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The MGM Deal: Amazon Has the Money and Needs the Content

Amazon (NASDAQ: AMZN) announces plans to buy MGM. Costco (NASDAQ: COST) slips a bit despite strong earnings. salesforce.com (NYSE: CRM) rises, and Dick's Sporting Goods (NYSE: DKS) swings higher thanks to strength in its golf business. In this episode of Motley Fool Money, Motley Fool analysts Ron Gross and Jason Moser discuss those stories and weigh in on the latest from Okta (NASDAQ: OKTA), Ulta Beauty (NASDAQ: ULTA), Autodesk (NASDAQ: ADSK), and Williams-Sonoma (NYSE: WSM).

Plus, Ron and Jason share two stocks on their radar, and Thomson Reuters automotive reporter Paul Lienert discusses Ford's (NYSE: F) new electric F-150, Tesla, Apple, and the future of the auto industry.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

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This video was recorded on May 28, 2021.

Chris Hill: We got the latest headlines from Wall Street, we'll get a report on the automotive industry from veteran journalist Paul Lienert. As always, we have got a couple of stocks on our radar but we begin with another deal in the media landscape. This week, Amazon bought MGM Studios for $8.5 billion. MGM was founded nearly a century ago, and the studio library includes 17,000 TV shows and more than 4,000 films, including the James Bond and Rocky Balboa franchises. Jason, pretty much everyone thinks that Amazon overpaid for MGM. [laughs] Let's face it. They need the content and they've got the money.

Jason Moser: Yes, and yes. They do need the content and they do have the money and I agree. Probably it's easy to look at this deal and at least in the near term and feel like maybe they overpaid, but also, I feel like as much as we love Disney for their vast catalog of IP, this to me is an investment on that same wavelength. What I'm getting at here is that while it looks like today, they're paying an awful lot for content that may or may not pan out in the near term. It also does give them, I think, a really long tail of opportunity in taking this content, taking this IP in a number of different directions, backstories. Doing all of that stuff that Disney does so well with all of its IP, making new stories out of content that they already have, this gives the Amazon at least the potential to do that, which I think is encouraging. Then the other side of this deal, it's not like they're going to get access to everything. I mean, licensing video content is an involved affair and it's difficult to always connect all the dots. While you might not see all of this content immediately making its way to Amazon's distribution, I think what it does do it, giving Amazon ownership of it, even though you may see that content on other channels, it at least gives Amazon the opportunity to monetize it to some extent. I just think this requires looking a little bit further out than probably many would like to.

Ron Gross: I think that's where you get into the valuation. When you look at the fact that they don't have total control or ownership over a lot of the content back from I think pre-1986, perhaps it was the day then 007, James Bond, has very tight restrictions on it from two folks who own really control of it. That's where you look at it and say, well, this has been shopped around for a while, Apple, Comcast, folks looked at this at significantly cheaper prices and passed. Yes, Amazon has the money. Yes, it probably won't matter if they overpaid, but you still want a company, a CEO that has fiscal discipline. I think based on the fact that they don't have total control and total ownership, they appear to have overpaid.

Hill: Let's get through some earnings, and we'll start with Costco. Third quarter profits and revenue came in higher than expected, same-store sales grew nearly 16%. The shares of Costco, basically flat this week, Ron, where is the respect?

Gross: I like this report, but it's not perfect. There were certainly some bright spots and Costco continues to be just a wonderfully run company, but it wasn't perfect. Revenue was strong up 21%, as you said, comp sales greater than 15%, e-commerce up 38%. The renewal rates from the membership business which is basically their whole model, very strong still at 88%. That's actually 0.1% lower, but that's because China kicked into the calculation now and China is new, and memberships tend to not renew at the same rates as ones that have been around for a while. There was strength in the non-food business. They saw strength in travel from pent-up demand from COVID as the vaccines rollout. People are getting back to traveling. There was pressure from supply delays, higher freight costs, ship shortages. I think we're going to see that consistently as we have been across retailers, as well as inflationary pressure, we're going to see, that's going to be a common theme. Items containing paper, plastic, metal. These things are seeing relatively significant price increases. Management says that although gross margins were a bit weak, inflation did not have a big impact on gross margins yet. Let's keep an eye on that. Adjusted income up 20%, that's strong. They are beginning a phased return of food sampling. I think we like this. The food courts are coming back. They are optimistic about sustained demand for their higher-margin items, jewelry, home furnishings. They showed some confidence by raising the dividend 12% back in April. Costco continues to operate very well. It just, things are not perfect and investors at 36 times earnings want to see something a little bit more robust to get excited about the stock.

