The FDA hits the pause button on Johnson & Johnson's (JNJ -1.33%) COVID-19 vaccine. NVIDIA (NVDA +2.82%) unveils its first server microprocessors and takes aim at Intel's most lucrative market. Booking Holdings (BKNG -0.17%) gets an upgrade. In this episode of MarketFoolery, Motley Fool analyst Alicia Alfiere and host Chris Hill analyze those stories, and Alicia Alfiere shares why Pinterest (PINS +0.81%) and its active user growth are on her radar this earnings season.
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 April 13, 2021.
Chris Hill: It's Tuesday, April 13th, welcome to MarketFoolery. I'm Chris Hill, with me today, Alicia Alfiere. Thanks for being here.
Alicia Alfiere: Delighted to be here.
Hill: We have a look ahead at earnings season. We're going to talk about travel, we're going to talk about the latest in the chip industry. But real quick, Alicia, I feel like we have to start just for a moment, with the big headline of the morning, which is Johnson & Johnson. For those who haven't heard the news, the Food and Drug Administration is asking states to temporarily halt using J&J's COVID-19 vaccine after six people in the United States developed a rare blood clotting disorder. The FDA said, and I'm quoting here, "This is out of an abundance of caution." When you look at the numbers, it really does seem like it's out of an abundance of caution. I'm not questioning the move, but look, we're a show about business and stocks, and when you look at shares of Johnson & Johnson down 1%, 2%, it seems like, at least in this moment, keeping in mind there is more information still to come to light in this moment, this doesn't seem like a huge concern for the business of Johnson & Johnson.
Alfiere: Yes, I would agree. Johnson & Johnson reported almost $83 billion in revenues in 2020 and none of that was related to the COVID vaccine. Just remember, it was only authorized for emergency use in February so we haven't even seen what the impact of the vaccine truly is. Additionally, I would say the company has several business segments. They have consumer health, pharmaceuticals, and medical devices. But at the same time, their pharmaceuticals, it represents about 55% of their revenues in 2020. So they do have a lot of skin in the game here in pharma. We'll see, I do think that in terms of the vaccination effort as a whole for the U.S., The White House came out and said that they don't believe that this will really impact the plan too much to get everybody vaccinated. They estimate that it's less than 5% of shots that the J&J vaccine has given the vaccination efforts.
Hill: Yeah, I saw a comment from one of the leaders in New York State saying, "Hey, if you have an appointment today, keep your appointment because if you were going to get the Johnson & Johnson shot, we've got the supply with Moderna and Pfizer." You're right, I saw a chart on CNBC this morning and it was basically Johnson & Johnson, we're talking seven million doses between Pfizer and Moderna, it's another 180 million doses on top of that. It seems like the right move, but it also seems, again to quote the FDA, "It's an abundance of caution."
With that, we will move onto shares of Nvidia which are up this morning after the company unveiled its first server microprocessors. This is a market that Intel is in, and I will point out, it is Intel's most lucrative market. As we see shares of Nvidia up a couple of percentage points, that's probably why we're seeing shares of Intel down a little bit today. How optimistic should Nvidia's shareholders be, and how worried should Intel be?
Alfiere: Those are really good questions. Right now, I would say it's too soon for anyone to be worried in terms of Intel shareholders, but I think Nvidia shareholders can be a little excited. Just to back up a little to explain that overall picture here, Nvidia is a leader in the graphics processing unit, and so that sounds like it's only in the gaming industry, but it's actually much more. It's used across high performance computing, data centers, and their chips are also used in AI. By stepping into the CPU market, they're definitely stepping into Intel's turf. I think right now, Intel holds about 90% of the market for CPUs. But there's a difference in the technology here, so it could get a little technical to explain. [laughs] If you bear with me, I have an imagery that we could think of here.
Hill: I need all the help I can get Alicia, so bring the imagery.
Alfiere: Intel, the CPU is super powerful. Let's think of them like a Hummer, super powerful, fast, but like those gas guzzlers, they're not energy efficient. That's what they called the CISC CPUs. Now when we look at the CPU that Nvidia is looking to create with Arm, which is a company that they're looking to acquire, these are RISC CPUs. I'd like to think of them as zippy little mini coopers. They're fast, streamlined, more energy efficient than the Hummer. This comes in handy when you have a group of processors, for the same amount of energy that a group of Intel processors use, so a group of those big, powerful Hummers. I could potentially, since this is still [laughs] a long way off, I don't think they're going to be released until 2023. But I could potentially pack-in way more Nvidia CPUs and it could be really fast and really efficient. But again, we can't get too far ahead of ourselves, can't write-off Intel yet, they're a dominant player in this market. But I think Nvidia CPUs, based on what we're seeing, are supposed to be more energy efficient and they're also supposed to be faster. I think about 10 times faster than today's capabilities. But we're not going to really know until it's released in 2023, so I'd say temper down the fear for sure.
