In this podcast, Motley Fool senior analysts Matt Argersinger and Jason Moser discuss:
- Nvidia's AI-fueled earnings report and the company's historic pop.
- Intuit's latest results and how proposed IRS free-file software could affect the company.
- Zoom Video Communications' post-pandemic slump.
- The signs retailers are fixing inventory problems, but high-end merchandise still isn't selling.
- Netflix's $7.99/month solution to password sharing.
- Two stocks on their radar: Salesforce and Invitation Homes.
Motley Fool contributor Lou Whiteman talks with former United Airlines CEO Oscar Munoz about his approach to turning the airline around, dealing with personal setbacks, and the lessons in leadership from his book, Turnaround Time.
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 May 26, 2023.
Dylan Lewis: A truly legendary earnings report and a look inside retail's rally. Motley Fool Money starts now.
It's the Motley Fool Money radio show, I'm Dylan Lewis. Joining me in studio, Motley Fool Senior Analysts Jason Moser and Matt Argersinger. Guys, great to have you here.
Jason Moser: Hey.
Matt Argersinger: Hey, Dylan.
Dylan Lewis: We've got brick-and-mortar putting up big results and lessons in leadership from a seasoned executive. But we're starting out today talking tech. We've got earnings from NVIDIA, Intuit, and Zoom, and we're kicking off this week talking about tech because the sector is probably the biggest factor, Matt, in how investors are feeling so far this year.
Matt Argersinger: That's right, Dylan, and it's remarkable the numbers I'm about to go through. Here we are. We're almost to the end of May. The QQQ, Nasdaq-100, up almost 30% year to date. That's a monster year already. The S&P 500, by the way, up 9%. Not a slouch there either. But here's where it gets interesting. If you look at the equal-weighted S&P 500, for example, as of Thursday's market close, that's negative. The average stock in the S&P 500 is actually negative for the year, and the Dow Jones is also negative. The Russell 2000 small cap's basically flat for the year. If you're a dividend investor like I am, well, you're in trouble because if, for example, the Schwab US Dividend ETF, which is one of the more popular dividend ETFs, that's down 7%. Energy, the sector is down 7% and don't get me started on banks, financials, or real estate. Forget about it. Tough year so far. I guess the point is, traders which we call this breadth or the lack of breadth in the market and it's not a great, great sign, and I just think if you weren't in a lot of big technology companies that we've been talking about, I know we're going to talk about a huge one in just a minute, you're probably not feeling that great this year and you just have to wonder if leadership is so narrow in the market. Does that mean that certain parts of the market have run too fast and the other parts that have been left behind, are they looking maybe more compelling and investors need to maybe shift their focus just a little bit?
Dylan Lewis: I think a lot of people probably holding mutual funds very happy that the S&P 500 is a market cap-weighted index and not that you have a weighted index.
Matt Argersinger: Absolutely.
Dylan Lewis: Big tech has done a lot of the heavy lifting this year, and NVIDIA is certainly doing everything it can to help. Jason, the company posted one of the largest single-day market cap moves in history after reporting its first-quarter results. The look backward was good. Revenue was down year over year at $7.2 billion, but ahead of expectations. Net income over $2 billion, up 26% year over year. But the story really to me, Jason, is share spiking 25% because of the look forward for this business.
Jason Moser: Well, I mean the big theme with NVIDIA, of course, is artificial intelligence or AI and we've been talking about it all earnings season with virtually every company from tech companies to restaurants. The market obviously likes NVIDIA's strategy, what it's doing. Data center was the big beneficiary here, with the company representing more than half of the overall business. So it is a very big deal. Looking at the overall numbers there, revenue $7.2 billion. It was down 13% from a year ago. Like you noted, some of those comparisons from a year ago, it didn't look like it was that great of a quarter, but it does come back to the guidance. That's what really I think has the market excited. Management calling for $11 billion in revenue for the current quarter, that represents 64% growth from a year ago, and that's thanks to a "steep increase in demand related to generative AI in large language models". Then they also noted in the call that demand has extended visibility in the data center segment. Again, a big deal because data center is such a big part of the business. But that demand has extended visibility in data center out a few quarters now and they've "procured substantially higher supply for the second half of the year". All signs point to this not being just a one-off core, but I think what leadership was pointing to in the call really just the early innings of a very, very large and important trend that's just underway.
