In this podcast, Motley Fool senior analysts Emily Flippen and Ron Gross discuss:
DocuSign‘s (NASDAQ: DOCU) 25% drop.
Target‘s (NYSE: TGT) bold moves.
Stitch Fix (NASDAQ: SFIX) continuing to struggle.
Vail Resorts (NYSE: MTN) benefiting from relaxed Covid restrictions.
The latest from Campbell Soup, Netflix (NASDAQ: NFLX), Amazon (NASDAQ: AMZN), and more.
Matt Argersinger, who leads investing on The Motley Fool’s Mogul and Real Estate Winners services, discusses the current state of the housing market, how a potential recession may affect real estate, and his interest in an alternative asset class: vintage comic books.
Emily and Ron share two stocks on their radar: Bilibili and Airbnb.
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 June 10, 2022.
Chris Hill: It’s the Motley Fool Money radio show. I’m Chris Hill and I’m joined by Motley Fool Senior Analyst Emily Flippen and Ron Gross. Good to see you both.
Ron Gross: How are you doing, Chris?
Emily Flippen: Hi, Chris.
Chris Hill: We’ve got the latest headlines from Wall Street. We’ll get an update on housing and real estate from Matt Argersinger. As always, we’ve got a couple of stocks on our radar. But we begin with the big macro. Inflation hit a 40-year high on Friday as the Consumer Price Index Report showed prices rising 8.6% year-over-year. The reaction from investors was swift, with the Dow, Nasdaq and S&P 500 all falling to end the week down each around 5%. Ron, for consumers, we’re seeing higher prices on groceries and gas. What does this mean for investors?
Ron Gross: Boy, my screen is filled with red today. Friday, stocks got slammed on this news, which perhaps shouldn’t be too surprising, a much hotter than expected number. As you said, consumers are definitely feeling the pinch. Fuel oil up over 106% over the past year. Everyday foods like cereal, eggs, double-digit percentage increases. Housing costs skyrocketed. Make matters worse, we’ve got real wages declining 0.6% from April, declining 3% on a 12-month basis. As you said, for sure, consumers are feeling it.
On the investing side, markets widely expect the Fed to keep raising rates, interest rates, short-term interest rates. They have to try to combat that inflation. The Fed will try to engineer what’s called a soft landing by raising those rates, bringing inflation down, but not driving us into a significant recession. That is not an easy thing to do. Many economists, market strategists already predicting a recession. JPMorgan‘s Jamie Dimon said we should brace for an economic hurricane. For regular long-term investors like us, I think you can look at your portfolio to make sure you’re happy with your allocations. More speculative or weaker companies can may be be sold off to raise a bit of cash. But for the most part, I think we stick with the mantra of not trying to time the market, and you can even buy into the market when stocks are lower. But I think we do have to understand the times could be tough for a while, so make sure you don’t have cash in the stock market that you’ll need over the next three years.
Chris Hill: Let’s get to some of the companies making headlines this week. Earlier in the week, DocuSign announced an expanded partnership with Microsoft. But after the closing bell on Thursday, DocuSign’s first quarter results were worse than Wall Street was expecting and shares on Friday fell 25%. Emily, is it really that bad?
Emily Flippen: Well, DocuSign shareholders are already intimately familiar with the pain that Ron was talking about. It’s been happening to them for a long time now, and I am, by the way, included in that group. I will say, though, that maybe this is a controversial opinion. This quarter really wasn’t that bad for DocuSign. Earnings did miss expectations. They only earned an adjusted %0.38 per share instead of the $0.46 expected. But revenue beat expectations, rising 25% year-over-year, and revenue was the big question mark for DocuSign. People were concerned about the top line slowing down as a result of the pandemic waning and competition in the e-signature business heating up.
But the unexpected costs that have weighed on the bottom line were, again, surprising to the market in this most recent quarter, which is why I think we’re seeing the stock pull back as much as it is. I will also say, though, I say the quarter is not bad. My concerns to DocuSign are much longer-term in nature, which is around their billings. Their billings guidance, despite being decent for the next quarter, is showing a significant slowdown heading into the next year, and that translates directly into top-line growth. If we’re getting into single-digit numbers here for revenue growth in DocuSign, the stock may still have further to fall.
