Jamie Dimon Tells It Like It Is as Earnings Season Kicks Off

In this podcast, Motley Fool senior analysts Emily Flippen and Jason Moser discuss:

• Latest results from the big banks and tough comments from Jamie Dimon at JPMorgan Chase (JPM 0.06%).
• Pinterest shares rising on an activist buying 9%.
• Amazon's potential for dropping in-house brands.
• Unity Software buying Ironsource.
• BMW launching a SWaaS (seat warmers as a service) subscription.
• The latest from Microsoft, Netflix, Twitter, Disney, and The Trade Desk.

Motley Fool contributor Rachel Warren and Motley Fool analyst Auri Hughes talk with Jared Isaacman, CEO of Shift4 Payments, about the future of fintech.

Emily and Jason answer mailbag questions about new "night effect" ETFs and underrated investing metrics, then share two stocks on their radar: Vail Resorts and Outset Medical.

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 15, 2022.

Chris Hill: It's the most wonderful time of the year, earnings season has begun. Motley Fool money starts now.

It's The Motley Fool Money radio show. I'm Chris Hill. Joining me in studio, Motley Fool Senior Analyst, Jason Moser and Emily Flippen. It's good to be in the studio, once again.

Emily Flippen: No kidding.

Jason Moser: I love how you emphasize the "in studio".

Chris Hill: We are back in studio. We've got the latest headlines from Wall Street. We'll talk fintech with the CEO of Shift4 Payments, and as always, we've got a couple of stocks on our radar. But we begin with the start of earnings season. The big banks kicked off with second quarter reports from Wells Fargo, Citigroup, JPMorgan Chase, and others. Jason, as is often the case, the dominant headlines came from JPMorgan Chase CEO Jamie Dimon, who was not happy [laughs] with the general state of the economy, his business, and the stress test that banks have to go through.

Jason Moser: Yeah, I feel like it's the stress tests that really rubbed him the wrong way. Generally speaking, the bank performed pretty well. Revenue was essentially flat at $31.6 billion for the quarter. Home lending revenue was down 26 percent from a year ago, investment banking revenue down 61 percent from a year ago. I know that sounds bad, but frankly, it's not so bad in the context of a rising interest rate environment. You're seeing that net interest income start to accelerate, which is nice. But with that said, going back to the stress test, I think that's really what got them a little bit worked up. If you go back to just a quarter ago, JPMorgan authorized a new $30 billion share repurchase program, essentially effective May 1st of this year. Well, fast-forward to the beginning of this earnings season, now this quarter, they actually had to suspend this buyback program. Most of that really is due to the stress tests that were recently performed by the Fed.

There's the stress capital buffer or the SCB, we heard a lot of that in the call there. Ultimately, JPMorgan is going to have to protect themselves a little bit more. They're going to have to add a little bit more capital in order to meet those demands of those stress tests which means they're going to be a little bit more conservative with capital here in the near term. I stress near-term. This is a short-term thing that probably will resolve itself by next quarter. But regardless, he's not happy with it, and I do want to read a quote because it matters. He said in the call, "We don't agree with the stress tests. It's inconsistent, it's not transparent, it's too volatile, it's basic capricious arbitrary." You don't want to hear him mince words very often, and that's another great example of it. I think that's something just to keep in mind with these banks as we go through earnings season.

Chris Hill: Well, Emily, it's not just Jamie Dimon, we had Sheila Bair, the former head of the FDIC on our podcast earlier this week. She said she's also worried about the way the stress tests are designed because one of the assumptions built into the test was that as she put it, inflation would magically drop.

Emily Flippen: The devil is always in the details with these things, but I think it's important to remember why regulations exist in the first place for banks and we can use an analogy. It's been said that park rangers have a hard time designing trash cans for national parks because there's considerable overlap between the smartest bears and the dumbest humans. [laughs] Well, Jamie Dimon and JPMorgan Chase have been great stewards of capital, there are banks out there that have maybe been less so. Regulations certainly have their place although unfortunately, in this case, when you are Jamie Dimon, when you're running JPMorgan Chase, this is a bumper that you run up against.

