The Jobs Report, Some Earnings News, and a Chat With Fiverr's CEO

The stock market hits a record high on a stronger-than-expected jobs report. Square (SQ 5.04%) announces plans to buy Australian fintech company Afterpay for $29 billion in stock. Etsy (ETSY 2.86%) reports earnings and Weber Grill (WEBR) makes its public market debut. In this episode of Motley Fool Money, Motley Fool analysts Ron Gross and Jason Moser discuss those stories and weigh in on the latest from Cloudflare (NET 3.77%). They also share the stocks on their radar. Plus, we revisit our July interview with Fiverr International (FVRR 4.07%) CEO Micha Kaufman and talk about the future of work.

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 Aug. 6, 2021.

Chris Hill: We've got the latest headlines from Wall Street. We've got a conversation with Fiverr CEO Micha Kaufman. As always, we've got a couple of stocks on our radar. But we begin this week with the big macro. The U.S. economy added 943,000 new jobs in July. The reports for May and June were revised to add an additional 119,000 jobs and the unemployment rate fell from 5.9% to 5.4%. That is a big drop for a single month.

Ron Gross: Not too shabby, two strong months in a row. I think this is really positive. Job gains, perhaps not surprisingly, were strongest in leisure and hospitality. As people get back to work, added 380,000 positions, 253,000 of those came in bars and restaurants. Again, people coming back to work where they're badly needed. Those industries have been really labor constrained for a while. Next was government jobs, then professional and business services. The wider unemployment metric that we sometimes talk about known as U-6, that fell pretty sharply to 9.2% from 9.8. The Fed is targeting 4.5% for the general unemployment rate. As you said, we're at 5.4% now. I think the Fed believes we're on target for something in the mid-fours next year. That would be pretty exciting and approaching full employment. I think it's likely the Fed will start to taper their bond buying program later this year, if things stay on course. Ten-year interest rates ticked up on this news, the tech-heavy Nasdaq was down on Friday probably as a result of a concern over higher interest rates. I'll just add that the stock market's a funny thing. Everyone wants a stronger economy, but strong economic data will cause the Fed to ease up on its stimulus policies and that will hurt stocks and people don't like that. It's hard to know what people are actually rooting for. I hope it's a strong economy.

Hill: Yeah. There absolutely is that situation where people are like, "Oh, we want the economy to come back," and then you get news like this and stocks are, it's like, "No, not like that, not when it affects my stocks."

Gross: Exactly. Delta obviously is the wildcard here. I am concerned, but not panicked. I think our economy is going to get through that.

Hill: The war on cash just got more interesting. Square is buying Afterpay, the Australian payments company, for $29 billion in stock. Despite that dilution, Jason, shares of Square are up 12% this week. That's a nice big jump considering how much they paid for Afterpay.

Jason Moser: Yeah. You said the D-word there, dilution. It is something that's going to impact that share count by close to 25%. I think the skeptic probably looks at this deal and thinks that Square is overpaying for what really just amounts to a feature. The optimist, the glass-half-full investor probably looks at this and says, "Well, sometimes it's easier to buy it as opposed to building it." Maybe in this case, that makes more sense for Square. I think for Square, this is a combination of buying it being easier than building it and ultimately, time being of the essence. I feel like they felt like they needed to get this deal done sooner rather than later. Hence, the inflated offer -- $29 billion, that puts Afterpay around 60 times gross profit. That obviously is not a cheap multiple. But I will say, at least the business is showing signs of success. This is a business that's grown revenue from $189 million in 2019 to $693 million in 2021. Gross merchandise volume went from $3.7 billion to $15.8 billion in the same period. Very similar cultures, very similar purposes. Yes, I think you would succeed in arguing that maybe Square overpaid for this. But by the same token, I think it's understandable why they did. Ultimately, I think this could be a nice added feature to the Cash App. Then that's ultimately what this really is all about, is building out that Cash App capability so that consumers and merchants alike have as many decisions and options as possible.

