In this episode of Motley Fool Money, host Chris Hill chats with analysts Jason Moser and Andy Cross about the latest headlines from Wall Street. The trio assess some recent earnings reports from tech, consumer goods, and healthcare companies. The guys also share some stocks for your watch list and much more.
Plus, Motley Fool co-founder David Gardner and Fool.com contributor Danny Vena interview MercadoLibre's (NASDAQ:MELI) head of investor relations, Federico Sandler, to get a sense of the company's total addressable market and how it is dealing with COVID-19, among other things.
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 24, 2020.
Chris Hill: Earnings season is heating up. So, let's get right to it.
We're going to start with Intel (NASDAQ:INTC). Second-quarter profits and revenue both came in higher than expected, but that was completely overshadowed by Intel's guidance for the third quarter; not only was it lower than Wall Street was expecting, but Intel announced delays to their next generation of chips aimed at competing with AMD. Shares of Intel down are 15% on Friday. Jason, it's the biggest drop after earnings in nearly 20 years. Do you look at this and think, that's an overreaction, or is Intel really behind the eight ball on this one?
Jason Moser: So, Chris, you know I do a lot of digging into this space with the work I'm doing on 5G in our 5G service. And my initial reaction is that, no, this is not an overreaction actually. I mean, there's no denying the success that Intel has had to date, but management has noted this more than once that the business -- they're in the middle of this transition. Intel has always been a PC-based company, they really weren't ever a mobile company, so to speak, so they kind of missed that gold rush, so to speak. But it's going from a PC-based company to a data-centric company, and that's presenting its fair share of challenges.
Now, I don't necessarily think that's the wrong decision. When you look at the role data plays in our lives, that makes sense. And data-centric revenue now accounts for about half of the company's overall revenue. So, that's cloud and network infrastructure spending; I mean, that's driving essentially 70% of the revenue. But this delay in the 7-nanometer technology that's pushing their results out further, that was the news in the call that I think the market -- I mean, I understand why the market is receiving that the way it is. I mean, this is a company trying to make a pivot, obviously, some key technology in a very meaningful part of the business, in its commercial PC business, those results are getting pushed out. That's going to hold revenue growth back. Literally, it's going to hold revenue, it's going to hold earnings growth back. I mean, this is a big business, really good at bringing things down the bottom line. Obviously, an R&D machine, 2.2% dividend yield, lots of things to like about it. But, you know, they really have to kind of prove themselves here; the burden of proof is on them at this point.
Andy Cross: Yeah, Chris, the stock is actually, looking over the last few years, it's actually done OK. You add the little dividend in, beating the Nasdaq. Over the last 10 years, though, has not; has really trailed the wider Nasdaq tech market. So, $255 billion market cap, Jason said a little bit of yield, nice slow growth, and not that expensive, you know, probably going to be an OK holding for those who are looking for more stability in their portfolio. They're not really going after the rocket ship growth. Like I said, the stock has done pretty well, and had a nice rebound this year. You know, but just more of a steady business, but clearly there are some concerns about some of the growth angles.
Hill: Shares of Microsoft (NASDAQ:MSFT) flat this week, despite fourth-quarter revenue coming in north of $38 billion. Great way to wrap up the fiscal year, Andy, the cloud division continues to deliver. And Microsoft's gaming division had a really great quarter.
Cross: Yeah, those were really the highlights, Chris. You look at the big winners on gaming with Xbox and their cloud, the Azure business growing 47%; that's actually a little bit of a deceleration, though, over the last few quarters and over last year. I think there's some concerns in there, the stock sold off after the earnings this week. But like you said, revenue's up 13%, $38 billion; that was much higher than management guidance at $36.8 billion. Operating income is up 8%, as they continue to, kind of, manage with some of their costs. Part of that cost is, they're closing those 80 stores, we talked about before on this show; that's a $450 million hit with part of that coming in in the second quarter.
So, the segments, when you, kind of, break through the quarter of the segments, Chris, it's really interesting, with productivity and business processing up 6%, LinkedIn up 10%, Dynamics and cloud up 13%. Their Dynamics 365 business, which is like CRM and planning tools, was up 38%. And like you said, their intelligent cloud, the Azure business, continues to show more and more growth, really benefiting from the work-from-home, remote workplace with Teams and the like from Microsoft. And that's driving most of their growth along with the gaming, which was just gigantic. I think it was up 65%. Their Xbox sales were up 65% for the quarter.