Hill: First quarter profits and revenue came in higher than expected for salesforce.com. The business software giant also issued higher guidance than Wall Street was expecting. Shares of Salesforce up more than 6% on Friday, Jason.

Moser: Yes, strong quarter. Salesforce is a funny one, because it's this massive market leader in customer relationship management. That CRM market that we talk about. But when you try to pinpoint exactly what Salesforce does, it's difficult to do it, and that's precisely what makes it so darn strong though. It's in a line of work with a lot of moving parts and Salesforce does a lot of things really well, but just understanding what CRM is, I think helps. CRM is about data, it's systems that compile data from different communication channels, including the Company's website, telephone, email, live chat, marketing materials, and even social media now, so that ultimately allows businesses to learn more about their target audiences and how to cater to their needs. That's where Salesforce does really well. It's just difficult to really fully understand how they do it but it's a collection of a lot of really great tools and acquisitions. I mean, they've acquired Newell Software along the way, Tableau. Now Slack, which should close later on in this quarter. All things put together, the sum of the parts here is really impressive that translates into the numbers. I mean, revenue of close to $6 billion, that was up 20%, excluding currency effects, operating cash flow $3.23 billion dollars, up 74% from a year ago. They raised revenue guidance like you mentioned to $26 billion for the year. They are gunning for $450 billion in revenue for fiscal 2026. The scary part is I totally believe that they can get there. When you put all of that together with its market-leading position, it's a company right now that is valued at around 37 times free cash flow. That to me seems totally reasonable for such dormant businesses, one that investors really should keep on the radar.

Hill: Shares of Dick's Sporting Goods up nearly 20% this week after same-store sales in the first quarter doubled expectations and profits tripled expectations, Ron. Whatever CEO, Lauren Hobart, and her team are doing at Dick's Sporting Goods appears to be working quite well.

Gross: This is a true blow-out quarter. As you said, the metrics are just wild. Net sales of 119% from last year's first quarter, and they also included a metric from two years ago to help people understand the impacts of COVID which a lot of retailers are doing now and I like that. If you look back at 2019, sales are up 52% compared to 2019, so really strong even when you remove the impact of COVID. Same-store sales up 115% as the anniversary of the majority of store closures. Let's take that into account when we see these crazy high numbers, last year was not a normal year as we all know. E-commerce up 14%. That's grown from 13% of net sales in the first quarter of 2019 to 20% now. I think we will continue to see that ramp up. Strong consumer demand across golf, outdoor activities, home fitness, activewear. These are rebound in their team sports business as youth sports get back to business. They admitted that they benefited from stimulus checks as many retailers have. Gross margins widened and as you said, earnings-per-share just skyrocketed up 511% from the first quarter of 2019 and was actually higher than all of 2019. Really strong, focused on tech, omnibusiness, omnichannel distribution, introducing Dick's house of sport in Rochester, New York. That's their first one. Focusing on the Golf Galaxy business as they see renewed strength in golf, raise their earnings-per-share guidance for 2021. This is a really strong quarter.

Hill: Not to add to the pressure on them, Ron, but you have to figure with summer camps opening up the potential for fall sports, returning to normal. You've got to believe that the next few months present a good opportunity for them as well.

Gross: I think this continues and the stock is not expensive at, I want to say like 11 or 12 times earnings right here and if they continue to put up these numbers and they continue with strong omnichannel, I think this is a good one to look at.

Hill: Okta's results in the first quarter took a back seat to the announcements the company made. The cybersecurity business said their loss for the current quarter is going to be bigger than originally thought and that CFO, Michael Kourey, is leaving immediately. Jason, they named an interim CFO while they looked for a replacement but the one-two punch of guidance and Kourey leaving had shares of Okta down nearly 10% this week.

