Dinosaurs Roar for Comcast and CoreWeave Goes Shopping

0:20Welcome to Motley Fool Money. I'm Andy Cross, joined by Motley Fool Senior Analyst and Advisor Jason Moser. Jason, happy Monday. Happy Monday, AC. Good to see you. Good to see you. Thanks for being here. We got confirmation today that CoreWeave is buying another AI data center company, and Oracle is cutting cloud prices for Uncle Sam. We'll also talk about two companies we're keeping an eye on if the price is right. But Jason, let's start with the summer movies. Universal's Jurassic World Rebirth reportedly brought in more than$300 million globally this weekend, giving a nice win to Comcast, the parent owner of Universal.

0:55This continues that strong summer at the box office that included How to Train Your Dragon, also from Universal, and Apple's F1. Jason, is this good news for long-suffering Comcast shareholders like me? It's not bad news. Most certainly, it's not bad news. Now, Comcast's content and experiences studio segment brought in$11 billion in revenue in 2024, along with about$1.4 billion in operating profits. So, I mean, this isn't something from the revenue side that is a tremendous needle mover. But, you know, I think about when maybe it's a needle mover to the extent that we would say the same thing for Disney, right?

1:35I mean, this is the content space. It can be very lumpy. Some years are better than others. I mean, if you look at the same segment, right, the content and experience, the studio segment, we talked about$11 billion in revenue in 2024. I mean, that was$12.3 billion in 2022. So it ebbs and flows. But this is terrific news. And I think the thing that I'm kind of amazed at, you know, the original Jurassic Park came out back in 1993. Yeah. So they have pulled a Disney to an extent and have really expanded and stretched out this IP library. I think that is a good sign for a Comcast. Jason, I 100%. So I see this as, again, this Comcast stock has not done that well over the past couple of years.

2:18It now yields about 3.7%. And of course, we have the spinoff, the spin out of the media properties called Versant. Versant, Versant later this year, where they're going to spin off CNBC and USA, MSNBC, the Golf Channel, and a few other properties. So I think that's got a lot of investors interested in Comcast, at least for me, those of us who own it. But this is the seventh film franchise of the Jurassic franchise. And that franchise is worth about$6 billion. And it is a Disney play kind of Jason, because they're using that in their IP. They're using the theme parks. I saw promotions all around the world, all around the cable properties for the Jurassic Rebirth movie.

2:58They were showing older Jurassic movies on some of those cable properties this weekend. So I think from that perspective, it does help build that franchise out. And it's going to be a very competitive summer. Disney itself has its Fantastic Four coming out this summer. We have the much anticipated Superman movie from Warner Brothers coming out this year. But I think it does help build out that franchise that has become more and more valuable to those universal theme parks, including the one that just opened up this year. No question. And I mean, this also plays into sort of that summer blockbuster, right?

3:31We always love to see what the summer blockbusters are going to be. And I just think it's noteworthy, these results, particularly given the sort of tepid reviews that the movie's gotten. I haven't seen it, and I kind of take critics' criticisms with a grain of salt. But, I mean, 51 % on Rotten Tomatoes and a cinema score of B from the opening weekend audience. I mean, that's not lighting the world on fire from a critic's perspective, but clearly the audience loved it. Yeah, and also, Jason, interesting notes over the weekend that Netflix, with its 300 million subscribers, they said at the Anime Expo in Los Angeles this weekend that more than half its subscribers now watch Japanese anime.

4:09I found that interesting just because it continues to show the power of the Netflix globally as a brand. And one reason why they're, along with YouTube, one of the most valuable media properties out there. And we've always said they do such a good job with that data. I mean, personally, I'm not an anime consumer, but I think this is a great example for investors where it's not necessarily wise to extrapolate one personal tastes into a potential idea. Just because it's not something that you like or eat or watch, it doesn't mean there isn't an opportunity there. That 50 % number globally really does tell us something impressive about Netflix's market position.

