# Musk Merger Rumors and SaaS Valuation Reset

**Podcast:** Motley Fool Money
**Published:** 2026-01-30

## Transcript

Is Elon Musk gonna make SpaceX, Tesla, and XAI a super company?
Molly Fool Money starts now.
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This is Motley Fool Money.
Welcome to Motley Fool Money.
I'm Travis Hoyam, joined by Lou Whiteman and Emily Flippin.
Guys, there's a lot going on in the market.
We're gonna get to earnings and especially tech earnings, which really kicked off this week.
But I want to start with the discussion around SpaceX and X AI potentially merging ahead of SpaceX's likely IPO in 2026.
Lou, this is something that we've seen before.
Elon Musk merged Solar City with Tesla.
You could argue that that was probably not a great merger, although it did work out ultimately for shareholders in the long run, but the solar business kind of didn't become what we thought it would be.
This looks a little bit similar, but where does your head go when you see another one of these huge Elon Musk companies potentially merging with each other?
First of all, to be fair, if I squint, I can sort of see the current energy business in Tesla, which is the only part that's really growing, coming out of the solar city.
So I guess maybe we give them credit for that and in in hindsight.
But yeah, I know what you mean.
Uh when I look at this, I look at it in the context of these reports that OpenAI and Anthropic are rushing to the altar.
Or not to the altar, but rushing to an IPO.
Uh, there's a beauty pageant going on right now, Travis.
Everybody, all of these huge capital-intensive companies want to tap equity markets at the same time.
Trillions of dollars.
That's a lot of capacity.
So they're all trying to look as pretty as possible, as attractive as possible relative to the competition.
If you combine SpaceX with XAI and all the potential of AI, I think arguably that is something that will capture the imaginations and make it easier to sell.
Backdrop here is that these more established tech giants, maybe we'll talk about them later, Alphabet, uh, Amazon, they have revenue.
They are meta, they are fueling their AI spend with their revenue.
Uh, we joked about this last fall, but for these guys that don't have that, the best time to have gone public was yesterday.
And it always has been.
You know, like I they need to do this as soon as possible.
To the extent that you can combine a whole bunch of very, very, you know, things that have captured investor intention or captured imagination and put them into one package.
I think that helps sell the IPO, and I think that's what really is at the heart of this.
Emily, is there a is there a story at least that all of these Elon Musk related companies kind of talk to each other and work together?
So might as well, they might as well just kind of be one massive conglomerate.
Well, if you're Elon Musk, that's certainly the narrative you're you're trying to sell.
And um, there really is a positive way to view the investments that Musk and and team are making between these companies, right?
Which is that SpaceX, XAI and Tesla, which by the way, just invested another two-ish billion dollars in XAI, kind of work together narratively to create some.
I'm sure there was a there was an arm's length transaction.
I'm sure it was an arm-length transaction.
Of course, aren't they all between Musk?
But no, they they there is some sort of flywheel, right?
Between the hardware, the distribution, the connectivity, the interference, whatever it may be between the businesses that feeds demand for one another.
But I think more realistically, in my opinion, this is really just going back to what business is funding another.
And you could argue that it's a little bit of a money grab ahead of an IPO to justify its valuation, right?
The more opaque a narrative is for say SpaceX.
If if there is a merger between XAI and SpaceX going into SpaceX's IPO, the more optionality that's built into the business, the harder it is to value that company.
So the maybe the more likely it is that they are able to generate revenue.
But realistically speaking, I don't actually see any actual mergers happening here.
Because to your point, Travis, those typically get a lot of recourse from investors.
Those typically need to be arm's length transactions.
They have a lot of third parties that start to get involved.
Whereas what we're seeing right now is just kind of an exchange of resources and capital between the businesses, that is a lot easier to do if you're somebody like Elon Musk, who hasn't a financial interest in all these companies.
It's a lot easier to just kind of move money and resources around as they're doing right now, using Tesla almost as a cash cow to some extent to help fund these other companies in the interim.
Um, and that really kind of delays the need for an IPO.
So while I agree with Lou's take that the IPO for whether it be OpenAI or SpaceX or others, maybe the best time to do it was yesterday because the market valuations right now obviously are still relatively strong.
