“Alexa, Let’s Go to Outer Space”

0:04Tyler Crowe:The space industry is moving at light speed. This is Motley Fool Money.

0:20Tyler Crowe:Welcome to Motley Fool Money. I'm Tyler Crowe and today I'm joined by longtime Fool contributors Matt Frankel and Jon Quast. got a pretty full schedule here we're going to talk about rh what used to be restoration hardware and its struggles kind of following up from yesterday's discussion about nike we're going to get some listener questions but we want to get started first with space and space investing in particular it has been one heck of a week when we talk about space in general uh just yesterday the artemis 2 launch which look it happened i i don't care how many times we see rocket launches Those things are wicked cool to watch.

0:58Matt Frankel:Yeah, and not to brag, but as a Floridian, I got to see the Artemis launch from my front yard yesterday. Me and my nine-year-old ran outside right after we watched the countdown on YouTube. Man, I'm pumped about space right now.

1:12Tyler Crowe:And talk about seeing smoke. There is a lot of smoke happening in the industry of space as well. I mean, we've talked about the SpaceX IPO. We've mentioned it before in our IPO show. and this week that chatter is getting louder and louder by the day. So it seems like the SpaceX IPO is coming pretty soon. And also in space news today, satellite company Globalstar is up about 8 % as we tape on rumors that Amazon is looking to acquire it. Now, one of the deals that we saw recently, I want to say in the past year or so, or maybe even further back, was SpaceX acquiring Spectrum from EchoStar. It's basically the ability to use broadband spectrum for communications.

1:57Tyler Crowe:In doing so, it established the ability for SpaceX to use cellular data transmission by a satellite. Now, I'm not saying this is precisely why SpaceX made that happen. And I'm not saying that's precisely why Amazon is making this acquisition of GlobalStar. But GlobalStar does have a very large spectrum license for the next 15 years. So, Matt, I have to imagine that was part of the deal.

2:24Jon Quast:Simply put, Amazon needs to scale its satellite, build out faster. They have grand plans. I think the latest number I saw was 3 ,200 satellites of its own. It wants to get into orbit to rival Starlink, but it's not there yet. Starlink, just to put it in perspective, has over 10 ,000 active satellites. Amazon has about 200. Acquiring GlobalStar and its spectrum licenses would speed up the timeframe because that's something, no matter how much money you have, you just can't speed that up. John is going to dive into GlobalStar's business a little more in a bit, but it does own valuable spectrum licenses, as Tyler said.

2:59Jon Quast:It's almost certainly a big reason that Amazon's interested here. Like I mentioned, these are highly regulated. They require years of navigating regulation, not only in the U.S., but all over the world. GlobalStar holds licenses for valuable spectrum in more than 120 countries around the world. So it does help accelerate the timeline of what Amazon's trying to do.

3:21Tyler Crowe:Certainly seems like there's some sort of trail here as to spectrum and making this a much more prominent part of the business. Now, look, the deal isn't finished yet. This is like I said, this was a lot of rumors and the stock is up on rumors and we don't have a price tag on it. But at the same time, Globalstar is about an$8 billion company. And it's not like for a company the size of Amazon, that there are huge valuation concerns here for acquiring this. It's not certainly going to break Amazon's bank to make an$8 billion acquisition. So with that in mind, what opportunity do you see here for Amazon, the stock?

3:58Tyler Crowe:Is this something that's a real needle mover or is it more like a, hey, this is nice to have, but I'm not building my investment thesis around it. When I think of Amazon, I think of Prime Video. You can agree or disagree, anyone you like, but I don't think anyone's building a investment thesis on Amazon based on it has prime video and something like global starts sort of feels like on that level.

4:21Matt Frankel:I think that's fair, Tyler. You're not building an investment thesis around this necessarily, but Amazon does have space aspirations. I think what this does that has value for Amazon is that it gets it a revenue stream from space that's reliable while it tries to build out that space business. And so breaking down Globalstar's business is actually pretty fascinating here. A single customer accounted for 63 % of revenue in 2025. We don't know for sure, but that customer is likely Apple. Apple owns 20 % of the business. It owns 85 % of Globalstar's capacity, or at the very least, 85 % of the capacity is dedicated to one customer.

