In this podcast, Motley Fool host Dylan Lewis and analysts Ron Gross and Jason Moser discuss:
- Apple's sluggish hardware sales and massive $110 billion buyback program.
- Amazon's killer cloud and ad segment growth.
- CVS's Medicare struggles.
- Wayfair working out of declines.
- Coca-Cola keeping things business-as-usual.
- The different fates in fast food for Starbucks, Domino's, and McDonald's.
- Two stocks worth watching: Wingstop and CrowdStrike.
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 03 2024.
Dylan Lewis: Consumers aren't eager to buy new iPhones or order Starbucks on them. This week's Motley Fool Money radio show starts now.
It's the Motley Fool Money radio show. I'm Dylan Lewis. Joining me in the studio, Motley Fool Senior Analysts Ron Gross and Jason Moser. Gentlemen, great to have you both here.
Ron Gross: How are you doing, Dylan?
Dylan Lewis: We've got fast food brands signaling that consumer is getting a little pickier and also radar stocks. Ron, generally this time of year, our eyes are on earnings, but we do take a peek at the big macro to make sure that we're not missing anything. For a while, the story was rates are going down. We've had a more recent idea of our rates going up. We had comments from Fed Chair Powell this week. We have fresh labor data. What are you seeing with the rate story?
Ron Gross: Two big stories that this week, on Wednesday, the Fed left interest rates unchanged at 5.3% and commented how they were wary about how stubborn inflation was proving to be. They signaled that rates will likely continue to stay higher for longer. That's been the mantra, higher for longer. It is interesting to see how sticky inflation has been. The Fed's preferred inflation index, while down from 7.1 for sure, which is great, still stands at 2.8%, higher than their target of 2%. Now investors did share the fact that Powell said he thought the next policy move was unlikely to be an increase, and the market actually rallied on that. You'll take what you can get, I guess, in this market. Now fast-forward to Friday, jobs report came out solid but much weaker than expected, which in a vacuum would not be so great, but in the context of an environment where you're looking for a soft landing for the economy, it's actually been heralded as a Goldilocks report. Weakness but not too bad. Its economy appears to be slowing. Market rallied significantly on the hopes that now one or potentially two rate cuts would happen this year. We will see.
Dylan Lewis: The big macro can, sometimes, be the big metric soup. I appreciate you helping us wade through that one, Ron.
Ron Gross: Very good.
Dylan Lewis: We have another monster earnings week to run through. That means we're recovering results all the way from A to W, Apple to Wayfair. Jason, let's start at the top of the alphabet shares of Apple, up 6% this week after the company's second fiscal quarter results. Revenue, down slightly year-over-year but came in ahead of expectations along with earnings. It seems a little bit of a wait-and-see quarter for Apple.
Jason Moser: It definitely feels that way. They did not knock the cover off the ball here, but the results seem good enough for Wall Street. and like Ron, it's that you take what you can get. To your point, yeah, revenue, down 4%, and they saw products revenue actually down 10%. Now they blamed this partly on timing and a tough comp from a year ago when supply chain bottlenecks were eased up. Take that for what it's worth, but when you look at the segments, we had iPhone revenue down 10%, services revenue was up 14%. Mac was up 4%. iPad, down 17%. Then I thought this was interesting, wearables, home, and accessories was down 10%, so just hoping to keep an eye on there, but China, always a big point of conversation with Apple. China was down again, but Tim Cook noted in the call that the results there are improving from a quarter ago, so they're seeing a reacceleration there in China. It's becoming less bad as what it was before, but we'll have to see how that shakes out because it's become a very competitive market. We know these replacement cycles are only getting longer as these phones continue to get better, and there are a lot of really good phones out there now, particularly when you look in the China market. Conversation about AI, but still nothing really to report there.
Dylan Lewis: I think a lot of people have been waiting for Apple's move when it comes to AI, and CEO Tim Cook alluded to give gifts, a little nugget of something saying, we're looking forward to sharing some very exciting things with customers at events later this year. Jason, what would you want to be seeing from Apple?