Matt Argersinger: It's extraordinary to watch the evolution of this business, Jason. I mean, I was covering NVIDIA for our Stock Advisor service more than 10 years ago, and I think I remember back then the business was largely based on just its graphics cards. It was all about, well, how is the video game market looking? We have competition from AMD and others, we're losing pricing power. Now this company is powering the next generation of computing and artificial intelligence. I mean, we're speaking for the show. It is the ultimate picks and shovels company for all of these major trends, whether it's data centers, supercomputing, crypto, and of course artificial intelligence, and goes to show you businesses can change a lot of ways, and if you don't follow closely enough, you can miss. What was it up in market cap yesterday? Like 250 billion. I mean, it was up like a Walmart in market cap.
Jason Moser: I mean, that 25% gain, 25% or so, I mean, that's being mirrored today Friday by Marvell, which reported last night. Same general idea here, man. They're talking about AI and all of the tailwinds. The market is eating it up. You're really seeing this rising tide lifting a lot of boats, and that speaks back to what you opened with Matty maybe in the back half of the year we start to see a little bit more parity here. Obviously remains to be seen, but clearly, AI is going to be a big point of focus. Not just for the coming quarters, but I feel like in the coming years.
Dylan Lewis: This week we also saw earnings from Intuit, the company behind TurboTax, Credit Karma, QuickBooks, and other cloud software offerings. Revenue grew 7% year-over-year, but fell short of expectations. Same for net income which came in at two billion. Matt, tax prep was probably not at the top of people's lists when they were thinking about companies that benefited from pandemic activity, but from comments from Intuit's management team, it seems like they are settling into a new normal here.
Matt Argersinger: That's right. This was fascinating. This is the quarter for Intuit where their consumer group business, which of course is the TurboTax businesses, obviously big because it includes the April 15 filing deadline, their third quarter. But I think what has investors concerned or the market concerned about Intuit was they missed expectations, but it's because they're lowering their expectations for the overall number of IRS returns. They're now expecting a decline of 2% versus original expectations for growth of 1%. They're also expecting the DIY category share of IRS returns to decline more than they expected. What's driving this? Well, get this, guys. It's because last year and the year before, more people filed their taxes in order to receive pandemic-related stimulus and tax credits. But because those weren't available this year, well, a lot of them elected just not to file taxes. [laughs] I mean, that's extraordinary to me. But I think another thing, of course, we've got this overhang. We know a few weeks ago, the IRS is also planning to launch a free government-provided direct tax filing program, so they've got probably more competition coming their way in 2024. But the fact that this business is not just now a seasonal business for them, it's also potentially having a secular shift given what happened in the government.
Dylan Lewis: Matt, I want to talk to you about this company in particular because of that IRS announcement and I'd like to, this is a business that has a lot of different software offerings, unpack a little bit exactly how important TurboTax is to Intuit's overall line here because I could see how that would maybe scare some shareholders.
Matt Argersinger: Big time. I mean, it's a big chunk of their business. According to surveys done by the IRS, some 72% of American taxpayers said they're least somewhat interested in using a free IRS tool to do their taxes. Just imagine what that could mean. If Intuit is already ratcheting down their expectations for IRS returns, what's that going to look like next year if the IRS actually has this tool out?
Dylan Lewis: I certainly understand that perspective. If I can get it for free, I'm happy to do so.
Matt Argersinger: Absolutely.
Dylan Lewis: We also had earnings from Zoom this week. The company beat expectations with its first quarter report, but posted its slowest quarterly growth rate at 3%. The company's enterprise segment continues to post double-digit growth, but the company's revenue from smaller users declined year-over-year, Jason.
