Earnings Report Roundup

Domino's (DPZ 1.36%) delivers, and Chipotle (CMG 0.40%) serves up big earnings. Snap (SNAP -2.72%) surprises, Netflix (NFLX -3.92%) slips, and Crocs (CROX -0.52%) kicks it up a notch. Zoom Video (ZM 0.05%) plans to buy Five9. Johnson & Johnson (JNJ -0.69%) rises, and Boston Beer (SAM 2.52%) fizzles.

In this episode of Motley Fool Money, Motley Fool analysts Jason Moser and Maria Gallagher discuss those stories with host Chris Hill and share two stocks on their radar. Plus, Wall Street Journal reporter Eliot Brown talks about the new book he co-authored, The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on July 23, 2021.

Chris Hill: We've got the latest headlines from Wall Street. Eliot Brown from The Wall Street Journal is our guest, and as always, we've got a couple of stocks on our radar. But we begin with the red hot restaurant industry, Domino's Pizza and Chipotle, both hitting new all-time highs this week after strong second quarter results. In Domino's case, Maria, it wasn't just the profits in revenue that beat Wall Street's expectations. They continue to increase their same-store sales both here in the U.S. and around the world.

Maria Gallagher: Yeah, I think you've said it best, Chris, which is to never bet against pizza. So U.S. same-store sales growth was 3.5%. International same-store sales growth was about 14%. It's the 110th consecutive quarter of international same-store sales growth and 41st consecutive quarter of U.S. same-store sales growth. What you see as well is that in the U.S, there was an increase in items per order. Internationally, a lot of growth was due to reopening. Hopefully, farther down the line, that translates to that higher order. The thing with Domino's is you know what you're getting when you get Domino's and you get it quickly. Their car side delivery consistently averages below two minutes from out-the-door to the customer. Or you have delivery and then you have autonomous delivery being tested out in Houston. It's a good place to get pizza and pizza that is delivered fast and pizza is always a good delivery food. It's just another really good quarter for Domino's.

Hill: Well, and you and I were talking about this earlier in the week, there are always going to be people who will look down their noses at Domino's. But as you said, part of the success of this business is the reliability, both in terms of the product and the product getting to your home.

Gallagher: Yeah, and it's pretty interesting because their growth in rural areas outperformed in urban areas. So it's interesting to see that reliability even when you're going maybe a little bit farther whereas in urban areas like I'm in New York, I can walk to a Domino's in one block. But when you get that delivery and it's probably a little bit farther away, it's that consistency and reliability that, I think, continues to drive it.

Hill: With Chipotle, Jason, the digital sales have been strong for a while, but it seems like part of the story with this latest quarter, is the return of dine in customers.

Jason Moser: I think that's definitely a fair assessment. One could look at these results and say they are the product of a very challenging quarter from a year ago and maybe that investors should curb their enthusiasm. I think that's a mistake. I think this is a company that is poised to keep on winning. Chris, imagine what happens if they actually mentioned breakfast in an earnings call for once, which they didn't do this quarter by the way. But to those numbers into the digital sales that you were calling out there, digital sales grew 10.5% from a year ago representing 48.5% of sales for this quarter. But if you look back just a quarter ago, it was around half. It was a little bit more than a quarter ago, but a year ago, digital sales were greater than 60%. We're seeing that moderate a little bit. That speaks to your point about people actually being willing to either go back into the restaurant or pick up from the restaurant. But all-in-all, when it comps up 31.2% restaurant level, operating margin up to 24.5%, that was double from a year ago. 

To me, this really is all about the opportunity because they are back to their peak $2.5 million annual average unit volume, now, they are gunning for $3 million. That's $3 million on average per store per year that they're aiming for. Now, for a company that is still running around 2,800 stores or so, they see an opportunity for 6,000 stores in total. You put the math together there. You are talking about potentially $18 billion in revenue based on those numbers in a company that's currently doing about $7 billion in revenue today. I certainly understand the optimism behind this stock. Yes, it's richly valued, but it's high-quality. It's a proven operator with a lot of market opportunity yet to capture.

Hill: Just real quick. I don't want you to get my hopes up here, but is breakfast a catalyst for Chipotle? Is that something they are considering? Because from an investing standpoint, we saw what all-day breakfast did for McDonald's shareholders a few years ago.

