on Delta alone, let alone all the thousands of companies and millions of other customers around the world in various industries who have been affected by this outage. It’s a big deal.

Dylan Lewis: I was trying to access my accounts with Schwab with our 401(k) over the weekend. That was the extent of the issues that I ran into. Not nearly as bad as hours and hours and hours at the airport with a young kid. But this was probably most severely felt by our airline travelers, but something that was widely observed. You were hinting at this a second ago, there, Matt, but we’re seeing estimates that Fortune 500 companies lost something to the magnitude of $5 billion due to the outages, banking and airlines, not surprisingly leading the way when it comes to that. I see that number and just the widespread impact that we saw with this, Jason. I feel like this is probably the thing we’re going to be hearing about from management teams on conference calls next earning season as we’re starting to see some impacted results.

Jason Moser: I suspect you’re right. Thankfully, I didn’t have the travel snafus that Matt had to deal with, but you made the point of banking, and the banking and payment systems were absolutely impacted. My wife runs a small business here in Northern Virginia, and the state tax website was down. They had to delay, essentially the deadline for payments being due because the tech broke. They couldn’t accept payments, and they couldn’t record the payments that were being made, and so they had to push that out like five days. It just throws a monkey wrench in everything. There’s lost money, there’s lost business, there’s lost productivity. It does, given the scale of this, it feels like there are going to be more shoes to drop. This is just too big of an incident. It’s very likely that CEO, George Kurtz, will have to testify in front of Congress. We’ll get a better idea as to what happened there. I think it seems the response to this point I’m going to say on the whole, it’s probably not satisfactory for most people. I also understand. This is a unique situation, and I don’t know how exactly you respond to this other than Holy cow, let’s just get this thing back up online as quickly as we possibly can and take our medicine.

Dylan Lewis: Jason’s going with a not satisfactory grade for CEO George Kurtz and CrowdStrike’s response, the market obviously agreeing here, shares are down about 30% as we tape still up 5% for the year, but certainly a hit for this business. Matt, having been there in the airport, what’s your grade for how things have been handled?

Matt Argersinger: I’d say it’s pretty bad. If the rumors are true that they were offering $10 gift cards for customers affected by the outage, I think, pretty unsatisfactory response. I would say this, and I want you guys maybe to react to this, and maybe I’m being hyperbolic here. But I do wonder, if you look at companies like Microsoft, CrowdStrike, which we’ve talked about, Apple, Amazon. We run banks through stress tests, and we have deemed certain banks too big to fail. Is it possible that maybe not today, but in the near future, we’re going to pinpoint a few companies and say these companies are just so big. They affect so much of our digital infrastructure, our transactions, our communications, our security. Billions of customers around the world. Are there going to be companies, tech companies that are too big to fail, and we might actually have a I don’t want to say a wave of regulations, but we might just have more scrutiny on these companies because they really do. I guarantee the average American doesn’t know CrowdStrike. Maybe they heard it a little bit, but it’s not like the same as an Alphabet or Google or Amazon or Apple. But look at the effect that this business had on so many people’s lives over the past week and still having an impact. I wonder if this company just got too big and it’s been too influential, and we might need to step back at some point and say we do have some tech companies that might need to undergo a few stress tests here and there.

Jason Moser: I think, to your point they’re on CrowdStrike, you’re right. Probably most people don’t know CrowdStrike, and most people do know Microsoft. Microsoft got dragged down with this one. This wasn’t really their fault, but it impacted something like 9 million of their devices in operating system. You got to feel for Microsoft in that regard. But I think in regard to too big to fail, I think we’re already there. I think you could argue that if Microsoft or Alphabet or Amazon were just to shutter their doors, any one of those three or some combination thereof, the entire world stops spinning

Matt Argersinger: Jason, it doesn’t even have to fail. It’s like too big to screw up or too big to break.

Jason Moser: I will say to, just following up on that $10 gift card because I think we had some laughs in regard to that. Honestly, it read like an onion article. I did find something. Apparently CrowdStrike, the company said they didn’t send gift cards to their customers or clients, but they did send them to teammates and partners who have been helping their customers through this situation. Then adding insult to injury, Uber flagged it as fraud because of high usage rates. Everything just hit it once, and so they’re like, this must be fraudulent activity, and they basically canceled all of these cards. I’m not exactly sure. Again, I think this just speaks to the communication. There are a lot of questions that are just unanswered, and I think that’s where you look at Kurtz, you want him to step up and maybe be a little bit more of a leader in this case.