Moser: I do understand the market's reaction. It was a good quarter. There are some questions, of course, that come up when the CFO of the year steps down after a major acquisition. Just not really a good look but with that said, I do see actually a tremendous opportunity for this business in the coming years. If you consider the trends that are really driving Okta's business today, it's the deployment of Cloud in hybrid, it is digital transformation, it is the adoption of Zero Trust security. Maybe Zero Trust is something we're going to hear more and more about here in the coming years. The Biden administration, for example, issued an executive order here recently in regard to our national cybersecurity posture, ultimately saying that Zero Trust is going to be a requirement for government agencies for one. We've seen Zero Trust all over other organizations as well. That's just going to be something that continues to be more and more important. I think it's tailwinds for Okta's business that will, I think, help them recover from this OK. If you look at the numbers, the revenue for the quarter, they're up 37% over the year, and subscription revenue up 38%. This is primarily a subscription business too, which is great. To me, again, you look at the dollar-based net retention rate there, it remains strong in the 120% range. That Auth0 deal just closed. Perhaps it was just time for the CFO to move on. I don't know. There wasn't a whole lot of light shared on the call but again, given the tailwinds and the importance of cybersecurity, I think that Okta is doing a lot of things to remain relevant in that space, and with the stock value today, it's 35 times sales. It's like all of these other high fliers but again, I think this is a business that I think they're doing something that really matters here. It's certainly one to keep on the radar for investors.

Hill: First quarter profits for Ulta Beauty were more than double what Wall Street was expecting. The cosmetics retailer also raised guidance for the full fiscal year. Shares of Ulta up nearly 10% this week, Ron.

Gross: Yeah, last quarter with Mary Dillon the CFO, she leaves behind a very strong company that puts up a really nice quarter beating expectations. Sales up 65%, driven by the reopening of the economy, of course, consumer confidence again, government stimulus checks, as we'll see across retail. Comp sales of 66%, driven by a 52% increase in transactions and an almost 9% increase in the average ticket. We'll come back down to earth and compare numbers to fiscal 2019. We saw sales increase 11% over 2019 and comp-store sales increased 7% over 2019. Still strong, obviously not as strong as when you compare it to the pandemic months. Mid-teen growth in e-commerce on top of last year's 100% growth, you have sales penetration now in the mid-20% of sales, gross and operating margins widened significantly. They've increased loyalty members by 1.7 million members in the first quarter. That's 2% lower than the first quarter of last year, but 5% higher than Q4. The member base continues to recover from the pandemic. I think we'll see that and we'll get back to growth mode. They're on track to open the first Ulta Beauty shops at Target later this summer. Net income, $230 million versus a loss this time last year and they're repurchasing stock. New CEO takes over, Dave Kimbell, former Chief Merchandising Officer, company increased guidance. I think this bodes well for at least the next several quarters, if not the next couple of years.

Hill: On last week's show, Andy Cross's radar stock was Autodesk. The design engineering software company came out with first quarter results on Thursday. Jason, shares of Autodesk up a bit this week. What stood out in their report for you?

Moser: Yeah, this is just a really strong business that's poised to become even stronger. I think particularly with the tailwinds of this massive infrastructure spending that's currently being deliberated here in DC, we're talking about tailwinds with a company like Okta. There are tailwinds here with a company like Autodesk too. When you look at what they're trying to build, it's a very comprehensive offering. I think that's something that's really working well for them. Just look at construction, for example. The architecture, engineering, and construction side of the business. They have this vision to connect all of the phases of construction with end-to-end cloud-based solutions that essentially take it from the planning and design to the construction operations and maintenance. To that end, the architecture, engineering, and construction segment grew 16% for the quarter. That was the top performer and it's the biggest part of the business so it matters. They grew the top line overall 11% excluding currency effects. Operating margin was flat. Earnings per share up 20% from a year ago. Subscription revenue, again, just a lovely subscription business model here, that's 96% of total revenue. That's just reliable too, which is really nice. For fiscal 22, they raised full-year revenue guidance up to a range of 4.3% to 4.35 billion shares today valued at around 60 times full-year earnings. Listen, we got a cash flow positive and profitable business.

Gross: Yeah, let's try to be happy with that.

Moser: It's not valued at 60 times sales. This is times earnings. I would encourage investors to focus on that. As a shareholder myself, I remain very pleased with what Autodesk is doing and I think it's only going to become a more relevant business here in the coming years.

Hill: Shares of Williams-Sonoma up 4% this week after a monster first quarter report. Profits came in 300% higher than a year ago, same-store sales were up 40%. They raised guidance. Ron, is it possible shares of Williams-Sonoma should have been up more of this week?