Jason Moser: I think the idea, at least probably what people are looking for, is for AI to be incorporated somehow into the device. Primarily that would be the phone, I would guess. Again it's a wait-and-see in a lot of regards because I think that one of the problems with AI right now, just in general, is understanding its implications and how we as consumers might use it or how businesses might use it in the form factor that takes. So I appreciate the fact that they're being deliberate and taking their time there, but yeah, they need to bring something to the table because this conversation regarding AI is only growing louder.
Ron Gross: I think the Worldwide Developers Conference in June is probably something to keep an eye on where the next big AI announcement would be. Interesting that the stock rallied significantly on this report. It's all about expectations, really, even though there were some weakness here. It was better than expected. Repurchasing $110 billion of stock continues to return a significant amount of capital to investors, shareholders, in addition to their dividend only trading at 25 times forward, but they do have a China problem, so it's going to be interesting to watch.
Dylan Lewis: For context, $110 billion of stock is a Boeing or an Airbnb in market cap. Apple is just saying, yeah, sure, we throw off enough cash. That's not going to get in the way of us doing our R&D investments. We can buy that back. We can also raise our dividend 4%. That's fine. We've got all this stuff in spades.
Jason Moser: I will say, with the dividend, it tilts me that it's so low.
Ron Gross: It's so [inaudible].
Jason Moser: Exactly. I appreciate what they're doing. Slow and steady wins the race. This is 12 consecutive years they've raised the dividend, and credit where credit's due, it requires looking further out in saying, in year '25, this is ultimately going to be a Dividend Aristocrat® and probably more. [The term Dividend Aristocrats® is a registered trademark of Standard & Poor’s Financial Services LLC.] Man, I'll tell you, share repurchases are fine. I would love to see them make a little bit more of a material boost to that dividend.
Ron Gross: Here.
Dylan Lewis: They're setting a low hurdle to keep going up every single year on their path to becoming an aristocrat. Ron, Amazon not really needing to wait for growth in the same way that Apple investors are. The machine just continues to churn their revenue up 13% to over 125 billion for the quarter. It seems like an incredibly strong earnings results for the company, especially with its operating income.
Ron Gross: Agreed. Record First Quarter sales. As AI, we have to mention AI in every story, we're contractually obligated. AI, the boom, it would just powered growth through their cloud computing unit. Amazon CEO Andy Jassy has tried to shift the company to focus more on AI innovation, both in the Amazon platform as well as the Cloud AWS platform. They were significantly behind Microsoft, Google, some others, attempting to make their way back into that space earlier this month. In a letter to shareholders, he laid out his vision for how generative AI could be a critical building block in their next pillar of growth. You had the website. You had Amazon Prime. You have AWS now. What's going to come next? Perhaps it's AI, but we will see. As you noted, the metrics are wonderful. Revenue, up 13%. North America, up 12%. Amazon Web Services, up 17%. Really strong. Net income increased to $10.4 billion, and that includes a $2 billion loss from their Rivian Automotive investment. Theoretically, from an operating perspective, as you mentioned, even higher. Free cash flow came in at $50 billion for the quarter. They're putting up some real good numbers. Their guidance was pretty strong. As well at CapEx, it's going to be pretty high now as they make investments for AI and other things, so we'll keep an eye on what that does to free cash flow. A pretty strong report trading at 38 times, it's not the cheapest stock in the world, but it is Amazon.
Dylan Lewis: We were talking dividend just a minute ago with Apple, and I do have to ask because everyone else in big tech is getting on the bandwagon.
Jason Moser: [laughs]
Dylan Lewis: Jason, do you think that Amazon would ever consider issuing a dividend?
Jason Moser: I think one day they probably will, but I think that they also are not going to feel pressured to do so. They're going to do it on their own timeline, and into Ron's point about the investments they're making in Cloud and AI and whatnot, i t's also nice to see that Jassy is very focused on costs as well with business, so they are not just spending money freely, which is very encouraging. I think probably what comes with that is a singular focus on the balance sheet, net cash flow, and making sure they have the capital that they need to make all of those investments. My guess is a dividend would probably follow years down the line, but I could be wrong.