At the same time, they have a lot of access to capital.
There's a lot of people, including Tesla shareholders to some extent, that are willing to help fund operations in the interim.
There the cash crunch hasn't hit for these companies yet.
So a couple points here.
Uh for one, I think if you're Elon and you would like them to be together, like kind of talk with the Solar City, the best time to do that is pre-IPO, right?
You can kind of control it right now.
So I think if there is hopes that they're all together, you might as well do it ahead of things.
And also, as far as like what investors invest in, they have never invested in Tesla based on just the current car lineup.
It has always been basically an investment in Elon's ability to do great things.
So to some extent, it almost doesn't matter what the product is or what the collection of assets is.
It is the idea that you give Elon the resources he will create value.
So at the end of the day, I maybe, you know, I'm talking against, but maybe you don't need this shiny uh collection, but maybe putting them all together and just saying, Elon, here's a pile of money and a lot of uh resources.
What can you do with it?
I think that is sort of what the market wants to buy.
So, you know, give it to them.
Emily, one of the things that we're seeing in the backlog or the remaining performance obligations for a lot of these companies is that there's a ton of demand for AI resources.
But at the same time, the most of these private companies are not yet profitable.
I think XAI falls into that.
They own X, which is, you know, the old Twitter.
Um are they at a point where they need to get to public markets?
And I guess the argument would be the same with SpaceX.
They they both kind of need to get to public markets to be able to access that capital.
And my question for you is if you're an investor, are you interested in those IPOs where the story is, hey, we're gonna make something huge in the future, but we are burning a ton of money.
And right now, there's not really a sustainable business model that just seems like there's so many of these companies that are gonna go public.
And can they all survive?
That's a huge question that we probably have to ask ourselves in 2026.
I actually really don't think so.
I think it's actually funny to conceptually think about the idea that a company needs to go public in order to access capital.
I mean, when you think about the size of SpaceX or XAI, um, these are huge, huge companies.
OpenAI, you name it.
These are companies, the private enterprises that have managed to fund themselves with private capital for a very long time, an unusually long time, especially given the size of their companies.
And historically, we saw companies go public at much smaller valuations because they needed access to capital.
Private markets have been willing to help fund these companies and billionaires to some extent, and even public companies.
Like I said, Tesla is kind of a funding vehicle for Musk's other cash-losing projects, given how much capital the business has access to.
I mean, these are all ways that help keep private companies private.
So it's cachet that you get when you go public.
And at some extent, I expect that the private market funding does run out.
But that's why these companies are not running to the IPO market.
That's why when we talk about it, SpaceX IPO, we heard about this in 2025.
We're not talking about 2026 for a potential IPO.
We're probably looking at 2027 at the earliest.
It's it is not a desperate attempt.
The private market funding year has not run out.
If it does, I promise you these companies are going public tomorrow.
What does all of this mean for Tesla?
Because that is the publicly traded company today.
So here is at least just a warning or something I think Tesla shareholders should consider.
As I said before, a lot of the investment in Tesla is an investment in Elon.
It's not so much an investment in I want to be in an automaker.
If there are two publicly traded stocks that are both, you can invest in Elon.
One of them is a car and energy company, and one is a space and AI company, you can see the imagination pulling away from Tesla, or at the very least, in, you know, all the stock price is is the number of buyers and the number of sellers.
If you if you if there's more options, less demand for one stock, I think it could cause some issue to Tesla's valuation.
I mean, I'm I'm not going to short it based on this.
As Emily said, we're still a long way away.
But I am curious of a world where people have options if they want to bet on Elon.
How much of that, like 100% of that going to Tesla versus just some percentage of that?
What that would do to Tesla's shares.
If nothing else, I would love to see what the financials look like for the SpaceX X AI business, because uh there's a lot going on under the hood there.
Obviously, a lot of a lot of mindshare, but are they burning a ton of cash?
Where's the revenue coming from?
Uh that those are disclosures that I think would be at least very interesting for us to cover.
When we come back, we are gonna talk about tech earnings.
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Good for dich, good for Berlin.
Welcome back to Motley Full Money.
Earnings season has begun, especially in big tech.
Meta and Microsoft are two of the big companies that reported this week, and they're heading in opposite directions, Emily.