Chris Hill: I mentioned the expanded partnership with Microsoft that was announced earlier in the week. Do you think there’s a chance that could be a prelude to an acquisition by Microsoft? Like you, I’m a DocuSign shareholder. I’m not looking to sell my shares, and I’m not looking necessarily for the company to be bought. But it wouldn’t be the first time in the company’s history that Microsoft partnered up with someone just so they could get a closer look and eventually buy them somewhere down the line.
Emily Flippen: Well, I do think Microsoft could be getting what is a dominant player in the e-signatures business, but more importantly, a growing player in the contract life-cycle management business for a pretty attractive price, if that’s where they’re headed with this. I will say, though, that I think maybe it’s selling DocuSign a little short here, and regulators may have concerns with the dominating presence that DocuSign does have in e-signatures as a potential regulatory concern.
Chris Hill: Target’s latest quarterly report was something of a disaster, but CEO Brian Cornell and his team are not sitting still. This week, Target announced it was going to clear out inventory by offering discounts, and the company also announced it is increasing its quarterly dividend 20%. Ron, I got to say, I like the boldness that they are showing here.
Ron Gross: I completely agree here, Chris. The stock is down 42% from its 52-week high, and times are tough and mistakes were made, especially on the merchandising side here. But I really like what CEO Brian Cornell is doing. Just for context, a couple of weeks ago, Target explained that it had a merchandise problem. It had overordered big, bulky home goods like patio furniture, TVs, and kitchen appliances. Those are costly to shift. They take up a lot of room and shipping containers. They also take up a lot of room in costly warehouses. Inventory was up 43%. The company issued weak guidance and the stock got whacked, appropriately so, but perhaps maybe it was overdone a bit there.
Earlier this week, they went on furthermore, they warned further of a more severe profit drop than they originally thought and they would have to cancel orders with vendors and offer discounts to clear out unwanted goods, ripping off the Band-Aid, getting this done so it doesn’t continue to impact the back half of the year. They now expect operating margins of just 2% in the second quarter. The second quarter is going to be a mess. We just have to understand that. The company did try to mitigate some of the damage of this news, also sent a strong signal to the market, as you mentioned, announcing a 20% increase in the dividend. That yield is now 2.8%. Shares are only trading at 16 times forward earnings. I’m a Target shareholder. I will likely look to add to my position. I like what they’re doing.
Chris Hill: Let’s face it, if you need some patio furniture or a new TV, it sounds like the sales are happening at Target near you.
Ron Gross: Obviously, a lot of people have been in the market for those products for the last year and a half and perhaps now not so much.
Chris Hill: The struggles continue at Stitch Fix. The company announced it is laying off 4% of its employees. They cut their guidance and posted a bigger loss in the latest quarter than was expected. Shares of Stitch Fix falling on Friday and hitting a new all-time low, Emily.
Emily Flippen: Stitch Fix and DocuSign, I have all the painful stories today. It’s not fun for Stitch Fix shareholders, either. Similar to DocuSign, this has been going on for a long time now. Since pre-departure of their former CEO and founder Katrina Lake, their net loss is $0.72 per share, and the most recent quarter was significantly higher than their $0.18 per share lost last year. Revenue did fall 8% to under $500 million. Customers also fell 5%. Stitch Fix’s market cap is now below $700 million.
I do think that there is a price at which investors should be interested in this business because it does have a viable business model, but they’re realizing that we’re just not going to be the future of fashion and we don’t need to have corporate overhead to act as such. So they are in cost-cutting mode right now, laying off, as you mentioned, 4% of their workforce, largely their corporate salaried workforce, trying to cut costs and figure out a streamlined level of efficiency for their business. The silver lining here is that their average revenue per client rose to over $550 per customer. That’s driven incrementally by those direct purchases to their Freestyle platform. So they clearly have some active, engaged, and loyal customers. They should focus on streamlining operations to become profitable again and focusing on retaining those high-value customers over the long term.