Jason Moser: It's getting to be a little bit like a broken record now with Zoom. This is really about growth and where that's going to come from. They pulled forward a ton of users here over the last few years. A good thing, clearly. But really, that was fast. Now it is going forward. How exactly do they continue to grow? It could be argued that the opportunity is more or less tapped at this point from a user's perspective. Now to that point, while it's good news that they raised guidance for the year, which they did, that still only reflects top-line growth of around 2.5% or so. Again, where is this growth going to come from? I mean, the numbers for the quarter, they were OK. Revenue $1.1 billion, up 5%, excluding currency effects. We saw earnings per share of $1.16, up versus $1.03 from a year ago. The enterprise segment revenue grew 13% with customers up 9%, and the number of customers contributing more than $100,000 in trailing 12 months revenue grew approximately 23% from a year ago, and the net dollar expansion rate for that enterprise segment was 112%. Those are good signs that they're doing right by their enterprise customers. But there's these two halves to this business.
There's the online and there's the enterprise. The online is the higher margin because it's automatic. I mean, that's just people signing up for Zoom online versus enterprise where that might be someone like us using Zoom as a service for our business. It does start to get a little bit more dicey here because we saw online representing just about 20% of the business before the pandemic. Now post-pandemic, it's closer to half. If we start seeing that online segment drying up a little bit, then you start to ask yourself the question, where does that growth come from? That's when this company starts introducing things like Zoom Rooms, Zoom Phone. They did note Zoom Phone actually made up about 10% of overall revenue for the quarter, a good sign. The tough part is they're competing against companies like Microsoft, which are offering these very same services. So is Zoom a utility at this point? I lean toward yes, and that's fine in that we all use it because it's part of our daily job. But what kind of pricing power does that afford them? I don't know. That's still up for debate there, and that's why they continue to introduce these additional services. Just remains to be seen whether that'll really help the cause.
Dylan Lewis: After the break, we've got more earnings updates with a look at retail and surprising names making big moves. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Dylan Lewis here in studio with Jason Moser and Matt Argersinger. We spent the first part of our show largely singing tech's praises, but looking at results coming this quarter, I think the industry I am most surprised by is retail this earning season. I want to spend some time talking about all these traditional mall retailers that recently reported great results from Gap, Urban Outfitters, and Abercrombie. They all had really strong earnings results and market reactions. Jason, what's the theme here?
Jason Moser: Well, I think the theme, and this is picking up from something that we discussed a little bit last week. It's in regard to a lot of these retailers right-sizing their inventories, and ultimately the impact that's how they got their overall financials. We've talked last week, companies like Target, TJX, Walmart, even Ross Stores, we saw their inventory levels coming down, which is a good thing ultimately because when companies have those inflated inventory levels, they start having to resort to discounting, that impacts gross margins, which ultimately comes all the way down to the bottom line, and they're just not as profitable. This week we saw a lot of the same here. You mentioned Urban Outfitters, Gap, even Kohl's a very consistent theme here. Urban Outfitters' inventory is down 6%. They saw a 260 basis point improvement in gross margin. Gap ended the first quarter with inventories almost 30% lower than a year ago. It saw a gross margin of 570 basis points, and then Kohl's inventory down 6% gross margin of 67 basis points. So you start to ask yourself this question, between the information we got this week, the information that we got from last week, are we starting to see a little bit of a light at the end of the tunnel in recovering from sort of this post-COVID hangover? A lot of these companies just dealt with a very abnormal three years. There was no real blueprint for a lot of it, and it just put a lot of these companies into a little bit of a difficult situation. But it seems like they're coming out on the other side of it now.
Dylan Lewis: Matt, I can't help but look at the success of these names in particular and ask the question, is mall activity back? Is this what we're seeing?
Matt Argersinger: I think it is. I think it is, guys. Because if you look at, for example, results from Simon Property Group, biggest mall owner in the US, traffic to their stores is up, the occupancy rate of their properties was 94.4% at the end of Q1. That's up more than a percentage point from a year ago. Sales per square foot for their retail tenants up 3.3% over the past 12 months, and Simon raises guidance for the year and its dividends. If the biggest owner of malls is doing all this and raising guidance, I think you can bet the retail store is pretty strong. People are getting out there and shopping in ways they really haven't since the pandemic. I'm not surprised to see a lot of these specialty mall retailers do so well.
Dylan Lewis: Sticking with brick-and-mortar, shares of Ulta down over 10% after the beauty retailer reported earnings. They were up year-over-year but missed expectations. Revenue hit 2.6 billion, up 14% year-over-year. But management shared that it was seeing stronger sales for its mass-market products, that's its higher-end brands. Matt, this seems to be sticking with a theme that we've been seeing in retail recently.
