In this episode of the [[[Poddcast] MarketFoolery moderator Chris Hill chats with Million Dollar Portfolio 's Jason Moser and Stock Advisor Canada & # 39; s Taylor Muckerman on the biggest stories of the market.
Tesla (NASDAQ: TSLA) is in the midst of a string of bad days, and while this serious decline in its stock price could be a buying opportunity, the company still has some big risks to tackle. Under Armor (NYSE: UA) (NYSE: UAA) has reported a data breach affecting 1
A full transcript follows the video.
This video was taken on April 2, 2018.
Chris Hill: Okay, we're back. Let's start the show. It is Monday, the 2nd of April. Welcome to MarketFoolery ! I am Chris Hill. Entry into the studio, by Stock Advisor Canada Taylor Muckerman, and Million Dollar Portfolio Jason Moser. Happy April!
Jason Moser: Hey now!
Taylor Muckerman: We stretch here. April Fools Part Deux
Moser: What is it now, April 2nd, right?
Hill: Exactly. For those who have not taken the time to go to nil.com, you can do that and watch the Sunday April Fools joke from the editor. But as I said, we are back. Taylor, were you here last week? Jason and I were gone, though not together.
Moser: There's nothing wrong with that.
Hill: There's nothing wrong with that.
Muckerman: Yes, I was here. I went to Virginia Beach at Easter, but I was in the office last week. Hold it down.
Hill: Okay. Something happened while we were away.
Muckerman: Just a little bit.
Hill: We'll look at a few of these things. Let's start with Tesla, because, wow! Last week, Tesla shares fell by about 20%. I would like to say that it was only one thing. I'm sure Tesla wishes it was just one thing. But they are currently dealing with several problems. I think the chronologically last is the recall of 123,000 Model S cars, which is recalling about possible power steering problems. Separately, Tesla is working with the National Transportation Safety Board, which has released a report on the fatal accident involving the X-vehicle model. The NTSB is investigating. And that does not even mention their debt problems.
Hill: Look, this is a company that has long been on tear. And the stock has been in tears for a long time. But …
Muckerman: At least the CEO still enjoys joking. He does not worry too much.
Moser: I feel like we could do the whole podcast just for that, and if we include everything else – let's be clear, I have an hour, one and a half hours required show today. There are a lot of things to come to, so we come to her.
Hill: So, if you were to rank the problems in relation to the affairs of Tesla, what is No. 1 on the list
Muckerman: Personally looming debt. I would set the NTSB pretty low, along with Elon Musk's joke about Tesla's April Fool's bankruptcy. Probably the looming debt problem, because you need a high stock price for some of the convertible bonds they will come next year. I think by November of next year, $ 1.8 billion will be due. So, the cash burn plus this debt term. And now you've lowered the quality of their debt by six levels from Moody's to junk status, so you might look at much higher interest rates and maybe a little less interest if they have to try to get to refinance, you are in debt to pay off the threat of debt. It could be a big problem for this company, with $ 3.5 billion in cash.
Moser: It's hard to prioritize because you're right, they face many challenges. I think the biggest thing that can be thought of, at least in the short term, is that the market will value this company a little more like a real car company. I mean, at least for a while. I think that's really a good thing. I think I was very close to loving what Elon Musk stands for, what he does. I do not own any Tesla shares, I do not know that I would ever do that, though maybe this sell-out could offer a chance. Because in the near future this is at least a car company. Today it's a car company, across the street it's an energy company and a battery maker and all that stuff. But first of all, these people are cars.
So, yes, April Fool's jokes aside, I think Taylor is right, I think the debt is at least something that investors need to consider. They have no operating income and they have significant interest payments to make every year. This stock is based on no fundamentals. What I mean by that is unprofitable. They can not sit there and say that they have a P / E because they have no actual E. So, many worries. I think investors should at least ask if this is actually an opportunity to record a very long-standing history of short-term weakness. I think it could possibly be.