Chris Hill: If someone were to come in and make a bid for a business like Stitch Fix, where would you expect them to come in terms of industry? Because I could see the case for larger company that is already in the retail space, already in the fashion space. But I could see this being an add-on acquisition for a larger tech company that wouldn’t necessarily be an obvious candidate.
Emily Flippen: I actually struggle to see any buyer for this business, to be frank. I don’t mean that against Stitch Fix in particular, but against the industry that they’re in. We saw Nordstrom try to do something very similar with Trunk Club. Nordstrom was arguably in a good position to do so because they had that premium brand awareness that Stitch Fix never really had, and even they struggled to do it with their loyal customer base. I think ultimately, they need to figure out a direction. Are they algorithms? Are they niche stylist? Are they an e-commerce operation? They never had that direction. Until they have that direction, I don’t see anyone coming in and buying them.
Chris Hill: Netflix needs help with an advertising platform, but is buying Roku the answer? We’ll discuss that after the break, so stay right here. You’re listening to Motley Fool Money.
Welcome back to Motley Fool Money. Chris Hill here with Emily Flippen and Ron Gross. Third-quarter results for Vail Resorts were better than expected. The resort operator benefited from COVID restrictions being relaxed and more people actually going outside. Emily, skiing season is over, it kind of looks like Vail did pretty well.
Emily Flippen: Who knew there were so many skiers? I imagine a lot of investors did, but prior to looking at this report, I did not know how popular it was. And I will say, this is a business that I think has obviously benefited from the lockdowns and the easing of the pandemic but also executes at a really high level. Revenue rose over 30% year-over-year in this quarter, largely driven by people returning, like you said, to the ski resorts. But not just typical peak season pass holders, which we saw pick up again this quarter, and we saw them able to raise prices on those season passes as well, showing a bit of pricing power, but they also had off-peak users as well.
So they’re almost, you could argue, getting in a new type of clientele that’s looking to just do anything in this environment, get out a bit more. They also raised the guidance as a result of this quarter — and to top it all off, talk about moves in the right direction, they’re also raising wages for hourly employees to help with staffing needs. I do have to wonder when I think about the future for Vail Resorts, what happens when international travel picks back up? Because we’re seeing reports out today that the Biden administration is lifting requirements for international travelers to come back with negative COVID tests, which some could argue would be an opportunity for people to take vacations, whereas they were taking domestically, maybe moving internationally. I wonder what happens to demand over, say, the midterm in that case, but I will say this is a business that knows how to execute very effectively.
Chris Hill: Also when we talk about moats, the idea that any business in any industry has a moat, one way you can have a moat is a high barrier to entry. And when your business is essentially owning mountains, it’s not like we’re building more mountains. So it’s a little bit of a moat for Vail Resorts, isn’t it?
Emily Flippen: [laughs] You can definitely argue that, although I will say, the limiting factor here is a demand to be on an icy mountain. As you may know, that’s not exactly my top-tier vacation. But for other people, if the icy mountain works for you, then more power to Vail Resorts.
Ron Gross: I’m with you, Emily.
Chris Hill: Campbell Soup’s third-quarter profits rose 18% and the company raised guidance for the full fiscal year. Looks like, among other things, Campbell’s is getting their supply chain worked out as well.
Ron Gross: Yeah, this is a strong report. Shares are only down 10% from their 52-week high, which, unfortunately, that’s a pretty big win, that they’ve held up pretty nicely here. As you mentioned, sales were up, the demand for products remained strong, and consumption up 4% compared to the prior year and up 14% on a three-year basis. As you mentioned, they are improving their supply chain and they’ve been able to put forth price increases, which helped to mitigate gross margin pressure. Gross margins actually increased 90 basis points, thanks to those price increases in the supply chain productivity. That is not a common thing to see currently in the retail space or the food space. Very interesting. In addition to that, they were able to cut marketing and selling expenses by 7%.
So you take the higher gross margins, the lower operating expenses, that leads you to an operating income increase of 23% or adjusted earnings per share increase of 37%. Pretty good. Raised full-year 2022 net sales guidance, but they only reaffirmed their earnings guidance because I think they’re being conservative about how inflation could continue to pressure margins. They have a major cost-cutting initiative in place. They’ve achieved $840 million so far of total savings. This company yields a 3.2% dividend yield. That’s a nice chunk of change for a pretty stable company only trading at 16, 16.5 times forward earnings. It’s not going to knock the cover off the ball, it’s not a high-tech company. But it’s a nice, stable company that you could feel comfortable owning.
