More Trouble for Boeing

In this episode of MarketFoolery, host Mac Greer talks with analyst Tim Beyers about some market news. Pressure is on the World Cup as some stark gender-based pay disparities get the media attention they deserve. Pressure is also on Boeing (BA 0.01%) after the company loses yet another big order. Rumors abound about DISH (DISH) and Alphabet (GOOG 0.37%) (GOOGL 0.35%) partnering up to build a fourth U.S. wireless carrier, but don't get too excited. Plus, Beyers shares his bull case for CrowdStrike (CRWD 0.14%) -- learn what this security provider does, why it's so exciting for the long term, how it could go wrong, and how it could go very right.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

This video was recorded on July 08, 2019.

Mac Greer: It's Monday, July 8th. Welcome to MarketFoolery. I'm Mac Greer, and we have a very special MarketFoolery for you today. If it sounds a bit different, it's because we're coming to you from Boulder, Colorado, from historic Chautauqua Park at the foot of the Flatirons in Boulder, Colorado. I am very honored to be joined by Motley Fool analyst Tim Beyers from our Colorado office, Foolorado. Tim, welcome!

Tim Beyers: Thanks, Mac! It's great to be back. We've done this before, but it's been a while.

Greer: It has been around 10 years or so when I last interviewed you here in Boulder. We've got lots to talk about. We're going to hit some Boeing news, Boeing losing another big order, Tim. Woof.

Beyers: Yeah, exactly. That's the best way to say it, right? The more this happens, the more it looks like it's not normal. Boeing's been through this before with the 787, but there's no telling when the 737 MAX is going to get off the ground. And right now, they're losing orders because of it.

Greer: Well, we're going to get to that. We're also going to talk about a stock that I know you are fired up to talk about, CrowdStrike. And we're going to do a little speculating, because there's some rumors afoot involving DISH and Google. We'll talk about that.

But let's begin with the big news of the weekend: The U.S. Women winning the World Cup, beating the Netherlands 2 to nothing on Sunday. Now, Tim, this story is so much bigger than sports. And it's a lot bigger than business. One of the big threads here is the pay disparity, the disparity in earnings between the U.S. Women's team and the U.S. Men's team.

Beyers: Yes. The U.S. Women's team filed an equal pay lawsuit in March. They really threw the gauntlet down before starting this tournament, and then they came through. As you saw, if you watched the game, at the end of it, there were chants of, "Equal pay, equal pay, equal pay." And I'll tell you, it is utter nonsense -- I mean, really -- that the Men's team is vying for a prize pool of $400 million, and the women are vying for a prize pool of $30 million. It really is crazy. When you put it in those terms, any other thought about proportional pay, and what they get paid relative to the prize pool, throw that out the window. You're talking about more than half of the population, you're talking about a generation of inspired girls, you're talking about one of the best teams on the planet, and they're playing for less than a tenth of the prize pool that's available to the men. That's nonsense.

Greer: That's amazing. So, just to underline that, the champions from the Men's World Cup get more than the total prize money in the Women's World Cup.

Beyers: Yes. That's crazy. And when you think about this from the business perspective, take that and say, how much is, say, Nike -- which had a great ad --

Greer: I've heard of them.

Beyers: -- hours after the women won the title, put out a great ad, I believe.

Greer: Incredible ad.

Beyers: Whether you love Nike or hate Nike -- and they are a polarizing stock because of their willingness to stand behind Colin Kaepernick. When I think about this, they're trying now to get to this growing population of women, of girls, who really haven't had apparel or shoes. When's the last time a girl soccer player had, like, a Megan Rapinoe soccer boot? Like, that's coming. I guarantee that's coming, whether Nike makes it or Adidas makes it. It is coming. So they're very forward-thinking about this. And if we're not adding that into the equal pay equation, then we're not thinking big enough.

Greer: To be clear there, Tim, this isn't just Nike trying to create goodwill. The U.S. Women's home jersey is the No. 1 selling soccer jersey in one season in history on Nike's website. So, Nike is making some money here.

Beyers: Yeah, and they will make a lot more. By catering to this population of very inspired girls who've been inspired by these women, I think they're getting at the forefront of a very big mega-trend, which is that women athletes are drawing big crowds. They're putting up superior performances. There isn't any difference between what we're seeing in terms of excellence, athleticism, on the women's side than there is on the men's side. That was very clear in the World Cup tournament. So, for the companies that are thinking about this in terms of businesses, how do you cater to girls who really want to be the next Megan Rapinoe or the next Alex Morgan? Nike is at the forefront of that, but they will not be the only one. You're going to see Under Armour, you're probably going to see Adidas. It's a big, big trend, and there's a lot of money behind it.

Greer: Tim, let's move on to big news from Deutsche Bank (DB 0.83%). Shares lower today on news that Deutsche Bank would cut 18,000 jobs by 2022. That works out to around 20% of their workforce. What is going on here with Deutsche Bank?