Matt Argersinger: That's right. I mean, if you look at the initial results, same-store sales up 9.3%, which includes both their online stores and stores open at least 14 months. That seems pretty good. Transactions were up 11%. A lot of retail companies would kill for that kind of growth. But again, it's that issue of the average transaction value or ticket that you are alluding to, Dylan, which is that was down 1.5%. You've got the higher-end priced items are not selling as fast as they once were. For Ulta, you've also got a big surge in operating expenses, which brought down margins, and doesn't look like that trend is going to improve the rest of the year. They revised down their operating margin expectation and mentioned, also hinted that sales growth is really going to moderate after two years of really lights outgrow. It speaks to the idea that consumers are pulling back a bit on their spending, especially when it comes to higher priced ticket items. I guess cosmetics would fall into that category. I'm not an expert there, maybe Jason is. But that seems to be the theme for something like Ulta.
Dylan Lewis: Jason, you are checking in on earnings from Williams-Sonoma, and it seems like we were seeing that same story play out.
Jason Moser: Yeah. What's really interesting, we're seeing pockets of pressure that still exists for these higher-end brands. Certainly, Williams-Sonoma qualifies there. So for all of the positives we were talking about with these companies like Urban, and Gap, and Kohl's, Williams-Sonoma is on the other side of the coin there. I mean, comp revenue declined 6%. While they did reiterate fiscal 2023 guidance, you look at things like inventory, and inventory up 28% over a year ago as they continue to deal with not only traffic, but just logistics issues. The gross margin is 38.6%, that's down 520 basis points from last year. But we also were talking before production here. It's nice how these companies are doing a little bit of the workforce and saying, yeah, maybe the comp versus last year isn't as great, but let's look at this compared to 2019. I think that is fair. We've talked about this a bit. I think these last three years were tricky. Let's look back to 2019. That gross margin 38.6%, it's still 270 basis points higher than 2019. So I'm not going to ding them for that. I do think looking back to 2019 is a reasonable exercise. But something they've done here, they're introducing a new brand to their portfolio called GreenRow, something focused on sustainable materials, manufacturing practices that really hammer home on that green and sustainable movement. I think that'll fit well in with their portfolio.
Dylan Lewis: One of the things I'm really curious about as we get this narrative from management teams of look at this, don't necessarily look at this, but just be judging you on this, not necessarily that. When do you give management teams that benefit of the doubt and when you say actually no, I'm going to make you look at the year-over-year comps here?
Jason Moser: Well, honestly, as an exercise, I go back to 2019 in my head and I just ask myself, did I like this business in 2019? Because I can tell you back in 2019, I was probably making fun of Urban Outfitters, maybe Gap or Kohl's. And I only say that just a little bit tongue in cheek there, but I do go back to 2019 and ask myself, is this a business that I was really interested in back then? If it was, well, then I take it with a little bit more of a grain of salt and I maybe dig in a little bit further. But oftentimes you know that they're trying to make the data say something in particular that speaks to maybe this wasn't the greatest investment in the first place.
Dylan Lewis: As we wrap up retail discussion, I've got an update from Costco. The company reported earnings this week that were shy of analysts estimates, with revenue up to 53 billion and earnings per share coming in at $2.93, down year-over-year. Like many retailers this earnings season, Matt, it seems like Costco is bitten a little bit by slowing spend on bulk items.
Matt Argersinger: That's it. That's what we've been talking about. Traffic was good, up 3.5%, but it's the average ticket down 3.5%. It's the big ticket items, furniture, electronics, jewelry, hardware and tools. I think consumers are spending less on physical items. We've seen this from Amazon, FedEx, UPS, Home Depot, Lowe's. It's all about going out there, spending more on services, travel, and smaller ticket items, discretionary items. I also thought it was interesting that Costco's e-commerce sales were down 9% on an adjusted basis in the quarter. That seems sharp to me, but I guess it is, again, one of those things where if you're ordering less heavy ticket items, that's where that's going to show up. It's not going to show up in things like food.
