In this episode of Motley Fool Money, Chris Hill chats with Motley Fool analysts Jason Moser and Ron Gross about the latest headlines from Wall Street. They start the show with the new lineup of smart devices announced recently. An edge platform stock plummets on reduced revenue guidance. They've got some news on the airline industry, the Prime Day event, and the loss of an iconic brand. They also share some stocks for your watch list and much more.
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This video was recorded on October 16, 2020.
Chris Hill: We've got the latest headlines from Wall Street, we will dig into how technology is shaping our lives, and as always, we've got a couple of stocks on our radar, but we begin with the biggest public company in America.
This week, Apple (AAPL 1.98%) unveiled four new versions of the iPhone 12, including the Mini, the Pro, and the Pro Max. CEO Tim Cook called it the beginning of a new era, and 5G was mentioned [laughs] constantly throughout this presentation, Ron. What stood out to you?
Ron Gross: [laughs] Well, I'm going to leave 5G to Jason, because I think it's a little bit more hype than reality right now. We need a nationwide rollout before that becomes exciting. I thought the Mini was interesting. I think it's going to be well-received, at 5.4 inches, a starting price point of $699. I find it fascinating and I really mean this. How every few years, consumers decide to upsize or downsize depending what happens to be the current trend. And so, I kind of think it is smart for Apple to go in that direction, because I think there's going to be a pretty strong demand for this.
These events are essential to Apple. Apple needs to continue to innovate and continue to put up those incredible revenue numbers, and therefore, cashflow. So, it's not necessarily these events, but it's the need to be innovative. And these events, let's face it, have become somewhat of a tradition, all the way going back to the excitement that Steve Jobs used to create around these. The stock never does much around these announcements, in fact, I think the stock tends to sell off more than go up on typical days like this, but it's the innovation that's important.
We saw some other things, a HomePod Mini, which while I think it looks interesting, I think it's their way to kind of catch up in the smart speaker space, which I think they've kind of been left behind to a certain extent. A couple of other interesting things of note, EarPods and power adapters are no longer going to be included with the phones that you purchase, which is a bummer for consumers, it's probably a decent margin boost for Apple itself. But that's offset by, I think, some of the components in these new phones that are kind of pricey, so we might not directly see an impact to margins there.
A few things that people were hoping to see that we didn't, so maybe we have some announcements coming later in the year, AirPods Studio, which is the over-the-head headphones speakers, a cheaper version of Apple TV has been talked about, and finally, there's a silicon-powered Mac that is on the horizon, but we haven't seen that quite yet.
Hill: Jason, we saw Verizon CEO, Hans Vestberg, joining Tim Cook on stage. To Ron's point, how much should we make out of all the talk around 5G?
Jason Moser: So, 5G to me is compelling, yet I think the consumer implications are going to be still a ways out. It's not going to be like hitting a switch, I think a lot of people -- you know, the financial media is having a field day with it, I think advertisers are having a field day with it, and therefore consumers feel like, oh, 5G is here, boom! Everything has changed. It's not going to be that way. This is going to be a slow rollout, we need to build out the infrastructure, but it's one step at a time. We need to get the capable devices out there, so it's nice to see Apple rolling out those 5G capable devices. Again, you know, it takes two to tango, as they say, Chris, you need the devices and you also need the infrastructure; the infrastructure is still being built.
Gross: Jason, speaking of two to tango, is it fair to say that this could be interesting for Chinese consumers, people based in China, since the 5G network is more sophisticated there or am I off base here?
Moser: No, I don't think you're off base at all. Certainly, the Chinese market is one that is a little bit ahead of us in regard to the 5G market and its capabilities. I think with Apple, it's just a matter of how they're able to continue getting those devices out there at the price points that they want to maintain, to kind of keep that, you know, that sort of luxury brand that they command, you know?
Hill: Shares of Fastly (FSLY 0.85%) are down 30% this week. The edge cloud platform cut revenue guidance for the current quarter because of a reduction in business from its largest customer. And Jason, when you're an unprofitable company, people focus on revenue, and when you come out [laughs] and tell them that revenue is going to be lower, we see stuff like this.