Chris Hill: Multiple reports this week that Netflix may be sizing up Roku as an acquisition target. Part of the thinking is that Roku’s ad platform could help Netflix as it prepares to offer an ad-supported plan. Emily, Netflix has said they don’t want to build their own ad platform. So I assumed that they would just partner with someone rather than look to make a big acquisition. You’re a Roku shareholder, how do you feel about this report?
Emily Flippen: Didn’t we all assume that, and I can sum up my feelings with a quick sentence, which is this is a good deal for Netflix but a very bad deal for Roku. As a Roku shareholder, if this were to move forward, which I don’t think it will, even if these rumors are substantiated, I would be very disappointed with Roku in part because I think Roku’s best days are likely still ahead of it and I think interest from Netflix would be a very big testament to the power of Roku’s CTV ad tech, which is what Netflix would be after in making this acquisition. You could argue that they would also be interested in using something like the Roku Channel to tease potential Netflix shows, maybe an episode or two, to drive somebody to get a premium Netflix subscription.
But given how saturated they are in terms of the subscription market, for Netflix, this is all about driving free cash flow, which they’ve typically hemorrhaged in the past. Roku sizes up pretty generous free cash flow, so that could be an addition for Netflix. But again, Roku, the reason why it’s so attractive to me as a shareholder is not just an interesting founder-led business, but it’s agnostic to the streaming platforms that it hosts, and investment or acquisition by a business like Netflix would take away a lot of the attractiveness of Roku.
Ron Gross: Emily, I don’t mean to put you on the spot, but from a Netflix shareholder perspective, shares were $700, we’re now at $185. Is it an interest to you at that price?
Emily Flippen: I would actually really be excited if I was a Netflix shareholder. Again, as I said, this is a free cash flow positive business. Keeping things just as they are, this would give you some free cash flow that Netflix could play around with, and give them access to the single largest streaming platform in the United States. A lot of good things out of this for Netflix. Again, I doubt it gets anywhere, though.
Chris Hill: Earlier this week, Amazon split their stock 20-for-1, and Shopify shareholders approved a 10-for-1 split, as Alphabet prepares for their own 20-for-1 stock split in July. It begs the question, Ron, should more companies be considering this? Is there a downside to splitting the stock? I know we say all the time: “Oh, the stock split doesn’t really matter. The pizza is the same size, whether you cut it in four slices or eight.” But I don’t know, it seems like there is actual upside to splitting your stock.
Ron Gross: It does appear that way, which make you scratch your head a little bit because theoretically, as you said, there shouldn’t be a change, the market cap remains the same, the amount you own in dollar terms stays the same. But there is no real downside, and there does appear to be at least a few things we can point to that could be on the upside. For example, a split can increase liquidity of a company. Now for a stock like Amazon, it was plenty liquid in the first place, so it doesn’t have an impact there, but it could for some smaller companies. It can also make it easier to distribute shares to employees.
For Amazon as an example, when it was trading at $2,200 a share, that would’ve had to be a minimum grant to an employee. That’s a big number. Now they can grant somebody shares at $110, so it makes equity available to a wider group of employees. Also, a lower stock price can make you eligible for inclusion in an index, specifically the Dow Jones Industrial Average. Being in that index creates demand for the stock as ETFs, exchange-traded funds, that track the index go in to buy shares because they must buy shares to continue to track that index. So there are some things that can create demand for a stock or make a split attractive, and there’s very little downside as I can see.
Chris Hill: Ron Gross, Emily Flippen, we will see you later on in the show. Up next, Matt Argersinger has got the latest on housing, real estate, and a lot more. So stay right here. You’re listening to Motley Fool Money.
Welcome back to Motley Fool Money. I’m Chris Hill, time to check in on the real estate market with Matt Argersinger. He’s the lead investor for Millionacres, the Motley Fool’s real estate investing service. He joins me now from his home in Virginia. Matty, thanks for being here.