Moser: It is definitely something they continue to test. It's something that I think eventually will roll out and it represents incremental opportunity. If you can open your stores earlier in the day and get those additional sales, it really should do nothing but really boost that topline.

Hill: Starbucks reports their earnings next week, that stock also hit a new all-time high this week. You think back a year ago, Maria, every restaurant chain was struggling. A few months ago, hiring was a huge challenge for most, if not all of them. But you look at how Chipotle, Domino's, and Starbucks are all performing. It seems like these three are starting to separate themselves and show everyone else, this is what it takes to succeed both in terms of hiring, how we treat our employees, and how we deal with our customers.

Gallagher: Yeah. I think it's a combination of all of those things and it's food that's good for delivery. I think delivery is going to continue, and there will be a lot of people. If you're bored of cooking and maybe you're not quite sure that you want to go back to restaurants yet, these are good places to get delivery. Or in Starbucks' case, you just go in and out really fast. Chipotle as well, you just go in and out, even if you're dining in, you may dine outside. I think it's just interesting to see how consumer habits will shift in terms of how much loyalty they have to these companies.

Hill: Well, and Jason, a point you've made before. I know Starbucks has lagged the other two, but the mobile app that Domino's and Chipotle have developed really is key to their success.

Moser: Yeah. I don't understand how any business out there today can't be focused on a mobile presence. This is just where the consumers are and that is not going to change. The companies like Chipotle, Starbucks, Domino's, Papa John's, they had the well with all doing to make these big investments and to take this chance so early into the game, and it's really starting to pay off.

Hill: Snap's second quarter included an adjusted profit that apparently no one was expecting. Daily active users are up, revenue per user is up, and shares of Snap up more than 20% on Friday, Maria.

Gallagher: Yes. When you think about social media in general, I think the real question is, how much time can people waste on these apps every single day? Snap has continually proven that it's a lot of time. They reached nearly 300 million daily active users. Daily time spent on the app per user grew over 60% last quarter. Revenue was up 116%, revenue is up over 100% in North America, 94% in Europe, 86% in the rest of the world. People are spending a lot of time on apps. It's an integrated part of their daily habits. If you have those top 5, 10, you have Snap, you have Twitter, you have TikTok, Facebook, and Instagram. People will rotate through all of them throughout their days. On average, a user of social media spends over 2.5 hours every day on these apps, and you filter between all of them. I think that Snap specifically continues to prove just how a lot of people spend a lot of their time and that leads to a lot of advertising dollars and spending on these platforms.

Hill: It is interesting to see how this business has grown because when they were going public, a lot of the questions were around monetization. But as you said, their ability to not just help people waste time, but also to satisfy advertisers has been so key to their growth.

Gallagher: Yeah, I am a person, I'm always an advertiser's dream, I get any targeted ad, there's a 90% chance I want it and I buy it. You see in all of these social medias, they understand your spending habits better than you do a lot of times. I don't mind it. When I go, I know that there's a lot of concerns, but I like scrolling through the apps and seeing targeted ads for stuff because a lot of times, it's stuff I want, it's not something random. It's targeted to you, which I think is useful.

Hill: Shares of Netflix went down a bit this week, after a less than amazing second quarter. Profits were lower than expected, but they added 1.5 million global subscribers, which puts them somewhere in the neighborhood of 210 million paid subs, Jason.

Moser: Yeah. I think this was a lot more of what you would expect, I think from a company that continues to make really big investments in content and to quantify that streaming obligations now stand at just under $22 billion versus just over $19 billion at the end of 2020. That's the fuel that keeps this engine running. No surprise there. But you said it, global paid subscribers exceeded the guidance they set out last quarter, that's good to see. Always looking for management to exceed their targets. Not so worried about Wall Street targets. They did acknowledge recent lumpiness for obvious reasons. Asia-Pacific, believe it or not, represented the crux of the growth there in global subscribers and average revenue per membership was up 4%, excluding currency effects. I think, really, probably the biggest story for the quarter for Netflix is this investment that they're making in gaming. Remember, they just recently hired Mike Verdu to serve as Netflix's Vice President of game development. Ultimately, they view gaming as another content category, something akin to their expansion into original content. It's going to be something that's included in members' subscriptions at no additional cost. It's going to give them the opportunity to test and learn there. 