Hill: In the case of Intel, it's a $250 million company, I would never go out of my way to bet against Intel. But this is a company that struggles for as dominant as they are, for as big as they are. They've struggled at various points in their history with different markets and I get that people shouldn't necessarily be worried, that's probably an overstatement. They can't be happy. They just can't be happy that a company like Nvidia is coming into this space.
Alfiere: Agreed, and I do think that they probably saw this coming with Nvidia quoting Arm to acquire them. I hope that they saw this coming and that they're doing something to be able to continue to be in this space.
Hill: We've talked a lot on this show over the past six weeks or so about the great reopening. We've talked about airlines and cruise lines and live events companies, we haven't really talked about Booking Holdings that much. Booking Holdings got an upgrade this morning from Jefferies based on a rebound in global travel and I know there are a lot of people who look at Booking Holdings for being as successful as that company has been and for those unfamiliar, it's the parent company of Priceline and Booking.com. For all the success they've had, this is yet another one of those companies that doesn't split their stock, a single share of Booking Holdings is $2,400. I totally understand anyone who looks at that and has sticker shock. From a business standpoint, how do you look at Booking Holdings?
Alfiere: Sure. Well, I look at it as an interesting reopening play right now. Like you said, they have Booking.com, Priceline, they also have Kayak, and OpenTable. Unfortunately, a lot of the businesses in the hospitality and travel industry were definitely hurt by COVID. The revenues were down 55% year-over-year. But an interesting thing that the company mentioned in their earnings report, travelers still booked 355 million room nights across their platforms in 2020. So that's still pretty incredible for this company. Also, when COVID hit, they worked really hard in terms of cutting non-essential costs. They also restructured their business to try to reflect this change in demand from COVID. So they decreased headcount, 23%. They also paused their share buybacks. So they're doing smart things to be able to continue, too. They actually reported profits in 2020. I was pretty surprised to see that. They had $59 million in net income. Pretty incredible, considering COVID. It's still down substantially from 2019, which was $4.9 billion. I would say they're a fighter definitely. The good news is that we have bright spots in the horizon for them.
The company recently talked about some of the promising trends that they saw in Israel, for example. Israel has been a leader in getting their population vaccinated. I think as of late March, they had 50% or more than 50% of their population fully vaccinated, which is pretty impressive, and the government started to really ease a lot of restrictions. What Booking Holdings started to see was this increase in demand. Domestic bookings began to increase. They're estimating it was about a double-digit growth over 2019. We see these interesting trends here and the possibility of pent-up demand for people who, like you and I, have been stuck at home and unable to travel. I think that the increased access to vaccines, and with economies reopening, and this pent-up demand, I think better days are ahead for Booking Holdings.
Hill: Am I correct in assuming it is an asset for Booking Holdings that this is a global company. There are a lot of businesses we talked about that are not only based here in the U.S., but this is where their operations are. As the U.S. economy goes, so goes the fate of those businesses. Am I correct in assuming that Booking Holdings with a foothold in North America but also in Europe, that diversification helps get them through the next, let's call it, 18 months? Because as good as the trend lines look in places like the U.S. and Israel, there are plenty of countries where the trend lines are still pretty bad.
Alfiere: Yeah, and that's actually a good point. The diversification helps in some ways, but it could also be a challenge, depending on how different companies approach their vaccination efforts and how they reopen their own economies. But I think for now, to see those bright spots glimmering on the horizon, I think it could be a strength rather than just relying on domestic travel.
Hill: Just want to remind the dozens of listeners here, if you're ever looking for stock ideas beyond the ones that we talked about on this show, you can check out Motley Fool Stock Advisor. It is our flagship service. You get the stock recommendations from David and Tom Gardner. You get their Best Buys Now and a lot more. Just go to stockideas.fool.com and yes, you get a 50% discount for being one of the dozens of listeners. Again, go to stockideas.fool.com.