Matt Argersinger: Hey, thanks for having me, Chris.
Chris Hill: Let’s start with residential housing. Where are we now? Because it seems like in certain parts of the country, we’re actually seeing prices drop. We’re seeing people who are selling their homes drop their prices a little bit. Is that depending on the region or are you seeing a trend here?
Matt Argersinger: No, I think it’s a trend and I’m talking to a guy who is in the middle of trying to sell one of his rental properties in D.C. It’s pretty slow. It’s pretty slow, Chris. We haven’t cut our price yet. But I’m seeing that in not only the D.C. area, but I’m seeing it across the board. I think I saw some data the other day that something like five percent of new listings on Zillow over the past month have seen price drops of at least 5, 10%. That’s big. I mean, we haven’t seen something like that in years, certainly not in this housing cycle. I think it has a lot to do with rising mortgage rates. The fact that home prices have appreciated so much so that the point where your average home buyers now looking at a monthly payment that’s anywhere from 20, 30% higher than where it was just a year ago. That’s sticker shock. We have sticker shock a lot with this economy, at the gas pump, the grocery store, but certainly in the housing market we’re seeing it, too. I’ve talked to a few brokers and it’s not so much that there’s less demand for housing. It’s really just, “Hey, I want to step back. I don’t have that FOMO [fear of missing out] that I had several months ago where I have to buy a house or I’m never going to buy one.” It’s like, “I’m going to step back. I’m going to see how these interest rates sell out, see if these price drops keep coming through, and then decide what to do in terms of buying a house,” and I think that’s just what it is. It’s a lot of buyers are cautious out there. They recognize that maybe the market’s tipped in their favor a little bit, and so they can afford to be a little cautious.
Chris Hill: You and I have talked previously about really what happened with the homebuilding companies in the wake of the Great Recession and how if they were overbuilding before 2008, they course-corrected and maybe even possibly overcorrected that to the point where we’re just building a lot fewer new homes as a nation than we were, let’s call it, 14, 15 years ago. Does this cooling off of home prices, if this continues for a few months, maybe even for the rest of the year, if you’re a homebuilding company, are you happy about this? I’m assuming there’s some sort of happy medium where there’s demand, but there’s not so much demand that they’re not able to keep up with thing. Of course, you look at things like the cost of lumber, the cost of raw materials, obviously that factors into it as well.
Matt Argersinger: Right. The scars from the financial crisis of 12, 13 years ago run deep for a lot of homebuilders. They did overbuild in that period, and I think you’re right. I think they overcorrected over the last 10 or so years and they underbuilt, and that was because they were concerned about running into those same issues that they had back in the prior housing recession. They were a lot more cautious about where they bought land and how long they held that land. A lot of homebuilders I follow these days, it’s not so much that they are in a position of worry. I mean, I think they know the demand is there. I think they are in a position to just protect their margins, and that’s what they’ve been doing. They’ve slowly worked through their backlog. They’re trying to optimize for what they’re seeing in the construction markets and the input markets, labor costs, and they’re making the decisions cautiously about where to actually build the house and how far to get into their backlog. They are accepting less bookings these days. I look at the homebuilding market, homebuilding industry, and I see a lot of very cheap stocks, to be frank. But also a situation where they’re probably not going to be able to grow as fast as you’d like to see, given the demand that there is in the housing market because of all the other pressures on the supply side. So for them, I think it’s a muddle-through period. I think as an investor, you can look at that and probably see some opportunities, if you’re willing to take a little bit of a longer-term view. But I almost think that the homebuilders are in a position of strength because they can choose to move a little cautiously. Again, protect those margins, not jump in where there might be issues with costs, and that’s what they’re doing.
Chris Hill: Do you think as a group, the homebuilding companies and therefore the homebuilding stocks, do you think these are better run companies than they were 15 years ago? Maybe I shouldn’t say better run. I’m not looking to call out any CEOs or leadership or anything like that. I guess I’m just wondering if they are more efficiently run and they are run in a smarter way, and the comparison that leaps to mind for me is the airline industry. That for anyone who has gotten on an airplane in the last 6 to 12 months, good luck finding an empty seat. The airlines seemed like, as a group, they are just better in terms of their capacity and how many routes they’re running. They’re willing to annoy customers a little bit by bumping them off a flight because what they don’t want is flights that are nearly empty. So I’m wondering if that applies to the homebuilders as well.