Moser: Yeah, I mean, this seems totally right. In fact, I'd argue it should have sold off more. Mind you, that's not a condemnation of the business, it's just one of those hyper growth stocks that's being getting a lot of attention. As you noted, it's not profitable, it's not cash flow positive, it's not the only game in town and it trades for 40X sales after the sell-off. So, I mean, this is just not a buy at any price business.
With that said, Fastly, for those who don't know what it does, it's a Content Delivery Network, essentially a CDN, it lives on the edge, literally, it's playing in that edge computing market, it's about getting stuff to us more quickly and more securely. They did offer preliminary results this week, and that was the disappointment. They expect third quarter revenue to total somewhere between $70 million and $71 million versus the guidance that they set of $73.5 million to $75.5 million. And so, anytime you see a hyper growth company pull back on guidance like that, yeah, that's really, really concerning. I don't know that it's a long-term concern necessarily, but you do need to keep in mind, as you mentioned, its top customer ByteDance, which is the Chinese firm that owns TikTok, you know, that's responsible for about 12% to 13% of the company's total revenue. They didn't spend as much as expected. It remains to be seen if that's a blip or a trend, but regardless, this is one of those companies, you have to take the good with the bad when you're investing in these types of businesses.
Hill: United Airlines' (UAL 2.50%) third quarter loss was bigger than expected, and the CEO said he does not expect flying levels to get back to normal until 2024. Ron, go in any direction you want, you can certainly dig into the numbers, I'm still focused [laughs] on the fact that the CEO of a major airline says we are four years out.
Gross: Yeah, I think the comments here are more important than the actual numbers. And these results are, kind of, a metaphor for really the entire industry. I don't think air travel demand gets back to anywhere near normal until a vaccine comes about sometime, let's hope next year or in the first half of next year, if we keep our fingers crossed. But the comments are interesting, because they're indicating that the worse actually may be over, and bookings are returning slowly, but it's that business demand that they're saying it's going to take a while and maybe as far as 2024, what you said is, that's a ways out, but they are doing whatever they can do now.
So, for United example, they reduced their cash burn to $25 million/day. [laughs] Now, let me repeat that, $25 million/day cash burn. But that is down from $40 million/day in the previous quarter. Scott Kirby, CEO of United, thinks that they will be cash flow positive sometime next year; I'm happy to see that. His quote is, we've got 12 to 15 months of pain, sacrifice, and difficulty ahead, but increasingly, the light at the end of the tunnel is visible. Clearly, additional government stimulus would be nice; so far it has not happened, but all of these companies have managed to shore up their balance sheets pretty nicely by taking advantage of the first stimulus program doing creative things like mortgaging their frequent flyer programs, mortgaging their planes, raising capital. So, I think we might be in a significantly better situation from a liquidity standpoint versus where we thought we maybe were in April and May.
So, this is going to take a while. Hopefully, these folks are going to survive. Lots of layoffs. 13,000 furloughs at United; we feel the pain for those folks for sure, but hopefully, sometime next year this starts to get better.
Hill: Amazon's (AMZN 3.10%) Prime Day event appears to have gone off without a hitch, and the company announced, during the two-day Prime Day period $3.5 billion in sales for third-party sellers. And Jason, I was struck by that, because in the past we've seen Amazon announce, sort of, total sales, it really feels like they're making a concerted effort, in part with their marketing and their paid advertising, to really push the idea that it's not just this tech behemoth, it's also a platform for small businesses and third-party sellers.
Moser: Oh, yeah, absolutely, and I do like that focus. I like them getting that message out there, because in this world, where big tech is really under the microscope, that's their opportunity to really prove their relevance in the overall economy. You know, personally, I've always been a little bit confused by Prime Day. I've never felt all that compelled by the offerings. I mean, much like death, taxes, and people, though, I mean, people just want more stuff. [laughs] And so, Amazon is there to scratch that itch. And as a shareholder, I applaud the effort and I want them to keep on doing it.
