In short
Motley Fool Money episode covers three main areas: (1) the August U.S. jobs report and what it implies for Fed rate cuts, (2) AI funding and major company moves (OpenAI, Anthropic, Alphabet), and (3) “vibes” around consumer brands and several stock picks.
Guests
Lou Whiteman (optimistic macro take; focuses on sector winners/losers and AI durability concerns), Matt Frankel (market reaction and rate-cut odds; questions AI business durability and IPO euphoria), plus host Travis Hoyam and engineer Dan Boyd (joins the “Stocks on our Radar” segment).
Key claims
jobs market is “frozen” by tariffs/uncertainty; healthcare added 31,000 jobs while manufacturing/government fell; labor force down 400,000 since April; unemployment 4.3% but younger job prospects are a “canary.” Rate cuts likely in September, but long-term rates/mortgages may not fall proportionately. AI: OpenAI buying StatSig; Anthropic raises $13B at $183B; valuations are lofty but supported by run-rate revenue (Anthropic $5B annualized; OpenAI ~$12B). Durability risk: B2B tools (e.g., Cursor) could be displaced by better models; commoditization worries. Alphabet: court remedy preserves status quo; cash “cash cow” supports AI; Apple distribution deal ~$20B/year. Examples: Lululemon shares down 17% due to product freshness concerns; Nike trying to regain “cool” via brand deals (e.g., Gamecocks/Under Armour shift). CoreWeave down 50% from peak; Figma IPO spike then drop (priced ~$33, above $120, now ~$52). Elon Musk: Tesla board considering trillion-dollar pay tied to 12 milestones (e.g., $400B annual adjusted EBITDA; $8.5T market cap). Stock radar: Lou watches Redwire (space components via M&A, Edge Autonomy drones); Matt likes Target turnaround (PE ~11, ~5% dividend); Dan jokes about Target’s relevance vs Amazon.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOAnalyzing the August Jobs Report
0:45 to 3:30
Discussion on the implications of the latest jobs report and economic outlook.
“Unemployment rate ticked slightly higher to 4.3%, although there's some rounding there.”
Sector-Specific Job Insights
3:30 to 6:44
Exploring the sector-specific job growth and potential impacts on the economy.
“And if we get clarity, then we could have a bounce back.”
Rate Cuts and Economic Implications
6:44 to 12:31
Debate on how potential rate cuts affect market perceptions and economic conditions.
“And I do think that there's a chance that if we do get clarity on tariffs, that we could see a bounce back and that just one month's data point shouldn't be as concerned.”
AI Developments and Market Impact
12:36 to 14:02
Discussion on recent AI advancements and their influence on economic growth.
“available for Vanguard index funds that participate in investor choice.”
Evaluating AI Valuations and Market Durability
14:02 to 20:01
Explore the sustainability of AI company valuations amidst competitive pressures.
“I have some companies in my portfolio that trade for valuations north of 30-time sales like this, they haven't 5X their revenue this year.”
Vibe Check: Brand Performances of Lululemon and Nike
20:40 to 28:01
Assess the current market positions and challenges facing Lululemon and Nike.
“This section, I want to get a vibe check on some of the stocks that have had some big moves and I want to get an idea what Matt and Lou think is going on.”
Emerging Brands in the Market
28:01 to 29:12
Explore the rise of new brands in the direct-to-consumer market.
“I mean, Aloe is another brand that our local Lululemon store was replaced by Aloe.”
The Impact of AI on Business
29:12 to 31:42
Discussion on the changing dynamics of AI in the market, focusing on CoreWeave.
“One of the things that I'm curious from you two is AI has been driving the market, but it seems like the story is changing over the past few months.”
Figma's IPO and Market Fluctuations
31:42 to 34:21
Analyzing Figma's IPO performance and current market challenges.
“And it's a really interesting business for sure, but not for me.”
Figma's IPO and Market Fluctuations
34:45 to 35:48
Analyzing Figma's IPO performance and current market challenges.
“It's the perfect time to hit reset before the autumn rush, and for me, that always starts with my wardrobe.”
Show all 13 chapters
Figma's IPO and Market Fluctuations
35:54 to 36:10
Analyzing Figma's IPO performance and current market challenges.
“That's quince.com slash motley for free shipping and 365 day returns.”
Elon Musk’s Trillion Dollar Pay Package
36:10 to 38:11
Discussion on Elon Musk's proposed pay package and its implications for Tesla.
“As always, people on the program may have interests in the stocks they talk about and The Motley Fool may have formal recommendations for or against, so don't buy stocks based solely on what you hear.”
Stocks on Our Radar
38:11 to 41:31
Overview of stocks being monitored, including Redwire and Target.
“I'm looking at a company called Redwire, ticker RDW.”