Jason Moser: Yeah. Again, this is not a JPMorgan specific issue. Banks across the board, they're going to need to focus on capital preservation in the near-term. JPMorgan built-up reserve $428 million for the quarter. We were talking about the tailwinds from releasing those reserves just a year ago, so it changes very quickly. Wells Fargo, same thing. They have a $580 million provision for credit losses for the quarter. In Wells, along with that, we know their exposure in the mortgage market. They saw fees from mortgage banking fall to $287 million from $1.3 billion a year earlier. You can see where this rising interest rate environment, it's good on that net interest income, and certainly Wells saw that accelerate as well. But for a bank like Wells Fargo that is highly exposed to that mortgage market, it's going to be a little bit of a difficult environment in that regard.

Chris Hill: Shares of Pinterest rose more than 15 percent on Friday after Elliott Management took a nine percent stake in the company. Emily, I feel like we're going to be seeing more of this, not just with Pinterest but with others beaten down growth stocks as well.

Emily Flippen: I think that's a fair assumption. I will say, comparing Pinterest versus other companies that have decreased in price maybe confiscates the reason for this investment, which is to say Pinterest has done a poor job on executing the thesis that they originally came out with. Whereas other stocks that are down significantly, maybe down to devaluation concerns, this is a very business-level concern for Pinterest. Their monthly active users have continuously declined and while monetization has increased, which is a great thing for this business, they've never really executed on the in-app shopping experience that was supposed to take Pinterest to that next level of engagement and monetization. Meanwhile, while they're struggling to come out with this shopping experience, we see competitors and even other social media sites rolling out with this commerce very quickly, virtually overnight. You have to wonder if Elliott Management is looking at this company saying, what are they going up against that they can't increase this monetization and engagement the same way as their peers, and is there something we can do to help get them there?

Chris Hill: Earnings season will heat up next week, but on Tuesday morning, all eyes won't be on Wall Street, they'll be on a courtroom in Wilmington, Delaware, where the case of Twitter v. Elon Musk will begin. [laughs] Jason, back in April when Musk announced he was buying Twitter for $54 a share, we said on this show, everybody slow down, this is not a done deal. I don't think either one of us thought it was going to get as messy as it's gotten.

Jason Moser: Like sands through the hourglass, Chris. [laughs] This is shaping out to be quite the soap opera, and it sounds like it's going to drag out for some time to come. Frankly I feel like this is probably ultimately what Musk wants. I feel like he's been looking to get this to go to court. He's probably having a little bit of buyer's remorse in the price that he offered for Twitter versus where it is now. He couldn't necessarily have foreseen market conditions, but it is what it is as they say. There's a lot of stuff that we just don't know clearly and there's going to be a lot of stuff that comes out in court. But to me, it does feel like he ultimately wants to get either more information or he wants to lower price, or he wants both, and this is ultimately going to be the way to get that. I feel like he looks at the legal expenses in the context of this deal is a drop in the bucket. He can wait this out. I think what really sucks, honestly, the losers here are the Twitter employees and shareholders of the business. They're the ones that are essentially stuck in limbo as this plays out and it really doesn't look like there is going to be a solution anytime soon. As soon as I say that of course is this is just changing by the day. We'll wait and see what Monday brings but nonetheless, it is an I messy situation.

Emily Flippen: It's so hard to predict, but I agree with your assessment that when we see protracted legal battles, typically the people who pay the price are the shareholders in the companies themselves, in this case, Twitter. I'm sure Twitter shareholders are hoping that this deal goes through. It'd be a significant premium to where Twitter is trading today. Other people, I'm sure are making the argument that depending on the facts, maybe that results in an agreement penalty fee paid, and maybe both parties simply walk away. But either way, the Twitter shareholders are the ones that are sitting here on the sidelines waiting to understand what's going to happen to their investment.

Chris Hill: More headlines this week in the business of streaming video. Disney is teaming up with The Trade Desk to help with targeted advertising across Disney's various platforms. Netflix chose Microsoft, not [Alphabet's] Google or Comcast, Microsoft to help build its ad-supported tier that Netflix plans to launch later this year. Emily, I think if you're a shareholder of any of these four companies, you're probably happy with the way this week has gone.