I think this was fascinating.
What did you take from Meta and Microsoft?
Because investors liked what they saw from Meta, not so much from Microsoft.
In the case of the different reactions, I think that has to do with different levels of expectations for both of these companies heading into earnings.
But to be honest, I really can't rationalize the market's reaction, especially to things like CapEx spend.
I want to shape the market.
If the market was a living entity and say, what did you want?
Did you want CapEx or did you want no CapEx?
Because I promise you, if Microsoft or any other tech giant had come out and said, hey, we're cutting expenditures, that would have sent the market into a panic.
I said on the show before that I think big tech earnings are much more of a leading indicator as to whether or not we're in a quote AI bubble than NVIDIA earnings, for instance, because they're the ones actually building out and buying the chips that are driving a lot of this demand.
So the fact that Microsoft is still planning on spending so heavily here is a conceptually good sign that the people at the top still see value and return on investment and their AI-related initiatives, right?
That's what's been propping up the market.
So conceptually, if you are Mr.
Market, I'm shaking you metaphorically right now.
What did you want?
You wanted this.
But I understand the market's reaction to Microsoft's in terms of the share price, because longer term, the analysts that I talked to here at our company, they they always have the question about when you spend this much money on CapEx and your software company, stop looking like a software company.
You start looking more like an industrial company.
And becoming utilities, it't you be valuable?
It's fascinating.
Yeah.
And we're cheering.
If you're this much money, then we're going to start valuing you respectively.
You don't generate as much cash flow.
The free cash flow there is going to be muted.
So the question then becomes how long, how protracted is this CapEx cycle?
It has to stop at some point.
But I do kind of feel like it's a catch 22 because the moment the spending stops, the market rally does too.
Uh Emily, do you think that the market is looking at Meta a little bit differently because there is a little bit more of a direct line to okay, you're you're spending this money on AI, but we're seeing growth in engagement.
You have growth in the amount that people are using these apps.
But but there's not only that, it's you're they're more engaged in ads, clicking on ads more, and you're getting more on money out of each one of those ads.
So there's kind of a direct tie to where the financial payoff is.
We could fudge whether that is a good return on investment in a traditional sense or not, but you can kind of see that tie there.
Whereas Microsoft, it's a little bit fuzzier.
Yeah, you've hit the nail on the head there, which is the same.
Virtually 100% of Meta's revenue comes from ads.
So when you talk about meta investing in AI or CapEx or whatever it may be, their only thing they care about is driving engagement to keep ad dollars on their platform.
They care about advertisers, they care about spending in order to get advertisers and spending on their platforms.
They need your eyes on their platforms as well.
So that is a comparatively different, I shouldn't say lower bar.
I wanted to say lower, it's a different bar to hurdle, as opposed to Microsoft, which clearly has a lot more balls to juggle, um, a lot more optionality, I think, in their court as well.
They're a little less uh of a single trick pony here.
But in the case of Meta, the best thing about this company is because they do such a great job maintaining engagement.
We've seen Zuckerberg over the course of the past decade or so spend billions and billions of dollars, in my opinion, really ineffectively trying to make the metaverse a reality.
The metaverse, I think, is an unadulterated failure as it exists today.
And that hasn't stopped the full speed ahead train that is engagement on Meta's platform.
I mean, Instagram has been incredible for them.
The transition to reels and ad spending on that platform, absolutely incredible.
So Meta has a lot of room to run.
They can just throw stuff at the wall, the spending, and just see what sticks because they have this platform that Jill still generates such incredible levels of engagement.
Yeah, that's the thing.
It's a, you know, Meta has built the perfect cash printing machine.
And until that goes wrong, people are just gonna, you know, just go with it.
I mean, with Zuck, you know what you're getting.
The nice thing about the metaverse is Zuck told you who he was there.
I am going to, I make a lot of money and I'm going to make big bets with it.
So yeah, I think to some extent, Zuck's shareholder base isn't scared of CapEx.
That's they've proven that through the years.
As far as what's going on here, uh Emily's Mr.
Market, I think it's moved from the it, this used to be just adrenaline to almost a fear factor contestant, where there is a mix of adrenaline and fear.
All right.
And they don't know what to think about AI.