Transcript
Automatic transcript. May contain errors.0:04Travis Hoium:The August jobs report is in and it looks like a rate cut is going to be coming. Only full money starts now.
0:25Travis Hoium:Everybody needs money. That's why they call it money. The best things in life are free, but you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. I am Travis Hoyam, joined by Lou Whiteman and Matt Frankel. The big news for today, coming out this morning, is the latest jobs report. The market was weak once again. 22 ,000 jobs added in the U.S. in the month of August. Unemployment rate ticked slightly higher to 4.3%, although there's some rounding there. They got some rounding benefits last month and not quite the same benefits this month, but up about a tenth of a percentage point.
1:06Travis Hoium:Revisions were a little bit mixed with a decline in jobs in June and a slight gain in July. There's a lot going on here, but Lou, I want to start with you. What was your takeaway from this report from an economic perspective?
1:19Lou Whiteman:I'm kind of glass half full here, Travis. I'm surprised to say it, but look, the overall picture here is still far from bleak, despite the headlines. Unemployment rate, historical standards is relatively low. The number of people employed has held steady since 2023. I really think that what is going on here, nothing is broken. It's just everything is frozen. This is tariffs. This is businesses unsure of what's to come. They're not really doing a ton of layoffs, but they're also not hiring. So, there's just this frozen market. I know the markets are happy because it does look like we're going to get a rate cut, and I think that's probably right.
2:01Lou Whiteman:But look, I don't think we should chicken little this number. Yeah, no, I would agree with that. But I would push back a little bit. It's really rare that Lou is the more optimistic of the two of us. But I would push back a little. And Travis kind of mentioned some of this a little bit earlier. It's very sector-specific where we're seeing the jobs numbers. In the last month, you had 22 ,000 jobs added as the headline. 31 ,000 jobs were added in healthcare. You back out healthcare, and we lost jobs. The government jobs were down. 15 ,000 manufacturing jobs were down. I feel, other than healthcare, where there's been a big shortage of healthcare workers, I'm married to a nursing professor.
2:46I can tell you that firsthand. There's a big shortage there. it's not as great as it might seem. I think we are ready for a rate cut, and this really clears the way for it.
2:58Lou Whiteman:So, two things on that real quick, Travis. For one, I think any job support, any time in history has always been, if you break it down on a sector basis, there's always winners and losers. So, I mean, not to dismiss that, because Matt, you're right. The other thing, too, is I think that the healthcare, as the standout, sort of supports the idea that it could be just frozen. Healthcare is essential. We need to, I mean, no matter what tariffs are doing, if you need healthcare employees, you do it. I think that that still can support this idea that other sectors, it's not so much that they're weak, it's just that they're frozen.
3:30Lou Whiteman:And if we get clarity, then we could have a bounce back.
3:34Travis Hoium:The other thing that we need to acknowledge is that the numbers are a little different than we've seen historically. Yes, 22 ,000 is a relatively low number, but the labor force is down 400 ,000 people since April. So this is partially just the number of people who are in the U.S. and not growing at the rate that it typically has. So that's partly an immigration story. The number of people who are in the workforce, so are they retiring, are they in school, is not particularly high. So both of those things are sort of working against that overall jobs number. That's why you're seeing the unemployment rate stay relatively low at 4.3%, despite the fact that we're not really adding a whole lot of jobs right now.
4:18Travis Hoium:What do you think, Matt? Yeah, no, that definitely makes sense. I mean, the job market is not as... Lou is right that it's kind of frozen in a way. We're seeing some contradictory data. Like you said, adding jobs is good. Labor force shrinking is not great. That 4.3 % unemployment rate, it's not as low as it has been. I forget what the record low is. I want to say it's around 3.6 % or something in that range. Close. Yeah, it's close. Historically, that's a low unemployment rate. But it seems like the market agrees with me. The priced-in rate cut odds have really changed even this morning since we've seen those numbers.
5:02I mean, even yesterday, it was pretty much a conclusion that we were going to get a rate cut in September. But now there's actually a non-zero probability priced into the market that we're going to get a double rate cut, a 50 basis point rate cut in September. I don't necessarily think that's going to happen. But just the fact that traders seem to be kind of moving in that direction shows that investors don't think this is a great report.
5:28Travis Hoium:This is one of the interesting things with these reports and the market's reaction. The short-term reaction, I think, Lou, is that, yes, we're probably on our way to a rate cut in September, whether it's a 25 basis point rate cut or whether it's a double rate cut that Matt talked about. We don't really know yet, but likely at least those short-term interest rates are starting to come down. The problem is they're coming down because we're not adding a lot of jobs. So it's like good from a market perspective because the market likes to have lower rates, but bad from an economy perspective because you would like to see more jobs, more economic activity, especially with younger people.