Emily Flippen: Certainly. Programmatic ads in general are great industry to be invested in. Right now there's big changes coming to cookies, but there's lots of alternatives available, in particular, The Trade Desk Unified ID 2.0 is really gaining traction, as you mentioned, especially with companies like Disney. But it is so interesting to look at Netflix partnering with Microsoft. A lot of people said this is Netflix going with an established player like Microsoft. But Microsoft is still pretty new to the programmatic ad space. They made their first headway when they acquired Xandr from AT&T in late 2021. Many people in fact thought this is going to be just for internal use at Microsoft. By any means, this isn't exactly what was expected, versus the Trade Desk or Roku for Netflix's partnership. But it is certainly interesting, lots of different speculation going on. If this is going to result in some acquisitive bid for Microsoft, which I don't expect or if Microsoft just promised to roll out this ad tier much faster than the competitors.

Chris Hill: Jason, to Emily's point, you look at Microsoft, they're the new kid on the block in this industry, but one thing they have going for them, and apparently they stressed this when they were talking to Netflix is, hey, we're not competing with you on content.

Jason Moser: Yeah.

Chris Hill: They've got their own content that they're worried about. We're going to be all in just for you guys.

Jason Moser: I think that's a really important point to note because I mean, that certainly would explain why Netflix doesn't want to couple up with something like Google because there are competitive forces at play there. Then we saw the announcements and obviously Trade Desk's partnership with Disney, well, now maybe Netflix looks at that and says we're not sure that we're going to be the top priority here. There's a lot of execution risk right now here in regard to this ad platform for Netflix because this is something that's completely out of their wheelhouse. I mean, with something like Disney, it's more or less expected because you look at all of the properties that this deal is going to cover between Hulu, ESPN Plus, ABC, Freeform, Nat Geo, FX, the list goes on and it likely will be that ad-supported layer of Disney Plus as well. Netflix probably looks at it and say, "You know what? We want to make sure that we're at the top of someone's [inaudible 00:11:01], we want to know that we are your priority and it seems like that's what they get with this Microsoft deal.

Emily Flippen: I love that point because I'm a Roku shareholder and I have expected this deal to go to Roku. But there's a good argument to be made that the Roku channel which now Roku is investing money in original content is inherently becoming competitive and Roku to this point, it was not associated with any single particular streaming service which made it powerful in its own right. I wonder if that's changing.

Jason Moser: What would be fascinating too that comes of this assuming that this Microsoft, Activision Blizzard deal does close, Netflix is making some investments there in the gaming space. I just can't help but wonder if there won't be some sort of co-opetition or partnership or just some experiments played out there on the gaming side. Maybe Microsoft opens that sieve up a little bit to let Netflix try some things with that big viewer base that they have, it could be a beneficial thing for both parties.

Chris Hill: Coming up, we've got the latest in retail, software, and automotive innovation. Stay right here. You're listening to Motley Fool Money.

Welcome back to Motley Fool Money, Chris Hill here in studio with Emily Flippen and Jason Moser. Amazon has started cutting the number of private-label brands it sells. The Wall Street Journal is reporting that Amazon executives are talking about getting out of the private label business altogether as a way to appease regulators. Jason, I bought things under the AmazonBasics label, I'm a satisfied customer. As a shareholder, however, I understand why they're having this conversation.

Jason Moser: I do as well. You and I were very taken aback to see that the private-label business that Amazon has is so robust, 243,000 plus products across 45 different house brands and that's just as of 2020. It feels like the theme of this is perhaps at least don't bite the hand that feeds you. What I mean by that is that when you look at Amazon's actual third-party business, that really has become such an important driver of their overall retail business. Back in 1999, third-party sells represented three percent of Amazon's total revenue. You fast forward to 2009, it was 31 percent. Go to 2018, it had reached 58 percent. Amazon has a little bit of a reputation of using some of that data copying stuff and then selling it for lower prices under their own brand and so it's understandable that some of their merchant customers are getting a little bit frustrated. Then you add to that all of the regulatory scrutiny that the company, the big tech in general is going through these days, this could be just throwing regulators a bone here saying, man, we'll step out of this market and then stop causing so much trouble if maybe you scratch our back too.