Ron Gross: They do need to continue to make sure their cost structure is right. They laid off 27,000 employees, I want to say, last year, and they keep doing it selectively to make sure their overall head count is where they want it to be. That obviously could cruise right down to the bottom line. As they save money, it pops free cash flow up, it creates more money to potentially pay a dividend and buy back stock, make investments. I think they're closer to getting their expense structure correct, certainly more than they were in the past.
Dylan Lewis: Coming up after the break, earnings palooza continues with a look at how Medicare is eating into CVS's results. Stay right here. You're listening to Motley Fool Money.
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Dylan Lewis: Welcome back to Motley Fool Money. I'm Dylan Lewis joined in the studio by Ron Gross and Jason Moser. Our earnings rundown continues with a look at CVS, Wayfair, and Coke. Ron, CVS, logging its worst day in about 15 years after reporting earnings this week. Sales up slightly from a year ago but wide losses, in particular, tied to the company's Medicare operations. Walk me through this. This is an in-depth category here.
Ron Gross: Yeah. The stock got just murdered. Investors wanted nothing to do with this company as they missed both revenue estimates, and they decreased their guidance. As you said, revenue growth, anemic at 3.7%. The problem with their Medicare unit and their insurance unit, two things. Increased utilization, and that means more money spent on insurance as people continue to seek treatment more and more post-COVID. Everybody put off some elective surgeries. Believe it or not, we're still dealing with that. It seems like COVID has been a while now but not in this case, much higher utilization rates that eats into bottom line. Medicare reimbursement rates, those were cut, and that continues to pressure the company for the remainder of the year and potentially 2025 and forward, but that remains to be seen. They got hit double whammy there. Like Aetna's revenue, for example, was up 25%, but their adjusted operating income fell 60%. They've got some work to do, and CVS is really paying the price for a really big push into Medicare Advantage plans through their Aetna division, and it's coming back to burn them a little bit. They're going to spend time making sure they right-size their balance sheet. They're going to cut costs if they need to. I think all competitors are likely going to need to take similar actions. Even though CVS went hard into Medicare, they are certainly not alone. Earnings, down 33%. Guidance was brought down as well. Stock is only trading for seven times forward guidance, intriguing, but I would be careful.
Dylan Lewis: Starting to look a little interesting?
Ron Gross: Seven times.
Dylan Lewis: This is a company that is very different than the CVS of about five years ago, with the focus on health, with the focus on insurance, the Medicare exposure. A lot of that has happened under CEO Karen Lynch's guidance. Is she on the hot seat?
Ron Gross: I would think for sure. She used to run Aetna, so the fact that CVS has moved big into Aetna-based products, probably not surprising, but that could be a mistake into 2025. We'll have to keep an eye on it but hot seat for sure.
Dylan Lewis: Much more favorable reaction to Wayfair's results. Shares, up 20% this week. Jason, I'm probably part of the reason why their sale story is doing OK. Two new kitchen stools and a mirror in my house. Revenue was down slightly but ahead of expectations. I'm glad I could do what I can now.
Jason Moser: It sounds like Dylan is a happy resident of the Wayborhood, right?
Dylan Lewis: They've got just what he needs.
Jason Moser: Get used to that one, right, the Wayborhood. That's going to be a big marketing platform for them, big campaign in the next several years, but yeah, like Apple, they didn't knock the cover off the ball by any means, but the results were good enough. Clearly, the market responded very positively to it, and management did paint a picture of better days ahead. Revenue, $2.7 billion is actually down 1.6% from a year ago. When you look at the metrics that really matter for this business, active customers, 22.3 million now, that was up 2.8% from a year ago. Revenue per active customer actually fell 2.8%, and orders per customer remained relatively flat. Any one of the key metrics we've always kept an eye on with Wayfair is that repeat customer business because acquiring those customers is expensive, so when you get them, you want to keep them. We've seen this metric really perform over time. Now repeat customers placed 80.5% of total orders delivered in the quarter, that was versus 79.1% a year ago, so that number continues to move in the right direction as well. I think that this is a business that, over the last three years, they, like many of these e-commerce businesses, went just through some really very difficult to support growth. A lot of that growth was pulled forward. They're normalizing now, still working toward sustainable profitability, but you keyed in on it there at the very beginning. We're all using it in one way or another. If you have a home or if you rent a place, they've got everything, so it's a nice place to be able to go look and find stuff that you need, unless you're a true Amazon loyalist, I guess.