So at one point, I think the reason Microsoft is down is that like 45% of their remaining performance obligations on the uh commercial side is tied to open AI.
And we're getting nervous.
I was a little bit surprised that wasn't higher, though.
Isn't it?
I mean, that's kind of what you want.
I that no, that was mind-blowing to me.
40%.
Yeah, I, you know, and and again, but so we're scared of open AI, but yet Amazon jumping in with open AI causes Amazon to go up.
I think, I think in general, we're at this point where we are still excited about the potential of AI, but we're getting nervous about all this spending.
So collectively, as a market, we are just, you know, we we are of many different minds.
There, there's just this anxious fear, but I don't want to miss out.
Like the FOMO hasn't gone away, but the kind of realities of the challenges are creeping in.
So I think it's just chaos.
I quarter to quarter, I just think it's getting harder and harder to read anything definitive out of this.
It's just we don't know what we want from these companies right now, like Emily was saying.
Emily, I think you'll love this stat.
I heard this morning that Meta is gonna spend more on CapEx in 2026 than they have lost in reality labs in the entire history of reality labs.
Has Mark Zuckerberg earned the right to say, because one of the things I'm in the conference call was, you know what?
Hey, the this ROI from ads is going great, but we're gonna build this other stuff that we're not gonna tell you exactly what it is yet.
You gotta just kind of trust me.
And when we're talking about $135 billion dollars worth of CapEx spend, there is a lot of, hey, you gotta just trust, trust Zuckerberg because he supposedly knows what's going on.
I I hate to come in hot with the opinions here, but it is genuinely how I feel.
I think Meta has done well, not because of Zuckerberg and his capital allocation decisions or his innovation, but in spite of it.
I think you probably could have taken anybody and put them at the helm of Meta over the course of the past 10 years or so.
And as long as they didn't do, actually, I wouldn't say I was to say, as long as they didn't do anything too crazy, but Zuckerberg did do something a little crazy with the metaverse.
Let's not forget the rebranding.
I genuinely think the company was poised to succeed simply based off the platforms that they owned.
And as long as they didn't mess up the flywheel machine that was Facebook and Instagram, they were going to be fine.
And I don't think I give Zuckerberg or his leadership team very much, if any, benefit of the doubt when it comes to capital allocation spending, because I have seen effectively zero evidence to support the idea that they know how to spend capital effectively.
So no, I I mean, I think the company may perform well, to be very clear.
I think meta shareholders should not be overly worried.
But I don't think it's because leadership is so incredible or smart or knows how to spend money.
So yeah, it's quite possible that he will go down as the greatest one hit wonder in the world, right?
You know, I mean, you know, teased to me as a metaphor.
Zuckerberg came up with something different.
Well, maybe the greatest acquirer too, because you do have the acquired Instagram and they were acquired WhatsApp.
They those were really controversial deals at the time, and they've both been phenomenal successes.
Right.
Yeah, but but look, the the other side, as far as the you know, comparison, remember that uh free cash flow year over year is up 500 something percent over the last decade.
So there's arguably more money to spend if they, you know, so it th the comparisons to Meta.
But look, if nothing else, again, this is what you get with Meta.
With the uh we didn't have time to talk about it, but Apple.
Great quarter, but it was just kind of blah.
They're doing the same thing.
We don't know from here, and so the stock is basically flat afterwards.
Compare that to, you know, meta.
If nothing else again, I think shareholders know what they're getting into here with meta.
At least look, we make a lot of money, we're gonna make big bets.
If you you know, if if you want to take this joyride, come along.
I I I think Zuck has the shareholder base that he needs, and I you know, it it's an adventure.
We will see where this story leads us.
I'm excited to see what sort of artificial intelligence products they introduce in 2026.
Because they're spending a lot of money, they've acquired a lot of talent, a lot of people who have built a lot of really interesting things.
So there's hopefully something there, but uh we're not seeing under the hood quite yet.
When we come back, we're gonna go dumpster diving in SAS stocks.
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One of the big trends in 2026 is that SAS stocks and SAS related stocks have been absolutely taking it on the chin.
So we're gonna do a little dumpster diving in the SAS market, if you will.
