In this MarketFoolery podcast, host Chris Hill chats with Motley Fool contributors Jason Moser from Million Dollar Portfolio and Taylor Muckerman from Stock Advisor Canada about today's biggest market stories.

Wells Fargo (NYSE:WFC) has yet another bad day with more U.S. Justice Department scrutiny, but the bank's long-term future is probably fine. (NASDAQ:AMZN) might be dipping its toe into yet another random business with Amazon-branded checking accounts. Wal-Mart (NYSE:WMT) is getting into the meal-kit game, and Blue Apron (NYSE:APRN) is down even more than usual on the news. Snap (NYSE:SNAP) continues to make it incredibly hard to root for the company, with unfair employee bonus cuts on top of the serious business model issues. Tune in to find out more.

A full transcript follows the video.

This video was recorded on March 5, 2018.

Chris Hill: It's Monday, March 5th. Welcome to MarketFoolery! I'm Chris Hill. Joining me in studio today, from Stock Advisor Canada, Taylor Muckerman, and from Million Dollar Portfolio, Jason Moser. Happy Monday, gents!

Taylor Muckerman: Same to you!

Hill: So, I'm the only one who stayed up to watch the end of the Academy Awards?

Muckerman: Yes, I think so.

Hill: I'm the only one mainlining more coffee than usual?

Jason Moser: I was up, just not watching it. It seemed like it was a long, drawn-out affair, from what you're saying.

Hill: It always is. And they suck me in every time.

Moser: I mean, I haven't seen any of the movies that are getting all of the buzz this year.

Muckerman: No horse in the race.

Moser: I was thinking about that. The only time I go to the movies anymore is when I go with the kids. Which is fine, I actually really enjoy taking them. But, all of my time watching anything video related, it's just the TV series that are on Netflix or Amazon or HBO or whatever. Just movies, it's tough for them to hold a candle to the quality of TV that's out there today.

Hill: Some of Jimmy Kimmel's jokes early in the telecast had to do with how much money, hand over fist, Black Panther is making.

Moser: Oh, yeah.

Muckerman: Hi-ho Disney.

Hill: He came out at one point and was like, "In the last 15 minutes, Black Panther has made another $17 million." Alright, we have a few things to get to. The meal kit industry is getting far more interesting than I ever thought it would. We're going to take it to that in a second. 

We have to start with Wells Fargo. The challenges just keep piling up. And when I say challenges, maybe I should say self-inflicted wounds. The U.S. Justice Department has ordered Wells Fargo to conduct an investigation of its Wealth and Investment Management business. This is based on reports that Wells Fargo is pushing financial products and services that are not the best fit for their customers, they're geared toward greater competition for the bank. Jason, this is just one more brick in the wall for me that the most interesting thing at the upcoming Berkshire Hathaway meeting is going to be the questions that Warren Buffett gets about Wells Fargo.

Moser: Yeah, this has been pretty fascinating. It's like, they're walking along, and they step in dog poop, and then they turn around and walk the other direction just to step on a rake. No matter what they do, they can't quite get it right. It's easy in the here and now to be very critical of what they're doing, and we should be. Ultimately, I think Wells Fargo is going to be just fine, because it's very easy to replace leadership and board members. It's far more difficult for a competitor to get in there and try to gain meaningful share on a bank of this size. Let's just think about it from the very perspective of regulatory barriers, for a competitor to actually get in there. 

Then, with the banks that are already established and competing, banking relationships tend to be pretty sticky. In this day and age, you have a lot of stuff that's automatically debited from your checking account, your checking account is tied to your credit card or your savings account, all of this stuff is married together. So, the switching costs are so brutal. Nobody really wants to actually go through all of that trouble, just on principle.

So, I think it's something where, I remember working in the banking industry, in the wealth management side, a lot of times it seemed like the incentives and bonuses were tied to seemingly arbitrary accounts, whether or not they were in the best interest of the customer. And that sounds like what could be going on here. I think at the end of the day, it's probably going to be OK, and Wells Fargo will recover. But I would like to see someone hold Buffett's feet to the fire, just to get his perspective.

Muckerman: Yeah. And I think their Foreign Exchange business is going to be under investigation, too. Yet another potential domino to fall there. But you don't see other banks pointing fingers, so maybe they're like, "We're going to stay out of this just in case we have something going on behind our closed doors." You're a bank that big, something is probably going awry, at least to some degree.

Hill: Oh, yeah, there's no question. If you're Bank of America or Citigroup or any of these other outfits and you're seeing this news, if you're not already 100% confident about how buttoned-up your business practices are, you're absolutely spreading the word --

Muckerman: You're doing some quality checks.

