Media Merger Mania Strikes Again

18:26Lou Whiteman:So, the gap isn't going to close as quick as maybe it would if Adobe was standing still. I worry more about Figma here than Adobe, Travis, if I'm honest, because look, the professional class knows what they know and they've been using one thing for decades. You have to be significantly better or significantly cheaper, so less profitable to take that away. But if free and cheap is taking the casual user, does AI cannibalize Figma's attempt to be sort of the disruptor here more than it cannibalizes the incumbent?

19:04Travis Hoium:And would Canva be the other name to add into that?

19:06Lou Whiteman:Yeah, yeah. There's a lot of names. There's a lot of names that will do this on kind of the low end. Yep. And if the low end is where the crowd is, then that makes life harder for disrupt. Not impossible, but it makes it harder for the disruptor because disruptors usually go from bottom up.

19:23Travis Hoium:When we come back, I am going to ask Rick and Lou to rank some baskets of stocks in some interesting categories, media, autonomous vehicles, and restaurants. You're listening to Motley Fool Money. Green shirt, new shoes, and I don't know where I am.

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20:18Travis Hoium:Welcome back to Motley Fool Money. Today, we are going to have Rick and Lou rank their top stocks in a few different sectors. We've already talked a little bit about media, so I do want to start there. And I'm going to give you five stocks. I want you to rank them one through five. I'm going to have Lou go first here. And then we'll see if we like his rankings before we get to Rick. So Lou, in the media space, I would like you to rank one through five. Netflix, Disney, Warner Brothers Discovery, Comcast, and Fox. And here's the information you need to know. This isn't just do I like the business, do I like the product, but also the valuation matters here.

20:58Travis Hoium:So this is do I like the stock?

21:01Lou Whiteman:Where are you at? So Disney is probably first with the valuation, but Disney and Netflix are - Surprise winner. Well, these are the top tiers. I probably feel more, if this was who's definitely just going to make it, I'd probably go with Netflix. But I do think Disney is close enough, and I do get a little better value. But those two are in the elite category here. After that, it's a mess to me. I might take WBD today just because, or I don't know, I would have taken it two days ago before this announcement, but at least there is maybe an outcome here. Fox is just a mess. I don't know what to say.

21:39Lou Whiteman:Comcast is there because they do have all of the non-streaming revenue. I worry about that revenue. I mean, the cable is declining. Even streaming, the broadband, it's not the growth opportunity, or it's not the salvation we thought it was. I would largely rank these as three I worry about and two I don't, and then the rest is detail. But I'm probably WBD just for outcome, then Comcast, then Fox going down.

22:08Travis Hoium:Just to put some numbers on those valuations, Disney's price earnings multiple on a trailing basis is 18, Netflix's 53. So that's why evaluation matters here. Rick, what's your order? Yeah, so I'm saying valuation doesn't matter. Obviously, I'm going number one will be Netflix. To me, they are the leader, and I don't mind overpaying for Netflix. People overpay for Netflix all the time, and I mean the stock, not the service, and they wind up being rewarded. So Netflix is my number one. Two is Disney is my favorite company, but in media, it'd be my second favorite stock. Obviously, they have a lot of things going well for them, and it's a varied empire.

22:45But growth has been really slow for Disney the past couple of years, so it's been a very lackluster stock over the past few years.

22:51Travis Hoium:ESPN can turn that around, or is that just going to be sort of hidden in the background, in the sports numbers, the way that they're reporting things? Because I've now used their streaming app. I think it's one of the more compelling new apps. They've got some bugs. I'd like to do some add-ons of NFL Plus. Can't figure out how to get that to work, but they'll figure that stuff out. But does that end up becoming a growth driver, especially as they start to bundle these services together, or is it kind of more of a nothing burger? I hope it's not a nothing burger, But even if it wasn't, it'll be found money if it works out.

23:24Because this is a segment that like a year or two years ago, the narrative was, okay, Disney, just spin off ESPN. Get rid of it. Programming costs are so high. We know ESPN is a great brand, but just the cost structure will never work for sports programming, despite the fact that it's the one thing that people demand to see live. But I think it'll be fine as far as whether it happens or not. I don't think it's being valued into the stock right now. In fact, I assume that ESPN is just accounted for, yeah, it'll be more of the same, whereas this whole ESPN$30 a month unlimited plan may start to turn heads.

23:58All right.

23:59Travis Hoium:Word about those bottom three. That's where things really get dicey. Yeah. So, Lou seemed to lump them all as the three worst ones before sort of just ranking them at the end. I'm a little more bold. Yeah. I'll go out. I'll say Comcast is number three. And I know. I know all the bad things about Comcast. I know that we've known that cable cord cutting has been happening for several years now, more than a decade since we had peak cable. But now, surprisingly, we're seeing connectivity. So, Brian, Van, you're wondering, where are these people going? And it's obviously some of the 5G, wireless, and all these companies are doing other products.