Hill: Yeah. And Teams got a little added bonus publicity this week when Slack (NYSE:WORK) filed [laughs] the lawsuit in the EU. I guess Slack is now admitting that Microsoft Teams is actually a competitor.
Cross: Yeah, it sure is. [laughs] I think they've been pretty much on that train really since they went public, maybe a year ago, with Stewart Butterfield, kind of, being a little bit cheeky with some of the competitiveness with Teams. But concerns around antitrust there from their perspective, that Teams is so closely tied into the Office business. Reminds me a little bit of what we saw with the antitrust fights in the late '90s and early 2000s. At that time, it was the browser wars tied into the dominance of Windows OEM.
So, yeah, that's something we'll have to watch, but probably it's more impactful for Slack than Microsoft. The worry with Microsoft, the one, kind of, weakness we saw, was continuing on the advertising front. Their advertising business was down 18% and that's a trend that they expect to continue this year.
Moser: I wonder what the management team at Zoom thinks about this Slack legal filing? Zoom and Slack are obviously different businesses, but certainly dealing with the same competitive forces from a company like Microsoft. Yet it really does seem like Zoom has been able to gain a lot of traction through this pandemic, whereas Slack, they're having to do a little bit more convincing perhaps as to why they're a more compelling solution, I guess.
Cross: It's interesting. And the retort Microsoft had for Slack was that they lack a very robust video conferencing tool like Teams is. By the way, Teams now can show 49 users at one time; it used to not be able to do that. I think that's what Zoom can do. So, they clearly are going into the space for the remote work space. Also, with schools, and it's not just companies, organizations and schools is an important market for Microsoft.
Moser: And Slack doing that video, it's not for lack of trying, they certainly did try, for whatever reason, they just failed at it.
Hill: Last week, we led the show with Twitter (NYSE:TWTR) being hacked, this week was better though, [laughs] shares of Twitter up thanks to a second quarter report featuring a nice jump in daily active users. And, Jason, I feel like we say this every time Twitter has a surprisingly good quarter, they need to prove they can do this two, three, four quarters in a row.
Moser: Yeah. Chris, you know that gif of Larry David from Curb Your Enthusiasm, where he's just kind of sitting there, he's like, "I don't know, maybe so, maybe not," he's sort of deliberating in his own mind? To me, that's what Twitter is to me at this point I feel like. It's that investment where I see the good, I see the bad, it's just, I don't really know what to fully make of it at this point. The biggest question to me remains, and it's a shame that it still does for as long as they've been public, what is next? They need to do something to take this network to the next level, because right now they just are not doing it.
Monetizable daily active users grew 34% to $186 million; that's terrific, that's six consecutive quarters, a very robust double-digit growth there, but yet, revenue fell 19%. Now, I mean, we understand why revenue fell, clearly, it's a challenge to the ad market, but you know companies out there are still growing, I mean, Snap recorded revenue growth for the quarter.
So, to me, it just keeps feeling like they're just not doing anything to take the business to the next level. And, you know, I told you a while back, I cut ties with the investment, I mean, you know, because that was what I was seeing. And I don't know that we saw anything in this quarter that leads me to believe they're on the cusp of anything new. I mean, there were rumors of subscription and whatnot, but that word was mentioned three times on the call, there's no plan there, it's just a seedling and an idea. So, still, you know, a good quarter, still big questions to answer.
Hill: Shares of Intuitive Surgical (NASDAQ:ISRG) hitting an all-time high this week after second-quarter profits more than doubled the expectations of Wall Street analysts. You tell me, Andy: Is this a sign that the worst is over for Intuitive Surgical and the path is clear, or was this kind of a situation where, look, accurate forecasting is tougher than ever because of the pandemic?
