In this podcast, Motley Fool senior analysts Jason Moser and Maria Gallagher discuss:
- The Fed's latest rate hike spooking investors.
- Costco Wholesale delivering (yet again) in the fourth quarter.
- Darden Restaurants walking a fine line with customers.
- DocuSign's hiring its new CEO from Alphabet.
- Amazon declaring victory with Thursday Night Football.
Motley Fool analyst Deidre Woollard and Motley Fool contributor Matt Frankel talk with Robert Leonard, host of the Millennial Investing podcast, about "house hacking."
Maria and Jason answer questions from the Fool Mailbag and share two stocks on their radar: Lululemon Athletica and Microsoft.
Got questions about stocks? Drop an email to [email protected] or call the Motley Fool Money Hotline at 703-254-1445!
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 September 23, 2022.
Chris Hill: We've got a new CEO, early results on Amazon's investment in the NFL and a preview of consumer spending for the holidays. Motley Fool Money starts now.
From Fool Global headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Chris Hill joining me, Motley Fool senior analysts Maria Gallagher and Jason Moser. Good to see you both.
Jason Moser: Hey.
Maria Gallagher: Nice to see you.
Chris Hill: We've got the latest headlines from Wall Street. We will dig into the Fool mailbag and as always, we've got a couple of stocks on our radar. But for the fifth time in six weeks, there was a lot of red on Wall Street. The Federal Reserve's announcement on Wednesday afternoon that interest rates will be increased by another three-quarters of a percent. Apparently surprised enough investors to cause a further drop. Jason, we were talking about this before the show. I'm a little mystified because all of the talk leading up to the announcement was that it was going to be three-quarters of a percent in terms of the hike, that's exactly what we got. I'm not sure why there was this dramatic reaction that continued throughout the rest of the week.
Jason Moser: Yeah. Certainly not a surprise in the decision. I feel like we all were expecting that. It did feel like the majority of folks felt like that would offer some certainty to the market and then the news would ultimately be received well. Clearly we got the George Costanza version, that did the opposite. Honestly, Chris, these are the times when my proclivity to expect the worst and hope for the best seems to really work out as an investor. I guess it just makes it easier to tolerate these stretches, not expecting a whole lot, at least in the near term. But I will say yet the level, the magnitude of this reaction is a bit surprising. It does really feel like it's a bit harsh, but it also does feel like we're seeing just more and more language there, expectations of recession becoming more prevalent. There's certainly data out there that tells us things are headed in that direction. Obviously, we don't really do a whole heck of a lot as far as interest rate yields go.
But when you look at the difference between the two and the 10 year, that's assignments used to at least give you certain looks into the state of the economy and whether there's optimism or pessimism. But right now, I mean, we see the gap between that two and the 10 year. That's telling us that the predominant view out there is very pessimistic. You see Goldman recently cutting their year-end S&P target. You see language like "hard landing" now. It does feel like pessimism is starting to really gin up there. I don't know that that's going to change anything in the near term. I think the good news though if you can look a little bit further down the line, is something that I tweeted yesterday. I still think about this a lot. There's data out there. There's historical data that shows us that on average, stocks perform worse in the year leading up to a recession, and during the recession.
Then down the line, things start to recover. In the two years following the recession, price returns were positive 82 percent of the time. We can debate whether we were in a recession here, the first two quarters of contraction we witnessed. I think, generally speaking, most feel like maybe that was a recession-lite, prepping us for the real deal that is expected now in 2023. Maybe this really is now we're on that pathway to that capitulation more or less, where we start to see some recovery post-recession. Because it does feel like we know a recession's inevitable. It's just a matter of when. Does feel like 2023 is setting up for that type of a call and then maybe we start to see things improve. But I know that is little solace for investors today. All we can really do is encourage you to hang in there and stock your portfolio with really good businesses. That's what we continue to focus on.
Chris Hill: Yeah, Maria, I think if there's a silver lining to Jason's point, some of the best businesses in America are looking more attractively priced now than they were, say, a year ago.
