Earnings Roundup: Adobe, Kroger, The Honest Company, and More

Adobe (ADBE 1.29%) hits an all-time high on earnings. Kroger (KR -2.28%) raises guidance and announces a $1 billion stock buyback authorization. The Honest Company (HNST 2.98%) issues its first report as a public company. Homebuilder Lennar (LEN 3.06%) posts strong profits, and electric-truck maker Lordstown Motors (RIDE -2.26%) needs new management.

In this episode of Motley Fool Money, Motley Fool analysts Ron Gross and Jason Moser, with host Chris Hill, analyze those stories, discuss value plays vs. value traps, weigh in on El Pollo Loco's flying chickens, and share two stocks on their radar.

Plus, Motley Fool contributor Keith Speights discusses the latest on COVID-19 vaccines, Johnson & Johnson (JNJ 0.29%), and the controversy surrounding the FDA's approval of Biogen's (BIIB -0.48%) treatment for Alzheimer's.

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 June 18, 2021.

Chris Hill: It's the Motley Fool Money radio show, I'm Chris Hill, joining me this week, Senior Analysts Jason Moser and Ron Gross. Good to see you as always, gentlemen.

Ron Gross: Hey.

Jason Moser: How are you doing, Chris?

Hill: We've got the latest headlines from Wall Street. We've got the latest on the healthcare industry, and as always, we've got a couple of stocks on our radar. But we begin with software eating the world. Shares of Adobe hit a new all time high on Friday after second quarter profits and revenue came in higher than Wall Street was expecting. The software company also upped their guidance for the current quarter. Jason, there is a lot to like with Adobe. What stood out to you?

Moser: Chris, I am just such a happy shareholder. This was a lovely quarter it seems on all accounts. Adobe, it's so interesting. To me, this is one that just hides in plain sight. A lot of people maybe don't own it. They feel like it's too big or maybe they feel like they are too late, but it's not too big, and you're not too late. This is one you want to have on your radar. Ubiquitous digital media company utilizing a subscription model, subscription revenue, basically 90% of the business with gross margins to boot. There are a lot of good things going on with this business. When you look at the numbers, I think that really tells the tale for the quarter. They brought in $3.84 billion in revenue, that was growth of 23% from a year ago, and non-GAAP earnings per share of $3.03. The digital media segment, which is the largest segment of the business that grew 25% from a year ago, and they exited the quarter actually with $11.2 billion of digital media annualized recurring revenue. That just gives you a little bit of an idea of what is coming. This is a company that continues to keep those partnerships, those relationships with its customers, because of all of this great software that it produces. One of the more interesting parts of the business, smaller part of the business, but we talk a lot about DocuSign on the show. Adobe has their Document Cloud that brought in $470 million in revenue, that was 30% growth from a year ago. New Adobe Sign customers doubled from a year ago.

It's clear that they are keeping their customers, they are bringing more customers in, and they're really excited about this recovery in the economy. Adobe's tools are used by so many in so many different spaces. E-commerce is no exception, and they lobbed out some pretty impressive projections there in regard to e-commerce. They see e-commerce spending, it's projected to be $4.2 trillion globally this year, going to reach $1 trillion in the U.S. alone in 2022. That is a really good sign for Adobe, because a lot of those customers in e-commerce are using those digital media tools to build and grow their businesses. Like you said, a lot to like. If you are a shareholder here, hang on to those shares.

Hill: Kroger's first quarter profits and revenue came in higher than expected. The grocery chain also raised guidance for the full fiscal year, and despite all that, goodness, Ron, shares of Kroger were actually flat this week.

Gross: It was a solid report. It was not stellar. The high point that you can point out was that they increased guidance. But if you just drill down a little bit, it's some mediocrity there. Total sales were flat. If you exclude fuel sales, they were actually down 4%. Now, sales were up 14.9% if you compare it to two years ago, and they give us these metrics as some of the other retailers have been, because of COVID. Year over year comparisons are rough this time around, so it's nice to have a more normalized year 2019 to compare to. It looks pretty good, sales up almost 15% compared to that. Investments in digital are paying off, it's obviously crucial in this day and age, to invest in your digital experience. Sales there were up 16%, they expanded to over 2,200 pickup locations, almost 2,500 delivery locations, which covered 98% of Kroger households. Gross margins narrowed a bit on the weaker sales, a higher shrink, shoplifting, shrink is another word for shoplifting, and other losses. There were some COVID related expenses in there as well that impacted margins. When you boil it all down and you exclude some pension related charges, adjusted EPS was actually down slightly. Compared to 2019 again though, you had it up 29%. Not too shabby for a supermarket company. As we said, they raised full year guidance, which was also nice to see. 2,800 retail stores right now, Harris Teeter, being my favorite, thank you. Only trading at 13 times. These companies don't typically trade at high multiples, but that's not expensive, and they approved a new $1 billion share repurchase program.