Cross: Yeah, I think a little bit of both, so Intuitive Surgical makes the da Vinci robotic surgery systems, minimally invasive, for urology, thoracic, and gynecology, among other things. Sales are down 22%. Instrument and accessory sales down 20%; that's about little more than half their sales. And system sales down 24%. Da Vinci procedures were down 19%, Chris. So, there's a lot of talk in the release in the call and they talked about this for the year, really, about just as hospital centers and surgical procedures that are not required have fallen off, and a lot more focus, obviously, going into fighting the COVID-19 pandemic and treating that disease. We're just not doing nearly as many surgeries as they used to. So, that has really impacted overall for the year for Intuitive Surgical, but we are starting to see a little bit of that slowdown across the world. They're starting to see different geographies improve faster than what we have seen in the U.S. So, I think investors are saying, wow! This is the leader in this space. Minimally invasive robotic surgery is going to be the growth, it is going to be the way that surgeries are performed around the world when you look out the next five, 10 years. Da Vinci and Intuitive Surgical and their innovations continue to lead the space. So, as this situation really starts to normalize, hopefully, over the next year or two, the procedures will come back and da Vinci will be the leader in that space.
Hill: Shares of Boston Beer (NYSE:SAM) up 25%, after second-quarter profits and revenue came in much higher than expected. Andy Cross, how much Sam Adams are people drinking during this pandemic?
Cross: [laughs] Actually, Chris, not very much Sam Adams, it's maybe of the company, but it's really Truly Seltzer and Twisted Tea with a little bit of Dogfish that are driving the bulk of volumes. As you said, it's a really impressive quarter compared to, I think, what we were expecting; it was much higher than what I was expecting. Sales are up 42%, net income more than doubled. Depletion, which is the sales from distributors to retailers, was up 46% for the quarter. Chris, shipments just of their alcohol, Sam Adam shipments were up 40%. So, earnings per share really had a monster quarter. Hard Seltzer Twisted Tea, and a little bit of Dogfish, which they acquired a few years ago, coming on line.
You just look at what Boston Beer is doing, they've really trying to manage their cost structure, taking care of their employees at the brewery is a big focus, but clearly that brand, the Twisted Tea, Truly Seltzer brands. I think Jim Koch, who founded, owns more than 20% of the stock, had mentioned that Truly Seltzer is one of the only seltzer brands that was not introduced this year that is taking market share. Incidentally, Chris, they're also taking a little bit of market share it seems from the wine and spirits category of anywhere. So, for those of us who like our spirits, Truly Seltzer is taking a little bit of share. Very impressive quarter.
And the guidance that they had, which they withdrew, they kind of brought it back for the earnings-per-share growth, but also on the depletions growth for 35%. So, it looks really impressive from Boston Beer.
Hill: Digital sales for Chipotle (NYSE:CMG) rose more than 200% in the second quarter, but shares fell a little bit this week, Jason. That's an amazing number, but it still wasn't enough to make up for the fact that restaurants are closed.
Moser: Yeah, I mean, just a handful of their stores are still closed, which is good for them. I mean, I think all things considered, I thought this was a really impressive quarter. I think we're going to look back five years from now and we're going to see Chipotle that is a lot bigger, even more mobile and quite possibly, Chris, has even a better queso than they do today. Which I know, it feels like there's only room for them to go up in that regard, so maybe they make some investments on that front and really surprise us.
But I think at the end of the day, it's still a good stock to own. I mean, you look at some of these numbers, like, revenue was only down close to 5%, that's $1.4 billion. And the comps are down, close to 10%, that's understandable given everything that's going on in the market. But they are back up almost fully operational. They're investing a lot in those Chipotlanes. So, I think that as time goes on, they're going to ultimately make it easier for the consumer to get their product, which is what a lot of successful e-commerce companies have done, obviously.
So, I think that, you know, when you focus on making sure that you can get your product to your consumer in virtually any way possible, making it easy, and you have good food, then people tend to come back. I mean, they're really investing a lot in delivery. And honestly, when you look at it, they're still talking about doubling the store base and getting to that point with average unit volumes of $2.5 million per year. Now, if you do the math there, you're talking about $12.5 billion to $13 billion in sales annually for this company, which is more than double what it's doing now. Now, I'm not saying they'll fully get there, but I'm saying they've got a reasonable shot at getting close. And if you believe that that is the case, then you can certainly still see room for this stock to perform well in the coming years.
Hill: Shares of Tesla (NASDAQ:TSLA) down a bit this week, despite the fact that the company reported a profit for the fourth quarter in a row. Andy, what's your headline for Tesla this week?