Dylan Lewis: Seems like CrowdStrike is very excited to turn the page to August and put July behind it. Also down this week, shares of Tesla stock was down about 10%. After the company reported second-quarter results, revenue was up slightly to just over 25 billion, but JMo, net income cratered, down 45% year over year, a huge hit. Were you surprised to see it?

Jason Moser: No, not really. It’s no secret that demand is waning in the EV space right now. That’s probably a law. I think it’s hard to argue against the long term electrification of our transportation system. But I think it must blaze out the thesis for us, and you either buy into it or you don’t, or maybe you just do, but you don’t really want to wait so long. I don’t know. But, he says, the value of Tesla is autonomy. If you believe Tesla will solve autonomy, you should buy Tesla stock. All of the other questions are just noise. That really is the North Star. You have to be able to think a little bit longer term. Unfortunately, in the near term, this is a car company, and automotive revenue is down 7% thanks to that weakening demand. I did see something in the Wall Street Journal earlier, industry wide the sales of battery powered vehicles in the US rose 6.8% of the first half of this year, according to motor intelligence. That compares to 50% growth in 2023. Clearly, a very big slowdown. The good news is energy generation and storage was up 100%. That’s great news. Right now it’s just 12% of the business. It’s not a big deal right now, but longer term, I think, given the trends on the demand for electricity, not only here in the US, but globally, when it comes to transportation and data centers and whatnot, obviously energy is going to be a big story in the next several years.

Dylan Lewis: Coming up after the break. We’ve got updates from Chipotle, Spotify, and UPS. Stay right here. You’re listening to Motley Fool Money.

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Dylan Lewis: Welcome back to Motley Fool Money. I’m Dylan Lewis. Here on air with Jason Moser and Matt Argersinger. We had a big week of earnings for Big Burrito, Big Streaming and Big shipping. We’re going to start out with the tasty one. Matt, people love burritos. People will always love burritos, and Chipotle is just going to keep cruising along. This seems like a business that can do no wrong right now. That was my take, at least on the earnings results.

Jason Moser: That’s my take too Dylan. This is impressive. A company that now has over 3,500 company owned restaurants. Revenue was up 18%, but comparable store sales up 11%, and there’s an 8% growth in transactions at the store level. Margins were higher by about 140 basis points at the restaurant level again. They remain on track to open 300 more restaurants this year. I just think outside maybe I don’t know, Ava, maybe Shake Shack, but those companies aren’t nearly as mature or have the scale of Chipotle. Chipotle is the best restaurant growth story out there right now. I think I can safely say that. As Ron Gross would say, this one is firing on all cylinders. They’re doing it internally with store metrics and externally with store growth. It’s really impressive. I just think the stock sold off a little bit after earnings, and it’s down, I think about 25% over the past month or so. It’s like everyone bought into the split, and then once the split happened, everyone sold off. But largely, I think it’s more evaluation. At its recent peak, it was trading for about 75 times earnings. That’s a rich valuation, even for a company that’s performing like this. Even with the stock down, 25%, as I mentioned, it’s still trading for about 50 times forward earnings. I love what Chipotle is doing. I just think that’s still a very rich valuation. That’s probably why it’s down, so just buyer beware at this point. But, is it doing well.

Dylan Lewis: To the extent that Chipotle is a little bit of a bellwether for us as we look at different types of consumers, interesting to see them performing so well while we’ve seen so many of the other fast food names struggle and become so much more value oriented with their menu and with their offerings.

Matt Argersinger: I agree. I think partly it’s probably Chipotle’s innovation. The quality of their products. They’ve been able to have their price increases stick much better than your average fast-casual restaurant.

Jason Moser: Look out for the Olympic opportunity here, too. Dylan, I know that sounds weird to say. We grew up in that era, at least, I grew up in the stage. I guess I’m a little older than you guys, but we won’t tell anybody. But growing up at that age where McDonald’s was the name for the Olympics, which was always so weird to me. Now Chipotle, they’re jumping on that Olympic stage. Their line is real food for real athletes. They’re actually even releasing a digital menu of items that reflect the favorite orders of a number of different Olympic athletes that will be in action this summer. I know the valuations crazy at 3,500 stores today, though. According to them, they’re only halfway to the 7,000 they think they can get. Even if you discount that back out, you can start to at least rationalize the evaluation a little bit. I’m not there yet, but it starts to make a little bit more sense.