Hill: And I agree, Taylor, as far as the biggest issues they're dealing with, the NTSB report is probably the lowest on the list. That does not mean that they are not confronted with it. Of course, every automaker has to deal with regulators. But if you only think about who is vying for Elon Musk's attention, you have regulators, you have customers, and I only speak for myself, as someone who has received various callback messages from various vehicles I have had over the years sometimes, I'll get a callback notification and I'm just like, OK, that's a little problem, I'm not going in.
Muckerman: Yes, like your sun visor or something like that.
Hill: Yes. It's not worth doing that to fix the sun visor. This is not the sun visor with Tesla. But not every customer will deal with the recall. But they have customers, they have creditors knocking on their door because of the debt. And that, to me, is a kind of confluence of all these groups, competing for their attention and time, which makes it particularly problematic at the moment.
Moser: I think the simplest solution in the short term It is very likely that they will eventually spend a share here. This will be an easy way to earn some money. We do not really avoid companies that buy stocks when their stocks are high, never really. That's actually a good way to do that, assuming you have a market for the issue of these stocks. I think in Tesla's case, they probably will.
Yes, I mean, remember callbacks. Every automaker deals with it. The only reason Tesla might get a bit more attention is that today they have a much smaller user base and we are entering this phase when automated cars are becoming more and more of a concern accident, the self-propelled device has been activated. And again I think self-driving cars, the technology is there and everything is fine. I think it's much farther outside than people thought, not just because of the car's technology, but also because of the infrastructure, the roads here, you just need more to actually be able to work. But on many fronts they definitely have a lot of challenges.
Muckerman: I think if Elon Musk was more behind the scenes of a CEO, without SpaceX and a boring company on and selling flame guns, maybe the company would not be so in the limelight. And that could have hurt the stock before. Maybe it would not have gone up that high. But I think it also hurts the company, if not necessarily small problems appear, but some problems arise, because everyone wants to bring Tesla in the headlines.
Moser: Yes, you live and die with it. Elon Musk must be the greatest fundraiser in human history, the man can muster phenomenal amounts of money. And he has a knack for timing, tweaking something at just the right time and lighting up just in time. And it really does generate a positive buzz, and in many cases it depends on the company.
Muckerman: For sure.
Moser: And the flip side is when that starts to work against you, it's going to be really hard to do it, and I think we're just looking at it
Muckerman: All in Same Week
Hill: Let's move on to Under Armor. Parted a little bit off. Under Armor has reported a data breach affecting 150 million MyFitnessPal app accounts. This is not a great name, MyFitnessPal. Anyway, what do you think, Jason? I've seen this story and all the problems Under Armor has had over the last two years, some of which are self-inflicted, just shrugged. You said that the payment card information in the violation was not affected. So I sort of looked at it and I thought OK, no one wants a data breach, but I do not consider that particularly bad for them.
Muckerman: Oh no, you got my junk email address! What should I do?
Hill: My junk email address or my step count, how many steps I take on average in a given week. I dont know.
Moser: There are a few things that I take from it at first. # 1 because they knew about it a little earlier than when they published it, and then they released it after market closing on a long holiday weekend, I mean, yes, that looks pretty weak.
Muckerman: PR 101. [laughs]
Moser: Yes, it's shit.
Hill: You are not the first company to pull this lever and they will not be the last. 19659002] Moser:And that is exactly what many other companies are doing out there. Well, I'm not saying that's right or wrong, I'm just saying, maybe there's a way to differentiate. So I would have liked to see that they came out a little earlier with it.
You're right, that's the kind of privacy breach I feel in, is it really important to me if you have my calorie count? I just do not do it. My e-mail addresses? None of this is really important. In a password world where we rely more on your fingerprint today, I mean, we're talking about data breaches, it's, as John Bender said, screws are constantly falling out, the world is an imperfect place. And I think we'll keep seeing this stuff over time. Under Armor makes it easy to put it in the limelight and make fun of it. Is that something that somehow affects this business? Absolutely, 100% no.
Muckerman: But there were three times as many users as the Facebook data scandal! It's so much bigger!