Who knows, if it gains traction, then they can do more with it, but I think this is all really pointing toward Netflix's ultimate aspirations of just becoming that modern-day 21st-century multimedia company. It's not going to be just video streaming, they really do have bigger aspirations.

Hill: Coming up; a reminder that comfortable footwear can be rewarding for your portfolio, as well as your feet. Details after the break, so stay right here. You're listening to Motley Fool Money. 

[...] 

Welcome back to Motley Fool Money. Chris Hill here with Maria Gallagher and Jason Moser. You can catch Motley Fool Money every week on your favorite podcast platform and on radio stations across America, including our newest affiliate, WHGC in Holland Michigan.

Moser: Welcome to the family.

Hill: Welcome indeed, shares of Crocs up nearly 20% this week. After the footwear company put up record revenue of $640 million in the second quarter. Maria, Andrew Rees took over as CEO four years ago, Crocs, they were at $7 a share and today it's at $130.

Gallagher: Crocs is a shoe that I judge but as a stock that I'm interested in, people started buying these in the pandemic and they have no interest in stopping, they appeal to such a wide audience. I mean, I was thinking about it. How many other brands can have partnerships with Balenciaga, Justin Bieber, Drew Barrymore, and Bad Bunny. It leads to consistent bits of revenue, like you said, with the past quarter revenue of $641 million, which translates to 29.1 million shoes sold. This was their 17th quarter up double-digit e-commerce growth. It raises guidance for this full year. It's really an interesting stock, even if I don't think I'll ever buy the shoes.

Hill: Digital sales is pretty interesting to see because there are companies in the apparel space that really struggle with that. I think it's one more testament to Rees and his team that they've been able to do that with their digital sales.

Gallagher: Yeah. I mean, their digital sales were up 25%. They are about 36% of their second quarter sales. There are a good portion of their sales right now through digital channels and I think the good thing is with Crocs, I think you're pretty sure you know what size you are when you see them. There's not a lot of versatility in what you're getting.

Hill: Earlier this week, Zoom Video announced it is buying Five9, a cloud-based call center operator for $14.7 billion in stock. Shares of Zoom Video went down a little bit this week. Jason, are there people on Wall Street who think they paid too much or do they just think this isn't a good acquisition because of Five9's business?

Moser: Well, no. I think it's just always the burden of proof is on the acquirer to really show that it makes sense. Honestly, I looked at it and the first thing I thought about it, reading about this deal on Zoom's Investor Relations website was one word, Salesforce. I think it's fair to view Zoom on the same playing field as Salesforce with this deal, it certainly shows management's grander aspirations. When you look at what Five9 does, they run virtual call centers, they essentially open-up the lines of communications in today's multichannel world. So I mean, customer service agents can respond to inquiries across all platforms. It is ultimately about the market opportunity, Zoom definitely needs to figure out how to build out an arsenal of capability beyond its core competencies. It's not very well thus far, but they need to leverage that expertise in communications. I think this is one strong way to do it, frankly. I mean, if you look at the market opportunities, Zoom sees that total addressable market today at around $86 billion. But if you look at the total addressable market in this space by Salesforce's judgment and Salesforce is a bigger business, they do more things. All of a sudden, you're talking about a $175 billion market opportunity. There are a lot of dollars out there. Even just a little success here can result in some big numbers for Zoom. In regard to the deal with all stock, they're taking advantage of a strong valuation. It'll dilute Zoom's current share count by around 12.5%, but Five9, strong business, 58%, 60% gross margin is prices that deal at around 30 times less. That's pretty much in line with the way a lot of these companies are being valued today.

Hill: Shares of Johnson & Johnson went up a bit this week after second quarter profits in revenue came in higher-than-expected. J&J also raised guidance for the full fiscal year. Maria, this is one of those quarters where I think if you're a shareholder, there is a lot to like.

Gallagher: Yeah, I think Johnson & Johnson is a company that even if you don't realize it, it just touches your life almost every day. It had global sales of $23.3 billion, and that breaks down to three segments. The first is worldwide consumer health sales, which was up about 13.3%, the brands we know and use, like Aveeno, Neutrogena, Motrin, Zyrtec, and Band-Aid. Then you have pharmaceutical sales, which were up 17.2% and that is their largest segment, that selling medications from problems like plaque psoriasis to immune-inflammatory diseases, prostate cancer, and then you have worldwide medical device sales, which that section was up over 60% with everything from surgical vision to hips and spine devices. It's just such a behemoth and there are so many moving parts to it. In this quarter, at least all of these parts seemed to be moving well and moving in the right direction.