Dylan Lewis: We also had an update from another company that’s been flexing some of its pricing power. Music stream or Spotify, continuing a great week, great quarter, great year shares up over 10% following the company earnings this release. Jason, what do you see in the results?

Jason Moser: Well, I feel like every time we talk about Spotify now, Bill Mann is just going to reach or punch me through my laptop or something, is because of these price increases. I didn’t mean to do it, Bill. I was just trying to make a point. But clearly, they have benefited from these price increases. See spot run. This stock has just been on fire. I start to wonder if maybe they’ve matured, maybe they’ve made that leap beyond that monthly active user number. It’s gotten so big. It’s less a question of whether they can grow that user base, and really just more of a question of how profitable they can ultimately make it. They added 7 million net new subscribers for the quarter. That was 1 million better than they forecast. But at 626 million users now, that was a little bit below what analysts were looking for. The stock still didn’t get punished, though, and I tell you, the reason why revenue grew 21% from a year ago. The recent price increases have absolutely helped the bottom line. With that premium average revenue per user, that grew 300 basis points, gross margin, one year ago, 25.5%, this year, 29.2%. Those are the metrics that matter and you’d like to see them trending in this direction. I do wonder, again, if we’re not going to see them maybe try to pull a Netflix here in the near future and say, at some point, they’re just going to not worry about reporting those average user numbers, those monthly active user numbers because they’ve gotten to the point where they’re so big, it’s just not as important as it once was.

Dylan Lewis: It’s a nice time to check in on them because we are almost back to the 2021 highs that the stock hit. The company has performed incredibly well to rebound and get back to that point. But, JMo, I think we’re looking at a slightly different Spotify now than when they were last at those levels. They’ve used some of those price hikes and pricing power we talked about, but they’ve also rolled out things and established their ad brand a little bit more. What do you see as some of the needle movers for this business for that next chapter of growth for them?

Jason Moser: They talked about this mis ” in users”, and a lot of that management chalked up into lumpiness and developing markets. I think we focus on those developing markets and the opportunity there, and it’s a step by step. They get folks in on that ad model and hopefully graduate them up to monthly premium paying subscribers. Paying attention to those premium subscribers, I think is always going to be very helpful. But I will say in regard to the price increases, it’s nice to see that with those price increases, come a much more robust platform. Spotify does more now than it’s ever done with books and podcasts and music and everything else in between. It continues to build out what really is just becoming an entertainment platform.

Dylan Lewis: We had some big moves in the other direction for UPS after earnings, shares down 10% this week. Matt you did the dive into the results. What did you see?

Matt Argersinger: Not a whole lot of surprises, Dylan, because Anthony Schiavone on our dividend investor service did a good analysis of this business. We’re thinking about recommending it for our dividend service. We were just worried about results in the short term. I’m glad we held off. The CFO also abruptly left about a month ago, which was a red flag for us. UPS is dealing with a really delicate balancing act. They’re trying to reshape the entire business right now, take a lot of costs out. At the same time, package volumes have really slumped. You’ve got customers going to cheaper ground services, so revenue has been flat to down. They’ve also front-loaded a lot of a lot of the Teamster contract costs, and so that’s why earnings are down 30%. I think what’s hopeful is if you look at going forward, they did have a slight pickup in volume. That was the first time in nine quarters that they’ve seen that, which is pretty amazing. They are on track to take about $1 billion in costs this year. They offload their coyote logistics business, which they thought was non core. They seem to get a better price than what they’re hoping for. The stock is at a five year low and the dividend yield is over 5%. Is this a potential bargain on a turnaround? I think it just might be. It trades for only 14 times the consensus earnings for next year. If they can turn around, if volumes can rebound, they get a lot of costs, they write their cost structure. This starts to look like an interesting opportunity, maybe.

Dylan Lewis: There’s two pieces to this. There’s a little bit of the macro environment in general, but also some UPS specific things that they need to be getting right in order to move from watch list to something you’d want to own.

