Warning Signs for Facebook, Uncertainty for Boeing

It's Motley Fool Money, where a handful of Foolish analysts hit on the week's biggest market news. Shares of MongoDB (MDB 4.83%) are up some 30% on earnings, despite losing money. Uber wants to go public with a cute little $120 billion market cap. Ulta Beauty (ULTA -0.40%) continues to knock it out of the park. Stitch Fix (SFIX 0.47%) shares popped, but risks still loom large. Brain drain at Facebook (META 0.43%) should have shareholders on alert about the future. Boeing's (BA 0.25%) 737 tragedies speak to some pretty big issues with management. Tune in for these stories and many more, and some stocks on our radar this week. Plus Academy Award-winning director Alex Gibney's The Inventor: Out for Blood in Silicon Valley premieres on HBO this Monday. Gibney talks with us about Elizabeth Holmes and the complicated web of storytelling, fraud, and lies that encircled Theranos.

A full transcript follows the video.

This video was recorded on March 15, 2019.

Chris Hill: It's the Motley Fool Money radio show! I'm Chris Hill. Joining me in studio this week, senior analysts Jason Moser and Ron Gross, and from 1623 Capital, Jeff Fischer. Good to see you as always, gentlemen! We've got the latest headlines from Wall Street. Academy Award-winning director Alex Gibney is our guest. And, as always, we'll give you an inside look at the stocks on our radar. 

But we begin this week with Boeing. Two deadly crashes in the past six months, both of which involved Boeing's 737 Max 8, the latest model of its best-selling plane. In the wake of the latest crash, the 737 has been grounded basically by every country on the planet, Ron. Shares of Boeing falling 10% in the past week. Obviously there's a human cost of this story. Our hearts go out to the families involved. This seems like a story that really has a number of pages to play out here. 

Ron Gross: For sure. I think this is a big deal. I think it's a short-term big deal, though. It's not the end of Boeing. I've seen some estimates from, for example, Ken Herbert, who's an aerospace analyst, who thinks it'll be a $500 million fix to the software. Could take six to eight weeks. There could be additional hits down the road if airlines start to charge Boeing for downtime and for planes just sitting around. It also remains to be seen if the production schedule of Boeing will be impacted. As of now, they're not changing their production schedule. They're going to keep rolling planes off the manufacturing line. But if orders start to slow or shift to other planes, it obviously could impact production, and that would have a longer-term impact. But barring that this is a problem that can be fixed, $500 million, perhaps a bit more, and then we move on.

Jeff Fischer: That could happen, Ron -- of course, the orders going to Airbus. They are at risk, according to Bloomberg, about $600 billion in standing orders of the 737 Max. Reportedly -- it's still a rumor -- Lion Air is looking to remove $22 billion worth of orders and just go all to Airbus. I think there's a lot of long-term revenue risk at stake here for Boeing. A lot of management missteps, it appears, too. Six months ago or so, after the Lion Air disaster, Boeing promised to have a software update by the end of 2018, and it hasn't happened yet, for one example. 

Meanwhile, the stock is not cheap. It's gone from under $100 billion market value in 2016 to $216 billion today. It's more than doubled in a couple of years. Very big resurgence in the share price. It trades at about 20 times earnings. It's priced to keep performing, and this could be a real headwind against it. 

Hill: But, as you said, Jeff, there are a lot of industries that have a lot of different players in them. If you're looking for cloud computing, there are a lot of places you can go. If you're looking for airplanes, there are basically two names on the list, and it's Boeing and Airbus. Boeing shares down. Airbus shares have risen in the past week. I'm wondering if the long-term effect for the stock ends up being a bigger deal for Boeing than it is for the actual underlying business. 

Gross: I'm going to have to see how that plays out. There's too many unknowns here. Interestingly, though, commercial aviation is 60% of Boeing's business. They do have 40% coming from government contracts and other things. Interestingly, recently, the Air Force has come out and said, "You'd better get your act together because we're seeing some problems with that program." That doesn't bode well. When it rains, it pours. 

We'll have to see how the stock plays out. It's really about, as Jeff and you just said, what happens with the competition, what happens with the production schedule. Does it really lead to a loss of revenue or not?