To your point about third-party sellers, you noted the $3.5 billion in sales. That was up 60% from a year ago. And if you go back a couple of years and you look at Jeff Bezos's letter to shareholders, he noted the chronology there, the timeline of how third-party sellers have continued to take up more share of that platform. And so today, third-party sales make up about 60% of the physical gross merchandise sales on an annual basis. So, you can take those numbers and then you can make some guesses as to how Prime Day may have done overall, but anyway you cut it, I would say it was another success.
And again, I do love to see them focusing on that small- to medium-size business message, because that really, really is important, particularly now.
Hill: Third quarter profits for Intuitive Surgical (ISRG 0.51%) came in higher than expected, but procedures involving the company's da Vinci surgical robot system still are not back to pre-COVID levels, Jason.
Moser: No, they aren't. All things considered, I think this business is weathering the current situation quite well. And while it's primarily a U.S.-centric business from a revenue perspective, still we're seeing the benefits of its global reach. Procedures were up 7% from a year ago; particular strength this quarter in China. They are seeing a lot of diagnostic procedures, things like colonoscopies, for example, those are still being delayed. And that is the point of weakness there.
And speaking of the procedure growth, if you go back to just March of this year, we were talking about on the show, global procedure growth was 19%, so you can see -- that was a considerable drop-off from earlier in the year. This is all leading to weaker demand, and it's certainly playing out in the third quarter, likely even further out. They are seeing weaker demand in actual capital requests as well. I mean, they installed 195 new systems for the quarter; that's compared to 275 installs from a year ago, 178 installs just a quarter ago.
You know, it's not all doom-and-gloom, I mean, this is a stock that's done very well for the year, all things considered, just up around 25%, it's a leader in the space, they continue to innovate. The headwinds are certainly understandable. And if we view those headwinds as temporary, which I do, then I think this is a business that will be poised for success, to resume the growth that it's witnessed to this point once we get past this pandemic.
Hill: Shares of Johnson & Johnson (JNJ 0.98%) down a bit this week, despite the fact the third quarter profits and revenue came in higher than expected. Ron, is this about Johnson & Johnson's valuation? I mean, this was a really good quarter they put up.
Gross: Yeah, I think the quarter was solid, we'll get to some of the numbers; they didn't, like, knock the cover off the ball, but certainly solid. But I think eyes are mostly on the potential for a vaccine, as they are with many of these similar companies. Hitting some of the numbers, revenues are up 1.7%. So, I mean, you know, nothing to write home about, but you did see strength in consumer products and pharmaceuticals. Now, interestingly, jiving with what Jason just said about Intuitive Surgical, there was weakness in the medical device unit, as people put off elective surgeries. And certainly, we think that will come back and this unit will once again put up some positive numbers. Adjusted earnings per share up 3.8%, still solid fine, not gangbusters, though.
Bigger news out of the week for Johnson & Johnson is that they paused the clinical trial of their experimental coronavirus vaccine because of an unexplained illness in one of the volunteers. As I think we've seen over the last month or two, this type of thing is a normal part of the Phase III process or a clinical process in general, but they need to be taken seriously, they need to be investigated, because we obviously have to feel secure about the vaccines that are eventually coming to the public. This week, Eli Lilly, for example, paused the trial for a potential therapeutic due to safety concerns. So, we've got to let the science dictate where these companies go, but for now Johnson & Johnson is on firm footing and we'll keep an eye on the vaccine news.
Hill: And again, and still paying that dividend, and one of the few companies, during the pandemic, that actually bumped it up.
Gross: You got it. Yep, for sure.
Hill: Earlier this week, Disney (DIS 2.16%) CEO Bob Chapek, announced a reorganization with the goal of prioritizing Disney's streaming video business. Jason, there's going to be three content groups, one for sports, one for general entertainment, one for movies. And Chapek has made it very clear, he is focused on putting the customer first.