Hill: Somewhat overlooked in all this news is that Square also came out with their second-quarter report. Anything in particular stands out to you?

Moser: Nothing in particular. It does feel like it's just steady as she goes here with this business and that's a good thing. It is really all about sellers and the Cash App. But if you look at numbers, total net revenue was $4.68 billion. That was up 143% from a year ago. Now, clearly we're coming from a tough time a year ago. There is a rebound factor there. If you exclude Bitcoin, which I think we always should do in this case with Square, net revenue for the quarter was $1.96 billion. That was still up 87% from a year ago. Cash App continues to deliver strong growth. It generated $3.33 billion of revenue and $546 million of gross profit. Gross payment volume for Square this quarter rose 88% to $42.8 billion, nearly 4.5 million customers. This was an interesting stat I saw. Nearly 4.5 million customers held a stock or an ETF in the second quarter alone via the Cash App. That was up more than three times from a year ago. Again, going back to the capability that they are introducing, that Cash App, which is now reaching over 40 million monthly transacting customers. There are just a lot of things going on with this business. But they all really come back to building out the capability and the functionality of that Cash App. Again, merchants and consumers have as many options as possible.

Hill: Shares of Etsy fell 10% after its second-quarter report showed profits higher than expected, and revenue growth of 23%. There's a lot going right for Etsy, Ron, but this is another one of those times when the guidance outweighed the results.

Gross: Yes, agreed. They definitely beat expectations, but investors are focused on the less than expected number of active buyers and what may be on the horizon in the future. I think it's essential to remember that Etsy benefited from a huge pull forward of buyers during the pandemic. In 2020, they acquired 38 million new buyers. That's nearly two times the number of new buyers acquired in 2019. I don't think it should be a surprise to investors that these numbers are slowing down. Overall, it was a solid quarter, consolidated gross merchandise sales, GMS, up 13%. If we remove the impact of lower demand for masks, the Etsy stand-alone business actually grew 31% year over year, on a two-year basis 153%. These are strong numbers. Consolidated revenue up 23%. As I said, new buyer growth slowed post-pandemic, but they did add 8 million new buyers. Again, I think investors wanted to see more than 8 million there. Net income up fractionally, up about 2%. But as you said, the guidance is a little bit troubling. The management said the comps get tougher as they progress through 2021. Again, I don't think that necessarily should be a surprise, especially considering the anniversary of strong pandemic results, including the absence of really strong demand for masks and stimulus checks, which helped the business. But they're doing what they need to do. They're focusing on improving customer service, buying experiences. They made two strategic acquisitions in July. I think the business is on track and investors just need to make sure their expectations fit with reality.

Hill: Cloudflare hit an all-time high this week, but second-quarter results for the cybersecurity company had the stock falling a bit on Friday. Jason, Cloudflare is not profitable yet, but CEO Matthew Prince appears to be doing a nice job of making it clear to Wall Street analysts that he is taking a long-term approach to profitability.

Moser: You are absolutely right and to that point -- to me, this company feels more like a must-own, given leadership's drive and focus on innovation and creation. It's a very Amazon-esque approach in that regard when it comes to profitability. The CEO, Matthew Prince, interestingly, he can be very critical of Amazon and its strategies when it comes to Amazon Web Services. But all in all, he still takes that very long-term approach and I think that's going to work out very well for this business and investors. In regard to the numbers, revenue up 53% from a year ago to just over $152 million. Dollar-based net retention, 124%. That was up 900 basis points. Again, that tells us that not only are they keeping their customers, but they're growing the services that they're selling those customers. Speaking of customers, they continue to bring more of them through the door. They added roughly 140 large customers for the quarter, bringing that total to 1,088. Remember, those are customers who spend at least $100,000 or more with the business. It accounts for more than half of total revenue now. They are important. But even more interesting is their $1 million large customer cohort remains the fastest growing of those large customer cohorts. Again, speaking to growing those customer relationships over time, margins continue to improve. They're seeing operating leverage playing out of the business there. 