Hill: Real quick. The technical term "shrink," does that include things other than shoplifting?

Gross: It does. It could be bookkeeping discrepancies, accounting things, shoplifting is a big part of it. Other reasons that you would not be able to account for merchandise, falls off the back of a truck, for example, so not just shoplifting.

Hill: The Honest Company issued its first report as a public company. The consumer goods business founded by actress Jessica Alba posted revenue that was higher than expected, but shares of Honest Company falling this week and down 30% from its IPO just last month, Jason?

Moser: I wouldn't worry too much about that. I think this was a very respectable introduction to the public markets, a very good first earnings release here. When you look at this business, it feels like this is the direction in which the world wants to head. There is a long-term trend in play here that could work out nicely over time. A company that's very focused on ESG and sustainability. I think a big question for a business like this, it really boils down to pricing oftentimes. It's a little bit more expensive to make this stuff right now in the near term. Now, as time goes on, those costs will come down, and I think a company like the Honest Company has some brand equity that could play out in its favor. They do have to be careful with that though. But when you look at the numbers, revenue is up 12% from a year-ago. They saw a little gross margin pressure there just primarily due to input costs, and there are some expenses there with additional marketing spending and some IPO costs. But all in all, they view their total addressable market here for their categories of diapers, and wipes, and skin, and personal care, and household products.

They see a total market opportunity around $130 billion with about $17 billion representing that clean and natural market within those categories. That's really the primary focus of the Honest Company. I think again, a very respectable introduction to the public markets. They should feel good about where they are headed. I think now it's just a matter of making those sales, and as long as they continue to establish and grow relationships like they're doing with Target. They expanded the presence there, from 900 stores to 1,200 stores. If you've been listening to this show and you listen to Ron talk about Target, you know that Target's a nice place for these folks to be.

Hill: Shares of Lennar rose more than 7% this week after the home builder's second quarter profits came in higher than expected. Ron, given what's happening to home prices lately, any chance the good people at Lennar could build homes a little more quickly?

Gross: If it wasn't for some raw material prices and some labor shortages, maybe. But boy, real estate is on fire all over the place. Strong quarter, revenue here up 22%, that's due to a 14% increase in deliveries, a 6% increase in average sale price, which as we say, is a result of the tight supply of homes in the U.S., there is no inventory for homes right now. They had a nice increase in margin in their mortgage business and an increase in volume and margin in their title business, so that helped results. Gross margin of 26.1% was the highest second quarter margin in the company's history. That was driven by a higher than expected sales price per home delivered $414,000, reflecting higher prices in most markets as we all see. That was partially offset by higher land and construction costs. New orders up 32%. New construction has been constrained due to the pandemic, tight labor market, shortage of lumber, as we saw, lumber prices skyrocket, that's come down a bit recently, but lumber prices were very, very high. Other raw materials and commodity prices are high as well as we talked about inflation and so many different industries, but they still put up great numbers. Net income excluding some non-operating charges and a gain on the sale of their solar business was up 79%, really strong. Guidance was strong for home deliveries and gross margins in the third quarter, they repurchased a million shares of common stock. Things are going quite well as a result of this real estate market that is on fire.

Hill: Are we going to have to wait three more months to their next earnings report to get an update on how construction is going? Because it seems like heading into the summer months, one scenario is we get updated guidance from Lennar a month from now.

Gross: That certainly could happen. It's very hard to predict, but we'll have other more macro related indicators about how construction housing starts, real estate in general are looking, and we'll be able to then project into these individual companies.

Hill: How do you separate a value play from a value trap? We'll discuss that after the break. Stay right here. You're listening to Motley Fool Money.

[...]