Fischer: Surprisingly, the shares are above the price they traded at in January, still, even now. Clearly, Wall Street still believes in the story.

Hill: You can add leadership drain to the list of challenges facing Mark Zuckerberg these days. Chris Cox, the chief product officer at Facebook, is leaving the company. Also leaving is Chris Daniels, the vice president of WhatsApp. Jason, this is not a great look at a time when increasingly, the questions around Facebook have to do with messaging products and platforms. 

Jason Moser: Yeah. If I were an investor in Facebook -- and I'm not -- this actually would have me a little concerned. Really, it looks like these resignations are based on Mark Zuckerberg's decision to pivot toward this private messaging platform that he ultimately wants Facebook and WhatsApp and Instagram to become. Essentially, much like Amazon is an investment in Jeff Bezos, Facebook is an investment in Mark Zuckerberg. You're buying into him and his vision. And I think it's just shaping up to be a very uncertain time. We expressed some skepticism last week regarding this pivot. It has to be something done very thoughtfully, slowly. I'm still not convinced they can pull it off. Not for nothing, but I sent out a poll last week asking folks on Twitter, if you had the opportunity to move your payments behavior over to a Facebook platform, would you? More than 3,000 votes, and 95% of them said no. I think if I added "Hell, no" as an option, that probably would have been the one that won based on the comments I received. 

Now, that's all to say, it doesn't mean they can't make that pivot. But what it does mean is, they have a real brand problem right now. They've lost a lot of trust. They're going to have to get a lot of that trust back before they can make this move to this next level that Zuckerberg wants to make. These resignations definitely do not help the cause.

Fischer: Jason's right. To me, what this says big-picture-wise is that social media business models have to evolve more quickly than I think many of us probably assumed. Your customers', users' interests dissipate if you don't keep them engaged in new ways. The newsfeed that we've all used for years, or that Facebook users have used for years, is becoming less engaging. They have to change the whole model, basically. What that tells me is, Facebook is not as stable as an Alphabet, for example, let alone Amazon. They're going to have to work all the time to keep people engaged. 

Moser: I'm really glad you brought up the Google example. We talk about that a lot. I'm an investor in Google, and one of the main reasons is, Google doesn't have to make the user experience worse in order to make money. Essentially, search is a far more resilient function than social. I think that's where Facebook's problems really are going to lie for the coming years. They have to figure out a way to move beyond this social dynamic of the business. It's still an ad business at the end of the day, and that's just not going to be easy to do.

Hill: Oracle's (ORCL 2.02%) third-quarter revenue fell 1%. That may not sound like a lot, but it is the second straight quarter of declining revenue for the software giant. You tell me, Jeff, how nervous should investors be? 

Fischer: I like it, Chris, I like your lead-in, because I think it's the story that Oracle has fought against for many years, the revenue flat or declining. And yet the stock has done well, generally speaking. It's up 100% the last seven years, 275% the last 10 years, beating the market by 35 points. The headlines are that they're struggling to grow in the cloud. But beneath the surface, they grew their cloud revenue by double digits. That's all they shared. More than 10%. Robust double digits, they said, so maybe that means 15%. In all regions, their cloud is growing. It's now nearly 70% of revenue. Software as a whole grew revenue 3% in constant currency. I think, although Oracle is not growing strongly, it's growing, it's stable and showing resilience, and it's inexpensive compared to the market itself. Meanwhile, they bought back 16% of shares in the last year. EPS is growing nicely and should grow 15% to 19% this year. 

Hill: Double digits is a wide range. Unlike you, I don't think 15% growth is robust double digits. Eighty-five percent, that's double digits and that's robust.

Another strong report from Ulta Beauty. Fourth-quarter profits came in higher than expected. Ron, same-store sales nearly 10%?

Gross: This is one I never would have imagined they could continue to put up this growth for this long. Quite frankly, I called it quite wrong. It's very impressive. Nine percent comp store growth based on a 7.1% transaction growth, 2.3% growth in the average ticket. Their e-commerce comparable sales were up 25%. The company is really doing a great job. Net sales, if you adjust for the fact that there were 53 weeks last year, do a little adjusting there, net sales were up 16%. Margins were up. There was some accounting changes in there, but they were also up because of operating leverage. And, you've got a great increase in earnings per share of 31% if you exclude the benefits from the tax-reform-related items in fiscal 2017.