Dylan Lewis: [laughs] I'm going to take some cues here from the key business metrics and, I think, paint a little bit of a picture with the consumer and the story there. Their active customers, as you highlighted, going up, but the spend per customer on average, going down. I feel like that is a sign of something we're going to continue to see this earning season with other companies.
Jason Moser: I agree. It feels like we're seeing that type of behavior across the spectrum of businesses, particularly in things like retail and restaurants and whatnot, but we're just seeing a lot of signs with a lot of these reports that, while there is some growth there, it's very clear that the consumer is stretched and starting to make concessions and deliberate and postpone purchasing. Now with that said, I think one thing they noted on the call was very encouraging. They said for the first time since 2019, they're seeing their suppliers starting to introduce large groups of new products into their catalogs as they try to build momentum for this recovery going beyond this year, so that's encouraging. With Wayfair, it's ultimately a network. They're not holding all of that in inventory, but they're connecting suppliers to customers, and to see those suppliers introducing a lot of new stuff, that's a good thing, and when the consumers start to feel a little bit better, Wayfair likely is going to get a few of those dollars.
Dylan Lewis: Jason, I know this is a company you've followed for quite some time, going back pre-pandemic. We're seeing this business normalize a little bit. Do you see a return-to-growth story here for them?
Jason Moser: I do to an extent. I think it's a very competitive market to be sure. You look at Amazon. They're the most obvious competitor that really is a threat to a business like this, but they've done a very good job through the years of maintaining the narrative, investing for growth. They're not worried about that profitability and cash flow right now because they feel they're building this network out, and the market opportunity is just so big, and they continue to grow that international business out. It does feel like there's another leg up to go here.
Dylan Lewis: More stools and mirrors in my future, it turns out. We're going to wrap this earnings rundown with a look at Coke. Revenue coming in a little bit ahead of expectations, up 3% year-over-year. Ron, when you look at the results from the company, maybe not quite as subject to some of the consumer whims because they are on the lower-priced end, but what did you see?
Ron Gross: The two main things were anemic volume growth of only 1%. You really would like to see that be stronger, but the report was relatively strong and that's because of a 13% price increase across their product line. It's the age-old story of why Warren Buffett has always said he liked Coke besides his addiction to Cherry Coke. It's because of the pricing power, and they have that ability to continually raise prices over time. They attributed about half of the price increase to inflation, the other half was to keep pace with competitors, but for the most part, consumers accepted it. They are seeing inflation decelerate. Corn syrup, sugar, aluminum cans are coming down, so pricing will probably moderate as the year progresses. Net revenue, only up 3%, if we remove currency, up 11%, a little bit better than that. Adjusted earnings per share, up 7%. That's what Coke does. Coke's going to really knock it out of the park, but they've got to continue to come up with new entries into the marketplace. They have this new Happy Tears Zero Sugar you may have heard about sold exclusively on social media. I don't know, I don't get it, but they upped their guidance by 4-5% expected EPS growth. Again it's Coca-Cola. It trades at 22 times guidance. Pepsi's at 21 times guidance, right in line there.
Dylan Lewis: You really came out swinging there, Ron. Anemic growth.
Ron Gross: I don't know, I don't get it. When it comes to the social media, I absolutely love the spice.
Jason Moser: You need to get more salty snacks in that portfolio.
Dylan Lewis: Up next, the numbers just keep coming in. We've got details on Starbucks' 15% drop this week and updates on two major fast-food chains. Stay right here. You're listening to Motley Fool Money.
Welcome back to Motley Fool Money. I'm Dylan Lewis, joined again in the studio by Ron Gross and Jason Moser. We've got earnings from three of the biggest food chains in the world this week, Starbucks, McDonald's, and Domino's, slightly different outlooks across all of them. Jason, I want to start with Starbucks. Shares down 15% and this is not something that we see all that often with a company like Starbucks. There seemed to be a lot of concerns and not a lot of inspiration in the results that we saw from the company. Also, not a lot of inspiration, the commentary from management after the results.