Welcome back to Motley Fool Money. Chris Hill here with Jason Moser, and Ron Gross. La-Z-Boy ended the fiscal year with a strong fourth quarter report. Profits and revenue were both solidly higher than Wall Street was expecting. Net shares of La-Z-Boy falling more than 15% this week, what's going on, Ron?

Gross: Yeah, the quarter was fine, benefiting from the economy reopening. But I think it's the outlook primarily that worries investors and we can get into that as I take you through the quarter. Sales reached a record high up 41%. So far, so good. Obviously last year was impacted by the pandemic. This year sales were driven by the reopening of stores. They had some increased production capacity, strong performance by their company-owned stores, and Joybird, which is their online furniture subsidiary, also had continued growth and was actually profitable. They had same-store sales increase of 100%. But if we go back to 2019, as we discussed earlier, they were up only, I say only 29%. That's pretty strong still. It's good to see that same-store sales number. Sales in the wholesale segment were up 40%, retail segment, 39%, very consistent there. They had operating margins that widened a bit and adjusted earnings per share were actually up 78%. You say, what's the problem here? Why would the stock sell-off? Well, that's when you get into some of the guidance, all business units are experiencing record demand. That's great. Backlog is at record levels, that is good, but only if you can fill those orders, and management expects ongoing global supply chain disruptions, headwinds related to raw materials and freight costs to make filling that backlog somewhat difficult.

They expect a temporary negative impact to profit margins due to higher raw material prices. They're going to offset that with some price increases. We see lots of retailers and even restaurant companies doing that as well. That I think is what the investors were focused on. I think that's fair because the past is the past. We have to look to the future when we think about our investments, and perhaps it rightly sold off. This stock is only trading at 12 times. That's fine. It's not some huge growth company, it's not a technology company, it's a relatively lower-end furniture retailer. Certainly not an expensive stock, but it's trading probably right around where it should be.

Hill: Yeah. But Ron, on last week's show, we talked about RH Holdings, parent company of Restoration Hardware. They're in the same line of work as La-Z-Boy, and I don't remember them saying they were facing any of these problems to this degree.

Gross: RH is doing a stellar job in terms of sourcing, in terms of their galleries, in terms of their loyalty program, they are obviously at a much higher price point as well, which I think has benefited their results. So yeah, two different stories.

Hill: Exciting week at Lordstown Motors. The electric truck start-up is looking for new management, because CEO Steve Burns and CFO Julio Rodriguez resigned on the same day. Shares of Lordstown down 10%. Jason, I'm surprised it's not down more than that.

Moser: Yeah. Exciting maybe for the financial media. Because we get to talk about this. I'd imagine if you are an investor in Lordstown, excited maybe isn't really the word, and it really feels like a lot of unforced errors here. But I think it's also a very good example of the dangers that SPACs can present. It's not to lump them all together by any means. There are plenty of great SPACs out there that are working out well. But by their very nature, there are more story stocks. They come to the market far earlier in their lives is the only concern. You need to make sure there's some stake behind that sizzle, Chris. It looks like with Lordstown, there might not be yet at least. It was really interesting to see this story develop through the week because on Tuesday, which was a day after the CEO and the CFO resigned, the president of the company told reporters that the company had enough cash on hand to get through next May and enough binding orders to keep production going through the end of next year. Well, then fast-forward to Thursday where the company files an 8-K in order to clarify the president's comments because they're like, "Listen, what this is, there are some purchase agreements that provide us with some signals of demand," but that they actually have no binding purchase orders or commitments from customers. I don't know if it's semantics. I don't know if the president was trying to paint a little bit of a better picture than is really the case.

But the bottom line is the leadership clearly they're not on the same page and when you have a business like this that is essentially pre-revenue and they are facing monumental competition, not only from a company like Tesla, which is clearly the leader in the EV space, but now you've got GM and Ford making all of these commitments to invest in EVs as well, spending billions upon billions of dollars to do so, it just goes to show you really how steep of an uphill climb it really is for Lordstown based on what we've seen with management to this point. This is one I think you have to steer clear of.

Hill: Just as we don't want to paint all SPACs with the same brush, we don't want to paint all 8-Ks with the same brush. But if you're filing an 8-K to basically say the president of our company, misspoke, that's a problem.

Moser: That's a problem.