Maria Gallagher: Absolutely there. I agree with a lot of what Jason's saying. I think a lot of the reaction has been in the continued shift of the narrative of, for so long the Fed was saying, inflation is just transitory and it's going to get better. We're moving past that narrative, and Powell has just been not as optimistic. He's saying things like the housing market has to go through a correction to get supply and demand more aligned. He's definitely taking more of a pessimistic -- as Jason was saying -- standpoint. I do think that shift is much more solidified this month than it has been even the past couple of months. I think now people are hopefully more aligned in the future saying, OK, this's probably here to stay. It's been here for a while, but it's probably here to stay.
Chris Hill: Let's move on to some of the companies making headlines this week. Shares of Costco were down a bit on Friday, despite the fact that fourth-quarter profits and revenue were both higher than expected. Maria, do I have this right? Their same-store sales came in at nearly 14 percent.
Maria Gallagher: Yeah, Costco continues to deliver. I think no one's ever really surprised when Costco delivers. Their net sales were up about 15.2 percent. For the full year, they were up about 16 percent. The comp sales for the year were about 14 percent or 10 percent when adjusted for gas prices and currency. But I think one of the big stories here is the lack of membership price increases that people have been waiting to see. Generally, Costco raises prices about every 5.5 years and their last increase was in 2017. People have been expecting some news about the membership price increases and this earnings report, they said they don't have timing for it yet.
With the constraints on consumers, they don't know when that time of increasing membership prices is going to be in. A lot of people were expecting this to be when they talked about it. Especially Sam's Club recently raised prices earlier this month. They're talking about Amazon Prime is probably going to increase their prices as well for their membership options. It is going to be something that people are still looking for Costco to do in the next couple of months, next couple of quarters. I think it'll be interesting for when they plan to actually do those increases.
Chris Hill: Related to that, we're starting to get some commentary from some of the biggest retailers out there in terms of seasonal hiring. Target came out this week, said they're going to be hiring 100,000 seasonal workers. I believe it was last week, UPS came out with the same number. Walmart said they're only hiring about 40,000 seasonal workers, which is roughly a 100,000 fewer than a year ago. As we start to get more pieces of the retail puzzle filling in Maria, how do you think we're shaping up for the end of the year?
Maria Gallagher: I think it's going to be really fascinating to see. A lot of these companies I think, are waiting to see consumer buying demand in September and October leading up to maybe some more crunch time hiring in the holiday season instead of having these long planning for holiday season. But like you said, Target said, it's going to be about the same as last year. Kohl's is planning to hire about 90,000 people, about the same as last year. Michaels is hiring 15,000, which is a little less than last year, but the Walmart is the one that has the biggest change. I wonder if that's a Walmart isolated thing, since a lot of these other retailers are guiding for similar, if not slightly lowered guidance further hiring for this year. But it'll be interesting to see what the other retailers say as we get closer and closer to the holiday season.
Chris Hill: Darden Restaurants is the parent company of Olive Garden, LongHorn Steakhouse, and The Capital Grille. While the company's fine dining segment continued its comeback, overall profits and revenue in the first quarter were lower than Wall Street was hoping for, Jason.
Jason Moser: Yeah. Big picture this wasn't the most encouraging quarter. They're clearly seeing slowdowns in traffic and ultimately performance in Maine Staples like Olive Garden and LongHorn. They made up for it a little bit on the higher end, like you've mentioned. That speaks a little bit, at least to one of the advantages of a company like this with a rather broad portfolio of offerings. It feels like really one of the big themes on the call was inflation that remains a headwind for consumers, particularly in those in households making less than $50,000 a year. That was a data point they called out on the call because the Olive Garden, Cheddar's, they're more direct exposure to those guests. Olive Garden's essentially half of the business. To me, they seem to be playing a little bit of the long game here. I would encourage investors at least to try to keep this in mind. At least where consumers are concerned. They're not trying to pass on as much pricing during these inflationary times.