Gross: Perhaps because they crushed estimates, left them in the dust. I don't know what the analysts were thinking when they put forth their estimates but they were way off. You hit some of the highlights. 40% comp growth, strength across all brands, which is important because sometimes we see weakness in some of their brands. Obviously, reopening acceleration across the country is helping all of the brands. We can go through them. West Elm, up 50%, Pottery Barn, 41%, Williams-Sonoma, 35, and Pottery Barn Kids and Teen up almost 28%. They have a couple of emerging brands. Rejuvenation and Mark and Graham combined those delivered comp growth of over 35%. The global business was up over 81% now, approximating about a $100 million business. Gross and operating margins widened really significantly. That's where we saw that compound into that huge adjusted earnings-per-share growth of almost 300% that you noted. As you said, they raised full-year outlook from mid to high single digit revenue growth to low double digit to mid-teen revenue growth, and year-over-year operating margin expansion, which again, both those things will compound to strong earnings-per-share growth. They intend to close 25% of their stores over the next five years as e-commerce continues to ramp, stock looks pretty good with only 15 times earnings.

Hill: Between the unveiling of its new electric truck and announcements made at its Investor Day event earlier this week, Ford Motor is the talk of the automotive industry. Here to share insights on that as well as the latest with Tesla self-driving cars and more, is veteran journalist, Paul Lienert. He covers automotive tech, innovation, strategy, and finance for Thomson Reuters. Paul, thanks so much for being here.

Paul Lienert: Chris, been a while since we talked. Glad to chat.

Hill: Lots to catch up on. I want to get to the new F-150 in a minute. But Ford Motor made a lot of announcements at the event they had on Wednesday. They are investing $30 billion in electric vehicles over the next four years. They expect by 2030, they're going to be somewhere in the neighborhood of 40% of their sales are going to be electric vehicles. I know you were covering the event. What is the biggest headline coming out of the event in terms of your thinking?

Lienert: Probably the biggest headline that I've seen involves either the $30 billion set of plans to spend through 2025 on electrifying its vehicles or that 40% of its global vehicle sales by 2030 will be EV. By the way, that includes 100% in Europe which it's already committed to. I think maybe a more important headline that I didn't see very many places was Ford CEO Jim Farley focusing, refocusing, and intentionally focusing on the commercial vehicle market. In Ford, I wouldn't say own side market, but boy, they have a stranglehold on it right now. That was part of its strategy with the electric F-150 was to aim it at commercial customers who are already heavy-duty buyers of the standard F-150, including some pretty fancy versions of it.

Hill: You and I have talked over the years about the leaders in this industry, CEOs like Elon Musk and Mary Barra, Alan Mulally. What is your take on Jim Farley? What should people know about him? Because I've just started to read a little bit about him. He seems like a very focused person.

Lienert: I've known Jim for a long time. I've known Jim since he was a young product planner at Toyota. He is a really smart guy. He knows cars inside out. He knows the car business inside out. He's a big thinker. Because I've had a running discussion with a friend of mine who's in the venture of the capital business the last couple of days about Ford, about Farley in particular. My friend was talking about Jim Hackett, who is Farley's immediate predecessor. I will tell you as much as I admire Jim Hackett and like some of his thinking. I think he found it difficult to articulate a plan or a vision or a strategy for Ford, in the wake of Alan Mulally, who did such a wonderful job of all of those things. I think with Jim Farley, Ford Motor Company now has a guy who has a vision, he's got a strategy, and he can articulate those and guess what? Wall Street loves it right now. Ford stock has shot up this week. To frame that, $30 billion that it's spending on electrification, its market cap is approaching $60 billion. Ford is talking essentially over the next four to five years, spending about half the value of the entire company on EVs.

Hill: Earlier this month they unveiled the F-150 Lightning, an all-electric truck. It's going to hit the road next spring. They've got more than 40,000 reservations for this thing in less than two days. What do you think of the truck and what does this do for Ford's business?