Emily Flippen: But what are we going to do without our AmazonBasics brand? [laughs] I've got to find new underwear provider, a new place to buy my cords. This is tragic for consumers in my opinion.

Jason Moser: I don't disagree. Every time I buy batteries, they just pop those AmazonBasics right at the top of the search and I just click Buy. Who knows, it'll be interesting to see how this shakes out.

Chris Hill: Unity Software announced an all-stock deal to buy ironSource, an app software company. Shares of ironSource soared on the news while shares of Unity Software did the opposite of soaring. You tell me, Emily, did Unity overpay for ironSource?

Emily Flippen: No, and that's a very strong statement. That does not agree with what the market is saying, Unity down I think around 15 percent on this news, and history says that stock-based deals like these especially large one funded by shareholders tend to not be accretive to the shareholders over long terms. They tend to pay too much, overestimate the synergies, but I like this deal in particular because ironSource shareholders are actually upset. That leads me to the no answer there because when I see people who own shares of ironSource speaking out to such a large premium saying, "I think this company is worth more," that to me highlights that maybe Unity is getting a deal here. They're getting this at a price of around $4.5 billion which is around 1/3 of what the company went public at in terms of valuation so relatively cheap. This is also cash flow positive, profitable, and growing faster than Unity and it offers the opportunity for Unity to expand its monetization engine. A large acquisition is scary, I'm a shareholder of Unity, down massively on that investment. But in my opinion, this might be an interesting acquisition and that might be a strong statement.

Chris Hill: Unity Software really has come down a lot to the point where it gets thrown in there among stocks discussed as, hey, maybe now it's an acquisition target itself. Do you think this purchase of IronSource staves off that conversation or removes Unity Software from that conversation?

Emily Flippen: I think it removes it but this acquisition is almost more like a merger of equals in some sense. We're having the game engine itself that drives the creation of these apps plus a monetization engine, that's where Unity has really struggled. I think it staves it off over the short term but what they do as a combined entity is really going to be important for the future.

Chris Hill: Some cars come with added features that cost more, one of those features is heated seats. BMW is turning the ability to warm your seat into a new subscription service. Reports out this week that in the UK and South Korea, BMW is installing seat warmers on some models at no extra cost. But to actually turn on the seat warmer will require customers to buy a monthly subscription plan of $17 a month. Although, Jason, you can also buy an unlimited plan for a lump sum of more than $400. [laughs] I'm intrigued in the new SwaS business model [laughs] for several reasons. What do you think?

Jason Moser: Chris, my car has seat warmers and I think I would be up in arms if I had to pay a subscription for it. Now, as we were discussing in the production meeting, this really does boil down to geography, it's where you live. I think ultimately the climate because maybe you only need seat warmers two or three or four months out of the year and then you do the math out there and perhaps it works. I think BMW owners tend to cycle through a little bit more often on the cars, perhaps 4-5 years you see them rotate into a new vehicle so maybe economically you can justify it. But then you have your outlier events, what if it's a cold May? [laughs] You got to go back in there. There's a lot of friction involved. It just doesn't seem very customer-centric.

Chris Hill: Emily, it does make you want to do the math and think how many months because it could work out in your favor to do the subscription service. Although a subscription service for heated seats just is patently absurd to say out loud.

Emily Flippen: I can keep my tush warm all by myself, thank you very much. But I also own a Honda Civic so I think BMW is maybe speaking to their audience here. Maybe they know their core customer better than we do.

Chris Hill: In all seriousness, do you think we're going to see more of these micro-transaction moves by automakers? I mean, this is something you could do for software. There are so many added features and maybe it's something where we just start to see more of this, not just from BMW but from others.

Jason Moser: Personally, I think yes, we do. I think the connected car is a big long-term trend that's really just now underway. You see companies like Cerence making investments in the space, Qualcomm Technology, Nvidia playing in that space as well so I'm absolutely certain there are going to be experiments tried here in trying to figure out this longer-term monetization.

Emily Flippen: Exactly. It's already happening, just a matter of speed.