Jason Moser: I think you could say that again. These were not good numbers clearly, and we'll get to that in a second, but I think see CEO Laxman Narasimhan seemed very caught on the defensive, whether it was the earnings call or whether it was interviews that he was offering financial media. I don't want to say detached from reality, but it just didn't seem like he really had a focus on what the real problems were. He kept on throwing around a lot of catchphrases and buzzwords, and there were some assigning of blame to the customer and whatnot. It just I don't know. To me, he really has work cut out for him, but I think even more so, to me, the drumbeat is only going to grow louder. He's been there for a year now. Stock is down 35% under his watch. This is Starbucks. That's a big move. It's only going to get louder. We're going to start hearing the question, is he the man for the job, and that's a really fair question, I think, at this point. Particularly after this report, revenue was down 1%. Global comps, down 4%. They saw particular weakness in China. That was down 11%. They noted that in this very competitive market that there are plenty of options there in the Chinese market. They don't have unlimited pricing power there. They do continue to open stores, so there is room to grow there and room to succeed, but they've run into a little bit of a buzzsaw there. You saw operating margin, down 140 basis points, earnings-per-share, down 7%, and I think really what got the market worked up, this guide down was significant. They were calling for earnings-per-share growth in that 15-20% range earlier. Now that's been whittled down to just flat to low single digits. That's a big deal, and so the market's reaction, I think, was absolutely right. Now the good news is, I think, a lot of this is very fixable. These are fixable problems. Much like Disney's got an Iger problem, Starbucks seems to still have a Schultz problem, and that is not going to be going away anytime soon.
Dylan Lewis: The results weren't particularly strong, and I don't think the picture is going to get that much better that quickly. Management did identify three different execution opportunities, they call them, for getting back on track, particularly in the United States.
Jason Moser: This is separate from the triple shot with two pumps win.
Dylan Lewis: This is a separate.
Jason Moser: Now, see, I'm already confused.
Dylan Lewis: Cringy. The first they identified was meeting demand across dayparts to drive future growth, so essentially meeting the demand of people who are coming into the store because it seems like, especially during some of their more peak hours, they're actually supply constrained with what they're able to give consumers.
Jason Moser: Yeah. If you are waking up in the morning, and Starbucks is a part of your routine, and it is for a lot of people, that is one of the peak traffic parts of the day for them, and then they noted in the call, people will go on there to the app, put an order together, and then see how long that order is going to take to fulfill, and they bag it, and they go somewhere else. That's just unacceptable, right? We've seen restaurants that have to deal with those throughput issues. The one that stands out is Chipotle. Do you remember back in the day, you knew if you went to Chipotle at lunchtime, you were waiting in the line starting outside, but it was almost like magic how quickly they got you through that line. Starbucks needs a little Chipotle right now, if they want to fix that throughput, and that to me, I think, is a key issue that needs to have 100% of their focus.
Ron Gross: This is a little Wall Street-y and not company-focused, but the reason that the stock got slammed so much is because the investment community was so taken by surprise about how weak the numbers were. I saw some comments from analysts who were, like, they were stunned and they've got to improve communication. They don't have to, but they should improve communications, so investors have a better understanding. I don't know how they missed it so bad. They could have pre-announced. They could have updated guidance. I'm happy to see that they brought guide down significantly for this quarter. At least it's better communication. Rip the Band-Aid off now, better than later.
Jason Moser: Maybe they can improve, right? Maybe that guide down is sandbagging. We won't know until we get there. You made a good point there, I think, in regard to the pre-announce. We've seen pre-announcements all the time, and whatever the reaction is, if they pre-announced this four weeks ago, probably the market has a very similar reaction. Wouldn't you say? Assuming they pre-announced four weeks ago, then there's some time there to digest, to get through it, put together some communication, and again how you're going to solve these problems. It does feel like a pre-announcement would've been apropos in this case.