Matt Argersinger: Right, so I think it’s the ladder that I’m more focused on. I think the macro we know will bounce back or do what it does. What’s in UPS’s control is what we’re focused on dividend investor. I think by the end of this year, we’ll have a good idea of whether or not they’ve succeeded.

Jason Moser: You see a 5% yield. You got to check it out.

Matt Argersinger: Perk my ears up.

Jason Moser: Listen, I’m hanging on to my shares. I can tell you that.

Dylan Lewis: Jason, Matt, Fools, we’re going to see you guys a little bit later in the show. Up next, we’ve got some investing words of wisdom from none other than Chief Rule Breaker and Motley Fool co founder, David Gardner. Stay right here. You’re listening to Motley Fool Money.

Welcome back to Motley Fool Money. I’m Dylan Lewis. We’ve been bringing you some of our favorite conversations from Fool Fest 2024 over the last few weeks, and our member meetups wouldn’t be complete without some words of investing wisdom, Chief Rule Breaker and Motley Fool co-founder David Gardner. Analyst Emily Flippen sat down with David to hit some questions sourced from the crowd and our in house AI chatbot, Jester AI. They talked about his best stock recommendation, some of his best investing lessons, and how to make sense of the nascent artificial Intelligence space.

Emily Flippen: I have to ask since we’re talking about artificial intelligence, and you just told me that you’re all in on artificial intelligence, I work on your Stock Advisor team, David, and I know that NVIDIA, which I’m sure everybody wants to talk about, NVIDIA getting a lot of benefits from the artificial intelligence boom is now one of, if not your best, Stock Advisor recommendation in terms of performance. David, what are your thoughts on NVIDIA? When you look at that performance, what is your cost basis? I’m very curious. I can’t help but wonder. When you look at the landscape of investors, what would you tell an investor who maybe owns NVIDIA and has owned NVIDIA for a long time, and what would you tell an investor who does not yet own NVIDIA, and is looking at NVIDIA and thinking to themselves, should I be owning NVIDIA?

David Gardner: I would feel very comfortable buying in NVIDIA tomorrow, and we’re holding for at least three years because that’s true, I think, of all Motley Fool investing, but I’ll at least specifically say of Rule Breaker investing, a dead minimum of three years. I wouldn’t buy any stock, including NVIDIA if I weren’t going to hold at least three years. I would feel comfortable doing that tomorrow. NVIDIA is an amazing 2005 roller coaster story. I’ve occasionally told this on my podcast, and some of you have been there all the way through, but to think of the five years that it went sideways. Eight years after the original recommendation, we finally got back to even. As I stepped away from stock picking in May of 2021, it was at 15. I walked away and it just kept going, now it’s at 128, my best pick ever. I didn’t know when I stepped away in May of 2021. But my cost basis, thanks to the most recent split, is $0.16. [laughs]Thank you. It deserves a clap. Two things you need to know about that. First of all, I don’t own any. I love the company. I love the pick, and I own so many of the stocks I’ve picked over years, but not all of them. I didn’t want to fill up a portfolio more than about 60 stocks or so. But the second thing I want to say about that is, why do we do this? Why does Emily do this? Why do my brother Tom, and Bill Mann, and Andy Cross, and our whole Motley, it’s for you. We’re picking the stocks for you. I am just so happy that $0.16 for those who were there and it was April 15, tax day, 2005. [laughs] If you were there with me that we bought and we’ve held. I think there’s a little magic around $0.16 because I hope this will be my only brag, but if I brag again you can give me the sign, but that’s poetically poetic justice, that is the same cost basis as my Amazon pick of 1997, $0.16. As they split together, 20 for one, it all ended up at this magical place of $0.16.

Emily Flippen: Wow. Feels like it’s a [inaudible], doesn’t it?

David Gardner: [laughs]. It was meant to be. But again, I think this is a great example of a rule breaker. A company that is leading the charge. It is the top dog and first mover. It wasn’t in 2005. Companies evolve and adapt and morph, but it certainly represents that as you all know today, Emily. It also looks overvalued, and they always do all the way up, and sometimes, as NVIDIA has, even the last few years, it’ll lose half its value, time and again. That’s happened a bunch of times. Anytime you want to ride 100 bagger, it’s never straight up. You’re going to have three or four cut-in-half death-defying moments over a 20 year period. That’s been true of NVIDIA, even more so than most. But anyway, that’s a quick thought on NVIDIA. A stock that it makes me so happy to think so many Fools.