Cross: Yeah, some of the news on the production side, we kind of knew, because they've given a little bit of an update. A couple of big, kind of, strategic pieces of news. They announced that they're going to build the next Gigafactory outside of Austin, near Austin, it'll be on 2,000 acres, Chris, and employ more than 5,000 people. It will be an ecological paradise, as Elon Musk calls it. People will be able to visit that area -- and I don't think necessarily inside the factory, although who knows -- around that area. It'll be for the Cybertruck and the Semi, Model 3 and Model Y for the Eastern United States. And California will continue to do Model S and X and a Model 3 and Y for the Western U.S.
So, obviously a lot of excitement from the Tesla side to be able to invest in that business. It actually was a pretty good quarter when you look at the numbers, they still get a lot of that money from the regulatory credits and that helps their profitability. So, some concerns on watching what that growth may look like, but the stock has done just phenomenally, I think it's up more than 500% over the past year and a lot of excitement around Tesla and the innovations and the investments they're making to continue that growth projection going forward.
Hill: And Musk maintaining, they're going to hit that delivery goal by the end of the year.
Cross: Yeah, it's still the goal. You know, they shut down their California factory for a good chunk of the quarter. So, it's even all that much more impressive. I think they may have been a little bit cagey on that 500,000 target, but still going there. And given the results recently, you can't put it past them.
Hill: Coca-Cola's (NYSE:KO) second-quarter report featured the biggest drop in revenue in 25 years, but the shares of Big Red are actually up this week on comments from CEO James Quincey. Jason, he says the worst is in the rearview mirror, what do you think?
Moser: Well, that's the hope; whether that actually is the case or not, remains to be seen. I don't think we're going to get quite back to the same level of economic shutdown the we had before. So, maybe he's right there. This has been a bad stock during the last five years, and I certainly understand why. It's got 400 master brands, less than 50% of those are global, regional and local brands that are actually responsible for 98% of the company's total revenue. They rely on some serious brand power there.
And what's made them so successful, just beyond the massive distribution network, their core product, it's starting to turn against them, even just a little bit. Unit case volume down. There's going to be some more marketing spend here in the back half of the year. So, that could certainly weigh down results if they do run into some headwinds. Yeah, just I'm not fully compelled by this business, I get it, I understand it, but it certainly seems like it's a different day and soda just doesn't hold the same status.
Hill: It is interesting to see, though, when you compare Coca-Cola and Boston Beer, you know, we don't have live sporting events. I mean, we're starting to get it, but we can't go to them. That appears not to have really hurt Boston Beer over the last quarter, it's still hurting Coca-Cola.
Moser: Well, yeah, and I mean, there's that false sense of security and happiness that you get from drinking more and more of Boston Beer's products versus something like a Coca-Cola. [laughs] So, that probably has something to do with it, but, yeah. I mean, again, Boston Beer, great example, their core product in Samuel Adams has started to turn against them. The success of that business really has been primarily due to what they've been able to do in seltzer and expanding the portfolio. So, always good to remember.
Hill: All right. Andy Cross, Jason Moser, guys, we'll see you later in the show. One of the best performing stocks over the last five years is MercadoLibre.
It's nearly a $50 billion company, and over the past five years the stock is up more than 600%. Earlier this month, Motley Fool co-founder David Gardner and Motley Fool contributor Danny Vena got the chance to talk with MercadoLibre's head of investor relations, Federico Sandler. They discussed MercadoLibre's total addressable market, how the company is dealing with COVID-19. And Federico started with an overview of the business.
Federico Sandler: MercadoLibre is the largest e-commerce and payments ecosystem in Latin America. The way for the audience to think about it, it would be equivalent to what eBay, PayPal, Amazon, and Square put together are in the region. So, we started as a, more a craigslist-eBay-ish type of flavor, but over time, not only we've evolved to more professional sellers on our marketplace, although most of what we sell is not owned by us. And then we have a payments ecosystem where not only we process payments online for merchants away from our marketplace, just like PayPal does online off of eBay, but also we have begun to venture in processing payments in the physical world, where we've seen a significant void, I would say, in terms of the services that banks offer. So, it's not only about payments, but we've identified opportunities around, essentially, generating financial inclusion and digitizing cash. So, two very big opportunities that are highly synergistical among themselves.
David Gardner: That's wonderful, and Federico, since I love superheroes and superhero origin stories, I love hearing where things came from, can you tell the story, a little bit of Marcos Galperin and how he started the company, and just a little bit of his background?