They're really focused on the value side of the equation for consumers, which of course is going to be tough on the financial side of the equation for this business in the near-term. To put that in context, you gave us some numbers. In the first-quarter, they call that total inflation of 9.5 percent, whereas their pricing was only about five or 6.5 percent. So they're giving up essentially 300 basis points just on inflation alone in order to continue with that value offering and keep customers feeling like they're getting something. A little bit more bang for their buck. But you look at the numbers, the comps for the quarter weren't that great Consolidated Comps, 4.2 percent, Olive Garden, just 2.3 percent, LongHorn, 4.2, and then as we said, Fine Dining 7.6. Maintain guidance for this next fiscal year, which I think is encouraging yet to feel good about that. They did feel like this quarter year that they're witnessing. They feel like they're hitting that peak. As far as inflation goes, some maybe those costs start to ease up for him here in this new fiscal year.
Chris Hill: I'm glad you mentioned the guidance because that was one of the things that caught my attention because it struck me as the move that you make. If you're a management team that believes that you can, I don't want to say finesse the numbers because it makes it sound like something shady is going on. But it struck me as a confident move by the management team. It was essentially their way of saying, we feel good about our guidance 12 months out because we feel confident in our ability to walk that fine line between, taking a little bit of a hit on the margins if we need to so that we can keep people coming in the door.
Jason Moser: I think you just hit the nail on the head there. They feel confident the decision-making and the strategy. It's not something new for them. They always have focused on the value side of things for their consumers. Again, that goes back to playing the long game. You're taking a little bit of pain in the near term, but you're seeing as being there for your most loyal customers and being there for folks who may actually feel like they're trading down a little bit to a little bit of a less expensive dining experience for a little while. Then maybe that at the end of the day, you create some interest in a new audience of diners that you didn't really have before. Again, I think it really does go back to just their consistency in their strategy and always focusing on value, making sure that they keep people coming through those doors and understanding that better times will ultimately result in better financial performance.
Chris Hill: One struggling tech stock gets a shot in the arm in the form of a new CEO, more right after the break. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here with Maria Gallagher and Jason Moser. This week, DocuSign announced it has found its next CEO. The electronic signature software maker is hiring Alphabet Executive, Allan Thygesen to move into the corner office on Oct. 10. Thygesen has been with Apple for more than a decade, most recently as the head of Google's advertising sales in North and South America. Jason shares a DocuSign down 65 percent year to date, so they need something to go. Hopefully, this is the guy to get it done.
Jason Moser: Well, a little bit of certainty in the executive suite never heard anybody and this is clearly something that they needed to take care of. It's good to see that they did. Alan joining DocuSign from Google where he served as President Americas and Global Partners. He's familiar with big dollar numbers, Chris. He led the company's more than $100 billion advertising business across North and South America. It's good to see you're getting someone in there who's familiar with big numbers and the impact they can have. But in all things considered, I think he was even with Google for almost 12 years. Obviously, very well experienced.
Management seems to be very encouraged and he tweeted earlier today, "DocuSign announced I will become their CEO on October 10th. I'm incredibly excited about the opportunity to lead a great category-defining company through the next phase of growth." With that in mind, you think about the incentives that they offer CEOs and they are healthy. I think what's interesting in this case is his bonus incentives raises performance incentives seem to be very tied ultimately to share performance. You'll see it referred to in the filing as total shareholder return. Oftentimes you'll see that tied to things like operating income or earnings per share or whatever. It can be tied to a number of different things. But this one in particular, shareholder return, the pros seem obvious. Higher returns makes shareholders happy.
It's a pretty broad metric and he can go bad at a number of different ways and he has some freedom to run the business. That's focused on something so specific as operating income or something like that. But the cons there are as if he doesn't execute or if he's a draft, a bust, so to speak, and not the right person for the job. Then you could see them trying to manufacturer share price with language and adjustments down the road. That's something to keep an eye on them. Absolutely not saying that will happen. I'm just saying that's something to keep an eye on when you look at the incentives that these new CEOs get. But encouraging news, absolutely.