Moser: We have to love leadership when that's their North Star, focusing really on what the consumer wants, that tells you everything you really need to know, in my mind. But this really is the opportunity for Disney to become one of the ultimate direct-to-consumer businesses. I mean, they already are super direct-to-consumer in so many ways, right, with the parks and whatnot. So, I like the move, I like the focus. Streaming, we know is not some kind of fad, I mean, this is the new model for distribution. So, making those investments accordingly makes sense.
We talk a lot about the blueprints that other businesses have left out there that others can go by. So, the company that comes to mind immediately is Netflix. When you look at Disney versus Netflix; and Disney has 3X the revenue of Netflix, normally it's far more profitable, it's got multiple revenue streams, complementary businesses. So, why does the market value Netflix more highly than Disney? That's, I think, a very fair question.
And you just look at what can Disney emulate there? I think that by nature it's going to be a little bit more of a complicated offering in the sense that it has Hulu, and ESPN, and Disney+, but they also have more IP, they have the potential to deliver far better, more compelling content on a more sustainable basis. So, I think looking at a lot of the things that Netflix has done to date will be wise. I mean, you talk about the innovators and then the imitators, and I think Disney could imitate in certain ways here. To me, I think there's a tremendous opportunity, and we already know how successful the remainder of the business can be in normal times, and we'll get back to somewhat normal times eventually.
Hill: You know, Jason, last week we started the show by talking about the entertainment industry. And one of the things we talked about was the dire straits that movie theaters are in. If you're AMC Entertainment, if you're [laughs] Cinemark and you're hearing these comments from Bob Chapek, you got to be concerned, right?
Moser: Oh, yeah, I mean, these businesses are already out there talking about the threat of running out of capital by year's end if things don't change. We're already seeing consumer behavior changing in the way that we consume content, there are more substitutes out there than ever before for our entertainment dollars. And I think the longer that this drags on, the more difficult it's going to be for those theaters to really convince consumers that they need to come back, because we're going to see, you know, like they say, there's more than one way to skin a cat, so to speak.
Gross: I do think I applaud Disney's move here; I think it's out of necessity the right thing to do, but it's not a slam dunk here. There's a lot of revenue that they're going to need to replace as they, kind of, restructure and focus on streaming. And so, not only do you need to increase your member base of Disney+, but you need to play with pricing and see how much pricing power you have now and over the years, because there's a lot of revenue on that topline that's probably going to go away and needs to be replaced.
Hill: Last month, Coca-Cola announced plans to cut the number of brands that it has in half, and this week we learned that one of the brands being cut is Tab, the iconic diet Cola first launched in 1963, rose to prominence and then started to fade in the early 1980s with the arrival of Diet Coke. It's the end of an era, guys; I mean, who doesn't remember Tab?
Gross: Man, you come for the pink can, but you stay for the unpleasant aftertaste. I mean, that's a business model right there. Smart move by Coke, they've got to stream down their offerings for sure.
Hill: I'm amazed at how long they kept this going, because you go back 20 years and the market share for Tab had plummeted to almost zero, but apparently, Jason, the people who love Tab are pretty passionate.
Moser: They are. And I do understand that to an extent. I mean, nostalgia is very powerful. If there was a book made from this, perhaps it could be farewell Tab, we hardly knew you: the ultimate story of disruption, because really Coca-Cola kind of disrupted themselves here, right?
Hill: All right, guys, we'll see you later in the show. Up next, a conversation with Jim Steyer, the Founder and CEO of Common Sense Media.
Common Sense Media is a nonprofit organization that provides education and advocacy to families to promote safe technology and media for kids. CEO Jim Steyer started Common Sense Media nearly 20 years ago. Recently, he talked with Motley Fool host Dylan Lewis about his new book on the ways in which technology shapes our lives. They also talked about the potential for new regulatory standards for tech companies. Here, Dylan gets the conversation started by talking about the current environment for social media.