Hill: Mary Dillon has been CEO for about five and a half years, and Ulta Beauty shares have more than tripled under her leadership. 

Gross: It's fantastic. And they're doing a great job of actually buying back stock, which we don't see all the time. During fiscal 2018, they bought back $600 million of stock at $250 a share. The stock now stands at $340. 

Hill: Shares of MongoDB up more than 30% this week after the company lost money in the fourth quarter. Jason, as long as that top-line revenue continues to skyrocket, who cares if they're not profitable?

Moser: [laughs] We'll get to that in a second. I think the ongoing concern with this business has always been Amazon. Competing in a world with Amazon, the behemoth in cloud database management, there's just no way they could do it. But I tell you, Mongo likes data, and they seem to be doing it just fine. They've built a good offering in a post-SQL world where data is just far more rich than the legacy systems were built around. And listen, double-digit, robust growth. Seventy-one percent, Chris. How about that? That's robust!

Gross: That's robust!

Fischer: That's robust!

Moser: These guys have a very attractive subscription model that makes most of their money. It reminds me a little bit of Ellie Mae in that regard. The total number of downloads now over 60 million. They have 1.2 million developers in their MongoDB University, which is for training and certification. 

To your point, all of this said, I think there are a lot of risks involved with this stock at this level. We talk about prices that are not based on any fundamentals. This is a price that is not based on any fundamentals at all. It's not profitable, it's not cash flow positive, and it's going to be a while until they get there. 

With that said, when you have that robust top-line growth, the stock is just going to keep on doing what it's doing, because the market assumes at some point or another, they are going to be profitable. And, right, it will eventually be profitable. It's a matter of when. I do think there's a bright future here. I just think you have to understand the risks that come along with a stock priced at these levels today. 

Fischer: The estimate is for a non-GAAP profit in 2022 of $0.09, but with a GAAP loss of $2.50 per share.

Moser: [laughs] I talk about this all the time, it seems like we live in this non-GAAP world now where you can just adjust for anything and the market seems to accept it! I mean, I guess that's fine, but at some point or another, another shoe's going to fall, and that non-GAAP perspective is just not going to hold the same value that it does today. 

The stock itself is trading at 26 times sales. That's an unbelievably sky-high valuation.

Fischer: Yeah, it has to be a rule breaker that just keeps on winning big to justify that.

Moser: Yeah. It is a good business, there's no question about it. 

Gross: Sometimes feels like 1999 all over again. 

Moser: It does!

Gross: When you start hearing investors and analysts making too many adjustments, be careful!

Hill: Wouldn't it be nice if we could apply the non-GAAP principles to handsomeness? In GAAP handsomeness, I'm me. But non-GAAP, I'm Brad Pitt.

First quarter results for Adobe Systems (ADBE 0.87%) looked good, but shares of the software company falling this week after management's guidance was not what Wall Street was hoping for. Jeff, this really seems like short-term thinking.

Fischer: Non-GAAP guidance. Yeah, it was short-term thinking, especially because their full-year guidance is right on track. It's just the next quarter where they're off by about $0.11 on guidance. But right near the mark on revenue. 

Adobe, as we know, is a great cloud story over the past several years. Growing robustly. 25%, is that robust revenue growth year over year? $2.6 billion, it'll top $11 billion in revenue this year. The stock reflects that growth rate. It trades at about 33 times expected earnings this year. Overall, Chris, the numbers look great. Adobe is creating and managing your digital media world better.

Hill: Shares of Stitch Fix up more than 20% this week after second-quarter results came in better than expected. You tell me, Ron, how good was this quarter?

Gross: [laughs] I don't know. This is a company I'm not sure I get. First of all, the stock is really volatile. Went public at $15 back in October 2017. Rose to a high of $49 in September of 2018. Now we're back at $30. The stock has been shredded due to concerns over user growth. That's really what the story is about. 

Now we see the stock get a nice pop because active clients grew 18% in the quarter, ending the quarter with 2.96 million active customers. Better than expected, investors like to see that. Stock goes up. But it was the slowest pace of growth for that metric since the company went public. Still need to be careful. Revenue up 25%. 