Chris Hill: The NFL season has just gotten started, but Amazon has already declared itself a winner. The company announced that Amazon Prime averaged 13 million viewers for its debut livestream of Thursday Night Football. Jay Marine, Head of Amazon Sports division, called it, "a resounding success." Maria, I watched the game. I'm an Amazon shareholder. I have to say this is a bigger audience that I was expecting.
Maria Gallagher: The amount of people who watch sports is always higher than I think. But this was the most watched program of the night across broadcast and cable out delivered the number two program by 271 percent. The second most-watched program was Young Sheldon, with only 3.5 million viewers on CBS. It was the biggest three hours ever for U.S. prime sign-ups for Amazon, including comparing it to Prime Day, Cyber Monday, and Black Friday. I just think it's a really important everyone talks about streaming and sports is the last hold cable has had. You see different nights with sports. You can go to different cable options. You have to see where can I watch this game, as a lot of people apparently are doing, but people really love to watch sports. In 2021, there were about 57.5 million viewers in the U.S. watch digitalized sports at least once a month. That's anticipated to reach 90 million by 2025 63 percent of sports fans are interested in paying for all sports, and 56 percent are willing to pay more for online streaming than traditional TV. It's this last really strong frontier of must-watch, must-watch-live TV. That leagues are really cashing in on that. I don't really see that changing anytime soon, especially with the success of this night.
Chris Hill: Well, and we also this week got an announcement from Apple. Apple is going to be sponsoring the halftime show of next year's Super Bowl. Certainly, they have the money, Maria, but it does to your point, it continues this move of streaming services into sports. Apple has been doing it with Major League Baseball. Now they're sponsoring the halftime show. I'm sure this is going to fuel speculation that when the next set of rights comes up for the NFL, in particular, the prospect of Apple being one of the bidders.
Maria Gallagher: Yeah, I think we're just continuing to see this shift into what entertainment looks like and where we go for our entertainment. They didn't disclose the terms of the deal. People think it was around 50 million for the sponsoring of the Super Bowl halftime show. Apparently the last time I Apple sponsored something like this was the Met Gala in 2016 as they were trying to get their Apple Watch to be more popular, which I don't remember them doing that. I think this makes more sense than them sponsoring the Met Gala. I'd like this idea of better. I think it's just going to be especially interesting for Apple because they've tried to shy away from being advertising the way some other advertisers do. They have differentiated themselves within the space. This is them saying, no, we're going to go even more of a traditional route and take this from Pepsi. I think that'll be interesting. I also didn't know that Jay-Z and Roc Nation produced the Super Bowl halftime show. Jay-Z decides the artist of the Super Bowl halftime show, which I am going to be interested to see who it is this year.
Chris Hill: Let's move slightly away from sports, but stick with live events in this minute we have remaining. Could you see Apple+ making a move into something like the academy awards or the Emmy awards. Certainly they're competing in these events as well. But it seems like it would certainly be less expensive to get the rights for something like that than it would be for the billion dollars a year that Amazon is paying for Thursday Night Football.
Maria Gallagher: I think it's less expensive, but maybe not as lucrative in the long run because you're seeing the Oscars, the Tony's, the Emmy's had about 6 million viewers, which is a new low. They're hitting record lows for the amount of people watching their shows, as opposed to record highs in sports. I just think that trend is going to probably continue. People don't care about them as much as they used to.
Chris Hill: Alright, Maria Gallagher, Jason Moser. We will see you a little bit later in the show, but up next, Deidre Woollard and Matt Frankel are going to dig into the world of house hacking. Details next. Stay right here. You're listening to Motley Fool Money.
Welcome back to Motley Fool Money. I'm Chris Hill. As the housing market tightens up, more people are looking into house hacking. You may already be familiar with Robert Leonard from his work as host of the Millennial Investing Podcast. Matt Frankel and Deidre Woollard caught up with Robert to talk about his brand new book, The Everything Guide to House Hacking.