Emily Flippen: I will say, as I’m reading through these questions, it does feel like ChatGPT is very self-serving with these questions. They’re all about generative AI and technology. I think that ChatGPT is really trying to point us in a direction here. But I do have to ask because again, ChatGPT has told me to, so I am obligated.

David Gardner: Let’s do it.

Emily Flippen: Throughout your career, you’ve seen the rise and fall of many technologies and business models. How has your approach to identifying truly disruptive companies evolved over time? Can you share an example of how past experience has reshaped your thinking?

David Gardner: Sure. First of all, in the earliest days as a stock picker, I thought it was all about finding the company that Wall Street hadn’t discovered yet. I was looking for small-cap companies in niche industries that, in my mind, would grow and be discovered by Wall Street, and then the coverage and the ensuing attention would cause it to do really well in a very short-term, 18-month period, that was my targeted length of time. That works once or twice, but it didn’t work eight or nine other times, and I started to think, I need to evolve to find what’s really working and winning. William O’Neil’s book, How to Make Money in Stocks, I’ve said this before, it’s one of the greatest and worst books ever written about investing. [laughs] Why it is great is because O’Neil said, let’s look at what actually wins out there in the market. He went and studied market history, and he wasn’t putting up principles and saying you should abide by these. He was looking empirically at what actually went up 10 or 25 times in value, and what were the factors that led to that. I guess I started to realize that I needed to focus on what’s really leading and winning, not things on the bleeding edge of nowhere that might get discovered one day, and so that’s why all of a sudden America Online was my first great stock. It was the decade that America came online. Eventually, it transitioned out, bad awkward merger with Time Warner. Steve Case hanging out with Jerry Levin and not really getting along and eventually broadband overtaking. But that was for me, the iconic learning that I’ve tried to share out with everybody here and many other people besides that you should always be, if you’re not the lead husky, the view never changes, we should be asking, who’s the innovator in every industry? Every industry has innovators.

The trucking industry, which we wouldn’t think of necessarily as high-tech, absolutely has innovators. Old Dominion Freight Lines, such a great company. A wonderful Stock Advisor holding of many years is a great example of understanding how to do logistics in a way that it’s hard to compete with if you’re competing against them in trucking. That’s an example. In every industry, Emily, I think that’s the learning and takeaways focus. If you could just stock a pond with the single most innovative at-scale company in every single industry that you want to identify that you care about, and only fish there, you are fishing the most stocked pond that you can find as an investor, and it’s so much more valuable than I would say merely indexing or buying everything. Let’s just buy excellence. Find excellence, add to it over time. That’s what I learned early on, and it took a Yahoo mistake and then an AOL realization to turn me onto that for life.

Emily Flippen: As you were talking, I’m sitting here trying to think about how you would answer this question. I can’t answer this question. I think if we had Tim Beyers on stage, he would be unable to answer this question. I’ll pose it to you. But I genuinely don’t think you’re going to be able to give a satisfying answer for exactly the reason you just mentioned, which is that we have not seen the industry of AI shake out yet. The Netflixes of AI do not yet exist, but the question is this., what do you feel is the most important three things that make a company a moat company that a younger Warren Buffett would look at in the current AI world? Perhaps I have artificially led you in a wrong direction, and you do have three factors that come to mind. [laughs] But for me, it is hard to come up with factors in an industry that is so nascent. I go back to maybe your six-rule breaker investing principles, which I continue to believe will be prevalent, regardless of the technology that continues to develop, that continues to guide at least my investment philosophy. But what comes to mind for you?

David Gardner: Thank you. I do use those. Part of the fun of writing my final investing book is a portion of it is simply a restatement of what I said 25 years ago, but now we have numbers attached, and we can learn from it. It’s not just supposition. I do lean on those principles every day, and so I would start with, who’s the top dog and who’s the first mover in important aspects of AI growth in society. Jason Free, Jason you here?

Jason Free: Over here.