Gross: For the kids at home, this is not how to run a public company.

Hill: Our email address is [email protected]. We got an email from Mike in Ohio, who writes, "I know The Motley Fool is typically more growth focused, but as I get older, I'm starting to think about rotating into some value stocks. How do I spot a value trap? I've heard this term a lot, but I'm still a bit fuzzy on this subject. Do you have some general rules of thumb to look out for to ensure that you don't get stuck in a value trap." What do you think, Ron?

Gross: Love the question, right up my alley. Let's start with the definition of value trap, first. In my opinion, it's an investment you make because you think the stock is undervalued, and that investment either doesn't give you the return you expected or you actually lose money. In my experience, in most cases, a value trap arises because you bought a stock of a company that was having trouble, was theoretically cheaper as a result, and you expect things to turn around. It's when things don't turn around, that a value investment becomes a value trap, and you keep holding on hoping things will turn, believing things will turn and it just keeps getting worse and worse, eventually leading to what we call a permanent loss of capital. You lose money.

The easiest way to avoid most value traps is to only buy strong companies that are executing well, versus troubled companies that look cheap that you think will rebound. Now, that certainly is a strategy employed by value investors around the globe, including myself in a former career. But you've got to be really careful that you're picking companies that are temporarily impaired rather than permanently impaired, and that's not the easiest thing to do when researching and analyzing a company. You're going to get it wrong a fair amount of times. That's going to lead to that permanent loss of capital, which will impact your returns in a severe way, and even in the worst of cases could lead to you owning some companies that end up filing bankruptcy. I've had a couple of those to be honest, and that really will kill your returns. So, buy strong companies, don't worry about turnarounds or companies that are failing and you'll be able to avoid value traps.

Hill: Well, and I'll just try and read Mike's mind a little bit with his question. It seems like at least part of what's underlying it is, he's moving out of growth mode as an investor and more into protect your wealth mode, and it would seem as though some of the companies that we typically describe as blue-chip stocks like Johnson & Johnson might be a better fit than, "Oh, I'm looking for something that's cheap."

Gross: Yes, because value investments that are troubled and look cheaper, are actually, sometimes more risky than you would ever think. They're not really what we think of as mature stable companies. Look at the S&P 500 dividend aristocrats. Look at the blue-chip stocks out there that have very long track records of putting up great results. They're not going to knock the cover off the ball, but you're not taking on that risk, so you shouldn't expect them to knock the cover off the ball. They'll just earn you nice rates of return year after year with less risk.

Hill: Jason Moser, Ron Gross, guys we'll see you later in the show. Up next, a closer look at the healthcare sector with industry veteran Keith Speights. Stay right here, you're listening to Motley Fool Money.

[...]

Welcome back to Motley Fool Money. I'm Chris Hill. Recently on this show, we've talked a lot about the great reopening here in the United States. But let's face it, the great reopening does not happen without COVID vaccines from Pfizer, Moderna, and Johnson & Johnson. Here to talk about that and more as Keith Speights, he is a Healthcare Technology Consultant. Over the past decade, he's been a contributing writer at The Motley Fool focusing on what else? The healthcare industry. Keith, thanks for being here.

Keith Speights: Good to be here, Chris.

Hill: Let's start with the vaccine. I want to go into the big picture to start. Where are we now as you look at these three businesses, the vaccine distribution across the United States and around the world?

Speights: Yeah, so Chris, the news in the United States is awesome. We're in a great position thanks to the vaccines that you've mentioned, Pfizer, Moderna, Johnson & Johnson. They've really helped the United States, not completely, but largely turned the corner in the fight against COVID-19. You mentioned the reopening of the economy. That's what we're seeing right now. We're seeing vaccines make the difference. I saw the AMC Entertainment CEO, AMC is one of the big meme stocks right now. The AMC CEO was saying he watches every day to see what's going on with vaccine news, because vaccines are the key, certainly for his company, but for a lot of other companies throughout the U.S. and the world. Here at home, things are really doing exceptionally well. But in other parts of the world, the news isn't so great, and especially in countries like India they really are facing some really serious challenges with COVID-19.