6:09Travis Hoium:That's kind of the one that I'm keeping an eye on is younger people seem to be having a harder time finding jobs, which is sort of alarming because that's could be the canary in the coal mine.
6:18Lou Whiteman:Yeah, this is definitely be careful what you wish for, right? Because rates come down when the economy isn't doing too well. I think the market is, we went through an extended period with very low rates. I think the market is almost too addicted to that or addicted to the idea of that. So, I do think there is some just kind of overreacting, but there's too much euphoria there with it. And look, Travis, I don't want to be too Pollyanna here too, because I don't want to say all is well, but, and this is a word the Fed hates now, more so than inflation being transitory, I think that these jobs numbers could be transitory.
7:02Lou Whiteman:And I do think that there's a chance that if we do get clarity on tariffs, that we could see a bounce back and that just one month's data point shouldn't be as concerned. So businesses are
7:13Travis Hoium:looking for certainty if they get that certainty.
7:16Lou Whiteman:Yes, if we can get certainty. And this is what I say. I do think I agree. I think we will get a rate cut in September. I continue to believe that the Fed is much less of a hurry to bring down rates than the market is. And I think that that will play out. And again, if we do get some sort of certainty and jobs look even a little better or they don't continue to trend downward in the months to come, I think given what we've seen with inflation and what might still be to come there, I continue to think that the Fed will be, that the market might be surprised at how reluctant the Fed is. The Fed, at the end of the day, Travis, has one tool and one tool only.
7:53Lou Whiteman:They do not want to expend that tool ahead of time. They definitely don't want to go past neutral when it comes to rates. I mean, right now, I'm looking at the tool. What exactly is neutral? Neutral would be about a percentage and a half below where we are right now is kind of where I would think of neutral. in the 3 % ballpark on the federal funds rate. Right now, the market's pricing in over seven rate cuts by the end of 2026. That would take us a little bit below neutral. The president has called for a 1 % interest rate. He said, we could lower rates to 1 % and it would be fine right now. One thing that people listening need to really be aware of, if either of those things happen, I mean, the 1 % is a little bit of a stretch, even by historical standards.
8:37But if we had to lower rates past neutral, it would probably be because the jobs market got even worse than it was now, or because we saw deflation, or we saw something really negative in the economy. It would not be because good things were happening.
8:52Travis Hoium:Yeah, that's always the push and pull here. The other thing I wanted to touch on, get your guys' thoughts on, is the Fed controls short-term rates, what we call the Fed funds rate. That's the headline number that we hear reported all over the place. That's the cut that we're talking about. They do not control, at least really control longer term rates, 10 year, 20 year, 30 year rates. Those rates are what mortgages are driven by, what auto loan rates are driven by. So we're starting to see a bit of a decline in the last few days, but those rates are about flat from where they were in early November 2024, is there a chance that even a double rate cut, Matt, wouldn't spur the market or wouldn't spur the economy because it doesn't actually have that much of an impact on making homes more affordable, making vehicles more affordable?
9:43Travis Hoium:And it is sort of a tension because even if, let's say that mortgage rates do come down a percentage point, if we have fewer jobs, that means that there's going to be fewer people to actually take advantage of that. If we get to the point where mortgages are 3 % again, it's going to be because bad things are happening in the economy. You mentioned that short-term interest rates don't really have an impact on most consumer interest rates, and they don't. There's a few that they do, like your credit card interest rate is directly tied to the federal funds rate. But is the difference between 24.5 % and 24.25 % really going to make a big difference in your life?
10:17Probably not. Mortgage rates tend to track. The 10-year Treasury is a really good gauge for that. And you can't just wave a magic wand, even if the Fed were to cut rates to 1 % tomorrow like the President wants. That doesn't mean mortgage rates are going to drop by three percentage points. It would definitely tend to move in the same direction. There tends to be a little bit of a spread that widens and contracts between long-term and short-term interest rates, and they move in the same direction. But it's a lot tougher to predict or control where mortgage rates and auto loan rates are going. I'm sure all homeowners, including myself, would love for low interest rates to come back.
10:58But it's really not that simple. You're right.
11:01Lou Whiteman:Bottom line here is, as you say, long-term rates are more dictated by what traders are willing to pay for debt. And there is enough going on outside of the Federal Reserve from just all the questions of Fed independence to where we're going with trade, with the weak dollar, strong dollar. There's just so much going on right now. If nothing else, it's hard to predict, but if nothing else, I think we can say there likely won't be a proportionate drop in long-term rates. So, I do think anything the Fed does right now will have less of an impact on mortgages, on the real economy than we might hope.
11:38Lou Whiteman:And I think we just go into it with that in mind and the details will work themselves out.