They landed a pretty sweet deal with the federal government, which is going to use Cloudflare Zero Trust solutions. Just back to your point in regard to patience and profitability, CEO and founder Matthew Prince said on the call that they have a long-term operating margin of 20%. When they get to that break-even status next year, they set that expectation this quarter that they are going to continue to reinvest in this business. They are not focused on just getting as profitable as quickly as possible. They have a lot of ideas and things they want to continue to build. This is going to be a business where they continue to use those profits to reinvest and grow. We've seen plenty of examples out there through the years where that works pretty well.

Hill: Shares of CVS Health basically flat this week despite the fact that second-quarter profits were higher than expected, and they raised guidance for the full fiscal year. Jason, CVS is planning to increase wages and invest more in their stores and digital platforms, and let's face it, in the short term, that's the kind of thing that can weigh a stock down a little bit.

Moser: Yeah, there's no doubt about it. This hasn't been the greatest investment over the past several years, but it is a business that's been somewhat in transition, so we have to give them a little bit of credit there. They made a big acquisition, obviously, recently with that. I do feel like there are a couple of catalysts on the horizon that could help them. I think there will be some goodwill and some brand equity that comes from their role during the pandemic, and they've certainly been seen as a part of the solution in that regard. Further, I do think your point about the investments in digital, I think those are going to continue to pay off. Just to put a little context around that, management noted in the call that the digital retail customer spent 2.5 times more in their store, and also managed one-and-a-half times more prescriptions than non-digital, and they remain customers longer than non-digital patients. I think that we're seeing a tangible impact of those investments in digital, which should work well for them further out. But yeah, to your point, they will be raising the minimum wage. That is something that will impact their cost structure. $600 million is the estimated labor costs over the next three years. All and all, it was a good quarter, revenue was up 11.1% versus the prior year, strength in all three major business segments, but the retail business segment grew the most, 14.2% growth there, driven primarily by prescription volume and COVID testing. It's a bit of a sleeper there, but I feel like they're making the right investments. There could be some better days ahead for CVS.

Hill: Big week for MercadoLibre, the leading e-commerce and fintech platform in Latin America. Second-quarter profits and revenue came in higher than expected, and Ron, the stock is still down from its high for the year, but up 12% this week.

Gross: Yeah, the stock was a little bit lackluster; two years up over 150%, so really strong there. They beat expectations on the top and the bottom lines. Unique active users grew by 47%, reaching almost 76 million. Gross merchandise volume up 46%, total payment volume up 50%, and total payment transactions increased 80%. These are obviously very strong numbers. The logistics business shipped 231 million items during the second quarter, that's up 46%. This all translated into net revenue growth of 103% on a currency-neutral basis, that's really strong results. The three main areas all put in pretty good results. Brazil, the weakest at 37% growth, Argentina, the best at 110%, and then Mexico at 96%. Gross margins took a bit of a hit, down 4.3% due to some costs associated with the expansion of logistics fulfillment centers, which is a good way to spend money. I think that's necessary. They did improve sequentially. That's great. Operating expenses, well controlled. This all boils down to a 67% increase in operating income. Very strong results, the stock's reacting appropriately.

Hill: Wayfair's second-quarter profits came in higher than expected. Shares of the online home furnishings retailer rose nearly 10% this week. Jason, Wayfair got a lot of people trying them for the first time during the pandemic, and you look at this quarter, it seems like they've done a nice job of keeping those new customers.