David Gardner: Awesome. Jason was saying something really smart last night. I don’t know enough. He’s studying this much more than I. I’ve learned a lot from him over the years. He said, I really think that AI in some ways, we don’t know this yet, but it’s really seriously accelerating, I hope I’m not misquoting you, Jason, it’s accelerating robotics. A lot of the gains and the rapid cycles that we’re learning is going to end up being in machines around us. This is for good, not ill. [laughs] Obviously, that’s just one use case for AI. But you start putting together all of the gains being made by AI, and you start putting it into machines that are helping us and making our lives easier. Whether you can’t walk, but now you can or get heavy work done in industrial dead zones that nobody would have wanted to go into. These things are unbelievable benefits that we’re going to get, so I would say that one right there, Emily, just asking, who’s the leader out front? A second one since there are three, and I’ll be quick, I might say the intellectual capital, the founder, the visionaries, the dreamers. I love the people like Brett Schulman today, who have been there, done that, built that, and you can see it in their eyes. I don’t think I have any third-eye vision, but hearing people articulate what they’re doing and why, especially, trying to work on behalf of humanity and human flourishing, and you just see those founders. I look for those visionaries. Robert Frost said, “I had a lover’s quarrel with the world.”

That was one of his poems that’s on his gravestone. I love the people who have a lover’s quarrel with their industry. They show up and say, we’re going to start breaking the rules here. People don’t like this or that about what we’re doing, so let’s instead do it this way, and they do. That’s a second thing, and then a really third thing I might throw in is financial backing. You can see it in who’s being funded and how much. Yes, there are stories that come out of nowhere, and part of AI will be that a four-person shop all of a sudden, can create $10 billion of value when it previously took 40,000 people to do that. I think some of that will pop up and surprise us. But those are three things that I’d look at, and they’re already there in the Rule Breaker trait.

Dylan Lewis: David mentioned his podcast. You can catch him each week on Rule Breaker Investing. As for his next investing book, you’re going to have to wait a little bit for that. But as he mentioned, it’s a collection of his wisdom in writing over the years, so the RBI podcast is a great place to get at sneak preview. Coming up after the break, Jason Moser and Matt Argersinger return with a couple of stocks on their radar. Stay right here. You’re listening to Motley Fool Money.

As always, people in the program may have interests in the stocks they talk about, and 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 Matt Argersinger. Fools, all traditions eventually have to come to an end. After more than 50 years, Airline Southwest plans to end its open seating approach and begin selling tickets with assigned seats and premium seats with extra legroom. Jason, did you ever think you would see the day, [laughs], where you could safely and slowly walk to your Southwest gate without having to jostle for a seat?

Jason Moser: I’m not terribly surprised they’re at least doing this. I will say I’ve only flown Southwest I think once in my life, and that was to a Fool event out in Texas, and so being so new to the concept, I will admit, it was a little bit confusing. There were some adjustments that needed to be made when I was boarding the plane. I was like, this isn’t like all of the others. I wasn’t really sure whether I liked it or not. I was like, it’s different. Okay, that’s fine. Whatever. I will say, on a serious note, this is something that I think is very important here in regard to why they did this. CEO Bob Jordan mentioned that the airlines surveyed thousands of customers to understand ultimately what they wanted, what they liked the most, and 80% in that survey, 80%, favored assigned seats. While maybe that old-school mentality loved the unassigned seating and the way it worked, you got to be able to change with the times, and clearly, consumer preferences have changed a bit given these survey results. I will say, I do give them a lot of credit for committing to making this change because ultimately, when you’re in a business, you’re selling consumers things, whether it’s burritos or plane tickets, you just want to be giving your consumers what they want, and they found out what their consumers want, and they’re making the change.

Dylan Lewis: Matt, you’re fresh off of some chaotic air travel, so I feel like the idea of something that is a little bit more predictable probably going to land with you here.

Matt Argersinger: Predictable would definitely land with me, to use the airplane pun, Dylan. But gosh, if I don’t see the inside of an airplane or an airport for another month or two, I am a happy guy.

Jason Moser: Wow, a month or two. Gee, I think I’d be screaming like six months to a year.

Matt Argersinger: I got the travel bug.

Dylan Lewis: It is interesting because Southwest has been feeling a little bit of heat from activist investor Elliot Management. Jason, do you feel like this is an adequate answer to some of the concerns that they’ve been raising about the business?