Chris Hill: Emily Flippen, Jason Moser, we will see you later in the show. Coming up after the break, we've got a conversation with Jared Isaacman, the CEO of Shift4 Payments. We'll talk about the latest trends in fintech and how Shift4 stands out from other players in the industry. Don't go anywhere. You're listening to Motley Fool Money. Later in the show, we're going to dip into the Fool mailbag, we've got radar stocks. Up next is CEO Jared Isaacman ... 

Chris Hill: Welcome back to Motley Fool Money, I'm Chris Hill. When you buy a hot dog at a baseball game, there's a good chance your transaction is being handled by Shift4 Payments. The company trades on the New York Stock Exchange under the ticker symbol appropriately, FOUR. Shift4 process is more than $200 billion in payments a year from stadiums, hotels, and e-commerce companies. CEO Jared Isaacman, is hoping he can scale the company internationally and beyond. No really, Shift4 Payments is partnering with Starlink to process payments presumably to get ready for space Internet. He joined Motley Fool contributor Rachel Warren and senior analyst Auri Hughes to talk about trends in fintech and how his company stands out from other players.

Rachel Warren: To start off I'd love to hear a bit more about your background, the story behind the founding of Shift4. Then maybe you can also explain to our audience what the company does and its various businesses, what those entail.

Jared Isaacman: For sure. It all began with my hatred for high school. My siblings are 15 years, 13 years, and 10 years older than me. While I was in high school raising my hand to get permission to go use the bathroom they were out either finishing up their higher education or already well into their careers. I admired the independence and said, I got to get on this fast track. Early days got exposure in the late '90s to the payments industry which was incredibly immature at that time period. Basically, at that point, banks were prioritizing just getting credit cards in your wallet so you could go spend and they just assume that the other side of the equation which was enabling businesses to accept credit cards as form of payment will just sort itself out. Like if you create enough demand, people will fix it. Ultimately, that was the case except it was just done really inefficiently.

There was a lot of outsourcing. It just wasn't a good commerce experience. While banks were focusing on card issuing, we began focusing on powering commerce from an acceptance side of things. In the beginning in the early days, the basement days, we just tried to literally bring everything in house quite literally it was my parents' house and it worked reasonably well. I would say we were generalists. We were just trying to find efficiencies and deliver a better experience for our customers. We quickly realized in early 2000s that commerce was not going to just be this binary thing of an approval or a decline of a credit card. It was going to involve so much more that you're going to connect payment rails into software and that software would tell you more about your customers. It would enable e-commerce transactions, omni-commerce.

You would have in-venue. You'd have online payments. You have mobile payments. But that software was going to be a critical component to this because it opens up the door to a lot of other things. Whether it's like gift and loyalty transactions or business intelligence. We began connecting our payment rails into software. Now, over 425 different software integrations exist across predominantly restaurant industries, hotel industries, stadiums, and theme parks. Where does that bring us today, 23 years later? We handle about a quarter of a trillion in payment volume. Just in the US, which is pretty sizable, about 1/3 of all restaurants in the US use some form of our payment technology. About 40 percent of all hotels, most ski resorts, half the Las Vegas Strip, and a lot of the cool theme parks and stadiums that you would go to. That's all powering what we call integrated payments which is completing a commerce experience between software and the consumer. Now we're about to embark on our next phase which is expanding internationally. That's our 23-year history payments in like a minute or two.

Auri Hughes: Just getting familiar with the company on my end, I've seen you guys have done really well acquiring these sporting venues and stadiums. Also making your mark in this hospitality sector as well. I know I've been traveling and I've seen Shift4 terminals while I've been out. The question I have are your payment systems set up to particularly address the specific needs of these type of clients or is there an edge there? Could you help me understand that?

Jared Isaacman: The last two years have been pretty interesting for fintech. It went from a time where like every fintech is going to change the world, a lot of exuberance and probably valuation to now I'm not sure where the relevancy is and don't they all just do the same thing? There's a lot of commerce in the world. You have industries that maybe never took credit cards as a form of payment before, education institutions. If you're going to pay that big college tuition bill you might as well get enough points to get a free trip to Disney World along the way. There are new industries that are appearing all the time. What I'd say is they're all generally connected through software. Those software integrations are super scarce. They're very rare, they're very hard to achieve because software companies care about making their software better to sell to their end customers.