Hill: [laughs] Yes, channel checks. Somewhat related to this, I guess, is Amazon (NASDAQ:AMZN), once again looking around the world of business and saying, "What else can we get into?" Now there's this report in The Wall Street Journal that Amazon is talking to JPMorgan Chase, among others, about offering checking accounts. When I first saw just the headline of it, as a longtime Amazon shareholder, I was shaking my head, saying, "No, no, don't do this. Don't do this." I've walked back from that, having actually looked beyond the headline and seeing that Amazon, at least now, anyway, is not looking into turning itself into a bank or starting a bank. If I understand this correctly, Jason, they're looking more at an Amazon-branded checking account product.

Moser: Yeah, that's what it is. As I mentioned earlier, the barriers to entry in this line of work are just really, really high. You have to go through a lot to become a bank holding company, and then you have to really develop the credibility in the space to grow a meaningful and profitable customer base. Now, Amazon has a meaningful and profitable customer base already, and I think that's why this could make sense. 

Considering a checking account, on the surface, it may seem a little weird. But let's think about it beyond us here at this table. This isn't something that I think is necessarily meant for us as much as it's meant for the younger demographics that are coming up in the workforce and looking to start a banking relationship that they haven't established yet. The switching costs that I mentioned before with Wells Fargo that are in play for us, those switching costs don't exist if you don't have a banking account. And I think that might be where they're looking at the real opportunity, and saying, "This is for those Millennials or even younger, if we could offer something that's very customer-centric," which obviously, Amazon is, "if we can do something and partner up with a credible banking partner," it sounds like they're talking to JPMorgan. Certainly, Jeff Bezos and Jamie Dimon, there's a relationship there as well.

Hill: "Hey, we're getting into healthcare together, let's talk about checking accounts."

Moser: "We'll also have to pay for it along the way, too!" So, it makes sense from that perspective. They probably look at that switching cost factor and think, that's working against us right now. But perhaps, for that younger demographic, we could use that to our advantage and build up a base of banking customers that, over the course of the next 40 to 50 years, if you reel someone in and have them in your banking relationship, that can be a very profitable venture over long periods of time.

Muckerman: For sure. I saw a survey last week, it was only a thousand people that were surveyed, but they were all Prime members, and over half of them said that they would utilize some kind of Amazon cryptocurrency like Amazon Coin to buy products on Prime, and 45% said they would consider using them as a banking option. That was just released last week. Granted, it's only a thousand people, but --

Moser: They've already experimented with Amazon Coin to some extent. That was something that they offered, they may still offer it, I'm not sure, but you could buy apps and stuff with Amazon Coins. Another dynamic to that is that is, if you have the Amazon Prime Visa credit card, you get the cash rewards, and then you can buy stuff on Amazon just using those cash rewards. So, they have some experience in this market. Who knows whether they actually will pursue this, but if they do, I think it's at least reasonable to give it a shot.

Hill: As I mentioned before, the business of meal kits is getting more interesting. Wal-Mart announced today that it's launching meal kits at more than 2,000 locations by the end of this year. They have already been testing this in about 250 locations. Shares of Blue Apron down about 5% on this news.

Muckerman: 5% more.

Hill: Yes, thank you, 5% more. Kroger is apparently testing a concept like this. We've talked before about Blue Apron and just how troubled that particular business is. But I think we've always thought, there is something here, there is some type of business here, and we're just not really sure what. Or, maybe that's just me. 

But, the fact that Wal-Mart has been testing this in a couple of hundred locations, and they feel good enough with the results that they're going to roll this out, I don't know, I feel like they may have hit upon a model that is better than Blue Apron's, in part because there's less friction in terms of actually getting the products. Part of this with Wal-Mart is, you can assemble kits when you show up, you can order them online and then just pick them up when you go. I don't know, it seems easier from the consumer standpoint than Blue Apron's.

Muckerman: And from Wal-Mart's, because you're not delivering it to folks. People are automatically coming to your store to do their regular shopping, and they just, "Hey, I want a quick fix for dinner tonight." And they're selling it for up to half off from what you can get from Blue Apron. They're talking about meals ranging, for two people, from $8-15. Blue Apron's is $9-10 a person. So, you're automatically cheaper, and you're at the point of sale where people are already coming to you anyways. I just think it's almost a no-brainer, if we're talking about just implementing the rotisserie chickens that they're already making and then selling accompanying items where, you can then use that chicken to turn it into a full-on meal, rather than just the chicken itself.

Hill: And more than half of their annual sales, Jason, come under the food umbrella.

Moser: Yeah. Wal-Mart is one of the biggest, perhaps the biggest, grocer in the U.S. market.