The company is profitable. It's not one of those highfliers that isn't profitable. But $12 million was the profit for the quarter. So you see the earnings triple, but from a very, very low base. 

Moser: I've heard this company referred to before as a data company, at the end of the day. I mean, sounds a little odd. They're selling you clothes. Do you buy that? Is this a data company? Can they really do that much with that data that they have?

Gross: Supposedly, the thesis hinges on the algorithm that they're using behind the scenes to recommend clothing to its users. I'll buy that. But it's really all about giving the users what they want in the end and being a great value for those customers. Otherwise you'll just see that active user base continue to trail off. 

Hill: I feel like we're in a situation now, you've got disruptors like Stitch Fix, you've got Amazon Wardrobe, which is starting to spend money on TV advertising, so clearly, they're making a push. Earlier this week, we had Tailored Brands, which is the parent company of Joseph A. Bank and Men's Wearhouse, that stock got crushed, and rightfully so. It feels like we're in an environment now where there's going to be some consolidation in the apparel space. The overall model of "I don't have to go to a store? You can just send stuff out?" It feels like that can work. 

On the flip side, it also feels like, Joseph A. Bank, it's not worth nothing. There is some brand equity there. I'm not sure. But apparel seems like it's going to be an interesting space to watch.

Gross: Very competitive environment. That's actually why Stitch Fix just warned that marketing spend would go up, profitability would be impacted as a result. They're also spending money to move into the U.K. to maybe buy some expansion there if the U.S. perhaps slows in terms of growth. You're right on the money. They're very, very competitive.

Fischer: It's tough to know who will win long-term. You have competitive risk, you have fashion risk, pricing risk. It's a tough place to invest, period.

Moser: Old Navy! Old Navy will win!

Hill: [laughs] Reports this week that Uber is planning its IPO for April, and that the company will be seeking a valuation of $120 billion. For context, guys, that would make Uber larger than Costco, Amgen, Nvidia, and 3M, just to name a few. Who's in on opening day?

Moser: [laughs] I feel like the low-hanging fruit maybe has already been picked, and we're not really going to get a chance at it. I'm just going to stick with my exposure to Grab, which is covering the southeastern Asian market by virtue of investment on booking.com's part. I'll just stick with that. I'll leave Uber to smarter people.

Hill: Ron?

Gross: The companies you mentioned, for the most part, are largely profitable, cash-flowing companies. Correct me if I'm wrong, but I don't think Uber is even profitable at this point.

Moser: No.

Fischer: No, it's losing billions.

Gross: A few billion dollars of losses on $11 billion dollars in revenue. As far as a product, I'm a user as much as the next guy, and love it. But that's very rich. 

Fischer: I think if I had to choose one, Uber or Lyft -- and Lyft is seeking a valuation of $20 billion to $25 billion, so one-fifth of Uber -- I'd go with the smaller one. Now, I'm saying that without seeing the financials, etc. But they're both similar --

Moser: Oh, Jeff, I want to show you those Lyft financials. [laughs] 

Fischer: -- similar businesses, I think Lyft is actually better run and has a long runway. They both do, if they succeed. So I'd go with the smaller one.

Hill: Let's go to our man behind the glass, Steve Broido. Steve, you're an active investor. Any interest in either Lyft or Uber as IPOs? 

Steve Broido: I don't think so. I do like the product. I think, as an end user, it's great! But I just think the risk... something bad's going to happen. I mean, accidents, something. It just doesn't seem good. 

[...]

Hill: When she wasn't being compared to Thomas Edison, Elizabeth Holmes was being hailed as the next Steve Jobs. After dropping out of Stanford at the age of 19, Holmes started Theranos, a company touting a breakthrough blood testing technology. Maybe it was no surprise that the device that Theranos was building was called the Edison. At its peak, the company was valued at $9 billion, aided by a board of directors featuring such well-known political leaders as Henry Kissinger and George Schultz. In March of 2018, Elizabeth Holmes was charged with fraud by the SEC, and the company's value dropped to zero. The rise and fall of Theranos is the subject of Alex Gibney's new HBO documentary, The Inventor: Out For Blood in Silicon Valley. I caught up with Gibney earlier this week. 