They don't like spending time doing lots of payment integrations. Shift4 is in a landscape of few and we've accumulated software integrations very specific to restaurants, hotels, stadiums, a little bit in gaming, and a little bit in specialty retail. That gives us a very unique right to win in those verticals and why we're able to deliver pretty extraordinary volume growth within that space. There are companies that we all know like Square and PayPal and they have software that appeals to very specific verticals as well. You wouldn't find Shift4 there. You'd find us in those hotels, you find us in those stadiums, and it's based on the products and the software integrations we have that are uniquely suited for those verticals.

Auri Hughes: Thank you that's very helpful.

Rachel Warren: Something I was also thinking about as well as we've seen the rebound from the COVID-19 pandemic and how that's impacted consumer spending, we've definitely seen more sales and shipped force core restaurant bar and hospitality markets. This has unleashed a lot of pent-up demand among consumers to go to concerts, sporting events, gaming venues, and so forth. I'm curious to hear from your vantage point, how has the pandemic, the recovery period that followed, and then this recent prolonged period of inflation shifting consumer spending habits. How has that impacted your business as well as the broader fintech space as a whole?

Jared Isaacman: It all depends on that slice of time that you look at it. Take 2020, everyone of our customers was totally level. Your hotels were at 40 percent of their pre-pandemic volume levels. Restaurants were at 60 percent pre-pandemic levels, but we grew overall in 2020 our volume by 10 percent. That was purely a factor of just taking share and not anyway related to our customers being healthier, immune to the realities of the pandemic. Now, '21 it was a different story altogether. '21 you had a lot of stimulus fueled exuberance. People were locked up in 2020 and they wanted to get out and party in '21. You saw like volume come out of South Florida like you'd never seen. South Florida eclipsed Las Vegas in terms of hospitality and restaurant spend, but it was very isolated to specific regions where all that pent-up demand was released.

You'd have some markets that were super hot in '21 and then you had like midtown Manhattan where people were not back in the office yet and those restaurants were pretty quiet. Those hotels where were still shuttered. As pandemic restrictions slowly released but you had the last little bit of a setback from Omicron and pretty much everyone who went to a New Year's party or a Christmas party pretty much got Omicron at that point in time that created a short-term slowdown. Now, 2022 is to get a whole different animal altogether because the inflation is very real helpful to our industry and that we make spread off dollars up to point where consumers no longer go out and spend. That's what you don't want. Now I expressed caution coming off our Q1 earnings that look, we're not seeing anything that consumers aren't healthy and still excited to go out and spend.

We set volume records literally every weekend. That said, just looking at it from a rational perspective, I don't know how long consumers are going to tolerate $100 steaks because that's what we've seen essentially happened. You're hearing it from everybody in fintech all the card brands, the banks are saying the same thing which is there's plenty of reason to believe that consumers are going to slow down and if we probably talk about it enough, they will, but there's a lot of cash and bank accounts and people are still spending so it just hasn't shown in the data yet. Again, the records we're seeing every weekend, it hasn't shown yet. But at some point or another, you've got to think some of these costs are going to come down at some of this demand is going to be reduced and $100 steaks will become normal price.

Rachel Warren: [laughs] We can only hope. As well beyond that, looking at this space and then looking at some of the dynamics that are at play right now as we see inflation continue to rise, as well as broader competition within the fintech space, what are some of the biggest competitive threats that you see as being present for your company? What are the solutions that you're leaning into there?

Jared Isaacman: The big shift I've been around like 23 years in the space. I've seen all the 1.0, 2.0, 3.0, evolutions of fintech. First, there's just a ton of commerce out there to capture. When you start thinking about on a global level rather than country by country or regional, the opportunities even more immense. That's a very high priority for us. I would say there are winners and losers for sure. The losers are the ones that have been around a really long time that consolidate a lot of old tech. We refer to those non-integrated or legacy acquires, that they're not growing payment volume. They're probably growing fees and they're reducing expenses. They're not winning volume which is really generally hard to do. You need real product and tech differentiation that helps businesses better conduct commerce with their customers.