Lienert: You know what, Chris. They were really clever on a couple of fronts. They made the Lightning looking awful lot like the existing F-150, which has been America's best selling vehicle for more than three decades. So that's not a dumb thing. No. 2, it didn't do it from the ground up. At first, you had to wonder, why didn't they do that? Well, there were two huge reasons. One, it was a lot less expensive, but two, it gets them into the market a lot quicker. The Chevy Silverado EV, for instance, probably won't hit the street for maybe six to nine months after the Lightning does.

Hill: When are you going to get your hands on one of these things? I want to know what it feels like to be behind the wheel. Because I think the challenge with something like this is, as you said, this is an incredibly popular vehicle that they are modeling this after. The people that they are hoping are going to buy it are going to make the obvious comparison to the existing F-150. It has a lot to live up to, doesn't it?

Lienert: Well, it does and particularly with the work truck market. I mean, these are people who depend on these trucks for their jobs. That's a whole different market from, say the market at GM's aiming the Hummer EV at. At a price that's considerably less than the Hummer EV is going to come in at. These are fussy people, Ford knows what they need because it has an ongoing and very successful commercial vehicle business. It's equipped with the Lightning with the things that work truck owners want. We were laughing the other day when we were counting the number of power outlets on the Lightning. I want to say there were 10 or 11 of them and a friend of mine said, "Oh, my gosh, power outlets, it's going to be the new cup holders."

Hill: For all of the success that Tesla has had over the past decade, I think it's fair to say that the unveiling they had last year with their truck didn't go as well as they would have liked. What do you think they are thinking as they watch the F-150 Lightning get the attention that it's getting? What is your take on the state of Tesla these days?

Lienert: Tesla and Elon Musk are the source of constant conversation at my place, both at home and at work. I say I have a great deal of admiration and respect for Elon Musk and for his company. They have been in the vanguard pretty much for the last 10 years, the vanguard of vehicle electrification. I think there's still there with some of the advanced battery work they're doing. Elon blew people away with the Cybertruck. I'm anxious to see what the production version looks like and get in it and get a feel for it. There was a lot of teasing and you know how irreverent Elon can be. Under his subjects there was a lot of teasing for it a year ago. I give him credit this week, he sent out what it sounded like a very sincere congratulatory message to Ford for putting that truck out on the street. It's going to be really interesting. I suspect the audience for the Cybertruck is completely and totally different from the audience for the F-150 Lightning.

Hill: This is a space where there can be more than one winner, it sounds like.

Lienert: For now, the space has been pretty rock solid. It's worth several million vehicles a year in the United States. The F-150 alone sells somewhere around 900,000 vehicles a year. There is likely room for more and particularly for different and the Cybertruck is surely different, not just in looks, but the fact that it's all-electric. We will see, I think, the market for pure electric pickups, whether we're talking the Lightning, the Hummer, the Cybertruck, is untapped. None of the companies know. Everybody's being a little cautious, maybe Tesla less so than the other guys. We're going to see how many buyers are actually out there and how soon the market gets saturated if in fact it does get saturated.

Hill: Earlier this week, The New York Times had a piece entitled The Costly Pursuit of Self-Driving Cars. I'm curious where you think we are right now with self-driving cars because you and I have been talking for nearly a decade and it seems like I don't want to say we're as far as we've ever been away from the self-driving cars. Well, we're nearly a decade into this conversation and you look at a business like Waymo, you got the people from Google [Alphabet] working on this and they're still having the types of problems that nearly a decade ago we thought we'd be further than we are in this process.

Lienert: Correct on all points, Chris. I might point out, Google probably has dropped something like $10 billion just in its own pursuit of self-driving cars. I have a little bit of a different take on this. If you're talking about passenger cars only and whether it's robotaxis or self-driving cars that you and I might one day be able to buy. That is still probably as far away from reality as it was two or three years ago. I would say we're realizing we're probably 90% of the way there and the last 10% is insane. It's going to be ridiculously expensive. It's going to take a ridiculous amount of time, way longer than anybody thought. The flip side of that and this is something that we learned, I think during the pandemic is that perhaps the real market or the more immediate market is for self-driving trucks. I'm thinking specifically about commercial delivery vehicles. Anything from small shuttles that we've seen occasionally around to big over-the-road trucks. I am beginning to believe that self-driving trucks are going to hit the highways in increasing numbers long before we see many robotaxis on the road. Do you know why? I forgot the biggest reason is it's a revenue generator. Probably bigger revenue generators than robotaxis.