Hill: When this started to break, this cascading number of announcements from these three companies, for a good stretch of time there, they were essentially grouped together. Over the past, let's call it six weeks or so, it really seems to be that Johnson & Johnson has broken off from the other two, and now you hear a lot of talk about Moderna's vaccine and Pfizer's vaccine in the same breath, Johnson & Johnson, they hit the pause button. How significant is that in terms of vaccine distribution and how significant is it for Johnson & Johnson as a company?

Speights: I think there are two answers there, Chris. In terms of how significant it is for vaccine distribution, it does make a big difference because the U.S. was hoping to be able to distribute 100 million of J&J's vaccines. Johnson & Johnson really not through any fault of its own, it was really a contractor that had some serious manufacturing issues that have really caused the problems for Johnson & Johnson. As a result, I think the latest numbers that I've seen, only about five% of vaccines given to Americans were Johnson & Johnson's vaccines. That's remarkably low considering it is the only single dose vaccine that's won authorization. You would think, well, a lot of people would really be attracted to that convenience. But those issues have caused that rate to be exceptionally low. But now, in terms of the question of how this impacts Johnson & Johnson, the real answer there's not very much. First of all, Johnson & Johnson is selling this vaccine at cost during the pandemic. It's making some revenue but no profits and so it's not impacting J&J's bottom line at all with some of the problems that it's faced.

The other thing is Johnson & Johnson is the biggest healthcare company on the planet. Any one product just isn't going to move the needle tremendously for Johnson & Johnson. I think J&J has over 200 separate companies that are part of the J&J empire. The vaccine, had it been as successful as anticipated, would have been great for Johnson & Johnson, at least on the top line. But it's still just a small part of this company's business.

Hill: Last question and then we'll move off of COVID-19. You look at shares of Johnson & Johnson and Pfizer for that matter, they're up about 25% or so over the past year. Everything you said about Johnson & Johnson, the size of the company, no one thing is going to move the lever for that business and therefore, for that stock. But I'm curious if on the flip side, you are surprised at the fact that shares of Moderna have more than tripled over the past year or do you look at that and say, "You know what, it's a much smaller business that makes sense to me."

Speights: Yeah. Actually, it does make sense to me. I think that smaller companies, smaller stocks in general, not just in the healthcare space. In any industry, smaller stocks are going to move more on good news and that's what we've seen with Moderna, particularly. We've also seen it with other companies that are on the horizon, Novavax, for example, was a huge winner in 2020, particularly. A company like Pfizer, I would've expected Pfizer stock to move more than it has. I still personally view Pfizer as a little underappreciated because of the contributions that it has made. But again, Pfizer like Johnson & Johnson has a lot of other products and a lot of other dynamics that come into play when you look at it, stock movement. I think investors are looking at some of the challenges that Pfizer faces and could face several years from now with some of its top drugs losing patent exclusivity. I think they're factoring all that in, but I think Pfizer is a stock that probably could have moved more than it has so far.

Hill: All right. Let's move off of this and talk about treatment for another health challenge and that is, Alzheimer's. Shares of Biogen are up 40% in the month of June, because the FDA approved Biogen's drug to treat Alzheimer's disease. The first medication aimed at slowing cognitive decline for people with Alzheimer's that regulators have approved and yet it is not without controversies. Three members of the FDA advisory panel resigned over the decision. There are a couple of threats to get to here, but I guess my first question is, what is going on here, like was this mistake to greenlight this treatment?

Speights: Chris, I call this nearly a biotech soap opera. You could even bring in Greek mythology here. First of all, Biogen's drug is like the mythical phoenix. It literally rose from the ashes. This was a drug that not all that long ago had been relegated to the trash after seemingly failing late-stage clinical studies. Biogen later came back and did some further analysis and they said, "Hey, we actually see that there's a potential here." They pursued that and then ultimately did file for FDA approval and ultimately won. But you're right, it's extremely controversial. The FDA's advisory committee that was convened to review the data came back and voted 10 against recommending approval, one abstention. No member of that committee voted in favor of this drug being approved. They thought that another clinical study needed to be conducted to establish that the drug was actually effective. Not even just that, several members of the committee wrote op-eds publicly urging the FDA not to go ahead and approve this drug and the FDA did it anyway, and this is extremely controversial.

Hill: Where does this go from here? Because part of me, here's what you are saying and thinking, if those people are right, if this doesn't deserve approval, then it's essentially setting up patients and their families for huge disappointments.