Muckerman: Didn't take long.

Moser: A lot of people don't really think about that, but it's impressive when you look at what they've been able to do with their grocery offering. I think these offerings all make perfect sense for a company like Wal-Mart or Kroger or Whole Foods/ Amazon, because they're natural complements to something that they already do. They have experience, the distribution, the supply chain management, they have an established business with customers and data already. So, all of that investment has already been made. And they're very financially healthy, profitable businesses, whereas Blue Apron is an extremely new business focusing on one particular aspect, and that's meal delivery. But, they have to acquire customers, they have to build out loyalty, the infrastructure, they have to get customers coming back for more and more, which is just going to be more difficult for them than those other more established players. And I think we're seeing that play out on Blue Apron's stock price.

Hill: Do you see any value in Blue Apron? From this standpoint -- do you see that company getting to the point where someone comes in, and whether it's Amazon or Wal-Mart or whoever, someone could buy Blue Apron, at the right price, if it got low enough.

Moser: It's not going to get much lower, Chris.

Hill: [laughs] I'm just curious, what's the greatest value right now? We've seen this with other businesses, primarily tech businesses, where you can say, this business is troubled, but there's value there in the patents that they own, or something like that. What's the greatest value that you see right now with Blue Apron? I'm not sure if it's the customer list. I have no idea.

Muckerman: I would say probably the customer list. But if you're an Amazon or somebody that already has a larger customer list and you can roll this out, all you need is a few industrial-size kitchens scattered around the country or wherever you want to implement this, and then find some delivery drivers, which doesn't seem too hard with Uber Eats and Grubhub and everybody delivering food already from restaurants. So, I don't see too much of an advantage there.

Moser: Yeah. I think maybe six months ago, I would have said the brand. And today I'll probably go with that, the brand, but with this caveat that I think that position has weakened a lot over the past few months. You mentioned tech. A good comparable there, you remember a company called LeapFrog that made these educational tech toys for kids. But they got stuck in the middle there with Amazon and Apple offering all the same kind of stuff, so consumers didn't even have to take that step with LeapFrog, they just automatically went straight to Apple or Amazon. 

I think with Blue Apron, I see the same thing playing out here. I think as days go by, that brand becomes less and less valuable. LeapFrog, I think, was eventually acquired for something like $1 a share. Maybe someone decides the brand is worth rolling in there, but they're not going to be paying a premium for it. I think Blue Apron would be stuck in a position where they're more of a desperate seller.

Hill: Speaking of desperate. Things are, maybe they're not desperate at Snap, but let's just say that the bar is getting higher for Evan Spiegel and the people at Snap. Snap is dealing with some employee morale problems after a rough first year in the public markets. And I don't think that figure is to get any easier now that Snap has announced that they're foregoing employee bonuses because of how rough the first year has been. On top of that, Jason, you have executives who are really starting to flee this ship.

Moser: Mm-hmm. Yep. These guys are making it really, really easy to not like them. They are just ... man, just, they talk about banks stepping in it, these guys seem to be stepping in it every day, too. Spiegel pulled in close to $650 million last year, which is apparently the third-highest payout ever for a CEO. Now we understand that employees aren't going to be receiving cash bonuses based on missing internal benchmarks that, by the way, weren't even declared to the employees. The employees had no idea what the benchmarks were. They were internally set, but no one knew what they were other than leadership, so you don't know whether you're going to miss it or hit it until you're told, flying blind. This really isn't a good way to build morale.

Muckerman: Or to encourage your employees to do what you want them to. There's no incentive, because you don't know where to spend your time.

Moser: Yeah, and according to people close to this matter, Evan Spiegel doesn't like it when employees come and challenge his thinking. Now, whether that is the case or isn't the case, because again, this is just what I'm reading, I don't know these guys and I've never seen them or met them, don't work with them -- but whether that's true or not, the perception, at least, is there. And perception is reality, to a certain extent. 

So, from the outside looking in, this really looks like a miserable place to work. And one could also say that this move to becoming a camera company is going to present more challenges, at least in the near term, than opportunities. Because there's no way that Snap becomes a profitable company any time soon. You're looking at probably 2020 or later. I don't know how long the market is going to string this thing along, and I'm floored that the market still gives the stock the credit that it gives it today. Yeah, I'm a bit confounded here.

Muckerman: One big earnings release in February and the stock took off.

Moser: And they've almost given that all back, too.