Dylan Lewis: Putting a bow on almost everything that we're seeing here in retail, it seems like whether it's cosmetics or big-box retailers, the higher-end stuff is where we're seeing the pinch. More of the mass market, more affordable things are where we're still seeing consumer activity, Jason.
Jason Moser: That seems fair. I think with Home Depot and Lowe's, look for pro customers to reaccelerate business here down the road. But that certainly has played out on that big-ticket item metric that Matty quoted.
Dylan Lewis: Jason Moser, Matt Argersinger, fellas, we will see you guys in a little bit. Up next, we've got tips from a turnaround specialist. Welcome back to Motley Fool Money, I'm Dylan Lewis. When he took the CEO role at United Airlines in 2015, Oscar Munoz was stepping into a difficult job at a difficult time. The company's recent merger with former competitor Continental was not going according to plan and the business was facing operational and cultural challenges. Motley Fool contributor Lou Whiteman talked with Munoz about his approach to turning the airline around, dealing with personal setbacks, and the lessons in leadership from his book Turnaround Time.
Lou Whiteman: Let's dive into United, and to set the stage and to push back, if I'm going too far, but from my professional career, going back to the mid-'90s, United has been a troubled company or a difficult situation, all the way back to the employee stock ownership plan. In 2015, you're coming in off of the board, you're named CEO. We were a few years after the merger with Continental, which was a merger in name only. You very much still had two airlines functioning under one holding company, and labor very much not on rowing together. There had just been a CEO controversy that you're stepping into as well. It's a tough job to take if you care about your career. You step in here and a lot of folks, the book is just how exactly you accomplished what you did. But so what was the game plan? Day 1, hit the ground running. How do you come into this quagmire and talk about the plan coming into it?
Oscar Munoz: You've been kind in your assessment of the company and its culture and its performance, so thank you for being gentle. But I often, my first interview with The Wall Street Journal when I asked the question about how are you finding things, and my answer was I think our entire workforce is disillusioned, disengaged, and disenfranchised. As a board member, I'm embarrassed to say that I and we didn't see that earlier. Part of leadership is assessing very quickly where you are and being really practical and real about it because I issued a full-page ad, in essence, apologizing to the world. Miracopa, like we've let you down and we're going to make things better, and that was a lot of controversy there because you don't know what you're going to do, you don't know how you're going to do it, but you got to set a North Star and a goal and then have everybody drive. Because one of my first-ever speeches to the company was we are wonderful at what we do, but we are wandering nomads in the desert, all headed in our own different direction without a North Star and like it or not, we're going to provide one and I'm going to take my time to do that. So to your question of how you do something like this, I think the leadership lesson is, first of all, in a true turnaround, which this was, there's no shortage of places that are broken then need to be fixed. Determining which one of those is the one that you need to or want to start with is a really big and important component of doing a success right now. I have been personally involved in other turnarounds over the course of my career. So I've had some wonderful experience and wonderful allies along the way. My instinct in this particular situation, when I met with employees and there was always a lingering feeling when I being embraced or taking pictures with folks where somebody almost screaming from inside "help me". It takes someone that's willing to engage at that human level to sense that because you can stand on a podium and give great speeches about we're going to do this and we're going to rule the world, and people are out there.
Truly, it's saying the same things like, "Yeah, I've heard this stuff before." I took it a step further. I did not do pulped speeches. I did not do a massive one. I went in literally into the crowd as often as I could and all hours in the night and really created an immediate, I think, bond that was just different than ever before. Because people would say, "Wow, we've heard that," fill in your expletive as you see fit, "I've heard all this stuff before," my answer would always be, so let me get this straight. Yes, the CEO of the corporation has been here at two o'clock in the morning standing on a picnic bench and a hangar in Houston, Texas in this particular case, and they're asking you questions about what he needs to, what I need to do next, and I need actionable items. Emotion, get it out of your system, but I need something more solid because I can't act, "I'm pissed, I hate you. You should fire everyone," because that just doesn't make sense. Again, it's like you and I would debate and issue if we knew each other. When you trust someone, when you're trusting someone and they're asking you a question, you have to convey that you're willing to listen. I think that was probably that I call it listen, learn, and only then can you lead as just I've truncated to that point and people say, "Yeah, that's right." It is not easy to do. Truly listening, learning, meaning you've heard things, parrot that back, "Is this what I heard you say, Lou? Is it?" That takes time, it's effort, and it puts you in a very vulnerable place because you don't know everything. In our particular company, in that particular state of distress that it was, it was the right thing to do and it proved to be successful.