Speights: It very well could. I think that's the sad thing about this, Chris. I personally had a grandparent who had Alzheimer's disease before she passed away. We really need effective treatment. It would be a shame if some of the experts believe this drug really doesn't work. Now, I hope it does. I hope Biogen does have to conduct another clinical study. That was part of the accelerated approval decision. I hope it comes out and this drug actually does work. But if you look at the data, it's really a toss of the coin. I think, as to whether or not it's actually effective or not.

Hill: In terms of timing, is the next trial by Biogen going to be done later this year or is it sometime in 2022?

Speights: The confirmatory study will take years to conduct. It's likely that we won't know the results of that study, possibly eight or nine years from now.

Hill: We'll, let's close on a much more short-term note here. Look, this is an industry you follow every single day. It's an industry I have only passing familiarity with. What are a couple of things that you think are going to be worth watching in the healthcare industry in the second half of 2021?

Speights: Yeah, Chris, I think the biggest story by far will be coronavirus variants. What happens? We already had the U.K. variant, we've got the Brazilian variant. But the really concerning one right now is the Delta variant that was identified in India. It just remains to be seen what's going to happen there. How effective will our current vaccines be against these variants and there could be more variants emerge as well. How effective will they be? Will we need booster doses more sooner rather than later to provide additional protection against variants? How effective will some modified vaccines, both Pfizer and Moderna are working on targeting specific variants be? They are conducting clinical studies. This is a huge story, because it doesn't just impact the healthcare world, it impacts the entire world. We've talked earlier about the economy reopening. If they're really bad, dangerous variants emerge that vaccines aren't as effective against, that could change the dynamics of the global economy.

Hill: You can read his articles on fool.com or you can follow him on Twitter. The guy knows his just stuff. If you want to know healthcare, you need to be following Keith Speights. Keith, thanks so much for being here.

Speights: Thanks, Chris. Good to be with you.

Hill: Up next, Ron Gross and Jason Moser return with two stocks on their radar and one correction from last week's show. Stay right here. You're listening to Motley Fool Money.

[...]

Welcome back to Motley Fool Money, my name is Chris Hill, here once again with Jason Moser and Ron Gross. Guys, on last week's show we talked about the latest quarterly results from Casey's General Stores, as well as the acquisition of another convenience store chain that they had made, and we got several emails from alerted listeners, starting with James Brown in Nevada who writes, "In your discussion of Casey's General Stores, you mentioned that they had acquired Buc-ee's for $580 million and that they were "Big in Texas." In truth, Casey's acquired Buc-ee's from Nebraska, not the Buc-ee's from Texas. An acquisition of Buc-ee's from Texas would have been in the multi-billion-dollar range and would've come at the consternation of many, a sad Texan." That's on me because, Ron, you did mention the Buc-ee's acquisition, I didn't realize that there's a Buc-ee's based in Nebraska. It's a division of Buchanan Energy.

Gross: Yeah.

Hill: I confused it with Buc-ee's, the one based in Texas, which is where almost all of their locations are. I blame the Buc-ee's in Texas and here's why. Because we've talked about Cisco Systems, the networking company and Cisco, the wholesale food service distribution company, and they've got names that sound exactly the same but they're in completely different industries. The Buc-ee's in Nebraska came first, it was established first. I feel like the one in Texas should have picked a different name.

Gross: That's fair, but thanks to James and others for pointing us out. We make mistakes from time to time and we're here to own up to them.

Hill: Absolutely. We are nothing if not accountable, keep us accountable. Drop us an email, [email protected]. Next week, El Pollo Loco is trying out its newest innovation, drone delivery. The chicken restaurant chain will be testing what it calls door to backyard drone delivery with ten of its locations in Southern California. Jason, they say this could reduce delivery cost by up to 30%. When you think about their concentration in California, that is not an insignificant sum of money they could be saving.

Moser: I absolutely believe it could save those costs. As a consumer, I would jump all over this, just to try it, just to witness what happens. I mean, it would just be fascinating. Now, my Spanish is a little rusty, Chris, but I have an itch to go trademark El Pollo Volador, the flying chicken, because I feel like that's where we're headed.

Gross: Kroger, which we discussed earlier today, has their own drone delivery pilot that's going on with a different company. So here we go, it's starting, we're going to see how this works out. I'm a little skeptical.