Hill: That's the thing that, in some ways, is the most surprising thing about Snap, is the fact that it's still a $22 billion company, when you look at their market cap. Again, I go back to the executives leaving because, as you said, Jason, big story in Bloomberg last week, employees are quoted off the record, that sort of thing. Let's just say for the sake of argument that the truth lies somewhere in between. Some are being completely accurate and objective about Evan Spiegel and the way he runs a company, and others, maybe they have an axe to grind, that sort of thing. That's one thing. It's another thing altogether when people, as we like to say, vote with their feet. The fact that you have at least five vice presidents who have left that company, the general counsel left company --

Muckerman: Engineering, sales and product, the works.

Hill: I was reminded when you were talking, I didn't realize his compensation was that high. I knew it was high, I didn't realize it was that high. But, you reminded me of Jack Dorsey at Twitter. When he walked back in the door, or very soon after he walked back in the door, to take the CEO job there, didn't he come out and basically do the opposite of what's happening at Snap? He took his stock award and distributed that to the employees.

Moser: Yeah, it was somewhere in the neighborhood of, was it $200 million in shares that he owned that he gave back to the employee pool? Which, listen, you can sit there and say that guy has more money than God, so $200 million was just a drop in the bucket. But, man, $200 million is $200 million. But, from a leadership perspective, you're right. It sets the tone, it tells you a lot about him. And I've always said, I think Jack Dorsey is one of the better CEOs out there, and I think over the past couple of years, people have questioned that. But one of the things that led me to that conclusion was, you see the steps that he's taking, you see the fact that he doesn't bow to Wall Street's near-term expectations, he's very focused on surrounding himself with good people, good leaders, and I think he's done that for the most part with Twitter and with Square. He's a good person, I think, is what I'm ultimately getting at. And I think typically, good people, you want to be invested with those types of leaders, and Dorsey strikes me as one of those. Evan Spiegel, I don't know. The jury is still out, obviously. 

I think the quick, common sense test you have to take with Snapchat, from an investor's perspective is, you go to their website and you see their social presence. You see Facebook, Instagram, you see Twitter, sometimes YouTube. You never see Snapchat. Maybe one time out of a hundred, you do. And I think that's because of the core purpose that the app serves. If you think about it, you also don't see Messenger, you don't see WhatsApp. They're all messaging apps. So, the core purpose is what really presents a big challenge for Snap as far as becoming a meaningful business that can drive long-term success there. 

So, they have to become something else. They're going to try to become a camera company. I don't know that's going to work out really well for them. They're apparently trying this Spectacles 2.0 and perhaps 3.0 reboot. There are a lot of challenges ahead, and it seems like the market is really assuming they're going to succeed. And I think there are enough questions to think they might not.

Muckerman: Yeah, they're having a hard enough time doing what they IPO-ed for, and then they're going to have to go out and hire to make these glasses possible, because you're talking about an app product vs. a physical product, a consumer good, it's totally different. A lot of road blocks, I think, out there.

Hill: I think there's a really good chance that a year from now, whether they have increased their market cap, or their market cap is cut by a third, there's a really good chance we're going to look back and point to the moment when Kylie Jenner came out and said, "I'm deleting this thing. I hate the new version." And $1.5 billion came off their market cap. That's going to be seen as a significant milepost in the next 12 months.

Moser: That's another good example. Everybody came out saying they hate this update. The venom on Twitter was relentless. And instead of getting out there and saying, "Yeah, maybe we screwed up. We understand our users don't like this. We're going to go in there and try to fix this." He takes the position that, "Your complaints basically validate our changing the experience in the first place." To me, that's extremely tone deaf and not in touch with the people you're trying to serve.

Hill: It's the opposite of Patrick Doyle, CEO of Domino's Pizza, a decade ago coming out and saying, "You know what? Our pizza's not that great. It doesn't taste that great. We're going to work on that."

Moser: That's a great example!

Hill: Alright, Jason Moser, Taylor Muckerman. Thanks for being here, guys! As always, people on 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 stocks based solely on what you hear. That's going to do it for this edition of MarketFoolery. The show is mixed by Austin Morgan, pulling double duty today between this and Industry Focus. I'm Chris Hill. Thanks for listening! We'll see you tomorrow!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Chris Hill owns shares of Amazon and Walt Disney. Jason Moser owns shares of Apple, Berkshire Hathaway (B shares), Square, Twitter, Visa, and Walt Disney. Taylor Muckerman owns shares of Amazon, Square, and Twitter. The Motley Fool owns shares of and recommends Amazon, Apple, Berkshire Hathaway (B shares), Facebook, Netflix, Twitter, Visa, and Walt Disney. The Motley Fool owns shares of Square. The Motley Fool is short shares of Kroger and has the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, short March 2018 $200 calls on Facebook, and long March 2018 $170 puts on Facebook. The Motley Fool recommends Grubhub. The Motley Fool has a disclosure policy.