11:43Travis Hoium:Definitely something we'll be covering throughout the end of the year. Next up, we are going to talk about the latest in artificial intelligence, some big funding rounds, and some big changes for Alphabet. You're listening to Motley Fool Money.
11:57Lou Whiteman:As a podcaster, my voice is heard by thousands of people. And now with Vanguard Investor Choice, I can be heard by the companies I invest in too. Vanguard Investor Choice makes it easy for eligible Vanguard fund investors to have a say in how their funds vote at company shareholder meetings. With just a few clicks, you can set your proxy voting preference and make your voice heard on topics like executive pay, board director elections, and more. Investor participation is the heartbeat of a healthy corporate governance ecosystem. You have a voice. Let it be heard. Visit vanguard.com slash investor choice to learn more.
12:35Lou Whiteman:Vanguard investors own shares of Vanguard index funds and those funds own shares of the companies they invest in. available for Vanguard index funds that participate in investor choice. Vanguard Marketing Corporation Distributor.
12:55Travis Hoium:Welcome back to Motley Fool Money. AI is arguably holding up the market right now, so we need to touch on the latest news in AI. OpenAI announced a deal to acquire StatSig, and BJ Raji is going to become their new CTO of applications. The turnover with their staff there seems a little bit crazy for how big of a company this is right now. But the other thing was that Anthropic raised$13 billion at a$183 billion valuation. Matt, what do you take from the week? Well, first of all, you said AI is arguably holding up the market. I don't know how arguable it is. It's clearly holding up the market, in my opinion.
13:32Travis Hoium:And maybe holding up the economy at this point, too, if you look at some of the numbers. Data centers is driving about half of the economic growth right now. Would the S &P have returned as much as it has over the past year without AI? Probably not. But valuations are getting lofty in a lot of cases, including the two you just mentioned. But it's not totally unjustified. Anthropic, for example, they announced they've reached a run rate of$5 billion of annualized revenue. That's a 5X since the start of the year. I don't know about you. I have some companies in my portfolio that trade for valuations north of 30-time sales like this, they haven't 5X their revenue this year.
14:13If they can keep growing like this, it's not entirely unjustified. Look at OpenAI. They're valued at half a trillion dollars in their latest stock sale. That's up from a$300 billion valuation in March. But with about$12 billion in annualized revenue now, they have a similar valuation as Anthropic and a lot of other tech stocks that are honestly putting up less exciting growth numbers. So yes, their valuations are a little bit lofty, but the numbers are backing them up a little bit.
14:46Travis Hoium:We've definitely seen a lot of revenue growth and the Anthropik numbers are really impressive, but I've got to ask how durable these businesses are, Lou. Anthropik in particular, 5xing your revenue in eight, nine months is incredibly impressive. But a lot of that is coming from companies like Cursor, who is a development tool. They're using AI models, paying those APIs. So basically, Anthropic is a B2B business. It's not a B2C business or business-to-consumer business like OpenAI, where millions of people are paying a subscription every single month. So the problem there potentially could be if a better model comes out, cursor and companies like that could just replace them.
15:29So how does that play into how you think
15:32Travis Hoium:about how durable these businesses and these valuations are? Because eventually these companies are going to come public.
15:38Lou Whiteman:Yeah. So durability, different temptation, I think too, is also what I wonder about if we're all going in the same direction, if we're all going towards these, smart, helpful AI models. What is going to make you pick one over the other? And does that lead to commoditization? Does that lead to all sorts of just issues with pricing? I don't know how durable they are because I don't know what's going to make one business stand out over time from the other. I do think that's why we've moved into the show me phase with the M &A we've seen with all with the talent wars we've seen. I think the next big challenge for these companies is what do you do with all of that spending you've done?
16:24Lou Whiteman:How do you create a product that not just is must have, but is must have versus all of the other products out there?
16:31Travis Hoium:And the company that all of these startups are going to have to deal with is Alphabet. And Alphabet got some pretty big news this week, not directly related to their AI business, although although they are talking about potentially including Gemini in iPhones in the next update there. So we'll hear more from Apple next week. We know that companies like Meta and even OpenAI are starting to use Google Cloud. So it seems like they're sort of rounding into shape and they now, we know, don't have to split off the Chrome business or Android. They also get to keep paying$20 billion a year to Apple to keep that distribution going in the Safari browser.
17:08Travis Hoium:So it seems like their distribution muscle continues to be really strong. Their models continue to get better. Lou, it seems like Alphabet had about as good a week as they possibly could. And they're really the company that all of these startups are going to have to deal with over the next decade or so.