__

Hill: Maybe I should start here. You're at a point in your career where I'm assuming you have a lot of options in terms of what you want to pursue. I'm curious to know what intrigued you about Theranos and Elizabeth Holmes to the point where you said, "That's going to be the next movie I direct."

Alex Gibney: It was the psychology of deception and fraud. I've been interested in that for a long time. Also, in a way, an extension of something I did in Scientology, which is the prison of belief. It was getting into the psychological component of how a fraud like this can happen. That's what really interested me, both from the fraudster side and the investor side, and the journalist side, I should add.

Hill: I definitely want to get to the investing side and the journalism side. Let's stick with the belief side. One of the people you interviewed in the documentary is Dan Ariely, behavioral economist. One of the things he talks about is how story is more important than data. Story has emotion, data does not. The power of a good story really seems like a thread through this entire documentary. It's really behind a lot of what went on here, isn't it? 

Gibney: I agree. I think in a way, the film is all about storytelling, and how much we like a good story, and how powerful good storytellers can be. I think in that sense, Elizabeth was in the tradition of good storytellers like Edison, who constructed a narrative around himself as the main character, and Steve Jobs, who did something very similar, but also was able to weave magnificent presentations and dramatic stories about products. Elizabeth was really good at that, too. She just didn't have a product. [laughs] That was her problem. 

Hill: She has a good story about herself and her reasons for starting Theranos. But I have to say, the device itself was a good story. About a third of the way into your movie, I found myself rooting for the device to work. And I know how this whole thing is going to end! But as a consumer of healthcare, and just as a human being...One of the employees says in the movie, "You want it to be true so badly."

Gibney: That's right. Tyler Shultz says that. And that, I think, is the key to how something like this works. You want it to be true so badly, so that you invest all of this hope in something that clearly isn't working. There's a kind of willful denial both on the part of Elizabeth and the part, to some extent, of the people who worked for her, until the divide between reality and fiction just became too great. 

But I think for Elizabeth, over time, on the one hand, she knew how badly the machine was operating. And yet, at the moments when she needed to pitch the dream, she pretended or deceived herself into believing that it was just weeks away from being perfected. A key example of that would be when they're all dancing to U Can't Touch This. After they achieved a kind of pitiful milestone, it was as if they discovered penicillin or something like that.

Hill: As I was watching this, I was reminded of The Smartest Guys in the Room, the documentary you did about Enron, particularly how the companies deal with scrutiny from business media. Ken Auletta from the New Yorker, Roger Parloff from Fortune magazine, these are smart, experienced, award-winning journalists, and when they start pressing her for details and data, she stonewalls them. And by the time the Wall Street Journal starts asking tough questions, they bring in the lawyers. And the intimidation tactics used by Theranos reminded me of what Enron was doing back when they were pulling off their fraud.

Gibney: Very similar. Enron would go after analysts, literally go after analysts and force firms to fire them. And then they clamped down hard on journalists, too, sometimes with a stick, and sometimes with a carrot. They did a magnificent job of bluffing people. Sort of like, "If you're not smart enough to understand what we're doing here, then I can't be bothered to tell you."

Interestingly about Enron, and I think ultimately what happened in that meeting with the Wall Street Journal, Enron was brought down by journalist Bethany McLean asking a very simple question, "How does Enron make its money?" And the Wall Street Journal, John Carreyrou in a way asked the same question. How does the machine work? And they kept hiding behind trade secrets, when in fact, there was another secret that was really at work here. 

Hill: Speaking of Carreyrou, that was one of the surprising parts of the documentary for me. Again, even though I know the story, even if Elizabeth Holmes didn't start this whole thing to defraud people right from the start, part of what makes it easy to believe in the promise of this blood testing technology is the idea that you'd be crazy to lie about something involving human lives like this. And what surprised me was, as things begin to unravel for Theranos, she digs in and becomes even more committed, to the point where Carreyrou says, "Looking back, I underestimated her willingness to lie in public."