The game of trying to save a couple of basis points is no longer really relevant. You're winning because you had a lot of value to the commerce experience. I'd say just because there's a lot of names out there in the fintech space it's not as necessarily competitive as it might appear because you have the old guard. That's like I would say the equivalent of pots lines, or gold, copper lines with people's phones in their houses. If you have it, you're probably not ripping out your phone but you're not going to ever move into a new house and probably have a landline again. There is a portion of we can't call it fintech in the payment space that represents that. That's not really competition. Then within the actual true fintech space, I'd say this Pangea event has happened where you have these continents that broken away and they're very clear what they're good at and where they're going to continue to win out for the foreseeable future.

Shopify is going to do just fine in e-commerce for a long time. That's going to be a first choice. Square is going to do just fine. Your small, mid-size, your bakeries, your coffee shops here, your food trucks, no one's going to encroach on that space. I'd say with respect to the more complex and demanding end of commerce where you need lots of software to make it happen. That's your hotels, you're big restaurants, your stadiums and such and specialty retailers. Shift4 is going to do really well there too. We're still confident when really well there in those particular verticals that we are extending our reach globally into a landscape that's very thin who can play in that space and try and bring that success we've gotten in the US into other markets.

Chris Hill: Coming up after the break, Emily Flippen and Jason Moser return. They've got a couple of stocks on their radar. Stay right here. You're listening to Motley Fool Money.

As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against. Don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here once again with Emily Flippen and Jason Moser in studio. Our email address is [email protected]. Got a question from Mike in Ohio who writes, "I know ETFs are not as popular as stocks for you Fools, but I'm wondering, what you think about these new ETFs that trade after hours?" Mike sent a link to a story about NightShares, which is a new ETF business trying to take advantage of the so-called night effect, where overnight markets possibly deliver higher returns than daytime trading sessions. Mike writes, "It seems like it's too good to be true, but I'm a skeptic. What's the catch here?" Emily, what is the catch here?

Emily Flippen: This is conceptually, a really interesting idea. What these funds are doing are buying futures contracts right before the market closes, is selling them right when the market opens, collecting any gains over that period. But what's worth noting, as they call out risk-adjusted returns, it performs better on a risk-adjusted basis. They have evidence to point that going back since 2008. Now, this is an interesting thing because liquidity in the overnight markets have only picked up in recent years. You can buy into this idea, but what you're buying into is the idea that the aftermarket activity over the next 15 years is going to be very similar to the way it was over the past 15 years. There's good evidence to show that as liquidity in the night markets pick up, that the risk part of the risk-adjusted returns will probably start to rise, volatility will increase, thus make those numbers look a little bit less impressive. Just something to marinate on. Again, conceptually very interested in the idea, but in practice might not live up to those high stated expectations.

Jason Moser: Yeah, I love that take there. Then the other thing to think about too is just as technology just changes everything. I wonder if, at some point here as sooner rather than later, we don't see markets essentially trend toward basically being open 24/7 anyway. A lifetime ago that really wasn't practical, now it seems it can be done to just click the button. It wouldn't shock me if that is the direction we're headed.

Chris Hill: I got an email from Sarah in Pennsylvania who writes, "I'm in my 30s, have been investing for a few years and I love it. Even with the market performance this year, I'm in it for the long haul. Part of what I find interesting about investing is getting the chance to learn about businesses in different industries. With all of the metrics in investing, PE ratios, etc., what is a metric that you think is important but doesn't get as much attention? Jason, what do you think?

Jason Moser: Yeah, congratulations Sarah. Great perspective. Thank you for the question. I think one that stands out to me, a lot of people hear it, the share count outstanding. The reason why I bring that up is because we always hear in the headlines, companies announcing share repurchase plans or authorizations, share repurchases are part of the deal, but you never see that next layer of, OK, well, you're repurchasing all those shares, but ultimately what is that doing to the share count outstanding because the reason why share repurchases should matter is they should bring that share count down? We know that's not always the case. It's easy to find that if you look at the 10K or 10Q and you just searched the word outstanding. It's going to probably be the very first one you see at the top of the report there. But share count outstanding is the one to pay attention to.