Lou Whiteman: Now that's sounds all great on paper, but also it takes a lot of luck. I think you got into that, into the book where you were doing this, you're going everywhere you could, go into the hubs, go into the main stations. You are the CEO talking to a lot of frontline employees who've been burned before. You're not exactly going to say, "Oh, good, you're here. Here's a list." You tell, I think it's Amy's story in the book? It's just a little bit of, I don't know if you call it luck or right place for right time, but just it's still with all of that, to me the lesson was you got to do this a lot to find that person. You just have to stay with it. But I think Amy's story did that, just sums up exactly what you're talking about here if you could share that.
Oscar Munoz: Well, thank you for bringing that up because it is quite a seminal moment in the turnaround of United. Because as we've talked, I'm out there listening and I've told the world I'm going to spend time, actually get to understand and know from the people that actually touch you as a customer what truly is broken about us before I can do anything because there was no shortage of things to do. As I said, you've got to pick the right thing. I'm flying back from Denver to Chicago one day and I've been out on this tour, and I've listened a lot and I've learned a ton, and I have 500 things. I'm just exaggerating, but a number of things that are wrong and they're all actionable, they all could be the first thing you start with. So I'm thinking to myself like, "Okay, you put yourself in the situation, you've told everybody you're going to go out there, you're going to figure out this one thing," and I'm like I have no clue at this point. I'm even more confused with the amount of things.
Call it divine intervention, call it luck, call it fate, call it I think my maternal grandmother looking at me, sorry, I always get emotional when I think about, looking at me from above. So I go to the front galley, and my style of interviewing is really, really super-sophisticated. I walk up to you and say, "Hi, Lou. How's it going?" It was like, "I'm Oscar." You could see her resistance to have a conversation. It's like, "I don't want to talk to you. I don't care to talk to you. There's nothing I'm going to say that you're going to even listen to or act." That's the disengaged and disenfranchised nature of our employee culture at the time. I stood there for a moment and I respected her desire not to talk. But as I was leaving, I just touched her gently on the arms. I'm just sitting right there, if you care to share something. Well, as I touched her gently, she pulled away and I could tell she was upset, and then she looked at me and her face said it all. She burst into an emotional outburst of tears, and anger, and suppressed.
You just had to be there to really see that thing. The words that she said that proves seminal in our turnaround is like she said, "Oscar, I'm just tired of always having to say I'm sorry." What that meant is I'm sorry the plane is late. She had nothing to do with it. I'm sorry our coffee sucks. She had nothing to do with it. I'm sorry we don't have the food. I'm sorry you can't sit with. If you think about our airline industry because of all the policies and procedures we have, we have to tell you no a lot, but the way you tell someone no and over time just gets tiring. For someone of that level who every day is flying, being told to be the brand, be the friendly skies, be all these things, I can only imagine what they're thinking. It's like, well, if just somebody at the corporate level would understand what we went through and fix some of the things that we don't have a chance to fix. For me, it became crystal clear, I got it. I know what this is going to be. We've lost our employees and before we do anything else, we have to regain their trust. That was my underlying mission, so I felt better and more calm about it. I now had to prove this to my senior leadership team, to our board, venture into investors and the customers because if you think about what are you going to do first, we're going to get our employees back into the bus with us, which sounds like a good idea, but it sounds expensive, it sounds time-consuming.
Doesn't sound like you're taking me into account as a customer or an investor. You can just imagine the thing. I think one of the leadership lessons again is whatever you do it, however you do it, once you've done it, you've got to have that conviction because everybody in the world is going to shoot at it. The only way leaders lead is to get at that conviction, and convince other people to get alongside of it. I think that was the premise. There was a promise we made in the premise upon which we made it, and it proved to be useful because overtime, regaining the trust of 100,000 employees spread all over God's green Earth who are all feeling the way they did in a world where you only see one, or two, or three, or four at the time, we don't have a factory floor. There's a level of discretionary effort that's in all of us that has to be captured, and that is only captured through both heart and mind. Heart is hard because it's emotional. The mind is it's a, well, we're broken. We need to fix this and the math doesn't work. I get that, but why is that my problem? When you're a frontline employee, it was the heart. It's like let's do this together.