Sandler: Yeah. So, Marcos, who is a founder along with a few other co-founders, went to Stanford to do his MBA. Usually, he used to work at a large oil company in Argentina. The largest national oil company doing trading of oil futures, and when he went to Stanford to do his MBA, he realized how much eBay was growing at the time and he decided to do, as part of his business plan, try to replicate, if you will, an e-commerce business that looked like PayPal with a few other flavors. So, the logistics piece was already in the cards and the payments piece was already in the cards.
And interestingly enough, when he did a survey on his students asking what their thoughts were about building a commerce business in Latin America, they all thought he was crazy, that would never work, because of the payments, because of the logistics, because of the trust. But interestingly enough, he actually met, I believe it's Mr. John Muse, who is a very prominent finance person in the U.S. And essentially he came to one of the classes and he basically offered himself to take him to the airport, and he purposely took the long road so he could actually pitch him on MercadoLibre, and on the way to the airport is that he, sort of, got his essentially the seed financing for the business, which then in turn opened other doors for other investors in the early days before we went public.
But after Stanford, Marcos moved to Argentina. He met other people in Stanford, who are actually in the company today, like, Stelleo Tolda, who manages our Brazilian business and is our chief operating officer. And we started to expand into Latin America very quickly. And then, as we continued to make seed financing rounds, we ended up actually with an offer from eBay which we did not take, and then we ended up going public in 2007, and then the rest is history. It's really a remarkable story, starting literally from a garage, which we can actually see from our offices, where MercadoLibre was founded.
Gardner: And, you know, when I think, in part, about the story, your own background, Marcos' background, I think about Argentina. Argentina does not strike me, from my position here in the United States, as the best economy that you could be operating out of, it seems as if it's a country that has a lot of problems of public debt and foreign debt, it doesn't look like a shining example of capitalism to me. And yet, being based in Argentina, you have managed to expand throughout the continent and weathered some political strife here and there.
Federico, what is it like to run the company from Argentina, and what are your views on your country and the rest of the continent?
Sandler: So, first of all, I think, operating in the region, like ours, we believe is a competitive advantage and a differentiating factor. Latin America is not only diverse from a geographical standpoint, but there are nuances that are inherent to the region, each country has its own sets of regulations, integrations with banks, logistical challenges. Obviously, dealing with the crisis, we went through the tech bubble, the financial crisis, the Argentinian crisis, the Brazilian crisis and now COVID. And I think, that because we have seasoned management with experience in the region, A. And B, because we have a business that is, for the most part, pretty flexible in terms of our cost structure, we can adapt, we are agile, we have been able to very successfully weather many of the storms. I would even argue that because we had to actually build all the rails on payments and on logistics, we probably didn't grow as much as other players did, like, in Asia. But I think, now that we've actually built the rails and have the user experience where we need it to be, we believe, now is the time that we are going to start to grow very, very fast, and COVID just has accelerated this.
But I think one of the reasons why we've been little more successful than most, is because we have seasoned management, because we are responsible allocators of capital, and because, I think, operating in Latin America is unique and not for everyone.
Danny Vena: Federico, you know, one of the things that comes to mind, based on what you're saying is, can you talk a little bit about how MercadoLibre's management approached this COVID-19 pandemic? Obviously, this is an unprecedented time in world history, and very many businesses are finding this extremely challenging. So, can you talk a little bit about MercadoLibre's approach to dealing with this pandemic?
Sandler: Yeah. So, I think, first of all, we're very fortunate to be in an industry and business that really we haven't had to change our overall strategy. So, the two major goals for our CEO is to win e-commerce and to become the FinTech leader. And fortunately, because of the crisis, that hasn't really changed. There's been some changes in category focus perhaps, but really the under-arching investment thesis about retail penetration and underbanked, unbanked, is still there.
But specifically, to COVID, I think, A, we move very fast to guarantee business continuity of our managed network, given that we have a government relations team across the region and we have been deemed an essential business in most of the regions that we operate. So, in spite of the lockdowns, we were well-prepared in the sense that, not only we have a logistics network, but because we actually moved quickly with governments, we were actually allowed to operate.
And the genesis of this was also because we're fortunate to have a Board member that sits in Asia, who not only let us know that we should be moving in from a government standpoint, but we've also strengthened significantly all our security protocols within our distribution center. So, taking temperature at entry and exit, organizing separate groups for picking and packing. And when we see the level of infections in MercadoLibre, it's actually quite low, and that's because of the processes that we have in place.