Gibney: Yes. And that, I think, testifies to a kind of psychological dimension of the story, which is what interested me to begin with. If you recall, when Bernie Madoff got caught, he basically threw up his hands and said, "You got me!" But I think Elizabeth had such an investment in the dream that even though she knew how badly things were working, she relentlessly relied on either outright lying or the weirdest kind of stretching of the truth that she could boldly proclaim as a refutation of what John was accusing her of. I think that they thought long and hard -- and Enron did this, too -- they would come up with phrases, tortured phrases that, if you really parse them, you can say they were maybe close to being accurate. When she's dissembling about whether or not they were using proprietary technology, I think they thought that proprietary technology was hacking into the Siemens machines so that they could handle small samples. That's like taking apart a car and putting a new rubber band on the flywheel or something. I mean, it's just crazy.

Hill: Startup companies in Silicon Valley often take aim at industries that are ripe for disruption. I don't think that's going to change anytime soon, but I'm curious if you think that this entire episode with Theranos and Elizabeth Holmes has in any way given pause to how investors and VCs invest. Do you think it's going to make them be a little bit more cautious? Or is there just too much money involved at this point?

Gibney: I guess it depends at which point. As you say, there's an awful lot of money in Silicon Valley. What's a million here or a million there? If you're betting on a 50-to-one shot, that million dollars, bet on 10 of those and one of them comes in, your bet is more than covered. 

But later on, when the money gets serious, like Rupert Murdoch invested $125 million, you'd hope that investors would kick the tires. You'd hope that companies like Walgreens would demand to look inside the box. But they didn't. Which teaches you something kind of scary about human nature. I think they won't get it right until we understand how flawed we all are and how susceptible we are, as you say, to Dan Ariely's notion that stories prey on emotions.

Hill: You've done a lot of investigating in the area of fraud. When I look through your IMDb page, it shows up both in your work as a director and as a producer. I'm curious if you have now gotten to the point where you've seen certain traits or commonalities among individuals that people can use to pinpoint as early warning signs. Is there something going on in the world of business right now that you see, and you think, "It really wouldn't shock me if that company or that person was committing fraud on some level"?

Gibney: It's usually the kind of messianic, almost religious sermonizing that takes place from CEOs. Whenever I see that, I think, maybe. Or, maybe, they're covering up for something really big. The more you see somebody who promises outlandish things, the more you suspect that underneath that might be a fraud. Just the way you see with politicians. For example, in a darker realm, politicians who rail against homosexuality, or ministers who rail against homosexuality, in extreme ways, are likely to be the ones who are caught in a bathroom stall with somebody of their own sex. It's an extreme version of part of our psychological makeup.

Hill: Did anything surprise you when you were making this documentary? 

Gibney: What surprised me really was how effective she was, how many people fell for it, and how often, when it came to a tipping point, all Elizabeth had to do was to talk to them, and people would be convinced. Tyler Shultz himself talks about it. He knew how bad things were in the lab, what he called the tiled world. And then he would go up to the carpeted world and have a conversation with Elizabeth, and she would just convince him. And she convinced his grandfather to basically doubt his own grandson. You realize the power of storytelling, how effective it can be despite all the evidence.

Hill: How do you think they were able to get Walgreens as a customer? I mean, there are various points in this story where, if you didn't know anything about it, you might think to yourself, "OK, well, now she's going to be discovered." And I think one of those points is when an established business like Walgreens comes to the table. 

Gibney: Well, I think that Walgreens panicked, and panicked in this sense -- they desperately wanted to be part of some new tech. They felt they were an old-fashioned company and they needed some glitter, and they were going to be left behind if their competitors were embracing some kind of new tech and they weren't. So Theranos comes along, and that seems to fit the bill for something exciting, some dazzling new 21st-century solutions to old problems, that they can tout as being very hip and modern. So I think they were susceptible to that pitch.

But then you realize that the top executives of the company were conned by Elizabeth in the most fundamental way. They had an investigator who was just dying to rip apart the Theranos Edison machine and look inside it and see what was going on. But Elizabeth convinced the executives not to let him. How does that work? Right? So, you're right. But I think, also, Elizabeth was very clever about gathering around her, step by step, people who would testify to her establishment credentials. You realize you rely on others. By the way, this happens in journalism all the time. You rely on past clips, as if those clips are all true. And they may be or they may not be. Henry Kissinger probably relied on George Schultz, then Jim Mattis probably relied on George Schultz and Henry Kissinger. And then you have the snowball. And investors: "Oh, Larry Ellison put some money in?" 