Dylan Lewis: It does feel like we're having a bit of a moment when it comes to the awareness around these issues and around these platforms. I mean, just thinking back over the last year or so, there's the Netflix documentary, The Social Dilemma that came out ...
Jim Steyer: Which we were part of and helped make, right?
Lewis: And that's a cultural phenomenon. That created a lot of conversations online. The Great Hack came out in 2019. Do you think that the tides are turning a little bit on this?
Steyer: Definitely. And by the way, we were part of both of them, so we know the guys who -- The Social Dilemma was filmed, we did a bunch of the events with Tristan Harris, one of the guys who's in the film. We gave him office space and he worked out of our offices. And we worked with the guys who made the film. Because we thought it was important to talk about the attention economy and the arms race for attention, and the fact that there was manipulative design, particularly aimed at kids, by the way, but at all people. And we worked with the guys in that movie, Roger McNamee, who went to high school with me and my brother, Tristan, Sandy Parakilas, all the people, they are all colleagues of ours. It's a small group of people, quite frankly. And then we know The Great Hack people very well, I did a bunch of things.
But what happened was, I would say, eight years ago, we were sort of lone voices in the wilderness, Dylan, right? And it's interesting, because I'm a luddite, I can barely turn on my computer. But I get the basics and our organization, Common Sense, gets the basics of what it can do to kids, particularly their social, emotional, and cognitive development. I'm assuming you're not a parent, or you would have said you are ...
Lewis: Not yet [laughs] ...
Steyer: But here's the deal, what had really energized me about it was, I could see the impact on my kids, particularly my daughters when they were preteens and teens and all the body image stuff, and all the comparative stuff on Facebook and Instagram and Snapchat, it's really unhealthy, right? So, you can see that as a parent. And what happened was, we realized there were no regulatory structure, because I was running the biggest child advocacy group in the United States; this is what I do for a living. And my brother is pretty smart about politics. You go look who's on the Board, look who my friends are, we know the people in Washington, Sacramento, elsewhere. We finally said, fine, we're going to write some laws.
And what's happened is, you could start to see the tide turn, I'd say in 2016-2017, and then you really saw things happen in 2018, when Cambridge Analytica happened. And that's when we decided to write the California Consumer Privacy Act, which is just the law of the land, because effectively, by passing that law in California and GDPR passed in Europe at that time, that's the European privacy law, we regulated privacy on behalf of you and everybody in the audience today, and you should thank us and send us contributions. But we did ...
Lewis: Well, on behalf of the audience I'll thank you right now, thank you for doing that.
Steyer: But you can feel, absolutely you've seen a sea change. Because in those days they glorified all the tech executives, they basically put them up on a pedestal, and this was the engine of our economy, which it is, you guys are a business show, and they're driving untold successful financially and in stock market prices, but there are huge consequences from what some of the companies have done with absolutely unchecked power and nobody regulating them. And Common Sense has led the way, and I'm proud of that.
And by the way, the momentum is completely on our side. And wait 'till you see 2021, because in 2021, man, we are going to really step up what we're going to -- we're going to have a really major regulatory framework on multiple issues. And the book is a precursor for that.
The reason I wrote the book, I'm shameless putting it up ...
Lewis: You have to plug it.
Steyer: I do. I got to plug, Which Side of History? comes out next week. But it's a campaign for us, it's not really a book. So, it's 50 people, and it's everybody from Marc Benioff, to Sacha Baron Cohen, to Mike Bloomberg, to Khaled Hosseini, to Michelle Alexander, to you name it, I got really smart people to write about the impact of tech on society. But the truth is, for me it's a campaign and for our organization it's a campaign, because I think it's a fair question to say to Sundar or to Pichai, or Mark Zuckerberg, or Jeff Bezos, or even Brian Roberts and Jeff Shell at Comcast or any of the big media and tech players, which side of history do you want to be on? I'd like to ask that to most politicians today as well, because to me, as a citizen, we are in a crisis moment in our democracy and tech has played a role in that. That's why I wrote about democracy, even though Common Sense is largely a kids and family organization.