5:03Matt Frankel:That customer is likely Apple. And so what is interesting here is when we think about the monetization of space, everybody wants to do space, but the monetization aspect gets tricky on the edges. This is something that Global Star does provide Apple with the SOS emergency signal. That is actually a pretty important thing. It's a valuable business. And so we have one of the most important, valuable companies in the world in Apple locked in as this global star customer and locked in for the long term. And so if you're Amazon, I get this space business, a reliable income stream from space as I continue to push forward with my own aspirations.

5:45Matt Frankel:So I think that that's kind of the valuable thing here for Amazon.

5:48Jon Quast:First, to Tyler's point, Prime Video should be a part of the thesis more so than a lot of people think. It's a big part of Amazon's advertising platform, which is one of the fastest-growing and most profitable parts of the business. We'll leave that for another conversation. But to me, Amazon's space investments are nice to have. I'm an Amazon shareholder, and 100 % of my thesis is built around the e-commerce platform and AWS. There's a solid argument to be made that Amazon building out its satellite count would be a big competitive advantage for AWS. Microsoft and Alphabet, which are the two closest competitors.

6:25Jon Quast:They don't have that. These satellite capabilities, they can remove geographical constraints at the edge. Right now, their reach is limited to where the internet goes. It'll let Amazon's customers move data without using the public internet at all, something its competitors can't offer. It can be a competitive advantage that helps AWS keep or even grow its already leading market share. So it could be a very nice thesis driver, but right for now, it's a nice to have.

6:57Tyler Crowe:I would say at the most generous, I think this acquisition and Amazon's budding space business is extremely early. I wouldn't even say early innings. It's like watching the pitcher warm up before the game even starts in terms of early innings here. So So it could be a fascinating thing to watch because clearly Amazon or Jeff Bezos as the chairman has had very ambitious plans for space with Blue Origin, which isn't necessarily tied to Amazon, but it's clearly something that Jeff Bezos has wanted to do. And I have to imagine that somewhere that is embedded in the DNA of Amazon. So coming up next, we're going to talk about another struggling retailer in the form of restoration hardware.

7:40Tyler Crowe:This time of year always makes me rethink what's in my closet.

7:44Jon Quast:I'm trying to keep fewer things, but better ones. Pieces that are well-made and easy to wear all the time. That's why I keep coming back to quince. The fabrics feel elevated, the fits are thoughtful, and the pricing actually makes sense. And as the calendar has moved from winter to spring, items like their men's linen pants and shirts are perfect. Lightweight, breathable and comfortable, striking the right balance between laid back and refined so you look put together without trying too hard. And their Flow Knit Activewear, Moisture Wicking, Anti-Odor, and Soft Enough, you'll actually want to wear it all day.

8:16Jon Quast:The best part is that their prices are 50-60 % less than similar brands. Quince works directly with ethical factories and cuts out the middlemen, so you're paying for quality, not brand markup. For me, the linen pants and the cotton chinos are the perfect transition items. Not only are they comfortable and breathable, but they look sharp and polished. Refresh your wardrobe with Quince. Go to quince.com slash motley for free shipping and 365 day returns. Now available in Canada too. Go to quince.com slash motley for free shipping and 365 day returns. Quince.com slash motley.

8:53Tyler Crowe:Shares of RH, which used to be called restoration hardware. I think I like the older name better. Shares plunged about 19 % yesterday after the company reported earnings and offered guidance. John, was it the guidance or the earnings that really had the market saying no thank you to whatever management had to say?

9:14Matt Frankel:Well, the earnings were not fantastic, but definitely the guidance is a big part of what's going on with RH and investors' adverse reaction to the report. Basically here, if you look ahead to the first quarter, it just reported fourth quarter results. But if you look ahead to the first quarter, it's looking at a sales decline. And this is after already a couple of years of just kind of mediocre, lackluster results. But then guidance for the year is modestly positive. And so if you take that in combination, what management is saying is, hey, our business trends are actually about to get worse, but don't worry, they'll be better before the end of the year.