Ron Gross: As you say, they would've taken the hit, maybe not as badly back then, but it's better to see a company being proactive and communicative than not, and so even if you're going to take the hit, be upfront. Let us know how the business is doing, the shareholders are the owners of the company, and just don't play it so close to the vest.
Dylan Lewis: Jason, after this decline, post-earnings shares are down around a level that has only really happened a couple of times over the last five years for this business. Generally, when they've fallen down to this level, they haven't stayed there very long. We've seen them rebound pretty quickly. When you see Starbucks at this point in time and the challenges that they currently face, are you interested, or are you sitting on the sidelines?
Jason Moser: I'm getting interested. I'm a shareholder in Starbucks today, thankfully to much lower cost basis, so it's still working out OK. It's a retirement portfolio holding. I own it primarily for the dividend income, and so when they start to see this, I do start to get interested. Now the flip side to that, I think things are going to get worse before they get better. I am not convinced that Laxman is the man for the job, and this quarter really reinforced that. Again I think the drumbeat is going to continue to grow louder in regard to that. He said they didn't pre-announce because they were focused on putting together their game plan or an action plan. You can do both. You're getting paid an awful lot of money to do this job. It didn't seem like it's that difficult of a hurdle, but to me, I think patience probably works out well here. It does feel like it might get worse before it gets better because they are noting as most everyone else is the stretch consumer, right? They can't keep on raising prices to the moon, so they're going to run into a little bit of a wall there.
Dylan Lewis: We're going to stick with food and look at results from Domino's. Ron, going through all of this, I am not seeing all of the same stretched consumer elements quite showing up in the numbers for Domino's. It seems like they've been able to weather this environment a little bit better than Starbucks.
Ron Gross: They're mediocre pizza is reasonably priced, [laughs] and that appeals to quite a number of people, including my son from time to time who was born in New York and his dad is from New York, and we just deal with it.
Jason Moser: It's the throughput, and they get you this stuff quickly.
Ron Gross: Let's look at the stock up 30% this year, up 50% over the last year, and this report was pretty strong, thanks to promotions and marketing. That actually paid off. That doesn't always, but the spend paid off. They revamped their loyalty program. They're advertising on Uber Eats. Delivery and pickup orders, both increasing. We saw their network sales, though it's mostly a franchise business, but their total network sales, up 7%. Their revenue were up 6%. US same-store sales growth up 5.6%. Higher numbers of carry-out and delivery orders across all income groups. The income group part is interesting. They started to work with Uber Eats back in 2023, and it was because they wanted to reach wealthier households who are willing to pay a delivery fee and use a program like Uber Eats to improve sales in that channel. They are making nice headway. They expect Uber sales to reach 3% of total sales by the end of the year. That's an addition to the revamp loyalty program, 33 million-plus active members, more than 2 million of whom joined since the relaunch in September. Margins are up. Net income, up 20%. They're launching a New York style pizza, Dylan.
Dylan Lewis: Hey.
Ron Gross: I don't know, we'll see, but long-term clients, they're sticking to their long-term hungry for more plan, I think, which is pretty good, 31 times forward earnings, something like Chipotle at 54, something like McDonald's at 22.
Dylan Lewis: I will note, as someone who grew up in New Jersey, spent my time going into New York every now and then, I will occasionally get Domino's Pizza. It is not my favorite, Ron, but it exists in a class of its own. It is not pizza in the conventional sense. You just have to say, I'm having Domino's.
Ron Gross: I've been a recommender of this stock for a long time as we have been at the Fool from time to time, and they provide a product that people want.
Dylan Lewis: We'll stick with a product that people want, and maybe a different idea of burger. Looking at results from McDonald's, not so much fanfare with their earnings results, Jason. It seems there are though some similar threads showing up in McDonald's earnings and the commentary around it that we've been seeing with Domino's and with Starbucks.