17:26Lou Whiteman:Yeah, the bottom line is, you said it, the cash cow continues. For both Alphabet and Meta, the seemingly, and I'm being flip here, but the seemingly endless supply of new cash coming in from these core ad businesses. They're the key to all of their AI hopes. They're the reason why they're the ones to beat. Look, I think status quo, which is basically what we got out of this court, I think that works just fine for Alphabet. I think it's really interesting. The court sort of, I give the judge a lot of credit. It's possible, Travis, that the best remedy for this case was to just realize, okay, things are shifting.
18:02Lou Whiteman:And so, what was true in the past isn't as big of a deal it was. And that's sort of what the court did here.
Read the full transcript
18:08Travis Hoium:And Matt, the big winner may not have been Alphabet. Apple has got a pretty big stake in this case as well. Yeah, well, I mean, Alphabet pays Apple billions of dollars a year to keep Google as the default search engine on iPhone. We don't know the exact number, but it's somewhere around$20 billion. Yeah. And I mean, personally, I couldn't imagine a world where everyone doesn't use Google to find things on the internet. But that's really what was at stake in this case, is that other companies could outbid Google and things like that. So, it's a big deal for Apple as well. I mean, their stock was up roughly 5 % after the announcement of this news as well.
18:50So, yeah, it's not just Alphabet. It has other implications.
18:55Travis Hoium:It will be interesting to hear what Apple announces next week, they seem to be trying to figure out how they're going to deal with Siri going forward. That's their AI tool that we would probably see first, but they have not been able to build models that are effective. So are they going to use something from OpenAI? Are they going to be using something from Alphabet and just continue this relationship that they've had with Alphabet? There's a lot that they have to answer, but you're right. They may financially be the biggest beneficiary because they keep that money coming in. Ironically, Alphabet gets to sort of keep their monopoly status.
19:30Travis Hoium:That was what was at stake. But they still have to deal with competition from companies like OpenAI. So this will be something that continues to play out. But Alphabet seems to be in a pretty good spot. When we come back, I'm going to get a vibe check from Matt and Lou about where we're sitting, not only with the economy, but with some really important and interesting companies who reported earnings recently. You're listening to Motley Fool Money.
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20:37Travis Hoium:Welcome back to Motley Fool Money. This section, I want to get a vibe check on some of the stocks that have had some big moves and I want to get an idea what Matt and Lou think is going on. I'm going to have him rate these 1 to 10. We couldn't come up with a great term for good or bad vibes without sounding older than we actually are. So let's start with Lululemon. Lou, they had a pretty rough quarter in the most recent quarter. The vibes around Lulu seem pretty bad, but is there something structural going on with them specifically, or is this consumer taste changing? Is this a tariff story? What in the world is going on with Lululemon?
21:20Lou Whiteman:Here's my fear. Two things can be true. These can be great clothes, and they can also be too expensive for their market clothes. To what extent has competitors out there copied them at lower prices? And if they have, where is the growth story going to go from here? Lulu all but admitted they have troubles here when they sued Costco, basically saying the the cheaper alternatives that Costco were doing are really good. I wonder about this. This is a two or a three for me. It's a nope, not a dope, Travis, if we're going to really get into vibes. Look, it still can work as an investment, even if the growth story doesn't recover, but that would mean Lulu just turning into a mature retailer.
22:02Lou Whiteman:I don't know. I have real questions about this. Yeah, I agree with Lou. They have a product problem, not a tariff problem or a consumer spending problem. That's a harder fix. A tariff problem is temporary. A consumer spending problem is cyclical. A product problem needs leadership to really step it up. How do they fix that?
22:23Travis Hoium:I think it's easy to say, and I listened to their conference call. They seemed like they thought they maybe had some answers in some areas that they maybe weren't the biggest in, some cozy home clothing. That's not really what I think about them historically. But that's their answer. And it doesn't necessarily sit well with me listening to the call. And it certainly isn't sitting well with the market. Shares are down 17 % as we're recording right now. So, I get that it's a product problem, but is there a product answer? Well, I mean, one of the things is they haven't put out any new products for the most part lately.
22:59And that's one of the things they said is, our products are getting old and dated. So, going forward, new styles are going to make up a lot bigger mix of their products starting in the spring, they said. And, I mean, clearly, the market's not happy with that answer. But they believe the answer is to kind of really refresh what they're selling.
23:20Lou Whiteman:If the answer is, we're a lifestyle brand, a high-end brand, that scares me because that is so fleeting. Maybe it'll work, maybe it'll last for 10 years, or maybe something new comes along tomorrow. So, I hope there's a better answer than that.
23:33Travis Hoium:Well, it doesn't seem like Lululemon is the new cool thing these days. That was probably the story 15 years ago for them. Not necessarily today. Speaking of another company, the vibes have shifted. Nike, they actually haven't done as poorly as I thought over the last year. The stock is down 8%. But a lot of challenges for Nike during the pandemic, they kind of gave up on their wholesale relationships. They're trying to rebuild those. but you go to a store like a Dick's and you're going to see a lot of other competitors in there where Nike used to have shelf space. Matt, I want to start with you.