Moser: [laughs] I know.
Hill: We used to talk, Jason, you mentioned something that Under Armor is remarkable in my opinion, if only because of that. Be the best silver lining they have now as a business, the brand is. For all the problems that Under Armor has to deal with, they still have a good brand.
Moser: Yeah, I'll tell you that we were traveling last week, we were at some airports and outside the country for a little while, this brand is still everywhere. I would say today that Under Armor alone, a brand equity loan, is worth more than the company's market capitalization.
Muckerman: Last year, we see 43% revenue growth outside North America
Moser: Yes. I really feel that this is a stock in which, in a year or two, provided that Plank's leadership team is still there, that stock will be worth much more than it does today.
Hill: That's not the thing, or maybe not the thing, but one of the big things you can see with Under Armor this year, just this calendar year, is the management team? We've talked about this before, Kevin Plank, for all his strengths as an entrepreneur, he seems to have a hard time keeping a leadership team.
Moser: This is one of our three main points that we at MDP see under Armor, and personally with my involvement. I have to make sure that leadership is there. Plank is one thing, but he needs a team.
Hill: Tim Cook on the news recently, and I have to say, I like this version of Tim Cook. Not that I do not like the other versions of Tim Cook, but this is Tim Cook, who sits down to do an interview for the updated iPad, it has a lower price for schools, and in the interview he ends up having a bit Cast shadows on both Facebook and Amazon. In the case of Facebook, he was asked about the privacy situation and what would he do in this situation, and he replied very quickly, "I would not be in this situation."
Muckerman: He tries to protect the highest market capital throne, King of the Mountain.
Hill: Exactly. And in the case of Amazon, he has made it clear that he is not a fan of what Amazon is doing with the competition for their second headquarters. What, I do not know, between Facebook and Amazon, should one of them be more offended than the other? I feel like it's Facebook.
Muckerman: At least I feel deserved for Facebook. But then we see that Zuckerberg comes back and argues that Apple is too expensive, and I think that's just a topic of conversation. Yes, I think Facebook deserves some shade. It could also come from someone, not necessarily a direct competitor, but in the tech scene, and very well known. It's good to have an opinion. I feel like, you're the Apple CEO, why not throw a shade?
Hill: Absolutely. And as you mentioned, Mark Zuckerberg gave an interview that was just released this morning, I think it was at Vox Media, and he noted Cook's comments and fired back. In fact, he addressed Jeff Bezos and talked about it, that was years ago, Bezos made the point that there are some companies trying to find ways to more fees, and there are companies that find ways to charge less and we try to be the latter. And Zuckerberg also tried to orient himself. I do not know that he did it.
Muckerman: Yes, it's difficult because you compare … we do not pay for Facebook, but the advertisers pay for Facebook, and they probably pay more, because the data is more available, you can do so well aim. So, yes, Facebook loads more, they just do not ask us anymore.
Moser: Yes. And nobody forces you to do mail, what you ate yesterday for lunch, let us be clear. I liked his point of view that we try to connect the whole world. It is not economically feasible for everyone to pay for it, and that's not what we stand for. So, I like seeing the back and forth, I think it's good to get all the perspectives.
I feel it somehow, in terms of Tim Cook, that's like a mango telling a banana, "You're not going to slip on our shell." It's like, wait a minute, you're both fruit, but with a mango you have to peel it, but you have to prepare for it. You have to peel it in the kitchen and then cut it open. You will not find any mango peels on the floor. A banana, you can just peel it, throw the bowl on the floor, eat, spice it up, and then someone slips on it. It's the same, but it's different. And I have the feeling that Tim Cook is here. It's not the same. It's similar, but it's very different. I think for Cook, I would rather have heard him say: "Do you know what, that could possibly happen to us." Because they have iTunes on the App Store and all these things with a flood of payment data. In a big gap he will eat his shoe. I feel like he's a bit quick in it, "Oh, that would never happen to us." Be careful, man, because that could be it. You are not as different as you think.