Moser: Amen to that. They've got a long track record now of doing just that, and it feels like this quarter, it was really a statement quarter. Whether the economy opened, the economy closed, pandemic, whatever is going on, this business should keep on doing well, and I think that's what this quarter really proved. Management's quite convinced that even with some short-term normalization regarding brick-and-mortar retail, as the economy reopens and people get back out, e-commerce share is doing nothing but gaining steam, and I think based on the numbers they lobbed up here this quarter, that's proving out. CEO Niraj Shah noted on the call, consumer balance sheets are strong, interest in the home is not going away, even if there is some of the shorter-term normalization toward bricks and mortar. To those numbers, net revenue, $3.9 billion. It was actually down 10.4% from a year ago. But it's worth noting, too, this is the toughest comp they've ever faced, based on what happened a year ago. Those sales numbers were dragged down a little bit by the U.S. There, those sales numbers in the U.S. were down 15.2% from a year ago. But it's worth noting that revenue was up 11% sequentially. Gross margin, very strong, 29.3%. That's versus 30.7% a year ago, and management's longer-term target is still in the 27-28% range. But when you look at just the customer numbers, the retention numbers, active customers reached 31.1 million, that's up 19.6% from a year-ago. 

Trailing-12-month revenue per active customer, $478, that was up 8.6% from a year ago. That repeat customer business. Now repeat customers place 75.6% of total orders in the quarter versus 67.4% a year ago. Those are customers they don't have to keep paying to acquire. It really has a big impact on this company's financials as we're seeing. It's really interesting to see them in this new stage. They're actually buying back stock. Maybe we're seeing this company entering a new stage of its life cycle so to speak, where they have a little bit more confidence in how they invest those incremental dollars.

Hill: Shares of DraftKings up a bit this week after second-quarter profits and revenue for the sports betting company came in higher than expected. DraftKings also raised guidance for the full fiscal year. Maybe not a surprise, Ron, when you consider we're just a month away from the start of the NFL season?

Gross: Yeah, everyone is excited for football season. Go Bucs. This is going to be a great season for sure. Strong quarter, beat expectations. Still not profitable, they're building something here. As you said, they did raise revenue guidance. Some volatility in the stock. Investors may be wondering why. On Friday, they disclosed an investigation by the SEC concerning allegations over, ''Black market gaming and money laundering made by short-seller Hindenburg Research." Again, short-seller, so take that with a grain of salt. We need to learn a little bit more as the SEC investigates. But the quarter was very strong, revenue up almost 300%, positively impacted by the return to a more normal sports schedule. They're migrating to their proprietary in-house online sports betting technology. They expanded ties with Major League Baseball, with the NFL. They joined rival FanDuel and Caesars recently to become an official sports-betting partner of the NFL. They're live in 12 states that collectively represent about 25% of the U.S. population. I expect that will increase over time as will this business and the results they put forth.

Hill: Feeling good about the Bucs repeating?

Gross: They're in top 2.

Hill: For people starting a small business, finding reliable freelance help has been a longtime challenge, one that Micha Kaufman wanted to solve when he helped start Fiverr, an online marketplace for freelance services. Founded in Israel in 2010, Fiverr now operates in over 160 countries around the world. In addition to co-founder, Kaufman is also the CEO and chairman of the board. Motley Fool Chief Investment Officer Andy Cross talked with Kaufman recently about Fiverr's platform, the company's culture, and the aim of starting the business in the first place.

Micha Kaufman: The idea behind the company was really to make the experience of buying a digital service as easy as buying on Amazon. We really wanted to create an e-commerce experience. Now it's easier said than done, because when you think about digital services, they're very nuanced. There is no SKU system for digital services. We needed to create a technology that allows freelancers and agencies to productize their services so that they can be offered in a simple manner. The experience would be going to a catalog, you either browse by categories or you do a search. You see everything, you see who's offering the service and what's their rating and their customer reviews. You see exactly what they're offering, you know exactly when it's going to be delivered, and you know the exact price. We don't do hourly rates, it's the exact price. So whatever prices you see on Fiverr are the prices you should expect to get the service for. All you have to do is just click "Order" and you're done. This is a huge revolution for both sides of the transaction because before Fiverr, the average time that it took for anyone to find and engage with freelancers was about 30 days. It takes a lot of time. It's really very similar to dating, and it's very hard to do this matching. The average time that it takes a visitor that lands on fiverr.com to take their credit card and place an order is 15 minutes, and it's going down. Once you replace 30 days by 15 minutes, you're not going back. That's the beauty, that's the magic that comes with it. It really removes the majority of the friction and the inefficiency that existed in the freelancing space.