Chris Hill: Emily, you got to metric?

Emily Flippen: Yeah, I'll mention enterprise value. Things like price to sales, price to earnings focused on the market cap as the price. In a lot of cases, businesses that have sufficient amounts of debt or cash, the better way to think about them is actually looking at their enterprise value, which is their market cap, plus the debt minus the cash that accompany has. What it's getting at is the value of the company itself if you were to come in and acquire that entire business. It can give a better picture of valuation for a company if they do have large amounts of cash or debt outstanding.

Chris Hill: [email protected], people, that's the email address. Keep the questions coming [email protected]. It's time to get to the stocks on our radar. Our man behind the glass, Dan Boyd, is actually behind the glass this week because we're back in studio. Jason Moser, you're up first. What are you looking at?

Jason Moser: Yeah, one I've mentioned before, Outset Medical, ticker is OM, they are the purveyor of the Tablo dialysis console, that is breaking down barriers, making dialysis more accessible, affordable, and effective. A great example of the potential of the Internet of medical things, it's the first hemodialysis system on the market with FDA clearance for two-way wireless data transmission. Now, in mid-June, Outset dropped some news of a shipping hold for the in-home use only. That resulted in the share price falling somewhere in the neighborhood of 35 percent just that one day. The reasons cited were additional FDA rigor for enhancements they made to the in-home offering.

This is a dialysis machine that focuses on in-home use as well as acute or in hospital settings. But it's worth mentioning, the acute demand remains very strong, the in-home demand still remains very strong and there are zero safety issues. This is just extra rigor with the FDA to make sure that those enhancements are in line with the ultimate goal that the company and the FDA has set out. I actually think this extra FDA rigor could work out in time. I will tell you, I bought the dip, Chris. I bought the dip.

Chris Hill: Dan, question about Outset Medical.

Dan Boyd: I have sent a lot of technology to contributors at the Fool over the years to get them to record at home and do things. One thing I've noticed is that they don't know what the heck they're doing. [laughs] Jason, what makes you think that medical patients who need kidney treatment are going to do better with their Tablo from Outset Medical?

Jason Moser: Well, generally speaking, it seems like the feedback is very positive folks like the opportunity to be able to not have to necessarily go to the hospital or an acute setting in order to deal with dialysis, which is a relatively consistent, and cumbersome, and expensive offering.

Chris Hill: Emily Flippen, what are you looking at this week?

Emily Flippen: Well, not quite living up to Outset Medical. I am looking at Vail Resorts, the ticker's MTN. They're a skiing company. They own a lot of different skiing lodges and Mountain activities for the adventurous folk. I've never been skiing myself. But for the people who do Vail Resorts is really seeing some seasonal strength. Demand has picked up as the pandemic has waned. The company actually just made an acquisition that expands its resorts to Europe for the first time ever. As they move toward this season pass, I think that Vail Resorts still has a lot of, I'd say, uphill in front of it, but I think a lot of people probably skiing downhill, but uphill in terms of its stock price in front of it.

Chris Hill: Dan, question about Vail Resorts?

Dan Boyd: Not really, Chris. I have more of a question for Emily's preferences on winter sports. You say you've never been skiing, have you been snowboarding before, and if not, would you be more interested in skiing or snowboarding?

Emily Flippen: Dan, I grew up in Texas. You couldn't pay me to Yonah mountain, but I will buy their resort stock. That's as close as I'm getting to outdoor winter activities though.

Chris Hill: Medical technology and outdoor winter mountain sports, very different businesses. Dan, what would you like to add to your watchlist?

Dan Boyd: This is a tough one, Chris, because one company has tanked recently and the other one is a winter sports company, something that I also don't really care about. I'm going to go with Vail, I guess. Just because it seems more fun than dialysis. [laughs]

Chris Hill: Jason Moser, Emily Flippen, thanks so much for being here.

Jason Moser: Thank you.

Emily Flippen: Thanks, Chris.

Chris Hill: That's going to do it for this week's Motley Fool Money radio show. The show is mixed by Dan Boyd. I'm Chris Hill, thanks for listening. We'll see you next time.