Hill: I am as well, but the fact that you've got all these tests going on makes me think that 5-10 years from now, some of these businesses are going to make this work. Again, if any of the dozens of listeners in the Southern California area want to do some boots on the ground research, hit up their local El Pollo Loco for some drone delivery, let us know how it goes because I am fascinated to see how this test goes for them.

Moser: I'd love to see some videos. The thing that I noted in that piece, that I still can't quite figure out why this is how it works, but they talked about lowering your meal down from 80 feet.

Gross: That sounds dangerous to me.

Moser: On a wire. I envision the drone just touching down in your backyard and letting go and then taking back off. It does feel like that 80-foot wire might add to the degree of difficulty.

Hill: Let's go to our man behind the glass Dan Boyd, before we get to the stocks on our radar, if you were living in Southern California, you'd give this a shot, wouldn't you? Just to see the drone coming by your backyard?

Boyd: Chris, I would give it a shot in the sense that I would take a gun and shoot the drones down and then go get people's food and eat it for myself.

Gross: That's hostile.

Moser: Wow.

Hill: Wow. We always appreciate how straightforward Dan is. Let's get to the stocks on our radar. Jason Moser, you're up first. What are you looking at this week?

Moser: Taking a look at Qorvo, ticker Q-R-V-O. It's a company in the radio frequency and semiconductor space and they provide one of the industry's broadest portfolios of products in that space. The one thing I'm primarily interested in with Qorvo is its progress in ultra wideband technology, UWB. It's a radio technology that moves large quantities of data over a wide ranging scale of frequency bands with very low power for short distances. It delivers superior location, accuracy, security, latency, as we talked about 5G. Ultimately, UWB gives our smartphones spatial awareness. It makes it so that smartphones know where the other smartphones are, basically. As the Internet of things rolls out and more things are connected, we need to know where all of these things are, we need that spatial awareness. So with Qorvo, I mean, they are pursuing that market. It's forecast to hit $2 billion by 2020, $2.7 billion by 2025.

Hill: Dan, question about Qorvo?

Boyd: Yeah. Sure, Chris. Jason, we keep hearing about the semiconductor shortage out there right now. Qorvo is a company that in March of 2020, in the beginning of the pandemic, fell like the rest of the market but since then has been on quite the tear. How are they avoiding all the semiconductor problems that other companies are seeing right now?

Moser: Well, they are a beneficiary of a large relationship with a little company called Apple. For better or worse, they have about a third of their revenue tied to Apple right now and that's a good thing right now because Apple continues to innovate, they're pushing out some really clever new devices, particularly the new phones. I think as long as they're able to maintain that relationship with Apple, they should be given a little bit of a benefit of the doubt, so to speak.

Hill: Ron Gross, what are you looking at this week?

Gross: I'm looking at GAN Limited, G-A-N. Small-cap stock, recent recommendation at the Motley Fool. They build and operate online casinos and sports betting sites for customers. They're a tollbooth company, they take a small cut of every dollar wagered on their customer's sites. Customers like Wynn Resorts or non-casino companies like Churchill Downs and FanDuel. They also offer simulated gaming for casino and gaming customers, Penn National Gaming is a large customer in that segment. This looks interesting to me. Online betting is really starting to take off, a growing industry, it was accelerated by the pandemic. I don't know a ton about the evolving gaming laws, so I need to dig into that a bit. Also FanDuel's a major%age of revenue here, so there's a risk that I need to dig in with that as well.

Hill: Dan, question about GAN Limited?

Boyd: You know what Chris, I don't have a question but I do have a gripe. I don't watch a lot of TV but I do watch live sports. It used to be that every other commercial was an insurance company commercial, those companies have way too much money. But now, every other commercial is a sports book commercial, these companies have way too much money. They're spending way too much time putting commercials on my baseball games.

Hill: Which stock do you want to bet on here, Dan?

Boyd: Normally, I like stocks that rhyme with my name, Chris, but not this one, not this one. No, I'm going to go with Qorvo.

Gross: Nice, I love it.

Moser: Sounds logical.

Hill: Jason Moser, guys, thanks so much for being here.

Moser: Thanks, Chris.

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 Mark Greer. I'm Chris Hill, thanks for listening. We'll see you next week.