24:08Travis Hoium:What are the vibes around Nike right now? And is there anything they can do to improve them? Yeah, they can become cool again. And, and I, I mean, what I mean by that is like, just as an anecdotal example, my favorite football team is if you couldn't tell from all the decorations on the wall is the university to South Carolina Gamecocks. They just dropped their 15-year relationship with Under Armour in favor of Nike. It starts in 2026. Nike's doing a great job of getting back to brand awareness, getting back to being the cool brand. They announced this a month ago. Up until then, Nike was the brand that we used to wear 15 years ago.
24:47That's just one example. They're trying to get back to cool, and I think it's the right way to go.
24:53Lou Whiteman:Nike can get back, but they can't get back to where they were. I mean, they can be a relevant part of a big market. But the days where Sonny Vacario, to really date myself, guys, but can just go in and splash cash and you can dominate the market and you need millions of dollars to break through, those are over. Now, one good Instagram influencer can do as much damage to the competitors as it once took Nike a multi-million dollar ad campaign to do. The world is different. Nike can rebound and do deals like that South Carolina deal and become part of this market. But the idea of just that dominant brand that everybody had to have, no matter what you were doing, the way it felt in the 80s, that's gone forever.
25:35Lou Whiteman:So for Nike, it's, again, a mature retailer. They can gain from here, but it's never going to be, I don't think, the blockbuster growth story at once was.
25:45Travis Hoium:I want to bring another brand into this because one of the things that I think could be happening with both Lululemon and Nike is just shifts in what consumers are looking for. Both of these brands have been around for a very long time. Lululemon, definitely a younger brand than Nike. I'm not certain that Nike can spend their way into being cool again, as Matt said. Very possible. That was definitely what they did in the 80s and the 90s. But you look at one company that's bucking these sort of tough trends that both Lululemon and Nike have on holding or on running, ticker symbol is ONON, they had 38 % constant currency growth in the most recent quarter.
26:25Travis Hoium:They've got partnerships with runners that I've never necessarily heard of, but it has translated to, hey, we're this premium brand. We can charge$250 for a pair of shoes and people are paying it. They don't seem to be impacted by both the economic malaise that we may be entering. And they've said tariffs, hey, if there's tariffs, we're going to raise our prices. So, Lou, is this something where maybe this is an example of your fear with brands in general, is that it's kind of fleeting and it goes back and forth. And Lululemon and Nike are on the bad side of the vibes right now.
27:00Lou Whiteman:So I'll tell you, I'll go a step further on, because I have a distance runner, a competitive runner in the house. On, for all their deals with runners, their real success is, the running snobs want hokas, not Ons. Ons' success is the kind of, for lack of better, wannabe runners or the lifestyle, which is a much bigger audience than the hardcore runners. They are. They're the flavor of the month. They are one of these examples of a brand that can break through just like without a trillion-dollar marketing campaign the way we had to do in the 80s. And, Travis, to your point, it will last as long as it's going to last.
27:35Lou Whiteman:It'll last until something else comes out. And we'll see. As an investor, I'm not dying to jump in at these levels. May they long succeed, but history shows that these things don't last forever.
27:48Travis Hoium:Matt, final word on these brands. Are you betting on a comeback for legacy brands like Lululemon or Nike? Or is somebody else like On, like maybe Hoka, like maybe somebody else going to come in? I mean, Aloe is another brand that our local Lululemon store was replaced by Aloe. It just seems like there's more and more brands given the direct-to-consumer nature, and anybody can start up a brand and become really big really quickly. Yeah, I mean, Awn is, they are really cool, and they didn't have to pay for it, like you guys said. I mean, I do strength training classes at a local gym, and Awn are like, they're the weightlifting shoe of choice.
28:27I didn't even know weightlifting shoes were a thing. and Ones are dominating that market, just if you could walk in there. If I had to buy one of the three today, I would probably go with Nike. Like I say, I'm seeing it firsthand how they're getting back to their roots. And I don't know if they're going to recapture the 80s Air Jordan vibes again, but they're definitely heading in the right direction. And it's such a cheap stock at the current price that if I had to buy one, it would be Nike.
28:56Travis Hoium:I would love it if they split off that Jordan brand, because I think that would get a premium in the market that is still a very popular brand among the kids. That's staying power. Absolutely. That's maybe a better brand today for Nike than the Nike brand itself. Let's move to artificial intelligence. One of the things that I'm curious from you two is AI has been driving the market, but it seems like the story is changing over the past few months. And I want to start with a company that's been a little bit controversial. Came public not too long ago, but CoreWeave was one of the hottest companies in the market, now down over 50 % from its peak.