Also, I want to highlight that, in this sense, I think COVID caught us at a perfect time, given the investments we have done in logistics over the past three years. So, unlike what happened to Amazon, we really did not have to put any restrictions on categories to be stored in our distribution centers.
And then, like I very briefly mentioned, I think the other thing that has happened in a shorter term is, some of the organizational focus has been on certain categories, like consumer packaged goods, given the pent-up demand of the category. And though it's still single digits of our gross merchandise volume, which would be the equivalent of the sales of our retailer, we're a commission-based business, so we make a percentage of the gross merchandise volume. But CPG is still single digits of gross merchandise volume, but growing triple digits. So, I think that's some of the learnings and how we've moved a little bit the business as a consequence of the pandemic.
Gardner: So, each of us, we're in different countries. Well, Danny and I are on different coasts, we're in different countries. And I especially feel like I'm far from Latin America right now, maybe it's because I'm holed down in my own room and I've been here for quite a while. So, this is a question, Federico, about just overall adoption of e-commerce in Latin America. It's something I don't feel equipped to judge, because I'm not there, I don't know what it's like. I don't know the differences between Buenos Aires and Mexico City, I don't know the different countries, and what the states of adoption are. So, could you give us a sense of the overall total addressable market that you see and where you are in the journey?
Sandler: Okay. So, let me break down where we -- first, the addressable market separate for payments and commerce, and then I'll tackle what we're doing in that respect. So, directionally for MercadoLibre, MercadoPago, we look at our region according to the World Bank, that has approximately 640 million people, of which roughly 362 million-and-growing are internet users and roughly 250 million are online buyers. During 2019, we had about 40 million unique buyers. So, 20 years out, we're not even close to what the addressable market could possibly be, not only in terms of people engaging with our platform, but when you look at the purchase frequency of MELI relative to some of our American counterparties, let alone the Asian ones, there's about 10 purchases per user per year on MELI, I think that's like 3X or 4X in the U.S. and that is, like, almost 7X or 8X in Asia.
So, on the commerce business, I would say, even 20 years out, it's still early days, and I think we are incredibly optimistic about the opportunity ahead of us.
On Pago, I think, it's the same population, but what we see is that roughly half of the population is either unbanked or underbanked. And there's like, approximately 80% of smartphone penetration, so there's more people with this than bank accounts. So, we can actually arm them with our payments services on the phone and begin to bank them.
But also the other important datapoint is that when you look at the amount of transactions that occur in Latin America with paper money, it's still about three-quarters, so we see a huge opportunity there to move some of those transactions that today occur in cash, more into our digital mobile wallet and our payments ecosystem.
Gardner: Really well broken down, thank you very much. It is interesting just to think about the different states and stages that e-commerce has. And it seems like it kind of goes from East to West. The East has adopted it massively and used it, most of all those of us in North America, feel as if we're, you know, keeping up. And then we look at South America and we see that there's still so much opportunity for growth and penetration.
Sandler: Definitely. And I think, look, what's happened -- and it's interesting to comment a little bit. I think we believe that we are going to overcome this period of health crisis by being more mature and stronger as a company, understanding better the benefits of buying online, but also from different angles, from the depth of assortment, A, but also from the health and safety and convenience of buying online.
But just to throw a few numbers, and that's probably a good indication of what lies ahead, but if we look at the period from, for example, February 24th to May 5th, the amount of new consumers going to our platform grew exponentially, there were 5 million in that period alone; that's a 45% growth year-over-year, and it's quite an expressive datapoint. If I told you that, in 2019, we had for the full-year about 40 million users in our platform.
We have a presentation that we actually facilitated on our IR website that has a whole bunch of insights, but the other important thing I think is important to highlight in this point is that our expectation is that these new entrants, both, the buyers and the sellers, will, for the most part, have satisfactory experiences when using our technology. And so even e-commerce being today 6%, roughly, probably higher as a result of the pandemic, when we look at e-commerce, where penetration will be even after physical retail opens, we don't think it's going to receive too much from the incremental penetration that we've seen in some countries as high as 16%. Physical retail will happen again, but I don't think e-commerce will regress too much.