24:32We still need to connect it. Yeah, fiber. They're not doing it necessarily through Comcast, so that's sort of taking a hit. But it's still a cash cow business, these two. And I'll be honest, as a theme park enthusiast, I've been to the Epic Universe that opened in Florida. I've been there six times, six individual visits since it opened. It opened in May, but I went there in April for a preview and then a couple days, several times this summer. And I think that overall it's doing fine. And more importantly, the reason I like Comcast as a stock, and you said the stock, not the business, it is selling at probably the lowest earnings multiple of these five companies, has a dividend of 4%.

25:04So you're being patient while this company sorts itself out. And to be honest, I just caught the first episode of The Paper, which is The Office Creator Show, streaming on Peacocks. And I'm going to keep watching. It's not bad. And Warner Brothers and Discovery and Fox, I started having the same, like, Lou, forget about these companies. Obviously, with WBD, you have the fact that it did pop already. So there's sort of like this appeal that maybe it does get bought out at a good price, and there's that kind of appreciation. So there's speculative appeal to it. But once that goes, there's obviously a lot of downside, too, if it doesn't happen.

25:34So I'll put Warner Brothers fourth and Fox fifth.

25:40Travis Hoium:Comcast trading for 5.6 price earnings multiple, even on a forward basis. It's under eight. That does not include the around$90 billion worth of debt or net debt that they have. So that's a pretty big number as well. But yeah, that is interesting value play. Let's move on to more of a growth segment or a certain growth segment, autonomous vehicles. And there's a lot of things going on here. But, you know, Lou, in your neck of the woods in the Atlanta area, Waymo is now operational and Lyft launched May Mobility earlier this week. So these are proliferating. I've seen a May Mobility vehicle in the Minneapolis area.

26:16Travis Hoium:So it seems like these vehicles are coming faster than a lot of people thought just a few years ago. Some of them still have safety drivers, but a few of them don't. So here are your five stocks that I want to know how you think they're going to perform in the future. Tesla Rivian. There's an AI autonomous vehicle story there. They have the full stack in house. They're going to be level two, but you know, visions of going to level three, level four, Uber, a little bit of a different play mobile eye, which is a company that's going to be selling chips and technology to other automakers. And then we ride Rick, I'm going to start with you.

26:52Yes.

26:53Travis Hoium:How do you rank these five companies? Yeah. So I'm going to say, so again, we're, we're judging the stocks, not the companies. Right. Yeah. Right. That's what makes this tough because Tesla is valued very differently than a lot of these other companies. Yeah. So, I mean, Tesla would be, well, yeah, it's, it's a great company. I I'm happy with my Tesla, my second Tesla. Uh, I mean, I traded my Tesla for Tesla last year, so I'm clearly happy with the experience, but as far as a stock goes, I'm going to start with Uber at number one. To me, this is a company that, uh, you thought that, okay, the pandemic, okay, this is when it's going to thrive.

27:23But then post pandemic, you figure, Hey, we're going to go back and we're going to start eating at restaurants again. We're going to go say, why are we going to be paying someone and tip someone to have food brought here or groceries when we can go get it ourselves? But sure enough, that business is still growing heavy free cash flow out of this company. So definitely Uber would be number one on my list. For number two, I will go Tesla. Again, the valuation frightens me. I'm afraid of what's going to happen after September when those$7 ,500 tax credits go by because the Model Y and the Model 3 are the cars that fall under that category.

27:55They're their best sellers by far in volume and everything else.

27:58Travis Hoium:And volume was down before those subsidy cuts, so that could be tougher. Yes, yes. No, growth has been slow even to come with. I think this last quarter, this third quarter that we're in right now, is going to be that last great quarter for them as far as that goes, because that's what I was going to be buying before to get that last$7 ,500 check, those that qualify. But again, I'm sort of concerned about the valuation and everything. Number three, I'm going to go with MobileLib, because I always think of picking shovels play matters, And there's no denying that the whole move towards autonomous driving has to be technology-driven.

28:29And you have to have a company like Mobileye getting in there and getting the chips and the hardware in there. So I'm all for that. And number four, between Rivian and WeRide. So I'm not a big fan of Rivian. And I know there's a lot of fools that love Rivian. I'm going to just make it number four for this sake. But again, I do think that it needs to go mass market the way that we saw with Tesla. The Model S, the Roadster, the X, they were great cars, but it wasn't until they had that breakthrough with the Y and the 3 that the company really hit that kind of scale. I don't know if Rivian can do that without sacrificing the brand that it has.