Hill: Is it safe to assume that Johnson & Johnson is one of the companies that benefits from an increase in elective surgery? Because that's something, for all the obvious reasons, we've seen a big reduction in that over the last 15 months.

Gallagher: Yeah. When you look at their medical device platform, you see so many things. A lot of eye surgeries, which I think is one of those elective surgeries. I think that will help.

Hill: Shares of Boston Beer Company falling more than 20% on Friday, after second quarter profits and revenue came in much lower-than-expected. The company said sales of their hard seltzer brand truly were weaker than they had projected. Jason the stocks down more than 20% in a single day. How bad were the hard seltzer numbers?

Moser: Chris, you live by the seltzer, you die by the seltzer, my friend. I'm unfortunately not surprised to see the market's reaction based on these numbers. I'm a little surprised though to see these numbers. I mean, that's a pretty steep drop-off in seltzer demand. We know that their beer business has been having some problems for a while now. Ultimately, what does boil down to was they thought there was just going to be greater demand for seltzer than materialized. They had really devoted a lot of their production to seltzer, less so to their other offerings like Twisted Tea and whatnot. Thanks to competition, thanks to the economy, opening backup, people getting out of their house, less pantry stuffing. We just saw lower numbers in the demand for their seltzer product. Depletions of 24% were down from 48% just a quarter ago. They made some significant revisions to guidance as well. When I say significant, I mean, they took full-year earnings per share from a range of $22 to $26. They reduced that to $18 to $22. They reduced shipments and depletions from 40% to 50% to 25% to 40%. You put that all together, now, with the sell-off today, the stock is trading at somewhere around 35 times full-year estimates. That actually seems pretty normal for what is a high-quality business with powerful brands. I think there was just a lot of enthusiasm baked into that stock price based on that seltzer performance that they had seen over the past year. At some point, you have to be able to deliver those numbers if you don't, the market is going to correct the stock price based on those new expectations. I think that's just what we're seeing here today.

Hill: Is there an opportunity for them this fall with hopefully more people returning to stadiums for football games or is that not anything they are projecting?

Moser: I think there's plenty of opportunity as the economy continues to open back up. They have said the on-premise sites, you're talking about people going back to restaurants, games, and whatnot. That absolutely is an opportunity. The competition in the space has just heated up so much. I think that's going to make a big difference.

Hill: Jason Moser, Maria Gallagher, we'll see you later in the show. But up next, Eliot Brown from The Wall Street Journal on the incredible rise and staggering fall of WeWork. Stay right here. This is Motley Fool Money. 

[...]

Welcome back to Motley Fool Money. I'm Chris Hill. In 2019, in the span of just a few weeks, WeWork went from being the most valuable start-up company in America to losing more than 80% of its value. How it all started and how it all came crashing down is brilliantly captured in the brand new book, The Cult of We: WeWork, Adam Neumann and the Great Start-up. Eliot Brown, a Wall Street Journal reporter and co-author of the book, joins me now from New York. Eliot, thanks for being here.

Eliot Brown: Happy to be here.

Hill: Let me start at the beginning for you, which was 2013, you're covering real estate, you meet Adam Neumann for the first time. What was your impression of him?

Brown: I was interested in WeWork because they were this expanding office space company and doing co-working and that was a trend I was interested in and was immediately just captured by how much energy this guy had. He was not the boring suit of a landlord that I was used to. He just starts in name dropping like Ashton Kutcher and Rama Manual and shows me a video of their summer camp with beer and him on a boat in the lake and it's like, "Wow, this is fun." Then the other main thing that stood out was -- there a couple, but he, one, was very insistent like, "Oh, you are a real estate reporter, we're in a real estate company, so I don't think you should be the one to write about us." That's one thing and then related, he just had this way of talking about the future that at the time, I was like, he was describing how when they open up in Portland in nine months, they will be filled within two weeks and he just said with extreme confidence. My thought was, "Wow, that's amazing. That's good business." Then afterwards, I thought, "Well, how would he know that? You can't know what's going to happen in nine months." But even the moment I was really there. I know he's very friendly and gracious and he really was just so warm and then you can really see why people get a lot of money.