Hill: Guys, one more news item before we get to radar stocks. This week Disney (NYSE:DIS) announced major changes to its movie release calendar. Planned sequels for the Avatar and Star Wars franchises have been pushed back a full year, and the release of the live-action version of Mulan, which had been slated for Aug. 21st, has been delayed indefinitely. Andy, I'll just start with you. It's really starting to get bad for the movie theaters.
Cross: Yeah, Netflix touched a little bit on this, and they said, it's just been slow to, kind of, come back on board with the production side, concern's there now with COVID cases, kind of, ramping back up again. I think some concerns long-term about what that might mean for continued production of movies and entertainment.
This was pretty massive. I mean, they changed a lot of different schedules. Mulan has had a lot of problems, I think, over the past couple of years with the production release schedule. So, you know, which is more evidence of the challenges with these big-budget releases that these companies are so concerned about.
Hill: Yeah, and Jason, obviously, Disney had planned to release Hamilton into theaters in the fall of 2021, and just decided, you know what, we're just going to put that up on Disney+. I actually don't think they can do that with every movie [laughs] they have. I mean, they really need to figure out a way to get some of these big action movies on the big screen.
Moser: They may be. I mean, I do agree with you, in certain cases that is a more enjoyable experience. I think you just have to, kind of, look at the conditions on the ground and try to ascertain how much of that we go back to. That we could certainly debate. One thing I don't think you can debate is, it's a really great time for Disney to have that Disney+ platform now. Like, that really saves them from a lot of hemming and hawing that they might be undertaking here otherwise. So, it could be worse. Yeah, I'm sure management probably remembers that at the conclusion of every meeting. [laughs]
Hill: Let's get to the stocks on our radar. Our man, Dan Boyd, is going to hit you with a question. Andy Cross, you're up first, what are you looking at this week?
Cross: Dan, I'm looking at Equinix (NASDAQ:EQIX), a real estate investment trust that operates more than 200 data centers around the world for, I think, more than 3,000 customers. Coming off its second-best first quarter of all time. Peak traffic was up 44%, so this is a company that provides these big data centers. Companies rely on them to move network traffic, internet traffic around. Of course, as we've been spending more and more time connected to our devices and all of the Internet of Things, internet traffic becomes more and more important. $65 billion market cap, stock has done very well, nice little 1.4% yield, generates $1.3 billion in funds from operation, cash flow for the company, 25% of revenues. Stock is up very nicely, so I'm looking for a little bit of a pullback before I go shopping on Equinix.
Hill: Dan, question about Equinix?
Dan Boyd: Not so much of a question, Chris, merely an observation. I think I have the hardest job on this radio show, because I have to attempt to make jokes out of Equinix as a radar stock.
Hill: You know, you could ask an actual investing question if you want it.
Boyd: Yeah, well, not right now. [laughs]
Hill: [laughs] Jason Moser, what are you looking at this week?
Moser: Oh, man. Okay, well, we talked a lot about alcohol on the show. So, not to be mistaken or confused with Jose Cuervo. My company is Qorvo (NASDAQ:QRVO), Dan, Qorvo. Ticker QRVO. And Qorvo though is a market leader in radio frequency solutions and semiconductor technologies. So, in simplest terms, it's a chip company, but as we roll out into 5G, Qorvo is a company that is focused, in particular, on this ultra-wideband product, which is basically responsible for sending lots of data over short areas with low power. So, a big opportunity for them there. It has a lot of great properties that make it a preferable technology. And so, Qorvo is feeling a lot of tailwinds from benefits of 5G and a neat business. Really, really digging into this one.
Hill: Dan, question about Qorvo?
Boyd: Yeah. So, you know, Jason mentioned Jose Cuervo at the top of this, and Qorvo, and I believe the ticker is QRVO. That's quite the name, Jason, do you think that they could have come up with something better?
Moser: You know, I guess they could have, but it really is memorable. And you know, it's like Chris and I were talking about Tailored Brands and their ticker TLRD, just makes you think like, what in the world, why weren't they going for something just like SUIT. I think Qorvo struck gold here, man, it is a memorable name.
Hill: What are you going to add to your watchlist, Dan?
Boyd: I'm going to go with Equinix, just because I think the name is better.
Hill: All right. Guys, thanks for being here. We're out of time. Thanks for listening. We'll see you next week.