Lewis: Since you mentioned the book, and I was absolutely shocked with the roundtable of names that you had as contributors for this thing, you listed off a bunch earlier, but is there anyone that really surprised you with their take on the tech industry or anyone that really introduced something new to the conversation that you hadn't thought about?
Steyer: So, I actually think -- so there's a Harvard Business School Professor, Shoshana Zuboff, who wrote a book called Surveillance Capitalism, [The Age of Surveillance Capitalism] which I think is the definitive work. And everyone who watches Motley Fool and who knows Motley Fool ought to read her stuff. I took a piece of that, I had her do a very short synopsis based on her book for it. I think that some of the stuff -- I actually think Mike Bloomberg wrote a really interesting piece about how climate change could be solved using technology. Bill Gates was going to do a piece about that too actually, and he was great about it, but he's now writing a book about that that's coming out next year and he didn't want to undercut his own book which is coming out next year. I think, for business people, Marc Benoiff, who's my good friend, who's the CEO and Founder of Salesforce.
So, Benoiff has a really powerful piece about corporate responsibility among tech executives, Marc has been out there more than anybody else in a lot of ways, and he basically calls Facebook cigarettes and should be treated and regulated like the tobacco industry. So, that's a pretty gutsy thing for the CEO of one of the major tech companies in the world to say, and there's a lot of people writing that. And basically, I asked a lot of my friends to write pieces, and they did, because they realized that tech, whether we like it or not, is everywhere in the lungs.
Lewis: So, you were pretty critical of Facebook in the intro of the book too, you said, no company has ever known so much or learned so little in such a short time. And I'm curious, if you had a timeline in front of you, what should have happened with Facebook that didn't happen?
Steyer: Well, I think they have been by far the most irresponsible and damaging of all the major tech companies. And that's why we as an organization and I personally have such a complicated [laughs] relationship with the people who started the company, and have for many years. Look, they have, first with Facebook and now with Instagram, because from the kids' standpoint, Instagram is way more -- and WhatsApp are way more important than Facebook, right? So first, we were really concerned about how they were impacting the social, emotional, and cognitive development of children, right, all the comparison culture, the "like" culture, all the stuff. If you watch The Social Dilemma, the guy who did the "Like" button is on there. You know, he used to work out of our office after he left Facebook.
And you know, you realize they've really, really manipulated society in a really bizarre way. And honestly, marks all the mantra back in, like, 2010 about frictionless sharing, and everybody you share all aspects of our lives, what total BS that is, what an absurd philosophy, that makes no sense. And in truth, it was just a monetization, they learned how to basically monetize your personal information, sell it to advertisers, so it's a brilliant business and I give them incredible credit.
Lewis: So, as someone who has spent a lot of time thinking about this, if you could, with just a wave of the wand, create the rules, what would they look like for these social media companies?
Steyer: Well, No. 1, is I would treat the platforms in the same way we treat broadcast television, cable television and newspapers. I would have standards, and I would actually hold them accountable for what they publish, including user generated content. The user generated content is a little more complicated, you'll have to -- but I would basically hold them accountable and have the same kind of standards we've had for media, in general, because they're the biggest media publishers in the world. They're way bigger than ABC, NBC, etc., right? So, I'd hold them accountable. And I'd have basically the same rules they wrote for all media in the United States.
Second, I'd have really strong consumer privacy laws. Third, I would take antitrust action against some of these companies. I would force Facebook to divest itself of Instagram and WhatsApp. I would look very seriously at some of the other big tech companies and have them broken up. I think that would increase competition, actually it'll increase the value of the companies if you broke them up into smaller entities. And then I would also require, I would be really, really look at ways in which the platforms could restore some of the democratic norms that have been undermined in the past few years.
So, I think there's a huge really important agenda for the tech industry right now, and that we should pursue it. That's something that those who watch The Motley, who follow The Motley Fool should pursue, because it's in your interest.