Lou Whiteman: As you mentioned, the best laid plans, so you come up with maybe a concept you need to sell that. I believe what, 37 days in, 36 days in, you have a heart attack and you end up in a medically induced coma for weeks with your family out of town, which is just reading this, just the personal side of it, too, of the dear God, this is a human being. You ended up not long after having a heart transplant, all while trying to run a major airline, all while trying to take, very on, hopefully formulate a plan, and then you have to sell it to everyone. If nothing else, yes, it's a great PSA for listen to your body and act quickly because thank God you did. But just as a manager for one thing, are you crazy for coming back? Why at that point wasn't that a sign like, "Oscar, maybe it's someone else," but also how? I mean, it's hard to think of a bigger momentum stopper in a job that it seems like that, yes, you went out, you were trying to make a good impression. You were trying to hit the ground running with momentum. There's nothing like a medically induced coma to blow momentum. I don't know, there's a question in there somewhere, but how is it possible that you continue the one from there, I guess, or am I overstating the difficult?
Oscar Munoz: It was tough. Not only I was coming back from this medical event, we had a proxy battle brewing. We still had labor negotiations that were undone. I was only 37 days in the job before I went out. So everything was in front of us completely. As I said to the receiving doctor, as I was being wheeled into the emergency room after this nasty heart attack, I muttered enough and coherent enough to get names and numbers of people to call, but also I kept saying I don't have time for this [laughs], which is so unbrand for me. Your question on people and why I came back. It's a very touching story to me and it's why honestly we wrote the book because when I was down, these people, these tens of thousands of people spread all over the globe, in the days that I went down, the outpouring of affection and support through letters, and notes, and cards, and flowers, and food that were being sent my way were overwhelming. It came to the point where there was so much mail that it would be received at my apartment. My children read those every morning and there was always a new bag of things. It became such a ritual at the hospital that the doctors and nurses themselves would come in for the, we dubbed, the morning reading. The reading of those notes and the outpouring of people, again, 37 days, I've met certainly hundreds of people, maybe a few thousand people on my walk. But the word has spread back to when we talked earlier about the level of connection that I was very honored and fortunate to be making with them, and the outpouring affection was so strong that the decision or the conversation within my family about whether to return or not was never really had other than, "Dad, you have to go back.
These people want you and need you," which was always my intent, by the way. [laughs] I never had a single doubt about coming back. People have shared with me excerpts from many of the talking heads over the course of my illness about he will never come back, he'll never be the same, his mental acuity will be deprived, his energy, all these things, the doomsday. I see those people every once in a while when I'm in green rooms, and there's a little level of, well, you love me now. But the reason to come back, it's just a point in the story in the middle of the night in the hospital, which is probably the most saddest, the most depressing time if you've ever been in the hospital. A nurse said, "I see a lot of people come through here and I've sectioned them off into two." It's about the why question. Some people ask in a defiant angry way like, "Why did this happen to me? I'm a good person, I'm religious, I'm fit or whatever. How dare I get cancer or whatever?" Then there's the other person that say they realize what's happened to them and ask the question more in a, "Why was I spared? Why am I still here? What is left to me to do?" She said wonderfully, it's like you strike me as that second person. That combined with the letters and the outpouring of affection and the support of my family was why we came back. There was a lot left to do, and my why was we hadn't finished and I thought I was certain we had the magic potion to begin the turnaround at the airline.
Dylan Lewis: Coming up after the break, Jason Moser and Matt Argersinger return with 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, so don't buy or sell stocks based solely on what you hear. I'm Dylan Lewis joined again by Matt Argersinger and Jason Moser. We have news that will devastate kids on college campuses and in-laws around the country. Netflix is finally beginning its crackdown on password sharing. The streamer began notifying subscribers in the US that there will be an extra fee of 7.99 per month to share your Netflix account with someone outside your home. Jason, I know you have a kid going off to college soon. Are you paying that extra eight dollars a month?