Jason Moser: It was a fairly benign quarter but definitely fell in line with the theme that we're seeing more widely across the industry. The consumer getting stretched, making concessions, starting to focus a little bit more on value. The good news for McDonald's is that's the play. It's a value play. They are focused on value, which is something that Starbucks can't necessarily claim, and so even when it gets difficult for McDonald's, they still have that to fall back on. Like I said, a relatively benign quarter, global comps were up 2%, but they did grow operating income 8%, which is encouraging, and they saw earnings-per-share growth of 2%. Nothing to write home about, but it was the 13th consecutive quarter of positive comp sales growth, and they are continuing to focus on opening stores. McDonald's is everywhere, but this is amazing to think about. They're targeting 50,000 restaurants by the end of 2027 from just over 40,000 today. They still feel they've got a long [inaudible]
Ron Gross: Where are they going?
Jason Moser: I know, and Ron, you'll have one in your garage. I think that's a fair question because Starbucks is doing the same thing. They're targeting opening up thousands of new stores as well, and you start going back to that Onion headline of A Starbucks Inside Of The Starbucks' Bathroom or something like that. You just saturate the market at some point, and you can't open stores forever, but they did just open their 6,000th store in China. They see that opportunity, still with plenty of runway there. I think when you look at it from a global perspective, and you look at this as a value proposition. They're, I guess you'd say, in the right place at the right time. It's not a stock that's going to double over the course of the next five years probably, but again, you probably own this one because of the income, because of the dividend, and it feels like they're doing a good job with the difficult conditions.
Dylan Lewis: Jason, you were talking about how McDonald's, being a value provider, plays very well right now with the market and with a pinched consumer. It's really interesting to me as we process results from all of the different restaurant fast-food, quick-serve, fast-casual brands because we had results from Chipotle that were absolutely stellar earlier in this earnings season. They are, I'd say, more in the upper middle-class as a standard customer, and then we see Starbucks in the middle getting waxed because they are both appealing to a value audience, appealing to not-so-much-of-a-value audience and seemingly having a harder time operating this environment.
Jason Moser: I think what Chipotle has done so well over the course of time is just basically remaining true to what they are. Along the way, they fiddled around with different concepts and maybe were going to try to open a pizza joint or burger joint, and they quickly realized that wasn't really a very good idea, but I will say that ShopHouse restaurant, I really wish they'd pursued that one, but they didn't. It does feel Chipotle has just remain true to what they do so well. When you look at Starbucks today versus the Starbucks that we knew 20 years ago, they're selling more cold beverages now, and that's different. It's not necessarily just coffee anymore. What comes with all of those cold beverages? A lot of different ingredients, a lot of management which breeds a lot of mismanagement, very difficult supply chain to manage there. We always make fun of them because they just have never nailed the food part right on Starbucks. I think that the juxtaposition there is interesting because you've got one business in Chipotle. They continue to do what they know how to do so well. It feels like Starbucks is a little bit aimless these days, and the market is making it pay the price for it.
Ron Gross: When I think of a company that does what they do so well, I think of a Chick-fil-A. Chick-fil-A knows what they're doing from a throughput, from a food perspective. I think, Cava, although it's in its infancy, could end up being like that as well, but you have to know who you are, and you have to know who your consumers are, and you have to deliver the quality product at the right price point. Not the easiest thing to do. Restaurants are notoriously tough things to run and tough things to invest in, but those that do it right, it really pays off.
Dylan Lewis: Coming up after the break, we've got stocks on our 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 anything based solely on what you hear. I'm Dylan Lewis, joined in the studio by Ron Gross and Jason Moser. This weekend is Berkshire Hathaway's annual meeting up in Omaha, Nebraska. Gentlemen, as we tape here on Friday we're a day away from the Woodstock of Capitalism. Ron, what are you looking for this year in Berkshire's annual meeting?
Ron Gross: It's the first one without Charlie Munger, so there's certainly going to be a lot of emotion in the room. It'll just be interesting to see how Mr. Buffett handles that, but I'm interested to hear, of course, about the health of the various businesses, what their plans are for stock buybacks. Shares are probably around two times tangible book value right now. It might be a little pricey for Warren, but if they're not going to find any huge acquisitions as they continue to struggle with, I'd like to see them continue to purchase stock back in a pretty meaningful way. It's always an interesting time to see what they're doing over there.