Hill: One of the things I was thinking about as I was reading the book that you and your colleague, Maureen Farrell wrote was something that behavioral economist Dan Ariely had said, which is how story is more important than data. Story has emotion, but data does not, and Adam Neumann was really good at telling a pretty compelling story both to his employees and investors, wasn't he?

Brown: Yeah. Actually there's a moment, we have an anecdote in the book, where he says the quiet part out loud. He said almost exactly what you just said. He's in a meeting with the CEO of Compass, a real estate company, and Adam was just obsessed with valuation and he tells the CEO of Compass, "Why do you think your revenue multiple is worse than mine? Why are you valued so much less compared to me based on your revenue?" He has them all around the room and they each say something, everyone in the office, and then he just says, "You're all wrong, it's because of my story." He was right. I mean, that is the reason that WeWork was valued essentially 20 times higher than a comparable real estate company doing the same thing.

Hill: Not to leap to Adam Neumann's defense, but there is a pretty rich history, particularly in Silicon Valley among start-ups, the whole idea of fake it 'till you make it. Early on, it doesn't seem like there were necessarily a ton of red flags.

Brown: Yeah. I think that's right. I think that's probably why they got one of the premier venture capital firms to invest in benchmark early on. Actually, if you go back, WeWork's known for just having these completely outside of its losses in the billions, but they actually had a profitable year in 2012 by their accounting and that was one of the things that attracted benchmark to like, "Wow, not only does this guy have a story, and it's just like it's outsized personality that tends to be the type of entrepreneurs we invest in, but they also have a business that makes a profit. We don't see that very often." The thing that everyone was forgetting is that most normal businesses raised half profits, that's for the businesses. The issue is WeWork was never something designed for venture capital where you fund investment upfront in building software, and then reap the rewards later once it grows to a certain scale.

Hill: I want to come back to venture capital in a second. But first, one of the great things about this book is there are a lot of anecdotes about excess, both in terms of behavior but also in terms of how money is spent. What was the first indication that you had? That's something I miss was happening either in the business of WeWork or in the corporate culture.

Brown: Two separate answers. That one is pretty clear to me where I was coming as a real estate reporter and then I found out their valuation. I was like, "Why is it worth $1.5 billion? I know what the building is worth and they don't even own their space, and the amount of space that they lease should bring them nowhere close to $1.5 billion." Then when you combine that with how they insisted that they were a tech company and they weren't, that outsourced lightbulb where l was like, oh, I get it now. That's why they said they're a non-real estate company because they need to have the story to get the valuation. Then on the cultural side, it was later. After I was learning more in digging in because I was really interested in what this weird company that was saying it wasn't a real estate company was. Just like started to come on these anecdotes of these stories of just all of the drinking and excess where they would just have passed tequila shots out to the entire staff, and cause that culty-ness of it where Adam likes tequila and therefore the entire company drinks tequila. Then I started to learn that there is this tiny series B company, meaning they just raised their second round of venture capital and Adam was only flying private basically. Private planes are extremely expensive. A round trip ticket to Tokyo is like $250,000 in the plane that Adam will travel. So that's more than a first-class ticket. [laughs] That was another pretty quick sign and it's like, "What's going on at this really tiny office space subleasing company that I'd like to cover?"

Hill: One of the things that comes up repeatedly in the book is the idea of oversight. Because as investors, we like to think that any business that we're investing in has adults in the room and has some measure of oversight, whether it's the board of directors or whatever. You mentioned a benchmark. WeWork has Goldman Sachs, JPMorgan Chase, Fidelity, T. Rowe Price, some of the gold standard names that you would want to be involved with. Then SoftBank comes along. I would love your thoughts on the relationship between Adam Neumann and Masayoshi Son, because part of me thinks, well, it could've been anyone with deep pockets to fund this company, but Son comes along and tells him, "You're not being crazy enough," which is probably not the advice that Adam Neumann needed to hear.