Matt Frankel: What have you learned along the way? I know that's a really broad question, but what did you get wrong at first that you're getting right in the duplex you live in now?
Robert Leonard: One of the other things I want to mention before I answer that directly is that a lot of times people think of house hacking as this lower-level type of living, I guess, it's the best way I can explain it. It is like, it's not as nice as having a single-family house. But as you mentioned at the beginning, I host a podcast. I've had the opportunity to talk to a lot of house hackers. I talked to somebody. He owns a multi-million dollar property in Arizona in Phoenix, and he has what's called an ADU in the backyard. He lives in a very nice almost mansion type property and rents out the ADU on Airbnb in a short term rental. They don't live together, they don't share space. They just happen to be on the same property and he's reducing his mortgage significantly because the short term rental is still profitable. It doesn't have to be, you're just graduating college type strategy.
This can be your longer strategy that can be a lot more comfortable. But in terms of the mistakes that I've made, I've done a single-family rent by the room house hack. I've done what's called a live-in flip, which I actually didn't mention before. But you could do a live-in flip, which is a type of house hack as well. I've done that. Then now I'm doing a multifamily house hacking. What I got wrong, at first, was that I didn't really treat it serious or a business because I didn't realize that I was a real estate investor at the time. I didn't have a lease in place. I didn't really screen the tenant appropriately. It was just a guy that I knew from the gym, and we had similar interests, and so I thought that would be great. I didn't check his background. I didn't do any credit scores. I didn't write up a normal lease. I collected rent in cash. I basically made all of the mistakes that you could. Thankfully, he ended up being great, paid rent on time, and it worked out OK for me. But it could have very easily gone the wrong way.
Deidre Woollard: I want to talk a little bit about how you choose the house hack. Obviously, when you're looking for a house, there are certain things that you are looking for as someone who wants to live in the house. Do you feel like there's some different considerations you should have if you're looking at the house from a perspective of a house hack?
Robert Leonard: I think there's three things. One, you need to look at from your perspective and maybe your significant other or anybody else that's involved in the decision. Are you and your parties that are involved, are you OK with this property? Do you like? It is where you want it to be? Etc. Does it fit your criteria? Second thing is, what tenants is this going to bring for you to manage and live with? Then the third thing is, does this fit the financial profile of what I want for a property? The first thing is location. Is it in a location you're willing to live in? Is it the type of property you will want to live in? Does it have a garage if you want a garage, driveway, yard, etc. Whatever that might look like for you. You need to make sure it works for you. The second thing is the tenant profile. Different types of properties are going to bring in a different type of tenant.
One isn't necessarily better than the other. It's just they're different. If you buy a four-plex, which is more similar to an apartment building, or even an up-down duplex rather than a side-by-side duplex, that's going to be a different tenant, especially if it's in a major metro or pretty close to a city. Those are going to be more apartment-like tenants versus if you buy a duplex in a little bit more of a rural area that's on five acres of land. Or if you did a luxury property where you have an ADU in the back and you house hack through a short-term rental. Those are all going to be different types of tenant. Again, one isn't better than the other. You just have to decide if those type of tenants is what you want to manage and who you're willing to live with. Then the third thing, of course, is, if you're going to be making these types of sacrifices that it takes to house hack, you want to make sure that it's providing the financial returns that you want it to be. That doesn't necessarily have to be living for free. You don't have to necessarily live for free. Let's just say you're living in an area where your rent would be $2,000 a month. But if you house hack, you can only pay $500 or $750 a month. You're like, I'm still paying $750 a month to live. I'm not living for free. But the alternative is that I would have to pay $2,000 if I wasn't house hacking. I'm saving almost $1,300 a month. So you just have to find the sweet spot of all of these three different things that I think people should consider when they're house hacking.
Matt Frankel: You brought up tenants. I want to talk about that for a second. Last time I spoke with you, I mentioned that my biggest mistake was that I didn't screen my first tenants. I ended up with a tenant in my first duplex who ended up going to jail after a week, definitely a situation I wanted to avoid. We ended up with two or three more so-so tenants in that place. My wife eventually said if we ever do this again buy a multi-unit property, we're going to hire a property manager. I don't even want the people to know that we own the house. I want them to think we're tenants, just like us. Does it ever make sense financially to hire a property manager for a house hack? Is that a thing? Do a lot of people do it?