4:45100%. When Motley Fool Money returns, CoreWeave goes shopping. Support for the show comes from Fundrise. Investing in companies already in the S &P 500 can sometimes feel like you're being served someone else's leftovers. It's still a great meal, but it's hard not to imagine what the food tasted like when it was fresh out of the oven. But with venture capital by Fundrise, you can finally get in early and take a seat at the table alongside the biggest names in tech investing. Fundrise's mission is to give investors the access required to invest in the best tech and AI companies before they go public.

5:17Visit Fundrise.com slash fool to check out Fundrise's venture portfolio and start investing in minutes. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. This is a paid advertisement. it. AI infrastructure company CoreWeave announced that it will buy Core Scientific for around$9 billion in an all-stock deal. That's about$20 per share based on CoreWeave stock. Now, shares of Core Scientific, Jason, are down around 20 % today to about 15%. So, the market's sensing something here. Yeah. This is an arms race like we haven't seen in some time.

5:51I mean, companies are just rushing to build out their AI capabilities, And this is just another sign of that. But I think it's really noteworthy, the core scientific shares being down so much today. I mean, there can be a number of reasons why something like that might happen. Investors don't think the deal will go through. Perhaps another bidder comes in. But, AC, I wonder if this doesn't have something to do with the deal structure itself and what it's saying about the market's perspective on core weave. Because that$9 billion number that's being bandied about, let's make sure we understand.

6:22That's just based on the July 3rd share price, right? Core Scientific shareholders are going to receive 0.1235 shares of CoreWeave for each share of Core Scientific that they hold. But as noted in the release, and this is important, the final value will be determined at the time of the transaction close. That's not until later in Q4. So I don't know. Do you think this is like a glass half empty view on CoreWeave and whether they can sort of hold their valuation? Because the stock has been on fire since it went public. Yeah, and went public just this year. The stock's done just fantastically well, and Core Scientific has done very well, though it has a little kind of spotted history.

6:59It's one of those SPACs back in 2021 that, when it came public out there, was about$4 billion. It basically lost almost 100 % of its value, had to declare bankruptcy, defile from the markets, came back to the public markets in January 2024. Actually, CoreWeave tried to buy them last year for about$6 per share. So now they're paying far more for that. It does give CoreWeave that vertical integration, Jason, that I think they need to build out. They're going to add about nine or 10 AI data centers of Core Scientific, give them massive gigawatts of capacity. And as CoreWeave is trying to build out its own AI data centers, it does need to continue to build out that capacity.

7:44And CoreWeave is Core Scientific's largest tenant. So, it makes sense from a vertical integration perspective, but I think the market is just saying, with the share issuance so soon after CoreWeave came public, there are some doubts about what price they're going to have to get Core Scientific into the CoreWeave family. Exactly. I certainly understand the market's enthusiasm around CoreWeave. When you're selling yourself as the AI hyperscaler, there is something to that. This is clearly a company that's playing a big role in the space. They just reported revenue growth 420 % in this most recently reported quarter.

8:20But again, you know, and you're right, vertical integration, this is going to be something that really gives CoreWeave more power over its platform and to that power. I mean, this is a power play, right? Through this acquisition, CoreWeave is going to own approximately 1.3 gigawatts of gross power, along with the opportunity of one plus gigawatts of potential gross power available for expansion. I mean, a gigawatt is a lot of power. It looks like that power is a medium-sized city. You think about the Hoover Dam. The Hoover Dam, one of our biggest hydroelectric generators here in the country. That's responsible for about 2 gigawatts of capacity.

8:55You can see how this could really impact CoreWeave if it goes through. Prediction time, yeah. Do you think it's going to go through? Do they have to lower the price, readjust the deal terms, you think, James? I think it's going to go through. I think that probably the market's enthusiasm is going to remain for CoreWeave. I think the stock will ebb and flow here a little bit. My suspicion is it will go through. probably not going to end up at that$9 billion valuation at the end of the day, because that is pretty extreme for a company like Core Scientific. I mean, that's like 18 times full year revenue in 2024.