Hill: If the listeners did not know that you spent the last week in the Bahamas –
Muckerman: I wanted to say
Hill: – This mango-banana analogy really gave a signal.
Moser: [laughs] I eat lots of mangoes and bananas at home anyway, I just like them. And I noticed it, I was like, you have to peel both of them.
Muckerman: And the mango is slipperier than the banana. Maybe you drop a piece of mango –
Moser: Exactly! You peel the mango, and then you hold it, this sucker comes out right away –
Muckerman: A bar of soap
Hill: A little fresh lime juice on the mango
Moser: Ooh, yes. We have some of those up in the fridge.
Muckerman: Apparently, a hot sauce that you put on the ticket.
Moser: That's right.
Hill: Returning to Tim Cook for a second is the only thing I thought about. And if you read this quote, it may seem more self-satisfied and haughty than when you see the interview. But I also had this thought, I just thought, OK, but …
Moser: Humility goes very far. You know what I mean? This is a kind of general way of life, humility goes far.
Muckerman: Probably not a job comment.
Moser: Hey, I do not know.
Hill: Incidentally, I agree with him – oh, please, do not let us pretend Steve Jobs did not try hard to give someone a verbal elbow. I agree with his point of view a little bit about Amazon. And I'm not an Apple shareholder, I'm an Amazon shareholder, and I've already said, I hope they make the right business decision. And of course, 2% of me really want it to be home near Ron Gross.
Moser: It will never be ending content. [laughs]
Hill: But I do not think he's wrong about that. That was my reaction when the list came, I just thought, 20 cities? Come on, narrow it at least to the single-digit range.
Moser: I think you're right, I think he made a fair observation there.
Muckerman: I did not see it. Not read too long version?
Moser: He criticizes her process
Hill: Basically a bit of comparison with a beauty contest. You will have a winner, you will have 19 losers.
Moser: [laughs] loser
Hill: You'll have a lot of people spending a lot of time and effort –
Muckerman: Yes, a lot of time and effort.
Hill: – and they will not win, and they'll feel, maybe not, that the bridge was burned, but they'll feel a little drained by the whole process, because they did not understand it.
Muckerman: That would be a fun exercise to find out how much money was actually spent by those governments that could have over-budgeted for years, and how much money was wasted to appeal to Amazon.
Hill: Well, it's interesting to see – the longer this process I personally find it interesting to see how cities and states react to it. You have, Maryland seems to support a Brinks truck to try again, which is great because it increases the chance that it will be near Ron's house. But the governor of Colorado came out because Denver was on the list, he came out recently and said, "You know what, I do not care if you go somewhere else, that's fine."
Moser: You know what I'm wondering, maybe a bit of ulterior motive here, I mean, I like the way the cities force them, they said they want their game, and these cities are competing a bit , try to make yourself better and make yourself attractive. If I'm governor of a particular state or a civil servant of a particular city, I think I'm looking beyond Amazon. I say, "Maybe we will not land the big fish here, but it's not the only business in the world, and there will be other opportunities to bring more business into our state. Let's build this one long-term focussed reputation on being business-friendly .We want to welcome companies like Amazon. " I think if you look beyond the Amazon profit or loss, I think there are many states or cities in those states that benefit from it.
Muckerman: And if you're big business, you're like, "Well, you would give Amazon that, why do not you give us a bit?"
Moser: Right. And in the other states, look at that crap they pulled in Georgia with the vice-governor and the whole Delta Snafu, I just have to believe companies look at that and say we do not I even want to disturb you, because we see how you play this. Well, I think you get a lot to see what these states and leaders stand for.
Hill: Jason Moser, Taylor Muckerman, thanks for being here, boys!
Moser: Thank you!
Hill: As always, people in the program are interested in the stocks they're talking about, and The Motley Fool may have formal recommendations for or against, so do not buy or sell stocks just because of what you hear , That's what it's going to do for this issue of MarketFoolery . The show is mixed by Dan Boyd. I am Chris Hill. Thanks for listening! See you tomorrow!