And I want Lou and Emily to kind of draft some SAS stocks that they're interested in and give us an idea.
All of these stocks that we're gonna talk about here are down at least 30%.
So to just give you an idea of some of the names, the trade desk, shift four, Netflix, Salesforce, Adobe.
There's a lot of companies that are down really big over the last few months.
So I gotta say, I I think the fear about software stocks is legitimate.
So I I think there's something there, which kind of makes me I don't like a lot of them on the list you gave me, but in the list you gave me, uh Netflix is on there, not a SAS, but subscription.
Netflix, I get why it's down.
I think the company is telling you that this isn't the Netflix of old.
That they I I think this is a deal they have to do.
I think it could be turbulent for the last next few years, but I'm not gonna bet against the best management team in the industry to get it right over time.
So as a long-term focused investor, I'll take Netflix at these valuations and uh and and for the long haul, and I think it works out.
Do you think this is one of these opportunities we're gonna look back on?
I just looking at the drawdowns over the last uh 25 years or so in 2004, 2005, down about 75%.
Uh in 2012, that was was that the quickster days.
Uh stock was actually down over 80%.
Are we gonna look back at this time as you know what, the market was kind of overreacting, and this is when you want to be aggressive on a company like Netflix?
Kinda.
I think the difference is they are a more mature company now, so maybe we shouldn't expect it to do like it the in insane fabulous appreciation that it did from there.
But uh like it's a new world for Netflix.
I still think that they are a best of breed in their category, and I that's kind of what I'm looking for.
So yeah, I I I think this is an opportunity.
It might not be the same opportunity it was a decade ago.
Emily, what are you picking?
I I think Netflix is a good draft.
If I can't draft Netflix, there is um one that I think is maybe overblown in terms of pessimism, and that's actually the trade desk.
And that's probably raising a bit of eyebrows because the trade desk has had its fair share of headwinds.
Um, their cocaine launch was a bit of a failure, you could argue.
And then I think they undid that.
Am I remembering that correctly?
Um, it's uh it was unclear to me exactly.
Um, I think they're kind of going back to the drawing board, is maybe how I would describe it.
And that's fair because they lost a lot of ground to competitors in the ad tech world, um, both in terms of walled garden as well as other independent competitors that have been encroaching upon their territory.
And then at the same time, it seems that CEO Jeff Green maybe is maybe not handling it the same way I would handle it, is how I would phrase that.
Obviously, I I'm not there behind the scenes, but the trade desk got a relatively recent CFO who over the course of the past week was actually terminated from the company.
It's not exactly clear why.
Um, there wasn't a lot of language provided.
Um, the CFO is going to be staying on the board, I believe, through the remainder of his term.
But it's possible that that has to do with disagreements in the management team.
And this is a company that is run effectively wholly by Jeff Green, who owns the majority of the voting stake and the business.
But despite all these headwinds, here's what I'll say a rising tide lifts all boats.
And we're heading into 2026, or we're into 2026.
This is a midterm year, typically is pretty good for ad spending.
The trade desk is one of many companies that is well positioned to manage the ad tech markets.
With the rising industry, even if they don't have their ad tech completely figured out this year, which I don't fully expect that they will, especially given their leadership turnover.
I actually think the trade desk with these lowered expectations is maybe poised for our performance.
The trade desk's compound annual growth rate over the past decade is 39%.
And the stock is down 78%.
That just seems crazy.
It seems like the market is pricing this as if there's a major disruption.
Is that sort of the way that it seems like the market is thinking right now, Emily?
Certainly is.
And that's because the trade deck was the effectively the only game in town for a long time.
And then they realized that while they were talking down the presence of walled gardens and how great it was to be the independent partner for demand side platforms.
And they realize, hey, actually, maybe there is competition out there, and they need to be better about their partnerships and showing how they have, I guess, in terms of the market share here in comparison to the companies like Amazon, who is launching their own ad tech solution.
So competition is substantially different today than it was, I would say a decade ago, but even just a year ago or two years ago.
All right, Lou, what is the next stock on this list of dumpster diving SaaS stocks that you're interested in?
So again, I'm looking long-term here because I actually, this company has earnings coming up, and I'm kind of worried about this quarterly report.
But Exxon Enterprise is on this list.