Dylan Lewis: Of course, be looking for the quotes. The quotes as well. Jason, what about you?
Jason Moser: I think with Berkshire, for me, especially with all of this dividend target, it comes back down to, at some point, are we going to see this company pay a dividend? It seems like now might be just an ideal time to do it. Buffett said here I think here recently that Berkshire is not set up to be some company that just presents these out-sized returns going forward, understandable. It's a big company, a lot of things going on. We know he likes dividends, Dylan. He loves it.
Dylan Lewis: He gobbles them up, and he doesn't want to pay them out.
Jason Moser: If we're looking at this new growth profile for Berkshire, at least according to his projections, I wonder if maybe now isn't a good time to consider a rewarding shareholders with a dividend policy because, obviously, he's not going to be there forever. You wonder if that's something where he wouldn't like to leave that as part of his legacy.
Dylan Lewis: Let's get over to stocks on our radar. Our man behind-the-glass, Dan Boyd, is going to hit you with a question. Ron, you're up first. What are you looking at this week?
Ron Gross: I'm taking a look at Wingstop, W-I-N-G, a company I've never owned, but I have contributed to their sales quite a bit. Shares are up 75% over the last year, 450% over the last five years. We do like our wings. Obviously, they're a wing restaurant, 2300 restaurants systemwide. They're going to grow those well over 3,000. The numbers are very impressive: 34% increase in revenue, 66% in earnings per share. Hundred times forward earnings. I got to dig in a little bit more there. Their wings are good, but they're not that good.
Dylan Lewis: Wow, but I love that you're bringing it to us, Ron. Dan, a question about Wingstop.
Dan Boyd: Not really a question, more of a quick story. During the Super Bowl this year, I had to run out to the store to get something, and I drove past a Wingstop. I got to tell you, it is standing room only in there at halftime on the Super Bowl. When you'd think that people will be getting them delivered or already have eaten them, I've never had it, there's something going on over there.
Ron Gross: Digital sales, 68% of sales in Q1, so lots of people on their phones, but also a lot of people in the stores say I'm a wing snob ever since I got that trigger. I only like to make wings at home anymore.
Dylan Lewis: I will say, of the ones that you can go out and get, Wingstop is one of my favorites. A lot of the chains are doing very well. They do a pretty good job. Jason, what's on your radar this week?
Jason Moser: Taking a look, a little bit of a closer look at CrowdStrike, ticker CRWD, I think several weeks back I had a call that Palo Alto Networks as a radar stock. When you look at cybersecurity, few market opportunities really offer the scale and the mission-critical nature that cybersecurity offers. It's an attractive market from that perspective, but it's a difficult one to understand. I am certainly no expert in the matter, and I've always felt maybe just investing in a cybersecurity ETF might be the better way to go, but it also feels maybe we get some winners in the space here, and CrowdStrike seems to be one. This Falcon platform that they have offers 27 modules for its customers to be able to use what they feel is necessary, and then they continue to add on modules. We've seen over time. Those customers that have been with them for longer periods of time, they do. They keep adding those modules all along the way. Twenty-nine thousand subscription customers worldwide. You've got a revenue that's grown about 65% over the last five years annually.
Dylan Lewis: Dan, a question about CrowdStrike.
Dan Boyd: Before we got on for this segment, I was, like, is it Cloudflare or CrowdStrike? There's just so many of these big cybersecurity companies, and they're all faceless.
Dylan Lewis: You know, Dan, it sounds like you might be a better fit for the ETF, and you got to be honest. Dan, which one's going on your watch list as well?
Dan Boyd: Even though I do love a good ETF, I'm going to go Wingstop this time around. [laughs]
Dylan Lewis: I love it. I don't want to put my thumb on the scale, but it's Ron's birthday this weekend. It's a Ron heads into the weekend today.
Ron Gross: With radar stocks win birthday.
Dylan Lewis: Jason Moser, Ron Gross, thanks for being here and bringing your radar stocks. Dan, thank you for weighing in. That's going to do it for this week's Motley Fool Money radio show. This show's mixed by Dan Boyd. I'm Dylan Lewis. Thanks for listening. We'll see you next time.