Brown: When that happened, the staffers who were around Adam a bunch and he'd meet with Masa and then he come back from these meetings where Masa would tell them to be crazier and they would just like put their hands on their palms because it's like Adam, by his own telling, it is like crazy already and then he'd be told you aren't thinking big enough. They were like, "Jesus, we just bought a waiver for our company, what are we going to do next?" I think that oversight was really lacking before SoftBank. I mean, to be clear, they were 42% of a wave pool company before SoftBank came along and they were riding private all the time. They just didn't own a jet yet. Then after SoftBank came in with all this money, they started to do really crazy things. Whereas just like let's start our own elementary school and Adam's mind went to megalomaniac level where he's like, "I could be president of the world, and I can live forever, and I need to have eight homes." So I think SoftBank was a real accelerator and it was the type of thing where I initially came into this thinking, "Well, people who have billions of dollars, it's not going to be as absurd but it's just like throwing money around. There's going to be more thoughts that go into that." But I guess one of the main lessons is all levels, I mean, so much more reckless than I thought the financial system was. At the mutual funds and SoftBank and private-equity fund, you have the principles, the leaders of these firms in a one-on-one meeting with Adam, or with 3&3, and in the room with him and within minutes are convinced to give an investment, and then they're like, we'll do due diligence. But then the analysts would come back to their firms and they would be like, this is a real estate company, and it's valued at 20 times a real estate company. This is not a good investment and they will be like, we're going to do it. The process was there to look at it, but the decision had already essentially been made. The recklessness was a quick decision and the reckless part of it was ignored.

Hill: What do you chalk that up to? When they do the due diligence, the analysts come back, say, "No, this is a bad investment, no, we're going to do it anyway." Is it that there's so much money to go around in terms of venture capital? Is it fear of missing out? What is it?

Brown: Yes and yes. I think broadly what I learned, and this is not new to anyone who studied the history of these things, bubbles where frenzy is really just work minds. If you are an investor, it's a lot harder to have critical thinking. In the same way when a stock goes up 10X, then suddenly, there's more people that are thinking, oh, well, it goes up from here. Theoretically, the worst thing you should be thinking after a stock irrationally just jumped up 10x, because it was more overvalued than it was presumably. I mean, I think that what happened in a bubble is, people don't think critically and there might be all these negative reasons, but there's just one positive reason and they zoom in on the positive and ignore the negative. In terms of the FOMO, these guys needed to spend money, so the example with Masayoshi and SoftBank, what we learned is, SoftBank got its check of $45 billion from the Saudis or committed in November of 2016. In December of 2016, Masayoshi Son meets Adam, and in 12 minutes like a pit stop on the way to Trump Tower to meet the president-elect, decides to give him $4 billion and so commits to the second-largest venture capital investment in the U.S. ever. There has to be a relationship there between, I just raised a $100 billion fund, I need to spend it, I need to show my investors that I can get into big companies. Uber and Airbnb probably don't want my money, where certainly not yet, here's this guy, he can absorb $4 billion, and he seems to have all the qualities that I like, in terms of a hard charging visionary founder who speaks really fast.

Hill: Let's cut to August of 2019. WeWork is getting ready to go public, they filed their S-1, and then people actually read it, which is when the dam breaks. This is something you pointed out in the book. When companies go public, there can be businesses that have their skeptics, but there will always be defenders, there's always someone willing to make the bull case for the company. WeWork's S-1 filing comes out, and it is just blood in the water. I mean Scott Galloway, Jim Cramer on CNBC, Matt Levine at Bloomberg, and God knows how many people on Twitter are going through it, and just ripping this apart because they can't believe what they're reading.

Brown: Yes. It's funny, WeWork was my baby, and I've been covering it forever and doing all these stories that had not been sticking, where I'll currently look like a real estate company and is valued like a software company. But then I'm on vacation, and out of reception, I come back with all these alerts, suddenly the world gets it. This is the emperor's new clothes moment or the parade moment in the emperor's new clothes, where people suddenly start saying, no, he's not wearing clothes, like it's not a tech company, because I think it was too absurd. This didn't even get press because it was so esoteric. But he restructured the entire corporate structure of the company to give himself better tax treatment on its stock options. A compensation package that would give him another 7% of the company or something like that, if we hit certain targets. These were things that didn't even get mentioned because he's leasing properties to the company, and company's paying him millions. It was just this endless period of things you can write about, and then people rightfully also had been starting to question why companies just become routine to lose $2 billion a year before going public. That's not a normal thing in start-up history.