9:24Yeah. So yeah, we might see some change in the price there, but my suspicion is it'll go through. There are definitely some synergies there and some cost savings, but I think it'll go through too. But I do think they'll have to readjust the terms. Exactly. Next up on Motley Fool Money, Oracle gives Uncle Sam. They say leadership isn't just about where you're going. It's about the conviction it takes to get there. For those who demand the world and possess the drive to claim it, there's a vehicle of equal distinction. Dynamic by design and engineered for pure impact, the Range Rover Sport rises to meet you the moment you take the lead.

9:57This is the most advanced Range Rover Sport yet, a master class in uncompromised performance and unbridled agility. Inside, the innovation is seamless. You'll find an elegant 13.1-inch touchscreen that puts total control of the vehicle's systems right at your fingertips, but it's the refinement that sets it apart. Sculpted 22-way heated seating with built-in massage function ensures every journey is defined by peerless comfort. Whether it's through unique interior finishes or custom wheel options, the ways to personalize your Range Rover Sport are nearly unlimited. Command attention and experience ultimate luxury in motion.

10:32Exclusive offers are available now. Explore further at RangeRover.com. Medeal, let's move over to news that Oracle is cutting cloud service prices for the U.S. government by as much as 75 % as reported this weekend by the Wall Street Journal. Jason, who's a winner here? Is this an Oracle beneficiary, a U.S. federal government beneficiary, a little bit of A, a little bit of B? I'm going to walk the fence here and say a little bit of A, a little bit of B. It does feel like both win somewhat here. This feels a bit like taking a page out of the book of Bezos, right? He was always known for driving down those prices in so many cases.

11:08And he's got that quote, your margin is my opportunity. He's taking that Uber long-term view. You know, AC, I think for federal agencies, they're under this mandate to modernize while also managing tighter budgets at the same time. So, you know, the old saying, cash is king. I think in this case, it seems maybe cost is king. And we're seeing other cloud providers kind of follow this same lead. Salesforce has done the same thing in regard to Slack, Google, Adobe. So this isn't anything necessarily new. But then I think for Oracle, you know, these discounts can help lock in really, you know, multi-year contracts.

11:44And that offers more stability for their business model and revenue prediction. And if they can extend those relationships, they can start talking a little bit about maybe exercising a little bit more pricing power down the road if they do a good job. So I can see both parties benefiting from that. I thought this was a little bit more beneficiary for Oracle when I first started studying it. But then I think the GSA, the General Services Administration, is starting to shake their big stick here to try to get some pricing out of some of these big players. It is interesting to me that this is for the licenses, not really for the subscription.

12:13And it goes through November. The pricing option goes through November of this year. So it does give Oracle a foot in. It's really the first deal the GSA cut for government-wide solutions, including lots of areas where Oracle and other cloud titans provide some of those services and compete very heavily. I think it's just more evidence of CFOs, Saffir Cats becoming more and more competitive, trying to push Oracle into markets. Clearly, Oracle has had some nice beneficiaries here in the markets and in their business as the stock has gone really well. It's up 60 % the past year or 40 % year to date, Jason.

12:51It's north of a$600 billion company, 35 times earnings, that's almost two times its five-year average. So what do you think about Oracle, the stock, going forward? I'm glad you brought that up. It does seem like a little bit of a richer valuation. But going back to Safra Katz, he's looking at fiscal 2026 targets here. Cloud revenue growth projected to grow from 24 % to over 40%. And then that IAAS, that infrastructure as a service, that growth there is projected to hit about 70%. So anytime you see valuations like that, I mean, you have to just kind of step back and say, OK, why is the market doing that?

13:29Where's the growth? And I think that's where they're seeing some of that growth. Now they just have to deliver. Yeah, I think so, too. I do, again, like this licensing play, because as they continue to push more subscription, this does get into the core part of what Oracle has done for so long and done so well for so many years. So I think it is a nice foothold for Oracle. I guarantee the GSA is going to be issuing lots of different kind of pricing asks of lots more providers as they continue to manage their own footprint, as they kind of push towards to be a little bit more technological savvy at the federal government.