Jason Moser: I think it’s a step in the right direction. I’m not sure how much sway Elliot really holds in something like this, and I’d like to believe that Southwest is doing this because it’s what their customers want, not what Elliot wants. But sometimes it takes that little push, that little nudge to make things like this happen, and so I’d imagine Elliot getting involved there, called Management Zion, and said, hey, maybe we need to start thinking about doing things a little bit differently, and this was a very sensible first step.

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

Matt Argersinger: A bit of a departure for me this week, because, as you know I’ve homed in on dividend-paying companies lately, but I’m looking at Coupang, ticker CPNG. It’s the leading e-commerce company in South Korea. It also has operations in China, Singapore, and just recently, Taiwan. Very popular online marketplace. It has infrastructure that could deliver 99% of orders in South Korea within a day. Very impressive. It also offers groceries, restaurant order, and delivery, payments, and streaming service. Does this sound like any other company we know?

Dylan Lewis: A little familiar.

Matt Argersinger: But I think what’s most intriguing to me right now is the company is now profitable. It generated over one billion in free cash flow over the last 12 months. It only has a $35 billion market cap, yet it accounts for only about 20% so far of total e-commerce in South Korea, so lots of upside, especially as it expands in those other countries. Just adding it to my watch list right now. I’m looking forward to taking a deeper look.

Dylan Lewis: Dan, a question or perhaps a comment on Coupang, ticker CPNG.

Dan Boyd: Sorry, gang, but I got a question for this one. I know you like the comments. [laughs] South Korea has a pretty well-documented population problem, Matty. Does that spell disaster for a company like Coupang in the future?

Matt Argersinger: I think it does limit their growth, Dan. I think it’s a great point. I would say the penetration of overall retail of e-commerce is actually even in a country like South Korea, which has a very advanced e-commerce landscape, it still actually a smaller percentage than the overall retail sales, so I still think they still have room to grow even if that demographic situation isn’t helping them.

Dylan Lewis: Jason, what do you got on your radar this week?

Jason Moser: Going to be looking forward to Twilio earnings next week. They announce earnings on Thursday, August 1st, after market closed. Ticker is TWLO. All this talk of the CrowdStrike outage and all of the trouble that came with it, this is one, Twilio is a cloud communications platform. They enable developers to build and operate customer engagement within their software applications. This is something where you would think Twilio may have felt an impact from this. I don’t know, but I’m going to be interested to hear what they have to say on the call in regard to that. Beyond that, this is a business in a little bit of a transition, and it feels like the transition is going pretty well. For the quarter, they’re calling for revenue just over one billion dollars. That would represent organic growth of 4-5%. But they also reiterated their full-year organic growth target of 5-10%. If that growth starts to reaccelerate here in the back half of the year, that would be encouraging, obviously. But the slowdown in growth, it’s nothing new. It’s something a lot of companies are dealing with right now. But CEO Khozema Shipchandler, who’s still relatively new to the position, been with the company for a while, but he seems to have a grasp on the business and feels very strongly it’s undervalued right now, so they’ve been repurchasing a lot of shares. Actually, Dylan [inaudible], bringing the share count down. That’s what we like to see.

Dan Boyd: We love to see it.

Jason Moser: They’re moving toward sustainable profitability and free cash flow now, which is encouraging as well. I think there’s going to be a time where the market is a bit more tolerant of companies like Twilio, and if Shipchandler keeps doing what he’s doing, I think that patience for this investment could pay off.

Dylan Lewis: Lot of buzzwords in there. Dan, what do what do you think of Twilio?

Dan Boyd: Well, Dylan, good question. I don’t know what to think of Twilio. Extremely whimsical name, but it seems like a boring, almost Ron Gross-esque company.

Jason Moser: Well, I like the comments more than the questions, and I’ll just leave it at that.

Dylan Lewis: Dan, are you going to be going with Coupang or Twilio this week?

Dan Boyd: I don’t know Dylan. I guess the whimsical nature of the word, Twilio, how fun it is to say, I think that might sway me as inane as that may sound.

Dylan Lewis: Dan, you’re a comic fan though. Coupang.

Dan Boyd: Sorry, Matty.

Dylan Lewis: You can see it in one of those exploding logos, right? Dan, appreciate you weighing in. Jason, Matt, appreciate you bringing your stocks. That’s going to do it for this week’s Motley Fool Money Radio show. The show’s mixed by Dan Boyd. I’m Dylan Lewis. Thanks for listening. We’ll see next.