Jason Moser: No, I am not. A couple of things. I mean, I think this is interesting from the perspective that they rolled this out in Canada earlier. They saw some initial pushback. It seemed like it got a little bit worse before it got better, but it did get better. I expect that same dynamic-related kind of play out here domestically. But this I think is partly to a greater strategy. We know that they are introducing their ad-supported model, much as Disney is doing the same. These companies are trying to push us to that ad subscription. The main reason is that the economics are so outstanding. They make more money on that ad subscription. Even though the cost for the subscription is lower, the ads that they're serving up really the economics work out. You're going to see Disney, for example, raise the price of their ad-free offering in order to create a bit more Deltas. They said in the call, they want to get the consumer's eyes on that lower price point. I think there's going to be something, too, that we're seeing Netflix do the same thing. I mean, the numbers are the numbers. It's just there's no free lunch and I think those days of ad-free low-cost streaming are coming to an end.
Dylan Lewis: Matt, the golden day is over?
Matt Argersinger: The golden days are definitely over for my in-laws because they love the Great British baking show and I know they use other people's passwords to get it. Sorry, mom and Dad-in-law.
Dylan Lewis: Let's get to stocks on our radar. Our man behind the glass, Dan Boyd, is going hit you with a question. Jason, you're up first, what are you looking at this week?
Jason Moser: Yeah, just keeping an eye on Salesforce, ticker is CRM, and this is a company that is in a customer relationship management software. They have earnings coming out on Wednesday after the market closes. The stock had an awful 2022. It's off to a good start here in 2023. Shares are up around 60% so far. But if you remember, too, at the beginning of the year, the company they were hit with an onslaught of activist investor interests, really wanting the company to focus on efficiencies and bringing more down to the bottom line. It makes a lot of sense. This is a pretty well-established business they're making, $27-28 billion a year in revenue. So we expect some earnings, Dylan. They did guide for $8.16 billion of revenue for this quarter they're getting ready to announce. That represents a growth of approximately 10-12%. Then also just interesting to see what the leadership situation is going to be here now the Benioff is back on his own as CEO.
Dylan Lewis: Dan, a question about Salesforce.
Dan Boyd: Less of a question, more of a comment, Dylan. Jason, you know a business is doing well when they have their own skyscraper in Downtown San Francisco.
Dylan Lewis: Yeah, I guess so. That's just mostly a fact, Dan, I think.
Dan Boyd: Well, it's just a bold choice for Jason to choose one of the top 100 largest companies on the planet by market cap. Bold move, Jason.
Dylan Lewis: Keep the spice coming, Dan. Matt, what is on your radar?
Matt Argersinger: Hey, I'm looking at Invitation Homes, ticker INVH. It is the country's leading single-family rental company. Not apartment buildings, or single-family homes of which they own about 83,000 as of the end of the first quarter. Since the pandemic, a lot of people who want to remain renters or price out of buying a home, but want more space, want a home office, don't want to share a roof or walls with others, again, it's a big trend. Most of their homes were located in the fast-growing Sun Belt states and cities. Results were fantastic in Q1. Same-store rent growth was up 8% on new leases. Average occupancy was almost 90%. I wouldn't call their shares cheap, but you are getting a 3.1 dividend yield, Dan, which is one of the highest yields Invitation shares have offered since they've been public.
Dylan Lewis: Dan, a question about Invitation Homes?
Dan Boyd: You guys are making this hard on me today. Both are good companies with excellent financials and bright futures. It's hard. Matty, these are long-term rental homes, not short-term?
Matt Argersinger: Correct. These are general leases that go for a year or even longer with single-family rentals. Yeah.
Dylan Lewis: Dan, which one's going on your watch list?
Dan Boyd: I like a good skyscraper, Dylan. So I'm going to go with Salesforce.
Dylan Lewis: Matt Argersinger, and Jason Moser, thanks for joining me.
Jason Moser: Thank you.
Matt Argersinger: Thanks.
Dylan Lewis: That's going to do it for this week's Motley Fool Money radio show. The show is mixed by Dan Boyd. I'm Dylan Lewis. Thanks for listening. We'll see you next time.