14:05Finally today, Jason, stocks are down a little bit, but passed through all-time highs last week. Let's end things with two stocks that we're keeping fresh on our watch list. If the prices are right, what are you looking at? Everybody loves stock ideas, right, ACO? Of course, yes. One that I just continue to keep my eye on is a company called Samsara. Ticker is IoT. It's now a$22 billion company. And Samsara operates its connected operations cloud, which is a software platform that connects all of the devices that a company has in its buildings, its equipment, its cars, and other facilities. And the platform then establishes this massive network of data and information specific to that company.

14:44Now, the company is still working its way to profitability. Basically, technically, it's cash flow positive, but stock-based compensation more than eats that up, which isn't uncommon for a company at this stage of its lifecycle. It's around 14 times forward sales projections today. Now, when I wrecked this company in the trend service back in 2023, the beginning of 2023, it was at 13 times. And it's been a little bit of a bumpy ride, and the stock has pulled back a little bit. But when you look at the fundamentals of this business, they just reported first quarter results that it exceeded all targets that leadership set the quarter ago.

15:20Revenue up 32%, annualized recurring revenue up 31%. They have 2 ,638 customers with ARR over$100 ,000. That's up 35 % from a year ago. So it is a company that continues to grow and establish a fairly dominant position in its market is what it seems. It really does seem like this is becoming kind of the top dog in its space. And I think it's also a company that possesses a lot of those hidden gems traits, those principles that our CEO, Tom Gardner, loves. He's so fond of, right? I mean, you get reasonable, remarkable growth into expanding markets, check, right? Led and owned by true long-term believers in the company, check, right?

16:03I mean, this is a company that is led by co-founders Sanjit Biswas and John Biggett. They own almost 70 % of the voting power. And in a relentless curiosity towards bold technical exploration, I mean, that is a double check for a company like this. So if we ever see any kind of a material pullback in this one, I certainly would be very tempted to add it to my portfolio. Jason, do you have any thoughts on these cute kind of ticker names, IOT? Does that tend to scare you away from a company? I never would recommend a company on the ticker alone, but you just made me think of Core Scientific, and it's ticker Coors.

16:42It's like the Smokey and the Bandit ticker. It's funny to see those sometimes. Jason, I'm looking at Howmet, symbol HWM. It's formerly part of Alcoa. Its history is steeped into high-precision metalworking. It provides 90 % of all structural and rotating aero engine components for the aerospace, space, transportation, energy markets. These are really super high-end precision airfoils and forging, forge wheels and chassis for the commercial trucking and auto space. The stock has doubled over the past year and it's up almost 50 % since the Rule Breakers team over in Stock Advisor, we recommended it just this year.

17:23It has these really serious competitive advantages that we love to see. It's patents, manufacturing, the history behind it, it's core clients. You don't really want to mess around with replacement parts for these kinds of really high precision manufactured items. It does have some opportunities in the energy space because it provides the blades for a lot of these, for the engine turbines that power a lot of the energy that goes into supporting data centers. I do love this business. It's just the stock has done so well. And while While Rule Breakers and the Stock Advisor team, as well as our Rule Breakers team, love buying into strength.

18:00I just want to see, I'm not going to criticize anybody for adding this great business to their portfolio. But for me, I'm just looking for a little bit of value, maybe a market breather before I kind of start looking at how that symbol HWM, just a wonderful business,$73 billion. So it's not small and it has a lot of room to grow in the aerospace market. Yep. Plenty of examples in my investing life where patience tends to pay off. 100%. There you have it. those two high quality companies and, uh, some Sarah and Hamet that we're watching. If the markets go on a little bit of a, of a tailspin here in the dog days of summer, maybe they go added to our portfolio.

18:36That's a wrap for us today here at Molly full money. Jason Moser. Thanks for joining me here. Thanks for, uh, thanks for having me here at the Molly full. We love hearing your feedback to be part of that feedback or to ask a question, email us at podcasts at fool.com. That's podcasts at fool.com. 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. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers.

19:09Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For all of us here at Motley Fool Money, thanks for listening, and we'll see you tomorrow.