Once Fortune -- and I think that's why Roger Parloff felt so bad -- once Fortune put Elizabeth on their cover, it was like, "Well, Fortune did it. It's good to go. This is fantastic! It's got to be real!" 

Hill: Not to give away the ending of your movie, but Elizabeth Holmes has been indicted on multiple counts of wire fraud. There's no trial date set at the moment. When this trial eventually happens, she's going to be facing up to 20 years in jail. She is a young woman. Do you think Elizabeth Holmes has a second act?

Gibney: I think that line from Fitzgerald, "There are no second acts in American lives," is maybe the stupidest thing he ever said. I think she probably does have a second act. But how that second act manifests itself, we'll see. She still has defenders, people who feel that she's a maligned entrepreneur. Tim Draper famously came out for her the other day and said the criticism of Elizabeth is akin to an assault on humanity, or something like that. You can look it up. So, yeah, I do, I think she does have a second act. But it remains to be seen whether that second act will be before or after prison.

__

Hill: HBO's new documentary The Inventor: Out For Blood in Silicon Valley premieres on Monday, March 18th. 

[...]

Hill: Time to get to the stocks on our radar this week. Our man behind the glass, Steve Broido, he's going to hit you with a question. You're up first, Ron, what are you looking at? 

Gross: I'm looking at Rollins, ROL. Pest and termite control company. Really steady performer. Delivered 51 straight quarters of increased revenue and earnings. Largely a recession-proof business. More than 80% of sales are recurring. Now, they're an acquirer, a serial acquirer of companies. They acquired 38 companies in 2018. But they've got a rock-solid balance sheet with no debt. Constantly increase their dividend. Seventeenth straight year that Rollins has raised its dividend by at least 12%. Yield is only 1%, but the stock is up over 200% over the last five years. 

Hill: Steve, question about Rollins?

Broido: Who's the money pest? Is it termites?

Gross: [laughs] Termites are a nice, recurring revenue stream because you do not want your house infested by termites. 

Hill: Jason Moser, what are you looking at?

Moser: Taking a look at LivePerson, ticker LPSN. This company seems like it's getting its second wind here. The business is focused on building out its AI empower platform to enable what they like to call conversational commerce, essentially brands partner with a live person to then reach out to their customers via places like their own websites, WhatsApp, SMS text, and whatnot. As a little extra here, on Monday's Industry Focus, we've got another fun Between Two Fools interview with founder and CEO of the company Rob Locascio. We talk about what the future holds for the company and a lot more. Tune in on Monday.

Hill: Steve, question about LivePerson?

Broido: Are there any universal findings this company is finding from their engagements with customers?

Moser: It's interesting, in the interview I had with Rob, it seems that we've really hit this peak with social media. He's calling a lot of those folks out. They kind of have to get their ducks in a row working on things like privacy and the influence that they have over the world.

Hill: Jeff Fischer?

Fischer: Zscaler. Do y'all know that company?

Gross: Never heard of it!

Fischer: All right, good.

Moser: Well, I've heard of it.

Gross: I've never heard of it.

Fischer: [laughs] Ticker is ZS. Eight-point-five-billion-dollar company selling security in the cloud. Right now, companies have a stack of security. Security for internal software, for accessing the internet, etc. This blankets your whole enterprise with security that you can get through the cloud from them. The stock came public one year ago, almost to the day. It's doubled since then.

Hill: Steve?

Broido: Can companies like this afford any failures? It seems like, if you're a security company, just one mess-up and you're done. 

Fischer: You know, I would think that, but companies bounce back from it if they handle it right.

Hill: Three very different businesses. Steve, you have one you want to add to your watch list?

Broido: I hate termites, but I love Rollins!

Gross: Whoo-hoo!

Hill: All right, Ron Gross, Jeff Fischer, Jason Moser, guys, thanks for being here! That's going to do it for this week's edition of Motley Fool Money. The show is mixed by Dan Boyd. Our engineer is Steve Broido. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening! We'll see you next week!

Check out the latest earnings call transcripts for Facebook, Boeing, and other companies we cover.