Andy Cross: Micha, there's lots of different freelancing around the world. It's a massive market. There's just lots of different kinds of freelance projects. Describe a little bit about who are the buyers, who are the sellers on Fiverr in general, and what types of projects are posted or required or asked for on the Fiverr platform.

Kaufman: Sure. Many years ago when we started the company, we decided that the go-to-market strategy for us is going to start at the very bottom of the market and allow freelancers to offer microservices, and focus on micro-businesses, the solopreneurs, the start-ups that are just starting. Over the years, we have gone upmarket, so it's the horizontal market. It started with about six categories, which are now well over 500 categories in nine large verticals. So you can basically find any digital service you can imagine and a few you can't imagine. Over the years, we took the company public starting more than two years ago. Ever since then, every quarter we report the addition of about 30 new categories every quarter. So it's a fast-growing catalog and the number of SKUs are just infinite.

Cross: Give us some examples of some of the digitals. I know there are so many and so many different categories, but maybe some examples for some.

Kaufman: It could be from the basic services of someone helping you find a name for your business, and then maybe helping you design a logo for your business, and then maybe creating a website for you, and maybe writing the content for that website. Maybe developing an app for your service. Or maybe that could be a spokesman service to present your product. Or that could be video editing, or that could be search engine optimization, or that could be someone providing a voiceover for something you produce. From very basic services to very advanced services. Actually some of the services are being offered, as I've said, not just by individual freelancers, but by agencies and studios that can actually tackle much more complex types of product, but keep the simplicity for the customer. If you need an app and that app requires scripting and content and design and the actual development and then to promote that app, you can find all of that as one service in the convenience of our marketplace. From the customer side it really provides a tremendous amount of access for small businesses, but also for multinational companies that require more advanced services. This is why we've created the Fiverr business to allow teams and groups within companies to interact on the marketplace together and define projects, define budgets, and have convenient management for all of that.

Cross: If I'm hearing you right, it started serving lots of small and medium-size businesses and still that's still a big part of your [...].

Kaufman: SMBs are 99.9% business in the U.S. It's a huge market.

Cross: U.S. is your largest market that you serve, although your global companies serve lots of different providers over the world. SMBs are such a key component, but you're also moving upscale a little bit. You mentioned Fiverr business, we can get in a little bit to that. You talked about solutions and milestones, some other news as you continue to offer and enhance your offerings, and also building a subscription business, which I want to talk more about. But talk a little bit about how the platform works. Let's say I'm looking for a service and Micha Kaufman's out there and has a great service, and he and I connect through the Fiverr platform. Let's just say the fee is $100, for example. I know you've talked about this in some of your presentations. Can you just walk through how the process works for you to actually get paid by me?

Kaufman: Absolutely. The magic here for freelancers is the fact that Fiverr is probably the first platform since the beginning of freelancing, whenever that was, that doesn't require freelancers to do anything to win a project. This is huge for them. Remember, before Fiverr, if you were just starting as a freelancer, you spend exactly 100% of your time chasing customers because you have none. Your business is to be your own marketeer. Over time that decreases, but we found, by speaking to freelancers, that it doesn't matter how successful they are, they continue investing about 30-40% of their time trying to find the next customer for the next week or month or quarter. On Fiverr, they don't need to do any of that, they just show up. They create a profile, they use our technology to productize their offerings, and then they sit back and relax. Next time they're going to hear from us is, "Hey Andy, you have a new customer. They already paid. Get to it. Just do the things that you love doing, which is not being a marketeer." Maybe you're a graphic designer, maybe you're a content writer. The way the fee is structured is very simple. 