Lewis: You mentioned before that you're a parent; and I'm not. But I would love to get your advice to the parents that are out there watching on how to navigate social media, how to navigate YouTube, all these different things, with their children and have, what feel like, productive conversations about these things.
Steyer: Well, A. conversation is a really good rule, because I think your kids [...] you just have to talk with them about it on a daily basis. I mean, I would say basically, delay, delay, delay in terms of giving your kids cellphones and access. Look, an iPhone is essentially a mini computer in your pocket, why would you give that to an eight-year-old, right? It allows you to have access to anything. So, I would think about several things. One, don't give your kids access to devices and platforms until way later. We've really been strict, we don't let our kids have a phone until they go to high school. And by the way, they whined and cried about it a little bit, they're all fine, and now they're very grateful to mom and dad that we did that.
I would say limited time, you know, be very specific about time limits, like, boys love video games. I have two sons, they would play video games eight hours a day if we let them, particularly when they were teenagers, I wouldn't let him do that. I would set time limits. I find that healthy balance is really hard during COVID-19, because kids are in front of a screen way more time, but I'd limit screen time. And then I'd be really careful about the content that they're exposed to. That's why Common Sense is there. We are the people, we're the universal rating system for all content.
So, No. 1, I'd delay devices and platforms until you thought your kids were age-appropriated. No matter what other kids in their school are saying and the peer pressure they feel at age 10 to have an iPhone. No. 2, I would limit the amount of time. And No. 3, I'd really regulate the content. And I would have daily conversations, because these kids are digital natives, they grew up with it. I mean, Dylan, you're not a digital native; you're closer to one than I am. And it affects every aspect of their lives, and they need to understand the pros and the cons of technology and the content.
Hill: Jim Steyer's new book is Which Side of History? How Technology Is Reshaping Democracy and Our Lives. And if you want to hear the latest on technology stocks then check out our daily podcast Industry Focus; it's a different industry every day, and on Fridays Dylan Lewis analyzes the latest tech news. You can find Industry Focus wherever you get your podcasts.
Edge Innovations is an engineering company that has several divisions, including one focused on animatronics and special effects. And, guys, I can't really think of an artful way to say this, so I'm just going to say, this company has built a robot dolphin.
The cost for the robot dolphin is somewhere in the neighborhood of $3 million to $5 million. And once you get past the idea that it's a robot dolphin, Ron, the business implications start to get pretty interesting. If you think about theme parks, movies, aquatic research.
Gross: Sure. [laughs] So, I'm all in favor of getting dolphins out of captivity. I think I read that maybe there's 3,000 in captivity. And I think it's great if we can set them free. I don't think a robot would replace the experience at a theme park of swimming with a dolphin, you would just probably pass and be like, no, I'm good, I'll just stay dry and I don't need to do that. I do like your comment about movies, television and how we could replace dolphin actors, [laughs] for lack of a better word, with their robot brethren. But I don't know, $3 million to $5 million is pretty expensive. [laughs]
Hill: Jason, you sound like you're not a fan.
Moser: Well, I mean, I am and I'm not. I do agree with Ron, I like the angle of being able to focus on fewer animals in captivity. I mean, as someone who has swam with the dolphins before, listen, that's a priceless experience. And fortunately for us, the facility that we were able to do that through -- this was about bringing dolphins in that were in trouble, right, helping them recover, and then ultimately setting them free. So, it seemed like it was a better message that they were espousing there.
It sure seems like for movies' sake, technology can really take place here and just give us some cool CGI. And in regard to actually going to Sea World, I mean, if you know that you're going to go see robot dolphins and killer whales and what not, I mean, that absolutely takes away from experiences, like, why even bother? So, yeah, I can see both sides of it there.
But ultimately, let's just go back to the rise of the machines, Chris, we talk about this all the time. I'm scared of hackable dolphins, right? I mean, this army of dolphins all of a sudden; let's talk about the implications there for a second.
Gross: Water and electricity scare me.
Moser: [laughs] That's another great point right there.