I still believe in the long-term story here.
Look, it is really, really highly valued.
And this is a market where I don't know if their core customer, the small, like local governments, really have the spending power to expand.
So I do think that's weighing on near term.
But it's an incredibly well-run company with a great opportunity up ahead.
So I like say, chaps, I may be able to get it cheaper in a few weeks, and I'm willing to accept the volatility, but thinking for the long term, I still think they're early in their growth path.
So I'll lean into this one.
What are you worried about when it looks at when you look at earnings?
I mean, the stock is expensive.
Enterprise value to sales is 19, but it has been significantly higher than that in the past.
This is one that I've owned for I think over a decade at this point.
And you're right, it has just been compounding like crazy.
But what are what are the reasons for concern at this point?
They uh expectations are so high because for so long they've done so good.
It just felt like they were unstoppable.
Again, I think that it's more of a just the reality of their market is going to step in here.
So I just think that earnings, look, when you have highly valued stocks, if earnings aren't fantastic, there tends to be an oversized result.
We saw that with their last quarter.
Maybe that means expectations are tempered this quarter, but I almost feel like if it's another quarter of just not fantastic, the narrative is going to be it's over.
And we could see an oversized reaction.
I hope not.
I own it too, but you know, I'm I'm both ready for that and still very, very interested in the long term.
Uh, two things can be true at once.
Emily, what do you have next?
Uh, the next one I'll draft is actually toast.
And similarly to what Lou was saying about Axon, it's entirely possible that I could get this stock cheaper in a couple of weeks.
But the pessimism that I see around toast has entirely to do with the macro environment they're operating in, and very little to do with the business operations of the business itself, which is, in my opinion, rare when I think about these SAS or subscription stocks that are down pretty massively from their previous highs.
A lot of them are facing severe operational issues.
The trade desk, which is weirdly my first draft pick because I was afraid Lou was gonna snap it away from me, is obviously facing operational issues.
Toast is an incredible one because there's when I think about the business performance, I genuinely can't ask more from this management team.
But there is genuine real fear and concern around consumer spending and restaurant spending in general, uh, which is totally fair.
We could see a contraction in toast valuation, certainly over the next couple of I would say quarters or years potentially, depending on what that looks like.
But longer term, I think Toast does something that is not replicated now by other software giants.
They have a decent mode that they're building and their software in comparison to their alternatives from everything that I understand is pretty far superior.
And they're only expanding that um as the you know days and quarters have passed.
So I really like this company.
Do you think Toast is the kind of company where you just want to own a niche and that's the value?
Because so many of these tech companies we're talking about, you know, they could do anything.
The, you know, the the Googles, the Microsoft's of the world, they kind of spread themselves all over the place.
Toast almost seems like it's value.
And this is where I think you're right.
If you get a phenomenal valuation for the company, they're just gonna own restaurants.
Is that the right way to think about it?
Like nobody's gonna be able to come in and beat them at what they do best.
Conceptually, yes.
I the fear that lives in the back of my head with Toast is kind of what we saw happen with Square, renamed block.
And I feel like Dorsey maybe lost vision with that company because we could have argued the same thing with Square, which is you know, we own the payment platform, the terminal, we're gonna own all of these little avenues.
And they just weren't really able to scale that as effectively as I think they maybe could have.
Now, Toast, I see a little bit more promise in that management team and how they're already scaling their company.
Lots of opportunity for international growth too, which is barely tapped for them.
I don't see them buying a bunch of cryptocurrency.
So again, all moving in the right direction there for me.
But in my mind, um, I worry about toast conceptually because of where they sit in the value chain, because we've seen other companies unsuccessfully perform there.
And I worry also, of course, about take rates for fees.
Payment processing in general is seeing a lot of pressure in terms of take rates.
So it's possible that part of the reason why toast is seeing share price pressures because there's an expectation that their take rates, despite adding all the stuff onto their platform, is only going to fall.
Lulu, let's have one more pick each.
What do you got next?
Sure.
So the the first round picks are off the board.
I I have, you know, questions.
I'm I'm reaching anywhere I look here, but I'm gonna go with Salesforce.
And I get why it's down.
I tons of competition, uh, revenue growth is cooled.