Robert Leonard: I wouldn't say that a lot of people do it, but it's definitely something that you can do. Mostly from the perspective of you just wanting it to be passive. You could do it from a couple of perspectives. One, you want it to be passive. Two, you want to protect your identity in a sense of protect your situation, like you said. Three, going back to what I said earlier, is it can be a really good opportunity for you to learn how to work with a property manager, so that when you scale into a future property, future rentals, you already know how to work with a property manager.
You might already have a property manager that you're willing to continue to work with if you continue to buy rentals or if not, if you go with a different property manager, you at least know how to work with and manage a property manager. I wouldn't say it's the most common thing, but it definitely it's possible. From a financial perspective, it's usually not the best because you're going to pay 10 percent of usually give or take, maybe a little bit more on your rent. If you're going to collect a $1,000 a month in rent, you're going to pay a $100 a month for your property manager, give or take. Financially it's not necessarily the best, but it does have its benefits for sure.
Deidre Woollard: Do you think that the fear of tenants or fear of becoming a landlord is the major block for people doing a house hack, or are there other things that you think keep people from doing it, because it seems like such a perfect solution.
Robert Leonard: I don't think that's the major problem. I do think it is a problem, but I don't think it's the major problem. I think the major problem is that people are like, I don't want to live with somebody else. I don't want to live next to somebody else. I don't want to be this close to somebody, etc. I think in my opinion, people that think like that. I understand it's not for everybody. I don't think house hacking is for everybody, but I think the people that just stop there are not really giving it enough of a chance. They're not really thinking critically, because there is probably an opportunity for you to make it a really good situation.
Like I said, at least where I live, and I've seen this across the country in many spots, it's not everywhere, but in a lot of spots. You can buy a beautiful duplex on a nice piece of land, and it's absolutely a beautiful property. You are technically connected to somebody, but it's really not that much different than a single-family home. I think a lot of times people might just get stuck that they're living next to somebody. But definitely there is certainly a piece where people are concerned that they're going to have to be landlords. But like Matt said, you could hire a property manager and that could help with that.
Chris Hill: If you want to learn more, pick up a copy of Robert Leonard's new book, The Everything Guide to House Hacking. Coming up after the break, Jason Moser and Maria Gallagher return. We're going to dip into the Fool mailbag and they 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. So don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money, Chris Hill here once again with Maria Gallagher and Jason Moser. Our email address is [email protected]. Make sure you put an s on there, [email protected]. I've got a question from Drew in Virginia who writes, I'm ready for September to be over so we can start earnings season in October. I think we can all identify with that sentiment. He goes on to write, "is there a company in particular you're looking forward to hearing from this next earnings season?" Jason, I'll start with you, anyone in particular. I mean, we're always curious but is there one in particular?
Jason Moser: Always curious. Yeah. I think one that stands out, I think PayPal, just obviously a business that we follow very closely here and one that has been going through some challenging stretches here in it. There was a recent Investor Day presentation, CEO Dan Schulman said that you felt like they were having a very good, solid quarter right now to revenues were coming in where they're expected in line with their guidance and felt like EPS was coming out a little bit stronger than they had anticipated. There was language in the call that it sounded like they are expecting an encouraging back half of the year. Now I'm sure they're dealing with economic turbulence as everyone is, but maybe this speaks to their ability to get guidance back in order. Remember that was one of their priorities they laid out earlier on in the beginning of the year was they wanted to get back to forecasting this business a bit more appropriately as compared to the last couple of years with all of the impacts of what's going on with the pandemic.