Matt Argersinger: Absolutely. Again, I think there are a lot of lessons learned in the prior crisis and I don’t know, Chris, if you’ve tried to refinance a home or buy a home, get a mortgage in the last, say, 7, or 8, 10 years. It’s really hard. I think a lot of homebuilders are applying that same kind of strenuous credit tests to the buyers of their homes. That in a way has forced them to be a lot more cautious about the people they are selling homes for, where they’re building homes. You have a lot of homebuilders nowadays that instead of buying huge tracts of land like they used to in the past, anticipating demand, they are buying option contracts on land or they’re just buying land in places they know they already have a lot of demand signing those contracts. Again, it’s all about caution. In a way, I think the homebuilders have probably been too cautious. I think they probably regret being that way and not taking as much advantage of this prior housing boom over the last few years that they could have. But I think right now they’re saying to themselves, “Hey, we’re actually in a good spot here. We didn’t overleverage ourselves, overextend ourselves like we did in the prior crisis. So coming out of this, we’re going to be in OK shape, even if we didn’t take as much advantage of the prior boom that we could have.”
Chris Hill: There is increasing speculation in all corners of the financial media about the prospects of a recession in the United States. I’m not asking you to look into your crystal ball and make a prediction about whether or not that’s going to happen. What I am going to ask you is, does history give us any guide as to what a recession means for the real estate industry, the housing industry, particularly on the residential side?
Matt Argersinger: I feel like every recession is different, and the way housing responds to it, if I think way back, of course, I wasn’t a conscious investor back in the day, but I remember in the late ’80s, early ’90s, the savings and loan crisis, which in part was a little bit of real estate recession and it took a lot of years for real estate to recover from that recession. You didn’t see that so much during the dot-com crash, that kind of recession. You certainly saw it in the ’07, ’08 financial crisis, which in a way real estate played a huge part of that. It took a lot of years to come out of that one. This one I’m not so sure. I think if we are entering a recession, I don’t think the housing market is one of those areas of the market that’s going to be hit too hard. I mean, again, there is that humongous demand/supply imbalance that is still there. Even though the housing prices have risen, interest rates are higher, there are millions of people who would rather own a house than be renting, or living with their parents, or whatever they might be doing at the moment. I think that demand is not going to go away. It’s very demographically driven. If we do hit a recession, whatever that looks like, I think it’s other factors that are going to be hit harder than the housing market in this particular time.
Chris Hill: Stepping back from housing and real estate, you’ve been investing for a long time. Maybe not since the late ’80s, but you’ve been investing for a long time. When you look at the market, particularly the year that we have had, all the talk around interest rates, growth stocks taking a really big hit, particularly over the last six months. What is your thought about the current state of the market and what investors might be looking at over the next 6 to 12 months?
Matt Argersinger: I think it’s going to be tough, Chris. And I’m an optimist. I mean, I wouldn’t be an investor if I wasn’t. But I do think investors are facing something. You and I are facing something as investors that we haven’t faced in our entire lifetime, which is a situation where the economy is in decent shape but could be heading to recession, inflation is as highest in 40 years, and you have a Federal Reserve that, for the first time in I think 40 years, is not there to kind of say, “Hey, we’re going to be here, if things get really tough.” If the economy turns down, if asset prices declined further, they’ve always been there, if you think the last several recessions or several crises that we’ve been through. They don’t have the ability, they don’t have the levers to pull that they’ve had in the past, and I think that presents a little bit of an interesting scenario for investors. I’m not saying things are going to fall off the table here, but I mean, the Fed hasn’t really even begun its tightening, its reduction in its bond portfolio. I think that starts within days. We haven’t even had that. We’ve had a Fed that choreographed what it wants to do with credit markets and to bring inflation down. But we’re not in it yet. I feel like as much as the market has anticipated things by driving valuations down across the board, and it’s not just technology stocks, I’ve seen real estate stock get hit, I’ve seen financial stocks get hit, retail. But I don’t know if we’ve actually been through the worst of it yet. So I think if you’re an investor out there, if you think now there are bargains out there, well, maybe think about being a little more patient. I’m not saying we’re heading into some abyss, but I do think it’s possible that asset prices get even lower and there might be even more opportunities for the patient investor.