But my base case on AI right now is that these huge model makers are gonna have a hard time justifying the expense.
But there are a lot of just small incremental progress that's gonna be all over the place.
I think it almost like the difference between typewriters and Microsoft Word.
We're not really going to do a revolution, but everything's gonna get a little easier.
Companies like Salesforce are well positioned to use AI for those little incremental things.
And so I will I will lean in and hope for the best.
So this is Salesforce being AI is a bit of a tailwind, but not enough to be a disrupany.
Yeah, I think it's just gonna be part of life.
All right, Emily, what do you got?
I actually wish I had more picks.
Uh, can I give some honorable mentions here?
Sure, sure, absolutely.
There are two that I'm not running with, but I do really like Adobe and PayPal.
Um, both of these companies, I think, have been uh fairly or unfairly hit by markets.
Uh PayPal has done an incredible thing to their branded checkout experience.
The reason it's not making my list right now is obviously they're dependent upon consumer spending in the near term, that could be a headwind.
Adobe, I think a lot of the fears around AI are maybe overblown with this company.
They still have the go-to software solution for creative professionals.
I worry about seat pricing and pricing pressure in that regard, which is why it's not making my cut in this exact moment.
But the stock that is making the cuts, I will say is ServiceNow.
And the reason why ServiceNow is making my cut is because I cannot believe how much shares have compressed over the course of the past year, almost by 50%, almost in half.
I I don't think it, I had not realized um until we had started to prepare for this show how much the valuation for ServiceNow has come down.
And um, I understand that we saw a lot of lofty valuations for especially big enterprise software and SaaS companies of which ServiceNow was included.
So it's not entirely unjustified, but I when I look at their earnings and I I see how the business is performing, to me, a lot of the concern has much more to do with the macro environment, the AI environment, than it does to do with anything on the performance side for ServiceNow.
And in my opinion, the software is just like gravity for enterprises.
They they need it, they consolidate, they automate, and they will find ways to integrate AI.
I do not think that AI alone is going to be a solution or replacement for what ServiceNow does today.
So I think ServiceNow could be a particularly timely addition.
They were in a bit of hot water this week after one of their executives uh said we lost $10 billion in market cap because of I think worry about an acquisition.
Now you can give us that market cap back.
When executives are looking at the stock price and the market cap that much.
It weirds me out just a little bit.
I I, you know, I completely agree.
I think I saw that headline cross my table, and then I plugged my ears and I went la la la la la.
Because ideally, your management team is spending their time thinking about the business, not thinking about the share price.
Fair enough.
When we come back, we are gonna talk about stocks on our radar.
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Before we go, I do want to touch on what's going on with Google and some of the advancement that they announced this week.
They announced that they are gonna be incorporating Gemini into Chrome.
This is something that you know we could probably see coming a mile away.
But it does seem like Emily, Google is leaning into these incremental improvements from AI.
I'm almost thinking of it like AI for normies.
Like I don't talk with my wife or friends about you know downloading this new app and look at this cool new browser that OpenAI made.
But Google incorporating Gemini in the product I already use, that that I can actually see working.
And that's exactly what Alphabet and Google needs, though, is because they need to peep people to continue the behavior that they've already had, right?
We're all for the most part already engaged, already using Alphabet's products.
So the idea about AI for normies, it's more about, okay, continue with your habits.
We're gonna slowly encroach upon that so that you don't go elsewhere.
You don't download that new app.
But my big question, Mark Bravo Bet is how much of this is just fighting for territory that they already have, right?
I think to an extent, doing this is just doing table stakes.
It's table stakes for them.
It's actually expands the pie.
Not at all.
For open AI or Perplexity, it would expand the pie.
A browser would expand the pie, but for Alphabet, it's table stakes.
They need to retain Chrome users.
That is the search portal that drives their business, especially those logged-in searches.
I mean, they need to retain those ad dollars.
Everything they're doing here, in my opinion, is fighting for territory that they've already acquired and held onto for the better part of the past decade.
Yeah, I mean, look, I remember when all of these companies announced the browsers.
I'm not gonna give Google too much credit for fighting off the competition, whether you know keeping credit, because I don't think I'd be hard pressed to find someone who thought that this was a threat.