9:59Matt Frankel:And I think, just as an outsider perspective, I think management has cried wolf one too many times here in recent years. And what I mean by that is it seems like that is routinely now the guidance. Things are about to be bad, but don't worry, it'll pick up in a couple of quarters and investors just aren't buying it right now. Everything that drives RH's business, housing prices, interest rates, even the stock market, all of these things are trending in the wrong direction. And that's kind of the point here. It's doing okay under the circumstances, but it's not great being under the circumstances and investors don't know when the circumstances will get better.

10:39Matt Frankel:I don't think that it was buying what management was selling and that's why the stock is down after the report.

10:46Tyler Crowe:Well, you can certainly say that the report is a continuing trend that we've seen with RH because this is not anything new. Over the past five years, shares of RH are down 81%. And I don't care how you slice it, that is not good. Now, there's clearly some internal problems, as you said, John, and there's some broader macro problems as well. And because this is furniture mostly and home goods and things like that, people buy furniture when they buy a new home or move. That tends to be the most frequent time that these purchases has happened. The challenges existing homes in the United States from 2022 to today are at about the same rate that we saw from 2008 to 2012, when we had that thing called the Great Recession going on and housing was not in a great place.

11:37Tyler Crowe:Now, at the same time, retail struggling and businesses struggling with their turnarounds is not a new story. I mean, yesterday, Travis Lew and Raistrel were talking about Nike and their seemingly multi-year turnaround strategy that hasn't quite gained traction yet. It seems to be where RH is in a similar position. So look, we know it's some sort of combination. And if I were to just ask which one is it, we would all say it's a combination of both. So I'm going to make you guys be a little more specific here. I want you to put percentages to when you look at this situation, how much of a percentage is it's the company and its problems versus it's just a really bad market.

12:17Tyler Crowe:And how would you break that kind of share into what to blame for RH's woes?

12:22Jon Quast:So before I give my percentages, so as you mentioned, the housing market is pretty terrible right now, and that's weighing on the business for sure. And it isn't just that people aren't moving into new homes and buying furniture for their new home, but people are largely not tapping into their home equity to complete big home purchases. That's generally talked about with projects like building a new deck and renovating a kitchen. But it also is a very common source of funding if people want to replace a few rooms' worth of furniture. Because of interest rates, that's generally not happening right now.

12:56Jon Quast:Plus, with the inflationary pressures over the past few years, economic concerns, consumers are generally feeling squeezed, especially when it comes to making nice-to-have purchases, like updating furniture. Although the company missed estimates, there's an argument to be made that 4 % year-over-year revenue growth in this environment isn't that terrible. But there are some things not to like about the company. Its debt levels are high. I feel like management should be a little more conservative right now when it comes to investing for growth and really trying to innovate in this type of environment.

13:29Jon Quast:In all, I would say 70-30 market versus company.

13:33Matt Frankel:Yeah, maybe I'm being a little bit too harsh here, but I'd put it closer to 50-50. But I agree with everything that Matt just said. It is true. The housing market is a huge reason that RH's business isn't booming like investors hoped. There's only so much that the company can do in that environment. And management does point out, as Matt alluded to, that it is growing or producing results that are better than many of its peers. So, I guess give it a little bit of credit there. It's a hard market to be in. But what is interesting is the numbers do look particularly weak right now because of what Matt just said.

14:09Matt Frankel:Management isn't very conservative when it's building out to the long-term vision of the company, and it's continuing to invest like business is booming. And so, look, we are long-term investors. We do like it when our companies take a long-term view. But I think that does contribute to the numbers perhaps looking worse than they need to be right now because it is investing still so much in what it wants to do. Now, what does it want to do? RH aims for$5.8 billion in revenue in 2030. That would be up 70 % in five years from what it just turned in in 2025. And in the past, it's had operating margins of around 20.

14:45Matt Frankel:That's what it's aiming for. Definitely not there now. But look, if things go swimmingly, according to management's plan, there's a scenario where RH could be generating a billion in operating income within five years. It only has a market cap of 2 billion right now. But the thing is, as Matt pointed out, it is using debt. It is using a sale leaseback strategy, which ups the ante a little bit. It's buying these opulent properties. These are financial moves that are anything but conservative. So if RH does succeed, it's making great moves right now. But the outcome is becoming increasingly binary.