Chris Hill: Last thing before I let you go. Earlier in the week, someone posted a poll on Twitter, kind of an interesting thought exercise for stock investors, and it was about alternative asset classes. The poll was simply like, which one would you rather invest in? It was sort of an esoteric group of choices for alternative asset classes. It was things like luxury watches, and art, and wine and that sort of thing. I don’t know if you voted in the poll, but I saw you responded to the poll and you just wrote vintage comic books, which I love as an answer, but it also reminded me as someone who follows you on Twitter, most of your Twitter game is about investing and real estate and housing. But every once in a while, you post a picture of a vintage comic book that I assume you own. We’ve known each other a long time. Every time I see that, I think to myself, “I need to ask Matt about that because I don’t think we’ve ever talked about this.” [laughs] So I’ll just use the show as an opportunity to ask, Matt, how long have you been interested in this, and do you actually look at vintage comic books? Is that something you do for enjoyment, or is that something that you actually think of as an alternative investment that if someone came along and offered you the right price, you would part ways with some of your collection?
Matt Argersinger: Yeah. It’s a great question. I mean, I’ve been collecting comic books since I was probably 10 years old, [laughs] long time. It didn’t occur to me that they were a real asset class until maybe it was 10 years ago I looked in and studied the price history of comic books. It’s extraordinary, Chris, if you really look at the data and see the growth in some of the issues out there. Of course, you’ve got to remember, we’ve also had the rise of Marvel Studios over the last 10 years. Movies that have propelled a lot of these characters into the limelight. Just as an example, when I was growing up, characters like The Avengers, and Iron Man, and Doctor Strange, those are some of the lamest characters [laughs] in the comic book universe. But today, everyone loves those characters. So what you’ve seen is some of the older issues of those comic books, say, from the ’60s, ’70s, ’80s even have soared in value as people have come to recognize these characters as pop culture icons in a way. Yeah, I enjoy comic books. I used to read them. I don’t read them as much these days. I’m more of a collector. But if you look at comic books from the ’60s and ’70s, earlier if you’re very wealthy, they present some very interesting opportunities. They’re rare. I mean, first appearance issues of major characters and good condition are very rare. The values, if you go to places like Heritage Auctions or eBay, you can see books that were probably $100 10 years ago, now they are well into the thousands of dollars. I think investors are just discovering this asset class, and who knows? Maybe it’s a bubble and I’m just getting swept into that myself, but I think there are a lot of opportunities.
Chris Hill: If you want to read more from Matt Argersinger and his team, you can go to Millionacres.com. If you want to get the occasional vintage comic book image, follow him on Twitter. Matty, thanks so much for being here.
Matt Argersinger: All right. Thanks, Chris.
Chris Hill: Up next, Emily Flippen and Ron Gross 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 your hear. Welcome back to Motley Fool Money. Chris Hill here once again with Emily Flippen and Ron Gross. You can hear this show every weekend on radio stations across America. If you radio folks want even more, you can listen and follow to the Motley Fool Money podcast seven days a week on your favorite podcast platform: Apple, Spotify, Stitcher, iHeart, Amazon Music. Wherever you get your podcasts, please listen and follow Motley Fool Money, and while you’re there, check out David Gardner’s Rule Breaker Investing podcast as well. Time to get to the stocks on our radar, our man behind the glass, Steve Broido, is going to hit you with a question. Emily Flippen, you’re up first, what are you looking at this week?