But you know, Google is, I guess, expanding the pie, but they're doing that as the big pie continues to contract.
So I, you know, this is more defensive than offensive than the playing offense to me.
The question for investors is whether even if Google dominates the new world the way they dominated the old world, will it be as profitable this time around?
And I I don't think any of us know, but I think that is the question to ask.
I can't believe that I am the AI bull in this group when it comes to stock like Alphabet.
I just think every time they come up with something I go new, I go, oh, I can actually see that being really valuable.
Yeah, to be clear, I like their product a lot, but they need it.
They need it.
It's not extra.
They need it.
Right.
Fair fair enough.
All right.
Let's get to the stocks on our radar.
Emily, I'm gonna have you go first.
What are you looking at this week?
Yeah, the Socamaye Radar this week is a company called Mama's Creations.
The ticker is M-A-M-A.
I wish I take could take credit for finding this one myself, but it has actually brought to my attention by analyst San Micdeo here at the company.
And uh they're a business that make and sell fresh food that's sold in the deli section of your local grocery store.
Uh uh, they also have distribution shops like Costco as well as some convenience stores like Sheets.
This is not frozen food, okay, Dan.
Not frozen food.
Do you like meatballs?
Do you like pasta?
Do you like uh potentially sushi?
They're looking at acquisitions in the sushi space, uh, paninis.
These are stuff when you walk into your grocery store and they're already prepared, you grab on your way out.
So obviously they're benefiting from kind the kind of like tailwinds that are changing right now for consumer behavior, the trade-down effect from eating out or eating at fast casual to convenience or grocery store locations.
Chipotle has talked about that in their earnings call.
Um, my main concern to this company is of course valuation, but also where they are in the value chain.
Just earlier this month, we saw that Berkshire was selling off their Kraft Heinz, which has been a massive underperformer for their portfolio.
Brands don't have as much pricing power with grocers and other distributors since they need the placement, but I do like this company and they are growing like gangbusters.
Dan, has Emily sold you on mass produced sushi.
Oh, no, absolutely not.
That sounds not uh does not sound like something I'm interested in.
Uh however, I mean, you know, to fast casual food is getting so expensive.
Fast food is no longer really affordable.
This kind of stuff has a definitely has a spot in the consumer landscape these days.
And don't knock grocery store sushi till you try it, Dan.
Come on.
Oh, believe me, I've had plenty of grocery store sushi.
It's just not my favorite thing.
It's not not what gets me up in the morning.
All right, Lou, what's on your radar this week?
Emily's cheating.
It's lunchtime, and now I'm hungry, so I'm I'm not focused.
But I'll I'll do what I can.
Uh, Dan, I'm looking at freight brokerage, CH Robinson, ticker, CHRW.
Now, brokers arrange transportations, kind of act as a middleman between shippers and the companies that want to move freight.
With tariffs and all this, it's been a tough year for freight, but Robinson in its most recent quarter, they grew operating income by 7%, even as revenue fell by 6.5%.
How?
Well, this is an AI success story.
Adjusted operating margin improved by 490 basis points year over year, because Robinson is actually having success using AI to automate processes that have historically been done manually and very uh taking out cost.
I don't think they're done.
We're talking about the potential of another 200 basis points gains in 2026.
Robinson is the biggest company in their field.
They're using their scale to their advantage, they're gaining customers.
You couple all of the work they're doing in-house with the inevitability of one day we the shipping market's gonna improve.
And I think Robinson looks pretty intriguing right now.
Dan, what do you think about shippers?
You've talked about CH Robinson before, Lou.
This is a boring company, and you know I love a boring company, and let especially when it involves logistics.
So, yeah, I'm I'm a fan.
I'm channeling Ron Gross here now.
I mean, um Dan, I know how I know how I know what you like.
Old Economy Lou on the podcast today.
All right, Dan, what's going on in your watch list?
Mama's Creation or CH Robinson?
This is a tough one.
I actually like both companies, so I'm gonna go with mama's creations because Emily rarely comes with anything I like.
So way to go, all right.
I gotta do some research on that one too.
Thanks for listening to everybody for Lou Whiteman, Emily Plippin, and Dan Blade behind the glass.
I'm trying to swim.
We'll see you here tomorrow.