Hill: Yeah. Technically, I think it would be an armada of robot dolphins. Before we get to the stocks on our radar, our email address is [email protected] A question from Tyler Winkler. "If you only had one investment to make today and give to your kids, in 20 years, besides an index fund, what would it be?"
Real quick, Ron, let's help Tyler with a couple of investment ideas for 2040.
Gross: A very hard question to answer, putting my money where my mouth is, I opened up two Roth IRAs for both my children earlier this year, and I put Microsoft into both of them. I like it as an investment for the next 20 years.
Moser: Yeah, let's go War on Cash style here. I think you got to look at a company like PayPal and think that is going to be one that is only more relevant 20 years from now.
Hill: I'm going to go with a company that is near-and-dear to my heart and taste buds, Starbucks, because drinking coffee in 2040 is going to be exactly the same as it is today. [laughs]
Let's get to the stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Jason, you're up first, what are you looking at this week?
Moser: Yeah. A new one, I think, to the show here, Visteon (VC -0.17%), ticker is VC. And Visteon designs and manufactures automobile cockpit electronics and connected car solutions for vehicle manufacturers worldwide. Main focus is really on audio and infotainment offerings and displays, but for me, I'm actually really interested in its heads-up displays that it's building out. These are displays that use augmented reality to overlay graphics in the driver's line-of-sight to represent objects in the vehicle's path all on the windshield. So, you're going to be able to get information as a driver on the windshield as opposed to having to kind of look around the car. The safety implications are obvious there. It's got a large and diverse customer base, with companies like Ford, and Mazda, General Motors, Volkswagen, Jaguar, Honda, BMW.
Ford is its largest customer, but this is a small cap company. Restructuring the business a little bit, which could weigh on the stock in the near-term, but definitely want to dig in into.
Hill: Dan, question about Visteon?
Dan Boyd: Yes, certainly, Chris. Jason, how much heads-up display is too much heads-up display? Because a lot of these things, they seem like they could be a little distracting.
Moser: It could be. And I think, you know, you hear talk of Tesla allowing for streaming video in the car. I think when you're streaming Netflix on your heads-up display, we got a problem.
Hill: Ron Gross, what are you looking at this week?
Gross: Danny, I'm going back to Bed Bath & Beyond (BBBY 1.65%), BBBY. Shares are up almost 100% over the last month, as relatively new CEO, Mark Tritton, formerly of Target, continues to make moves to turn the company around. This week, the company announced it will sell 80 Christmas tree shops. Who knew there were 80 Christmas tree shops, but there are, Dan. And they're going to sell a distribution center for $250 million; that's in addition to lots of shakeups at the executive level, raising money by selling PersonalizationMall to 1-800-Flowers. They're doing a lot of great things to, both, turn the business and shore up the balance sheet. And is still a big short interest here, Dan. So, if they continue to execute, I think those shorts are going to have to cover, sending the stock higher.
Hill: Dan, question about Bed Bath & Beyond?
Boyd: Certainly, Chris. Ron, I rag on you constantly for your stock picks on the show and today is no [laughs] exception, Bed Bath & Beyond is the boring-est place on the planet and I don't think I've ever gone there willingly. Why did you bring this to me?
Gross: Because I want to make you money, Dan, and that's all I'm here to do. You should spend some time in the Beyond section, because I think that's really where you'll shine. [laughs]
Hill: Dan, two stocks, you got one you want to add to your watchlist?
Boyd: I'll tell you what. Ron, his choice is compelling, because of the way the stock has moved in the last year, but I'm going to go with Visteon, because I'm really quite interested in automotive technology and I'm excited to see where that kind of stuff brings us.
Moser: All right.
Hill: All right. Jason Moser, Ron Gross, guys, thanks for being here.
Gross: Thanks, Chris.
Moser: Thank you.
Hill: That's going to do it for this week's edition of Motley Fool Money. The show is mixed by Dan Boyd, our Producer is Mac Greer, I'm Chris Hill, thanks for listening, we'll see you next week.