That's encouraging to me. I mean, I think you've got some things on the horizon, you get the Venmo integration on Amazon now as a payment option, I think that's very encouraging. You got continued impressive growth with Braintree, which that's essentially a payments platform for big merchant customers and serves like Uber and DoorDash and Airbnb. Then they are going to be taking out at least $900 million in cost this year from the business aiming for $1.3 billion next year. Very much aligned with that theme we've been talking about over the last several weeks in efficiency. Business is becoming more efficient and PayPal is no exception there. Yes one, I always enjoy following. I'm encouraged by their progress. But we'll hold them to it. They're not through it yet and we're going to hold them to it and make sure they finish this year up strong.
Chris Hill: What about you, Maria?
Maria Gallagher: I have a couple of themes that I'm excited to look at. I think consumer spending is something that's super important. Looking at things like Walmart, Costco, Target, and then also companies like Lululemon, Tiffany's, getting the gamut of how consumers are spending and then, as well as how businesses are spending. Thinking things like social media. Looking at [Meta's] Facebook, Twitter, Pinterest, seeing where advertisers are spending their dollars and seeing how those advertisers are feeling compared to last quarter. I think those are two areas that I'm really excited to look at.
Chris Hill: Got a question from Kevin in Maryland. He writes, Crate & Barrel is hiring a Chief Metaverse Officer, is this a sign of a market top for the metaverse or does this actually seem like a smart move? Jason, I'll go to you first. It's not just Crate & Barrel that's hiring for this brand new position, Chief Metaverse Officer. Procter & Gamble is doing this, LVMH. There are several companies not named meta platforms that are hiring for a Chief Metaverse Officer, what do you think?
Jason Moser: Yeah. They'll preface this. Obviously, some folks know, I mean, one of the services I run here at the Fool is focused on immersive technology, augmented virtual reality. The metaverse is clearly a part of that. Generally speaking, obviously, I'm bullish on that stuff, on that technology. I think overall I'm bullish on the metaverse. But I will say this feels like the early stages of every company under the sun declaring themselves sustainable and in green. It's the concept is you are right now and that just snowballs are more and more companies do it well, Procter & Gamble is doing well then, of course, we need to too. At some point it runs the risk of becoming extremely watered down and trying to understand exactly what companies are doing with these investments.
I'm not saying they won't pan out. It's just you need to make sure you tried to connect the dots there, I guess is what I'm saying. That for me is really ultimately the biggest question mark right now in regard to the metaverse in really a lot of other statements that Zuckerberg makes. They make very bold statements that having a metaverse ultimately makes everything better, more connected. But they don't really do a great job of connecting the dots yet to make us understand more why. They just say connection, it's good. Well, we've seen cases where maybe connection isn't as good as they think it is. My bet is we'll likely continue to see the goalposts moved and actually defining what the metaverse is. Still feels like it's a squishy concept that I'm sure a lot of these seasoned executives who are Chris, I will add older than you and me, that they might have a little bit of a tougher time wrapping their minds around it as well. So let's give this thing some time to play out.
Chris Hill: What do you think, Maria?
Maria Gallagher: I would say I'm just a little confused why companies with I think, like Jason was saying, with augmented reality, virtual reality, I think that that makes more sense to me. I understand having that need within a furniture business like a Wayfair or Crate & Barrel or Sephora with virtual trials for makeup and stuff. I think that there's an interesting element for the virtual world with these companies. But I don't understand how it plays into the metaverse because isn't the metaverse a second? I always just imagine the metaverse is just a better Sims and so I don't really understand how Crate & Barrel is going to profit from that. I would just say I'm a little confused by it and I haven't been able to find like Jason saying it doesn't mean that much. I've haven't been able to find a good explanation of why a company it's got hiring a Chief Metaverse Officer or what that means.
Chris Hill: Jason, you used the word bet, which reminded me, I'm surprised that we're not hearing that casinos are hiring for chief. Because I feel like that's going to be one of the first applications. Like if I could place a wager on who's going to succeed first in the metaverse, I'd put some money on the casinos because it seems like that maybe that's just a degenerate gambler in me I don't think that has possibilities more than say, Crate & Barrel.