The transactional portion of our business is 25.5%. Twenty percent comes out of the seller. But they know that, so they can price whatever they want to get on a net basis, so 20%. Then there's a transactional fee of 5.5% that comes from the buyer. That is it, it's as simple as that. Convenience. Again, since they don't need to spend so much time marketing themselves, 20% is actually not very high. This is why we're not getting pushback from our community. Fiverr doesn't just connect people, it is a platform on top of which the transactions are being conducted. We don't just solve access to talent, we solve all the secondary issues like contracting, invoicing, NDAs, secure communications, secure exchange of files, and storage of files, and obviously all of our rating system and so forth. By having the transaction happen on our platform, that provides us with a tremendous amount of data points that allow us to improve the service. We're always a partner to every transaction. If the system thinks that the freelancer might be late to deliver an order, the system automatically would ping that seller and remind them that they have their delivery date due. These are very rare cases, they don't meet that. The system could replace that freelancer with the consent of the customer while keeping everything streamlined so he thinks everything is simple. Beyond that, it provides us with those data points that allow us to understand how to do liquidity management in a smart way, and we have our own rating and reputation system that allows us to track hundreds of different data points. Every transaction is being used, that data is being fed to machine learning and AI to make sure that the next match is even better. Since we have tens of millions of transactions in our history, the system keeps improving itself.

Cross: Let's talk about the Fiverr culture. I know it's something you all spend a lot of time on thinking through different factors that go into culture. What makes the Fiverr culture unique?

Kaufman: The first thing maybe is the diversity of our team in our thinking. Fiverr is a company, it's called Fiverr International. The reason is that we didn't want to make this a specific country company. We really want to enjoy the fact that talent is global and so should our team be. We think that diversity that comes from different backgrounds, ethnicity and countries and languages add so much color into everything we do. It creates a lot of innovative ideas in the company. I think that this is one of the drivers. The second is the fact that people are extremely passionate about the mission. I've been an entrepreneur for almost 20 years. The likelihood of creating a successful company is some small number after the decimal point, but the likelihood of creating a successful company that is actually doing good, is almost zero. It's so slim. We've been so fortunate to be in a position where we change the lives of millions of people in a great way. This is a huge driver. We never forget who we work for, it's in our DNA. It's probably the largest freelancing community in the world, and this is how we treat it. 

Maybe you remember this, when we took the company public, the people that were up there ringing the bell were our community members, not us. This is how we think and this is how our team thinks. Then there are things that are within our operating principles and I've mentioned some which are thinking about simplifying everything. How to create simple, beautiful-to-use products that compress tremendous amounts of friction and inefficiency into something that would be super simple to use. Again it's easier said than done. It's the toughest thing ever, but you have a team that obsesses about that and it obsesses about the customer experience. I think that these are just some of the attributes that you have within the team which makes the culture really amazing. I think you sensed this and people tell me this. When they come to one of our offices or they hang up with us on Zoom, there's a sense of something really unique in the air. I love this thing. It's just incredible people.

Hill: You guys, we got another hot IPO. Weber Grill went public on Thursday and yes, technically the stock was flat on its first trading day, so the IPO itself was not the thing that was up, but the grills themselves Ron, I mean we're fans of the Weber Grill products, aren't we?

Gross: A lifelong customer and I will remain one for a very long time. Love my Weber.

Hill: Although we were talking during the break, Jason, it sounds like it for Ron, it's definitely for me, more of a fan of the business than the stock at this point anyway.

Moser: Yeah. I feel like that's a safe assumption there. Based on the S-1, it does feel like the use of proceeds, it was really just a bit of cash out there and an organizational structure. It looks like you're three minutes into a Tetris game. Chris, it just doesn't quite make sense, but I guess as time goes on, we'll figure more out about this business, but no question, a very, very high-quality product.