Later in the week, earnings season is going to kick off with the big banks reporting, and they go first as they tend to do. I'm curious what you're going to be watching this earnings season, whether it's a company or an industry. I mean, there are always stocks that I'm interested in. As a general trend, the thing I'm going to be watching is guidance because I've been saying on the show for a while that I think this is the quarter where some companies are not going to offer guidance and that they are going to get punished for it. I don't have any one particular company in mind, but I just think there are enough positive trend lines with the U.S. opening up that, unlike a year ago, when every company under the sun was saying, "We're not offering guidance because there's too much uncertainty," all of us cut them slack for doing so. It's a year later, and I think there are a lot of people on Wall Street who are not going to be cutting slack for companies not offering guidance. Anyway, that's what I'm going to be watching as a general trend. But whether it's a trend in the industry or an individual company, what are you curious to see this earnings season?
Alfiere: I think that you've picked the best trend to look at. I'm a little jealous because you've definitely picked the best thing to look for. I think it'll be interesting to see that kind of guidance that we do receive. You've mentioned in the past this idea of management potentially sandbagging with some of their guidance. When we get that guidance, I think it will be interesting to see how useful it is. But I think that you're right. I think we're going to continue to see more and more companies give that guidance, and that will be definitely helpful. I think that's also a sign of optimism to come. For me, I'm a big nerd, so I'm going to be looking at a lot of companies. Something that's come on my radar recently that I'm really interested in is Pinterest. I don't know how familiar you are, but it's like a visual search engine that says that it inspires its users to take positive actions. It's one of the most unique social media experiences that you could have. In most cases, when we're on social media, we're looking to connect with brands. When we get ads, they're really annoying, they interrupt your social media experience. But for Pinterest, it's actually part of the experience and it could enhance your experience. We're all working from home. Let's say you're looking for stuff for your home office or my favorite word, your cloffice, which is a closet office.
Hill: No, that's not a word.
Alfiere: It is a word.
Hill: I'm sorry, I'm going to derail your intelligent analysis for just one moment. Cloffice?
Alfiere: Yes, a closet office.
Hill: A closet office. Okay.
Alfiere: I love it.
Hill: I won't be using that word.
Alfiere: Not yet, but maybe in the future. I don't have a cloffice because my closets are full. But anyway, let's say you're looking for ideas of revamping your cloffice or your office, you could use Pinterest to search for ideas. But now with the advertiser tie-in, let's say I see a neat cork board, I can be able to go from visual inspiration to action by shopping, and for some of these small businesses, hopefully purchasing those items. Pinterest has partnered with Shopify and Etsy, two other really interesting e-commerce companies. It will be interesting for me to see for the first quarter, "Hey, how is Pinterest doing?" They are a social media platform. For those companies, we always want to look at, hey, what's the active user growth? Are they attracting more members? Or what's the churn? Are they losing members? Also, I would say revenues. We always want to look at revenues to see if they're growing. Also I would say, for social media types, especially Pinterest, how are they monetizing their users? Are those trends going up or are they going down? That is one of the companies that I'll be looking at.
Hill: It's interesting about Pinterest because there was a decent stretch of time where you could see the people in the media-buying industry struggling with Pinterest as a platform. I mean, the people who are controlling the ad budgets. Just as there is an adoption rate for any type of technology, there is also an adoption rate within the media-buying industry. We saw this with podcasts for a long time, where there were companies with large budgets that they were spending on digital platforms, they were spending on radio, television, that sort of thing, and they couldn't really figure out podcasts. It seems like Pinterest struggled with that, but I think they passed that point a couple of years ago. It really seems like this is one of those platforms that, again, the people controlling the purse strings of the ad budgets are embracing Pinterest. That goes to not only validating the business, but rewarding shareholders ultimately.
Alfiere: Agreed, and what's really interesting about Pinterest, and they're in partnership with advertisers, is that I think it's a really unique opportunity for small and medium-sized businesses. But then also what Pinterest does is, because they have access to all of the social media data and things that people are searching for, what they do is they compile all of that information into a trends report. They forecast what they think is going to happen. What that allows advertisers, small companies, medium-sized companies to do is to be aware of the trends before they get really big. So they could sell more items, which is super important. It's this really great, virtuous cycle that's just so exciting to watch. So I'm excited to see what happens for them in the first quarter, and I think they're going to report sometime in early May.
Hill: Alicia Alfiere, I really appreciate you being here. Thanks.
Alfiere: So glad to be here.
Hill: As always, people on the program 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. That's going to do it for this edition of MarketFoolery. The show is mixed by Dan Boyd. I'm Chris Hill, thanks for listening. We'll see you tomorrow.