29:36Travis Hoium:Lou, is this just bad vibes? Is there something that's going on with CoreWeave's business in particular that we need to question? What are you taking from the huge moves in CoreWeave stock?
29:49Lou Whiteman:I'm kind of a bad one to ask because I was a skeptic from day one. So I'm sort of just going to talk my book here, but I don't understand how something that depreciates as quickly as these NVIDIA chips where, you know, NVIDIA is literally racing to make the current generation obsolete as fast as they can. I don't know.
30:07Travis Hoium:And they talked about that. I want to touch on that. Jensen Wong, in their recent conference call, talked about the incredibly high ROI from these new chips like Blackwell. What he didn't mention is the returns, these high returns that they say that they have are pretty fleeting because the price per token is dropping about 90 % per year right now.
30:29Lou Whiteman:Yeah, yeah. I just, I don't know what to make of the core weave business. I do think, and we'll maybe talk about this with another one too, a lot of the stock movement is there's so much pent up demand for IPOs right now. And there are so many companies that we became familiar with because they stayed private for so long. I do think that that's just euphoria fading to business reality. So I don't really want to make too much of like CoreWeave is doomed because of the decline. I think if anything, it was just the artificial euphoria that was incorrect. But I don't consider this a buying opportunity in CoreWeave 2 because I just worry about just the core business and how those chips age.
31:09It's a capital-intensive business that's growing. it's tripled its revenue year over year. But at the same time, it's also tripled its cost of revenue. It's more than tripled its marketing expenses and things like that. So, it's going to be a very sensitive stock to profitability and whether it can keep that growth rate alive. It's a highly capital-intensive business that's going to get more capital-intensive over time, I believe. I'm staying on the sidelines with this one. And it's a really interesting business for sure, but not for me.
31:48Travis Hoium:Lou, you mentioned an IPO that we wanted to talk about. That is Figma. Figma just absolutely skyrocketed when the IPO, this is a little over a month ago now is all. I believe the IPO price that people could get pre-market was$33 per share, skyrocketed to over$120 per share. We're now down to 52 as we're recording, so more than a 50 % drop in shares. Is this just the IPO ups and downs and the vibes, if you will, of traders trying to get in early and then figuring out that the day trade just didn't quite work? Or what's going on here? Because it seems like this is a theme amongst these once hot companies that they're just kind of falling and the business hasn't changed in the past month.
32:34Lou Whiteman:Right.
32:34Travis Hoium:Right.
32:34Lou Whiteman:I mean, let's just blame this on Adobe, because we all knew Figma's name because Adobe tried to buy them. And I do think that, I mean, I'm being sarcastic here, but there is just that sort of like pent-up demand for unicorns. Again, for these big companies that we felt there was FOMO that we couldn't get, and then finally you can get it. Look, Figma, I'm worried about Figma in a way, because Figma, I think, is caught in a weird place between they aren't Adobe, They don't have all those corporate accounts paying. So, I think on the high end, it's hard to grow into that. You really have to have a better product to replace Adobe.
33:09Lou Whiteman:And on the bottom end, AI is making everything free. So, I think it's an awkward middle. The nice thing about it is, this is a company that is, they want optionality. They own Bitcoin. They said they're going to try different things. So, there's a lot of ways it could go and work out. But I don't know if that core business right now, given the competitive challenges, is anything to get too excited about, if I'm honest. 26 times sales even after this move, it's an expensive stock. It's growing really fast. I think it was 41 % growth year over year in the quarter. Still strong, but it was priced really for perfection right after the IPO.
33:51Now, it's starting to trade in line with the IPO price. It's gravitating in that direction. And I mean, they price IPOs like they do for a reason. And maybe in Figma's case, that was the correct price.
34:06Travis Hoium:Yeah, as I'm looking right now,$25 billion market cap, their buyout from Adobe was supposed to be$20 billion. So kind of going sideways over the past four or five years for Adobe. When we come back, we're going to touch on Elon Musk's potential trillion-dollar pay package and get to Stocks on our Radar. You're listening to Motley Fool Money.
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36:10Travis Hoium:Welcome back to Motley Fool Money. As always, people on the program may have interests in the stocks they talk about and The Motley Fool may have formal recommendations for or against, so don't buy stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Of course, Elon Musk made his way into the news this week as if he doesn't have enough money or motivation to grow Tesla.
36:42Travis Hoium:The board of directors is looking at a potentially trillion dollar pay package. Lou, what do you think when you saw this?