Jason Moser: I do agree. I think it does feel like it is specific to the company that's doing it. In some companies, it seems to make more sense than in others. I don't know who really wants to go to the metaverse and do their laundry and brush their teeth so you wonder, is P&G really making the wise investment dollars there? But by the same token, I mean, you're also looking at something whereas the metaverse grows out, it becomes more and more a world where people frequent. I mean, there will be, I'm sure, brand placement opportunities and things like that. Let's face it, there is a market for virtual goods. I mean, I don't have all that much interest in them, but it doesn't mean that a lot of other people don't. I mean, we clearly know that they do. Again, I think you're going to see the goalpost continue to move, but it does really feel like it's going to be specific to the company itself as to the benefits they really get from those investments.
Chris Hill: All right, keep the emails coming. You can also call the Motley Fool Money hotline (703)254-1445. Leave a question on the voice mail and you may end up hearing your voice on the show, (703)254-1445. Let's go to our man behind the glass, Rick Engdahl, it's time for Radar Stocks. He's going to hit you with a question, Maria you're up first, what's on your radar this week?
Maria Gallagher: What's on my radar this week is Lululemon. I've been spending some time looking a little bit more at retail, like I was saying. Last quarter, the revenue was up 29 percent, their comp sales were up 23 percent. They have a pretty strong and enduring brand. I want to spend more time looking at them and thinking about how a potential recessionary environment will impact them since they are at a much higher price point than some of the other retailers I've spent my time with. But I do think that the hold their brand has is pretty strong. I don't love the Mirror acquisition, but there are other elements of the company that I think are pretty interesting to look at.
Chris Hill: Rick, question about Lululemon.
Rick Engdahl: Yeah, I'm personally all of my exercise has moved to home exercise, including a lot of work that I do and the VR and I'm just wondering if Lululemon has a Chief Metaverse Officer lined up?
Maria Gallagher: Honestly, I wouldn't be surprised if they got one. Between Mirror because Mirror is everyone working out in front of a Mirror so they already halfway there.
Chris Hill: Jason Moser, what's on your radar?
Jason Moser: Yeah, I know these are difficult times for investors and often you feels like you just want to curl up and then not do anything at all. Sometimes it's the best course of action. But, if you are interested in buying stocks focused on some of these big winners, the big obvious suspects out there Microsoft is one of those ticker MSFT just wrapped up a very strong fiscal year. Microsoft Cloud surpassed $25 billion in quarterly revenue for the first time, which was up 33 percent. Obviously, they're going to play a key role in Netflix's new ad related tier, which I think is interesting and we're watching to see what the Activision Blizzard deal, how that shakes out.
The Teams buildout continues. Management is leaving no stone unturned there and they keep saying on the calls they are all in on Teams. I think that's going to be just a more productive part of the business as well. They are even making it happen with LinkedIn, too, Chris. LinkedIn, Talent Solutions surpassed $6 billion in revenue over the past 12 months. That was up 39 percent from a year ago. LinkedIn marketing solutions surpassed $5 billion in annual revenue for the first time. This is just another business that the reaches us all in so many ways shares down around 29 percent this year. They generated $65 billion in free cash flow this year, Chris, that values it at around 27.5 times. It's worth a look.
Chris Hill: Rick's question about Microsoft.
Rick Engdahl: Years ago when I was teaching my son to invest, he chose Microsoft as a company because he found out that they owned Minecraft. What else does Microsoft own that I have no idea that they own?
Chris Hill: We'll talk about it in the metaverse, meet me after the show in the metaverse, we'll talk it over. What do you want to add to your watch list, Rick?
Rick Engdahl: Well, I think going to have to go with my son in Microsoft here. It worked for him.
Chris Hill: Never go against the family. Maria Gallagher, Jason Moser. Thanks so much for being here.
Maria Gallagher: Thanks for having us.
Chris Hill: That's going to do it for this week's Motley Fool Money radio show. The show is mixed by Rick Engdahl. I'm Chris Hill. Thanks for listening. We'll see you next time.