Emily Flippen: I’m looking at Bilibili this week. That ticker is BILI. You’ve probably heard me talk about this company before. They’re a Chinese video streaming service. You can imagine it as a mix between a business like YouTube as well as a premium streaming service. But they dropped this week after earnings, although the stock is naturally flat. Despite the revenue growing 30%, daily average users growing 32%. Losses were greater than expected in part due to the lockdowns across the country. The reason why it’s on my radar is because I actually think this is a solid business that if you can see through the dark clouds in front of it, it’s probably a long-term stock to hold. The average time spent by daily active users on this site was 95 minutes per day. That’s the highest in Bilibili’s history. The number of paying users and the ratio of paying users to active users is also the highest they’ve ever been. They’re working on reducing losses, sales and marketing decreasing 30 percent quarter-over-quarter. So I think this business is going to be rapidly approaching some sort of adjusted profitability and it’s probably one the investors should keep on the radar.
Chris Hill: Steve, question about Bilibili?
Steve Broido: Sure. When you’re dealing with a company in a country like China, how do you know that all these numbers that they were throwing out there are accurate? They certainly aren’t part of the U.S. system.
Emily Flippen: Well, a track record does help, and Bilibili does have a decent track record of reporting what seems to be effective numbers. But you never really know. They are audited by PwC [PricewaterhouseCoopers], so they are audited by international auditors. But fraud obviously can happen anywhere, but especially in China, there’s no independent auditing. So you are taking it with an element of faith and a grain of salt.
Chris Hill: Ron Gross, what’s on your radar this week?
Ron Gross: A stock that I bought earlier this year at higher prices, of course, is Airbnb, ABNB is the ticker, considering adding to my position at these prices. Obviously, they operate an online vacation and travel renting lodging platform, operate in more than 220 countries around the world at this point. In the most recent quarter, reported over 102 million nights and experiences booked that surpasses pre-pandemic levels, represents a 59% year-over-year increase, generated $1.2 billion in free cash flow. They continue to innovate. They recently rolled out what they’re calling the biggest change in the decade. The update includes new ways for guests to search on Airbnb by category, to find places that maybe they wouldn’t have been able to find otherwise. They do have about $2 billion in debt. That seems to be OK here, but that’s definitely something we should keep an eye on. We also have to keep an eye on the big boys like Marriott stepping into this space and seeing what that will have to do to the market share of Airbnb. But I like it here.
Chris Hill: Steve, question about Airbnb?
Steve Broido: With fuel prices being what they are and knowing that a lot of people that go to an Airbnb are driving there, does that hit them, clip their wings a little bit?
Ron Gross: It would have to. Anytime people get in the car and costs are higher than normal, they would maybe stay another night or even put off a potential trip. So that’s something to consider for sure.
Chris Hill: What do you want to add to your watch list, Steve?
Steve Broido: I think I’m going Airbnb. [laughs]
Chris Hill: Ron Gross, Emily Flippen, thanks so much for being here.
Ron Gross: Thanks, Chris.
Emily Flippen: Thanks, Chris.
Chris Hill: That’s going to do it for this week’s Motley Fool Money radio show. The show is mixed by Steve Broido. I’m Chris Hill, thanks for listening. We’ll see you next time.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Chris Hill has positions in Airbnb, Inc., Amazon, Apple, DocuSign, JPMorgan Chase, Microsoft, Shopify, and Target. Emily Flippen has positions in Airbnb, Inc., Bilibili, DocuSign, Roku, Shopify, Spotify Technology, and Zillow Group (C shares). Matthew Argersinger has positions in Airbnb, Inc., Amazon, DocuSign, Netflix, Roku, Shopify, Stitch Fix, Vail Resorts, and Zillow Group (A shares). Ron Gross has positions in Airbnb, Inc., Amazon, Apple, Marriott International, Microsoft, and Target. Steve Broido has positions in Amazon, Apple, DocuSign, Microsoft, Netflix, Roku, Shopify, and Spotify Technology. The Motley Fool has positions in and recommends Airbnb, Inc., Amazon, Apple, DocuSign, Microsoft, Netflix, Roku, Shopify, Spotify Technology, Stitch Fix, Target, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool recommends Bilibili, Marriott International, and Vail Resorts and recommends the following options: long January 2023 $1,140 calls on Shopify, long January 2023 $115 calls on Marriott International, long January 2024 $60 calls on DocuSign, long March 2023 $120 calls on Apple, short January 2023 $1,160 calls on Shopify, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.