15:22Matt Frankel:If it fails to hit its goals, it's really put itself in a tough financial position.

15:27Tyler Crowe:Coming up after the break, we're getting into the mailbag to ask what our reading list is.

15:32Jon Quast:This time of year always makes me rethink what's in my closet. I'm trying to keep fewer things, but better ones. Pieces that are well-made and easy to wear all the time. That's why I keep coming back to Quince. The fabrics feel elevated, the fits are thoughtful, and the pricing actually makes sense. And as the calendar has moved from winter to spring, items like their men's linen pants and shirts are perfect. Lightweight, breathable and comfortable, striking the right balance between laid back and refined so you look put together without trying too hard. And their Flow Knit Activewear, moisture wicking, anti-odor and soft enough, you'll actually want to wear it all day.

16:07Jon Quast:The best part is that their prices are 50-60 % less than similar brands. Quince works directly with ethical factories and cuts out the middlemen, so you're paying for quality, not brand markup. For me, the linen pants and the cotton chinos are the perfect transition items. Not only are they comfortable and breathable, but they look sharp and polished. Refresh your wardrobe with Quince. Go to quince.com slash motley for free shipping and 365-day returns. Now available in Canada, too. Go to quince.com slash Motley for free shipping and 365-day returns. quince.com slash Motley.

16:44Tyler Crowe:So we had a little bit of technical difficulties in between takes here. John's having some technical difficulties, but we're going to soldier on, and we're going to talk about our last mailbag question here. Just before we do that, though, we want to make you part of the conversation. If you have a stock or an investing question for Matt, John, myself, or anyone else on the show, You can now email us at podcasts at fool.com. We'd love to have your mailbag segments whenever possible, like this one we're about to do. So send in your questions. Just remember to keep them foolish. That email again is podcasts at fool.com, podcasts at fool.com.

17:17Tyler Crowe:So our email question comes in today from Jack Quinn. And this is probably one of the favorite ones that we always get, because I think I've answered this one before in live events and things like that. And it's always a fun one to do. And Jack asks, newer listener here and newer investor as well, aside from listening to The Motley Fool, is there any books you recommend for beginner or amateur investors to get a better understanding of the markets, stocks, etc.? Thanks. so before we get into that we do have to mention that the motley fool us we our founders tom and david gardner have written several books we have the motley fool investing guide rule breakers rule makers and david gardner also wrote a book recently uh rule breaker investing so there's lots of options in the motley fool universe already but we're gonna step away from that for a second and focus on some non-Motley Fool books.

18:11Tyler Crowe:And I'll do mine first. And mine is One Up on Wall Street by Peter Lynch. I think for beginner investors, this is kind of that one that gets you inspired to want to invest. I remember the sensation I had after reading that book was I wanted to run through a wall to invest in the market after reading about this book. It kind of explains how using your expertise in whatever field you have before you got into investing can be an extremely valuable tool and how you can use that as an example of making better decisions in how to invest in the market and how he did it for several years running a fund called the Magellan Fund at Fidelity.

18:51Tyler Crowe:I've always been a big fan, too, of The Intelligent Investor, but I would also say that is probably not the one that is a first-time reader. It's a little bit of a dry read, so keep that in mind. And not to discount John's part, because he wasn't able to join us, but the book that he recommended was The Psychology of Money by Morgan Housel. Matt, what did you have?

19:14Jon Quast:You already mentioned my favorite investing book, One Up on Wall Street. The Intelligent Investor is absolutely a great one. It's by Warren Buffett's mentor, Benjamin Graham, but not great for first-timers, I agree. But since you already mentioned my favorite, I'll add that one of the best ways to learn as a newer investor is by reading all of Warren Buffett's annual letters to Berkshire Hathaway shareholders. He's been writing them for decades, or he was writing them for decades. He wrote his last one last year. There are certainly some company-specific business discussions, specific to Berkshire.