Beyers: Deutsche Bank is eliminating its equity trading. They're eliminating a lot of what I would consider retail banking and retail equities banking. Equity trading is not the fat, profitable business that it used to be because fees are coming down. They're coming down across the boards. They're coming down for institutions, they're coming down for individuals like you and I because of business models like Robinhood, zero-fee stock trades. So, in order to remake the bank, they are dumping some of these very low-lying businesses that are historically important to Deutsche Bank, but just don't make nearly enough money. That's going to cost them about 18,000 jobs.

It's something to watch in the U.S. banking sector because a lot of the U.S. bank stocks last year underperformed, and all the CEOs got their typical raises. In fact, The Wall Street Journal did an analysis this morning -- this is fresh news -- the average pay raise for a Wall Street bank CEO for the past year was 8.5%. The S&P 500 average was 5.6%. So, Mac, tell me how I get paid for underperformance.

Greer: How do I get that gig? Yeah, we were talking about this, we had breakfast before our taping. In what other areas of your life do you get rewarded for underperforming? As a father? As a husband? In your workplace? How does that work?

Beyers: I'm trying to crack this code. Only if you work at a Wall Street bank, apparently, does this work. That's how the math works on Wall Street. Maybe we need to be borrowing some things from Wall Street, I don't know. But it really is frustrating. It's a little annoying. But I think, if you're an investor and you're watching this, the signal from Deutsche Bank is, pay close attention. What starts in Europe doesn't stay in Europe. Whatever happens there may be coming to our shores soon, so keep a close eye on those U.S. banks.

Greer: Let's move on to Boeing. Tim, more bad news for Boeing. Flyadeal, a discount Saudi Arabian airlines, has canceled its order of up to 50 737 MAXes. The order will instead go to Airbus. Tim, Boeing not out of the woods yet.

Beyers: No. In fact, the longer this goes on, the more this starts to look like it's not business as usual. You may remember a few years ago that, as Boeing was coming out with the 787, what we call it the Dreamliner, that plane had a few issues because it was being designed in an entirely new way, they had to do lots of different tests. There were some unfortunate incidents there. They weren't exactly the same as what we've seen with the MAX, which has led to over 340 fatalities in two very serious crashes overseas. It wasn't quite at that scale. But my original thought had always been, Boeing has been here before, they've fixed issues before, they fixed them with the 787, they'll be fine. But the longer this goes on, the more orders that get canceled, the more it looks like this isn't business as usual. This is an outlier. And Airbus is going to continue to seize it because they do have a very comparable plane in the A321Neo.

Greer: I want to hit you up with a question here. The 737 MAX was grounded in March by the FAA and by regulators around the world. Before the grounding, Boeing shares trading north of $400. Today, trading around $350. Are you interested? Is there an opportunity there? Or is it still buyer beware?

Beyers: There's a little bit of buyer beware. I would be willing to let this fall a little further. Boeing's one of the greatest businesses in the world. I don't think you should quibble over dollars on this one too much. If you do buy in now, I don't have a problem with that because I can see -- especially if you're on a 10-year hold. This is a duopoly. And historically, they go back and forth. One year Airbus is the leader, the next, Boeing is the leader. More than half of Boeing's revenue comes from the aircraft division, so this is a big deal. Once they fix this, the tailwinds really start to stack up. So, for me, personally, I'd probably wait a little bit longer, maybe get a slightly better price. But if I didn't, I don't quibble about it. I'd just prepare to hold this for 10 years.

Greer: Okay, Tim, let's move on to a stock that I know you're excited about, a company you're fired up about -- CrowdStrike. Shares of the cybersecurity company up on Monday on positive coverage. One analyst at Bank of America Merrill Lynch calling CrowdStrike a "dominant force in endpoint security." Now, Tim, CrowdStrike is a Motley Fool recommendation, and the stock has been on quite the tear lately. First of all, what is CrowdStrike?

Beyers: CrowdStrike is what you call a cloud security platform. I blame the Starbucks generation -- of which I am a part -- for this. Basically, what it means is that when you take a device that's going to connect to a network, but you take it outside of our headquarters -- whether you're talking about Foolorado or Fool HQ -- and you go work at a Starbucks -- and, I mean, how many of us have done this? Every one of us has done this. When you do that, you complicate the way you can monitor a network. So, in order to account for that, there are companies, including CrowdStrike, that use the cloud in order to say, "OK, what we're going to do is put security in the cloud, and we're going to monitor everything that connects into the network, regardless of where they are." Just to put it really simply, an endpoint is a smartphone, or it's a desktop, or it's a MacBook. It's anything that connects to a network through the cloud. It's the endpoint for the network. So, in order to be able to monitor that, CrowdStrike has these intelligent agents, they use artificial intelligence, they're essentially looking for outlying patterns that tell them something is wrong, and we need to take action.

Greer: When I hear all that, one of my questions is, what about the competition? They are obviously not the only player in this space.

Beyers: Right. Zscaler is another one. We're talking tickers. Ticker for CrowdStrike is CRWD. Zscaler is ZS. Both of these are companies that operate security in the cloud. You're right, there are plenty of them. There are lots of companies that specialize in securing the cloud when you're connecting into a network from the cloud. There are others, too, that make more traditional equipment, like Palo Alto Networks.