Hill: Ron, I think that's the problem. I have a Weber Grill, it's 15 years old. If they want repeat customers, they have to start making these things not quite as good.

Gross: They last for a while. I do replace my grates and my flavorizer bars from time to time, so there's a little bit of accessories here to purchase, a $9 billion market cap for this company. The IPO itself wasn't that in high demand, but they priced it right because of that and now you have the stock up a bit, so the bankers did well.

Moser: I'm pretty sure that's the first-time flavorizer has ever been used on this show, Ron. We talk a lot of grillers [...].

Gross: I'm not even sure it's the right word.

Hill: Let's go to the stocks on our radar. Our man behind the glass Dan Boyd is going to hit you with a question. Jason Moser, you're up first. What are you looking at this week?

Moser: Taking a look at Synaptics, the ticker is SYNA. Synaptics makes its hay selling its technology to large original equipment manufacturers, companies that make mobile products, PCs, other voice and video items. This technology covers a broad spectrum: chips, firmware, software, artificial intelligence, touch sensing, image, voice. Synaptics has a role in a lot of this stuff. Last year, we talked about this. It was a business in transition. Company that is really focused now on the opportunity in the Internet of Things. Management made a conscious decision to focus more on getting that profitability back. I'll tell you what. This week, the company announced results that show it's working. Revenue grew 18%. Earnings were up 75% as they continue to pursue that IoT opportunity which is now the largest part of the business. Stock had a terrific week. This is one that I've recommended in both services that I run here, which has been a tremendous performance so far. I'm looking for that to continue.

Hill: Dan, question about Synaptics?

Dan Boyd: Absolutely, Chris. Now, Jason, there are a lot of companies in this space, can you say anything about Synaptics' market share?

Moser: Yeah. Well, Synaptics' market share, it's one of the leaders in this space. It's got customers like Alphabet (GOOG 1.25%) (GOOGL 1.27%), Samsung, Sony (SONY 0.31%), Lenovo, to mention a few. While this is a very crowded space with a lot of options, Synaptics certainly does a good job of maintaining their share, because once you get into these devices and establish these long-lasting relationships with your big providers, they tend to want to keep you around.

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

Gross: I'm looking at 10x Genomics (TXG -0.79%), TXG, to see if I should add it to my personal biotech basket. 10x Genomics products allow scientists to look at the expression of genes inside individual cells. Dan, you will have to take my word for it that that is new and exciting, but I do absolutely need to learn more about it. Their flagship franchise called Chromium uses a razor-and-blade model that provides recurring revenue from consumables used to run experiments. Their Visium platform allows researchers to look at expressions throughout a tissue sample. These are important things for genomics. 10x has also moved beyond research into clinical diagnostics with two acquisitions earlier this year. Management is guiding for about $500 million in revenue. They also think this is a $15 billion industry, so leaves substantial room for them to grow from the $500 million where they are today.

Hill: 10x Genomics; Dan, you got a question?

Boyd: Yeah. Ron, 10x is in the name. Are we going to see 10X on the stock price too?

Gross: Well, that remains to be seen. That's a tall order, but this is the space to do it. If you are a biotech company or anywhere in the sector and you hit it, you've got the potential to grow significantly. We'll have to wait and see. Only time will tell.

Moser: Would you consider Weber to be a 10X opportunity, Ron?

Gross: I would not.

Moser: No. OK. I just wanted to confirm.

Hill: What do you want to add to your watch list, Dan?

Boyd: As much as I want it to be Weber I think I'm going to go with Synaptics on this one, because Jason convinced me.

Moser: Oh, we love to hear that, Dan.

Hill: Jason Moser and Ron Gross, guys, thanks for being here.

Gross: Thanks, Chris.

Moser: Thank you.

Hill: That's going to do it for this week's show. It's mixed by Dan Boyd, produced by Mac Greer. I'm Chris Hill, we'll see you next week.