29:05And number five, I'll put where we ride last, and it's also probably the one that may wind up being, it's either going to be the best or the worst stock of these five. Yeah, very binary outcome. Yeah, very binary outcome. Again, Chinese autonomous driving, trying to get from level two to level four, doing all these things. And there's so many companies working on this right now. And I hope they succeed because who wouldn't want cars that are safer on the road and that we can actually just relax while we drive. But I don't know if, as far as investment goes, it may be too early to pick a winner.

29:33And it may even earlier to assume that WeRide will be the winner. All right, Lou, where are you at?

29:37Lou Whiteman:Yeah, I mean, I'm somewhat similar for slightly different reasons. I'm Uber first, too. And the reason is slightly different. I think if autonomous driving, if we figure it out, it sort of becomes commoditized, at least. And so, who controls the customer matters more than, I think, the tech. And they are in such a great position with that, with just their roster of customers. So, I really like them. I think they're about middle on the valuation of these five, too. So, you're not getting a bad valuation. Beyond that, I know you said, Travis, focus on valuation. But look, there are a couple of these companies, I don't even know if they're going to make it.

30:12Lou Whiteman:So it's hard to get too caught up in valuation in that. I'm at Mobileye second because valuation, and I do think, again, I've never liked automakers, but I've done real well with the right auto suppliers. And I think this couldn't be the right auto supplier. I don't love the valuation I get, so I'm not eager to add here. But I think it's a solid company and a winner. Tesla's third for me. Tesla I don't know what to think of what they're doing with robotaxis I don't think what to do with their automotive I think they'll figure it out but you also have optionality elsewhere there which as an investor I like you know energy solar all of that you want an optimist robot I know what you're really saying here I love dancing robots who does not like dancing robots okay at the bottom end, I think, yeah, I struggle.

31:03Lou Whiteman:Rivian, I don't see, especially since we're judging on autonomous, I'm less, you know, they feel like an afterthought there for me a little.

31:14Travis Hoium:They've come in really with an autonomous story that a lot of people have bought, but it does seem a little bit like Fox getting into streaming in 2025. It's like, if you were going to do this, you should have done it when you went public three or four years ago.

31:27Lou Whiteman:They are still mostly a hardware story, and that is their vehicles. But look, WeRide, like you said, it's just all over the place. WeRide is everywhere doing everything. I mean, look, hardware sales, subscription sales, service revenue. So in a way, wow, look at that diversification. But in an unregulated, soon-to-be regulated, there's also just risk all over the place. You throw in the wild card of the Chinese. Chinese. I just, I can't get my head around that one. So it's, it's last for me just almost on the too hard, who knows? I can't say.

32:03Travis Hoium:It's interesting how the narrative have changed, has changed over the past six months to a year. I don't think a year ago we would have thought Uber was going to be a leading autonomous vehicle company, but I think you're right, Lou, and you guys are both heading in the same direction that it seems like there's so many players here that this is going to kind of commoditize itself one way or another. Quickly, I want to get to your thoughts on restaurants. Rick, you may be our restaurant expert in this group, but I wanted to get a feel for where do you rank Chipotle, Darden, Cava, Portillo's, and Wingstop?

32:36Travis Hoium:Because there's a lot going on here. We've talked about this on a number of shows. People may be sitting down more, maybe eating out a little bit less. There's growth in certain stocks. It's negative same-store sales in other stocks, but where do you have these ranked? Yeah. So number one, I'm going to go with Kava with the caveat that we're talking about the stock and that the stock has taken a big hit in recent months. So this is not Kava from high flying where it was several months ago. It's fallen substantially. Comps were up just 2 % in its latest quarter, which is not very impressive, but better than most of the other chains that went negative.

33:09Number two, I would say Chipotle, one of the companies that did post negative comps. It's hard to go bet against Chipotle. And right now you have a chance to actually bet on Chipotle while it's out of favor. And just as we saw several years ago when they had the foodborne illness outbreak, it's not a bad time to bet on a company when everyone's assuming that their time is up and they're on their third CEO or whatever. So Chipotle, number two. Third, I would go with Wingstop here. Wingstop also had a very rough quarter, but the stock moved up. and you are seeing some signs where this is the company that was so golden coming out of the pandemic that it was able to just have positive comps, even in the actual quarter when people had sheltered places, had strong takeoff business and strong digital sales.

33:52They were built for this. And then for fourth and fifth, I'm going to go with Portillo's fourth. And again, it is very speculative. I'm a fan of their hot Italian beef. I'm a fan of their chocolate cake shake. And it has a lot of room to grow. It has more upside than all the ovens. And Darden, even though I put them last, they actually work on a different fiscal year. Their fiscal year ended in May, so we don't know what happened in the summer quarter where a lot of companies seem to have stumbled. They did post positive comps at Olive Garden and Longhorn Steakhouse. So, that's it. That's my one, two, three, five.

