In this Motley Fool Money podcast, host Chris Hill kicks off the year with a 2018 preview show, joined by Total Income's Ron Gross, and Motley Fool Pro and Options' Jeff Fischer.
In this segment, Chris asks them to cast their eyes on the folks at the top: CEOs. These leaders are definitely having a profound impact on their companies. Not necessarily good, mind you, but profound. These two are the ones in greatest need of a win.
A full transcript follows the video.
This video was recorded on Jan. 5, 2018.
Chris Hill: Let's talk CEOs. Who is the CEO to watch this year? And it can be because that person is on the hot seat, or because they're just at an interesting place in an interesting time. Ron?
Ron Gross: This guy needs a win bad, and he's just not going to get it, unfortunately, and that's Eddie Lampert of Sears, both the largest shareholder and the CEO. In my opinion, he has destroyed shareholder value at this company. Shares are down 90% over the last five years. Revenues and profits have been decimated. He's bought back a ton of stock for the company over the years, but he did not invest in the stores, he did not invest in e-commerce. He's basically been selling off assets such as real estate to try to keep this thing afloat. Balance sheet remains a mess. They keep announcing store closures. Bruce Berkowitz, famed value investor, has announced his retirement from the board. I hold out little hope for Sears, and I don't think Eddie Lampert is going to be able to turn this.
Hill: What about you, Jeff?
Jeff Fischer: Well, all these men are having trouble at GE, IBM, Ford, Under Armour, all male CEOs who need to get it right. But Evan Spiegel at Snap (NYSE:SNAP) needs to have a good year. GE and IBM and Ford all have time. Under Armour has time, as well. Snap arguably may not have that much more time. It's falling off the radar in a lot of cases. Even very young people I speak with do not use Snap --
Gross: You speak with young people?
Fischer: Yeah, we have some friends who are in their 20s and late teens. We're at that age now, our kids are that age. You are too, Ron.
Gross: I guess.
Fischer: [laughs] So, the children I speak with, who may be my own children -- anyway, Snap is not as important to them. Instagram has taken over, and Facebook has shown staying power. Yet Snap has a $17.5 billion market cap, Chris, on revenue last year of $700 million, which indeed is up from $400 million the year before. So, revenue jumped nicely. But their operating loss is epic. $3.2 billion operating loss. That's $1.3 billion spent on R&D, and $1.9 spent on SG&A.
Fischer: Only $83 million spent on capex. $83 million, a tiny amount, on capex. So, I don't know what they're building here, because all their spending is just evaporating. The company is extremely unprofitable and doesn't have a path to get to profitability. So, he needs to turn that around.
Hill: Do you think someone buys Snap? Because Facebook would be a logical buyer, except for the fact that they have Instagram, which is so popular.
Fischer: Exactly. Facebook has copied Snap in so many ways, they don't need to buy them. And when a company is struggling with much, as Twitter has in the past, why step in and buy it?
Hill: You mentioned General Electric a moment ago. I think John Flannery, the new CEO, is going to be fun to watch this year. I don't own shares of that stock. But, he was CEO for about an hour and a half when he started making big, sweeping changes at GE.
Gross: He has a low bar to hurdle, but that's a big job.
Fischer: Yeah, he's only going to focus on three: industries, healthcare, industrials.
Chris Hill owns shares of Under Armour (A Shares) and Under Armour (C Shares). Jeff Fischer owns shares of Facebook. Ron Gross owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook, Ford, Twitter, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool has a disclosure policy.