Hill: We were talking during the break, this is two years ago, and I know a lot of people have short memories, but it is worth pointing out. I don't recall ever seeing anything like this before. In real-time when it was happening, the idea that they're going to go public at this huge valuation, and in the span of a few weeks, we're going to cut our valuation in half, or we're going to cut it even further and then investment bankers are basically saying, en masse, we can't get anyone to buy this, and the IPO has to be shelved.

Brown: These investment bankers, one of them told him it would be worth $96 billion a few months earlier. I mean, it was just so extraordinary of a moment in business and the market started to come back with a real fire afterward eventually. But at the time, for a brief while, it really iced over Silicon Valley start-ups. People having time trouble raising money, suddenly, all these companies that had been funded with the same thesis of light money on fire to try to grow revenue, they were suddenly told, "No, this no longer works." This predominant thesis of the era is wrong, and so they suddenly had to just start cutting. All of these SoftBank companies were laying off huge chunks of their staff, and it seemed it was going to be the end of the punctuation on the era of start-up and unicorn insanity. Then the pandemic happened and things changed.

Hill: Well, just like Theranos happened, and we thought, well, we'll never have that type of thing happen again, and along comes Adam Neumann.

Eliot Brown: Yes. Though, I think one of the funny differences between Theranos and WeWork is, Theranos was about a charismatic entrepreneur lying to convince unsophisticated investors like former Secretary of State to back the company, whereas Adam was able to use truth, but contorting it to convince sophisticated investors to see something as real, that wasn't. He taught sophisticated investors to look at a real estate company and see a disruptive start-up.

Hill: The book is The Cult of We: WeWork, Adam Neumann, and the Great Start-Up. It is already a best-seller on Amazon and by this time next week, I'm pretty sure it's going to be another best-seller.

Brown: I should give you the caveat, it's a micro category on Amazon, so we still need everyone's help, so please, buy a book.

Hill: It's a fascinating read. Eliot, congrats to you and Maureen Farrell. Thanks so much for being here.

Brown: Thanks for having me.

Hill: Up next, Maria Gallagher and Jason Moser return with a couple of stocks on their radar. Stay right here. This is Motley Fool Money. 

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Welcome back to Motley Fool Money. Chris Hill here, once again with Maria Gallagher and Jason Moser. Radar stocks, let's get to them quick. Rick Engdahl is our man behind the glass this week. He's going to hit you with a question. Jason Moser, you're up first, what are you looking at?

Moser: Yeah. Keeping an eye on PayPal (PYPL 0.64%), ticker PYPL. This war on cash staple has hit another 52-week high. This week, Chris, earnings are coming out next Wednesday. They're pushing on trillions of dollars annually through their networks now, and I want to hear how many times they mentioned the word, "Super-app" on their conference call on Wednesday. So, PayPal; stocks have a great year-to-date, up 30%, doubling the market, I expect more.

Hill: Rick, question about PayPal?

Rick Engdahl: Whenever I have to use PayPal, I feel like I'm in a little time machine back to 1998. Just like the user interface that I come up against. Is there anybody under 45 still signing up for PayPal, Jason?

Moser: No, I think they're all signing up for Venmo.

Hill: Maria Gallagher, what are you looking at?

Gallagher: I'm looking at Squarespace (SQSP -1.71%), ticker symbol SQSP. They went public in May of this year, and together, Wix and Squarespace power 55% of websites that are built with a website builder. I follow Wix a little bit, and I think it's important to understand the differences between Squarespace and Wix, and compare and contrast the two. It's done pretty well since it IPO'd, or did direct listing in May so I am interested in it.

Hill: Rick, question about Squarespace?

Engdahl: I am actually a Squarespace customer. I have a couple of websites that I haven't updated in a couple of years, but I'm still paying for them. I'm wondering how many more customers like me are out there? How much did they depend on dormant sites?

Gallagher: Interesting, it's like gyms. How many people are paying for memberships even though they never step foot into a gym? That's something I'll look out for.

Hill: Rick Engdahl, you got one of those two stocks you want to add to your watch list

Engdahl: To be honest, I own shares of both of them already so you both win.

Moser: All right, fair enough.

Gallagher: Yay, I'll take it.

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

Moser: Thank you.

Gallagher: Thanks for having us.

Hill: That's going to do it for this week's edition of Motley Fool Money. The show is mixed by Rick Engdahl, our producer's Mac Greer. I'm Chris Hill, thanks for listening. We'll see you next week.