34:20Lou Whiteman:So, as a consumer, I'm going to Cava nine out of 10 times. But Rick, we're supposed to do valuation. Even with the declines, it is still by far an enterprise value to EBITDA. It is still up there. I struggle here. Look, here's what I'm got to say on this, I'm actually going the exact opposite. I'm going Darden tops because Wall Street, if I'm an investor, Wall Street pays for growth. And I wonder if fast casual, it's a category that didn't really even exist when we were kids guys and has just come up and become a wonderful thing. But I'm wondering if it has just become saturated and reached its natural limits.

34:56Lou Whiteman:And I don't know. I'm just not sure if any of these guys will really be able to post substantial growth. I think we're just doing as much fast casual maybe as we want to. Darden, tried and true, there's still, even in this economy where maybe the fast casual is falling off, but you still go out to celebrate a night or do that. I think slow and steady is the play here. It's also, I think, the second best valuation among these guys. The rest of them, I mean, throw a stone. I think they can all be market beaters, but I wonder about all of their growth. I probably, maybe Chipotle 2nd, Cava, and then Portobello and Wingstop, but I'd really, really struggle with that.

35:42Lou Whiteman:Darden's to stand out for me here, and for weird reasons. So, you didn't put this on there, Travis. No one's going to put Brinker International on it, But Chili's is the one chain that has posted monster comps. And if you pull up a stock chart on Brinker International, the ticker symbol EAT, great ticker symbol, has been a monster stock. And it's, again, I don't know what they've done at Chili's. I've gone to Chili's. I go to Chili's once every couple of months. So, I mean, I haven't noticed a turnaround. But something has happened there, magical, over the last two years where they've had strong comps on top of strong comps.

36:16And it's working out great for them. But yeah, very much like the Darden story of an old brand that you don't necessarily trust. But hey, not to count on being a growth stock, but definitely an interesting company.

36:26Travis Hoium:And maybe the one to play them all is Uber. When we come back, we are going to get to Stocks on Our Radar. You're listening to Motley Fool Money.

36:54Lou 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.

37:33Lou 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.

37:49Travis Hoium: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 The Motley Fool's 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. We like to end the show with stocks on our radar. We're going to have Dan Boyd behind the glass. Give his thoughts and see what is going to end up on his radar.

38:21Travis Hoium:Rick, I'm going to have you go first. What's on your radar this week? Yeah, I'm going to go with Celsius, C-E-L-H, ticker symbol. This is the company behind the sparkling beverage, namesake beverages. It has thermogenesis and all these cool things. The stock had taken a beating from late last year to early this year, to the beginning of this year. And then it made an Alani new acquisition, which basically transformed everything starting in April. Their last quarter was amazing growth for a company that posted negative growth on the Celsius side. And actually, even the Celsius brand had a positive turnaround.

38:49But the company's doing well. PepsiCo got so excited that they own a piece of the company. They own a bigger piece of the company now just because they want to get in on that Alani new distribution, not just Celsius. So good times for Celsius Holdings.

39:01Travis Hoium:Dan, what do you think about Celsius Holdings? I just happen to have one sitting next to me right now. I've never had one of these things. I know that they're popular. I assume they're good. Rick, you got a favorite flavor? So I got into the Alani Nu stuff, and I know it's actually targeted to women, but to me, I enjoy the cherry smash. I think that's what it's called, cherry slush flavor of the Alani Lu. I always enjoyed the orange vibe of Celsius, if you guys are for that brand. Lu, what's on your radar this week?

39:29Lou Whiteman:Yeah, it's just carbonated tang, you guys. Come on. But look, I'm bringing Truist Financial, ticker TFC. Truist is just a poorly named product of a 2019 merger between BB &T and SunTrust. And on paper, this is a powerful banking franchise with a presence throughout the Mid-Atlantic and Southeast. But look, the integration didn't go well. The stock has underperformed. I'm seeing signs of life, though. Truist is going on the offensive, announcing plans to open 100 new branches in high-growth areas. They made a lot of loans during the zero-interest rate times. Those are maturing, which provides an opportunity for repricing and improved profitability.

40:04Lou Whiteman:Right now, you can buy the shares at a discount to the company's book value and get a 4.6 dividend yield to boot. It looks intriguing to me, Dan, for a company I think that's on the upswing.

40:16Travis Hoium:Truist may be a good energy drink name, but it's a bank. So what do you think, Dan? Yeah, the name still stinks. So I think I'm going to have to go with Celsius this time around. They have really made a big turnaround in investors' eyes over just the past few months. So I'm watching that one as well. for Lou Whiteman, Rick Minyarez, and our production leader, Dan Boyd, the entire Motley Fool team. I am Travis Hoyam. Thank you for listening to Motley Fool Money. We'll see you here tomorrow.