But what's really interesting is, because of the way CrowdStrike uses artificial intelligence and machine learning and gathers a lot of data, the key word in its name is crowd. They take a lot of different data from a lot of different sources. They monitor what's happening on the internet. They take all of that, and they make more intelligent decisions. Then they strike when they see the pattern that they've observed. What makes them different is gathering all that data from lots of different sources around the web.

Greer: Okay, Tim, so if five years from now, we're looking back and CrowdStrike has absolutely crushed the market, what happened? And if five years from now we're looking back and it's been a real laggard, it's been an underperformer, what do you think happened?

Beyers: If it destroys from here, it'll mean that AI for security has caught on, and the idea of autonomously and automatically using machine learning and artificial intelligence to detect patterns and root out bad actors, that CrowdStrike has found a secret sauce to using that technology very, very well, and they've done it better than others. If they failed, it's because that technology gave a lot of false positives, or it wasn't quite right -- or, quite frankly, that somebody like Zscaler said, "We've got the better mousetrap here. We've got better data. We've got better scale," and they found a way to take CrowdStrike and put them in a box and leave them there.

Greer: Tim, let's close with a New York Post report that Google and DISH are in talks to build a fourth U.S. wireless carrier. Google has denied the report. What do you think? Does that get you excited?

Beyers: No, that's nonsense. That's absolute nonsense. Mostly because it's DISH, not because it's a bad idea. Google does need another network, and they shouldn't get in the business of buying a network. But remember, Google, probably around the time that we last talked, here in Chautauqua, Mac, do you remember that they were talking about buying up spectrum? And they were bidding on spectrum? Do you remember this?

Greer: Yeah.

Beyers: So, I think the report is accurate. I think that Google denying it, all that means is that they maybe had some preliminary conversations, but I would not be surprised at all if Google partners up with either like a T-Mobile or Sprint, or both, or maybe even all three, to form a significant network, where if you're a Google member, if you have, say, like an Android smartphone that allows you to get very fast access wherever you are, that does appeal to me. If you are Google, the one thing you want, as omnipresently as possible, is really fast access through the Chrome browser. That's what feeds the Google machine. There is definitely a need for there to be a Google-centric network. But with DISH? No.

Greer: OK. When you look at Google and you look at Alphabet, the parent company writ large, I know at one time you were pretty bullish, or at least bullish on YouTube.

Beyers: Yes.

Greer: Are you still feeling that way? How do we feel about Alphabet writ large?

Beyers: Not as good as I feel about Amazon. Amongst the cloud titans, the one that stands out for me if you're going to talk about a communications company is Twilio. I think Twilio is the emerging cloud titan that not enough people are following. That ticker is TWLO. What Twilio does is, they orchestrate communications. If you're hailing an Uber, or I got here on a Lyft, hailing a Lyft, Twilio sends that data, it sends my request, to Lyft, to a driver. It allows you to make phone calls inside of Salesforce. I like Alphabet. The reason I don't like Alphabet, or I'm not as bullish on it as I used to be, is I feel like the advertising model is changing dramatically. Search will always be relevant, but the most important advertising of the next 10 years, in my opinion, is connected TVs that are highly personalized, highly tailored. And in that business, Roku is the sleeping giant, and they are probably not going to be under the radar too much longer.

Greer: And a Google and DISH partnership doesn't do it for you?

Beyers: No. That does absolutely nothing for me. I can't see DISH being a technical leader in a business that requires technical leadership.

Greer: Tim, we're going to wrap up with my favorite question, a signature question of mine. I don't know if I've ever put you to this. It's the desert island question. We're going to review all the stocks we've discussed. If you're on a desert island for the next five years, and you can only buy one of these stocks -- you've got nothing else to do, you're on a desert island. Are you going with Nike, Deutsche Bank, Boeing, CrowdStrike, Alphabet, or DISH?

Beyers: CrowdStrike?

Greer: Wow, you didn't even hesitate. Even with the run up. The stock's been on fire.

Beyers: Here's the reason why, two reasons. First, the number of devices or endpoints -- remember, we talked about a laptop, a smartphone, anything that connects to the internet when you're at Starbucks, let's just say -- all of those things are endpoints. And those endpoints are multiplying geometrically. There's that. Also, every two years, the volume of data that is out in the wild is doubling. You take those two things together, that requires delivering security at scale. And the only way to do that is through the cloud.

Greer: Okay. If you have any thoughts on endpoint security, or the World Cup, or Deutsche Bank, or Boeing, or DISH, or Alphabet, we'd love to hear from you: [email protected].

As always, people on the show may have interest 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. Tim Beyers from Chautauqua Park, historic Chautauqua Park in Boulder, Colorado, thanks so much for joining me.

Beyers: Thanks, Mac!

Greer: That's it for this edition of MarketFoolery. The show is mixed by Austin Morgan. I'm Mac Greer. Thanks for listening, and we will see you tomorrow!