36:49Lou Whiteman:So look, you know, at first glance, it's ridiculous, right? A trillion dollars. So why aren't shareholders outraged? They're not outraged because for a while now, a bet on Tesla is a bet on Elon Musk. So keeping Elon in happy matters. I like that these milestones, there's actual, you know, it's performance. They have to get the robots out there, they have to have robo-taxes out there. It's ridiculous, sure, but if Elon does grow Tesla to an$8.5 trillion market cap, investors will do just fine on the deal. So, hey, why not? Yeah. And it's based on 12 different milestones that are each a combination of hitting a market cap goal and hitting an operational milestone like Lou mentioned.
37:31They're not all stock-related. I mean, the most ambitious of them, I would say, is the$400 billion of annual adjusted EBITDA. That's a lofty goal. If he can hit that target, I think an$8.5 trillion valuation is not that unreasonable. If I'm a Tesla shareholder, I'm happy if I don't really care what they're paying Elon if my investment 8X is. It's crazy.
37:59Travis Hoium:We talk about CEO pay and how much they're making with every other company except Tesla, then it seems like Elon Musk can just squeeze more out of a company that he already has a huge, huge stake in. But that is the way things work with Tesla. Let's get to stocks on our radar. Lou, what are you bringing today?
38:17Lou Whiteman:All right. I'm looking at a company called Redwire, ticker RDW. Travis, I've been pretty skeptical about this new generation of space companies that all came public via the SPAC boom. Redwire was one of them, and neither the stock nor the business has done much for a while. But Redwire, I think, is evolving into something that could be intriguing. They're planning to do for space what a company I really like, Transdime, has done for aerospace, which is to use M &A to collect high-margin proprietary or patented components and make money selling them. They did a deal in May to acquire something called Edge Autonomy and expands them into drones.
38:52Lou Whiteman:It's the first of what I think is many moves to build out the portfolio. Look, there's a ton of risk here, and I'm not sure the current valuation accounts for that risk. So this is only a radar stock for me right now, but I really liked the management team. I really liked the idea. So it's one I'm watching closely.
39:08Travis Hoium:Dan, what do you think about red wire? When I think about red wire, I think about the old trope of diffusing a bomb, right? Cutting the red wire, which as far as aerospace goes that, you know, it kind of implies explosions. So maybe not
39:23Lou Whiteman:the best thing to think about when you think of red wire. Well, let's not cut this because I don't need a bomb on my hands, Dan. Matt, what are you looking at? Well, now that retail earnings are mostly done, we've got a bunch of bargains. But Target is a company in particular that I'm looking at right now. They're down big after, honestly, a so-so quarter and really an unexpected leadership change. They're taking some steps to get back on track. It's a roughly 5 % yielding dividend stock right now. The dividend's well covered by its profits. It trades for a PE of about 11 right now. So even if its earnings get hit a little bit in this restructuring process, it's still fairly valued.
40:02Of course, there is the risk that Target becomes the next Kmart, which no one wants. But the company does have a strong history of differentiating itself from Walmart and the others and coexisting. And I'm confident in the turnaround.
40:14Travis Hoium:Dan, what do you think of Target? You know, Target, listen, gang, I don't like shopping. I have a limited time on this earth and I don't want to spend it in a store. And so for me, Target is completely vestigial, totally useless. As long as something like Amazon exists and I need cheap crap, I can just go there instead of Target. So, Matt, I don't know. I don't know if Target's ever going on my watch list.
40:38Lou Whiteman:Can Target just open their self-checkout lanes? Every time I go in there, they're closed. What's the point of putting them in? Anyway.
40:48Travis Hoium:You've got to live closer to Target headquarters where I'm at. They apparently run the stores a little bit more efficiently. Dan, you don't want to get your groceries delivered from Target like we do? No, no. I go to the grocery store. I'm fine with that. But yeah, like I said, I don't think Target's ever making it. So explosions or no, we're going to go Redwire today. We'll see what happens. All right. Lou takes this one with Redwire. Interesting story. And you've got some history with some companies with a pretty similar business model. So I got to check that one out too. for Lou Whiteman, Matt Frankel, our engineer, Dan Boyd, and the entire Motley Fool team.
41:27Travis Hoium:I am Travis Hoyam. Thanks for listening to Motley Fool Money. We'll see you here tomorrow.
From the publisher
The crew discusses another disappointing jobs report, the week in artificial intelligence, and a vibe check on some of the most talked about names on the market.
Travis Hoium, Lou Whiteman, and Matt Frankel discuss:
- This week’s jobs data
- Anthropic’s funding
- Google antitrust win
- Elon Musk’s potential trillion dollar payday
Companies discussed: Tesla (TSLA), Alphabet (GOOG), Lululemon (LULU), Nike (NKE), On Holding (ONON), Figma (FIG), Coreweave (CRWV).
Host: Travis Hoium
Guests: Lou Whiteman, Matt Frankel
Engineer: Dan Boyd
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