Hill: That's as good a reason as any to put your emphasis on where the money can be made. The biggest company out there is Apple and they've got the deepest pockets. Apple has blown hot and cold when it comes to the automotive industry. There are times over the past decade where it really seemed like they were working furiously behind the scenes to develop their version of a vehicle. Then you haven't heard anything for six months, 12 months. Is Apple going to enter the automotive market in the next five years?

Lienert: I'll answer that without trying to sound slide. They are in the automotive market right now, but in a different way, I think, than you're talking about. The question is whether they really will do the car that has been designed and shelved and redesigned and still does not have a green light as far as we know. We've talked to people who have worked for Apple. We've talked to people who have bid on various Apple projects involving the Apple Car. We have a good deal of intel out there about it and what they're thinking and how they're thinking. The current thinking has been a smallish electric car that's self-driving. Apple's assembled a pretty formidable team with talent in all these various areas including batteries and self-driving software and technology sensors. They're getting close to being ready to go, if and when Tim Cook ever decides to push that button. They know full well, simply from watching the experiences of Google and General Motors and Volkswagen and others, just how expensive a proposition is. Money isn't necessarily the object here. I think Apple's long game, Tim Cook long game, is not to sell cars, but it's to leverage the data it thinks it can get from those cars. Here's the rub, I think there's a good argument to be made that Apple can make perhaps nearly as much money from the data it's already begun harvesting from the devices we take in the cars and now it's beginning to get itself embedded in dashboards. If Apple can do more deals with more car companies to get itself more deeply embedded in dashboards, does it really need to do a car to make the kind of money it's made, for instance, off iPhone apps? Yeah, they make money on iPhones, but man do they make a lot of money on the apps too don't they.

Hill: They sure do. Last thing and then I'll let you go. I know you've been focused on Ford Motor this week because of their event but what's one more thing in the automotive world that you're keeping your eyes on throughout 2021.

Paul Lienert: I'm so glad you asked me that, Chris. I am captivated by the work that's going on, much of it behind the scenes and a lot it in the auto industry on aerial vehicles, electric, vertical take-off and landing vehicles, planes if you will, that are neither a conventional aircraft nor a helicopter but these things are being looked at for everything from hauling passengers to hauling cargo. It's going to be fun to see where GM and Toyota and other companies go with that and how soon they put them on the market.

Hill: It's one more reason I like talking to you, Paul, you managed to sell that without using the phrase flying cars.

Lienert: I was waiting for you.

Hill: If you want to know more about the automotive industry, it's pretty simple. Read Paul Lienert's stuff. Paul, it's been a busy week for you so I appreciate the time. Thanks for being here.

Paul Lienert: You're too kind. Thank you, Chris, take care. Good to talk.

Hill: Before we get to the radar stocks, a reminder, as always. If you are looking for more stock ideas, more recommendations, check out Stock Advisor. It is the flagship service here at The Motley Fool. You get stock recommendations every month, Best Buys Now and a lot more. Just go to radarstocks.fool.com. You get a 50% discount, not because it's memorial day weekend, it's not one of those sales. It's just because you are one of our dozens of listeners, that's why.

Gross: Awesome.

Hill: Jason Moser, you're up first. What are you looking at this week?

Moser: Yeah, digging into a new one for me. The company is called Elastic (NYSE: ESTC), ticker is ESTC. They provide software and services that enable users, or in this case, businesses to search through structured and unstructured data just to try to come up with what all that data ultimately means. Search for consumers, Google's got that nailed. The search for businesses, it's a little bit of a different value proposition there. That's what Elastic's focused on. Very nice subscription model that accounts for better than 90% of their revenue. Just recorded recently, 13,800 subscription customers, that is compared to 5,000 in 2018. That tells me that maybe they are doing something right. They see a total addressable market at $78 billion today for a company that generated $500 million in trailing 12-month revenue. Seems like there may be some opportunity on the horizon for the company and therefore investors.

Hill: Dan Boyd, our man behind the glass, do you have a question about Elastic?

Dan Boyd: Not really a question, Chris, more of a comment here. Jason's a smart guy and he brings great stocks to this show every week, week-in, week-out. You could depend on him. This Elastic company, probably a great company. But when I heard the word Elastic, I didn't think about Software-as-a-Service. I think about gym shorts, socks, not Software-as-a-Service.

Moser: I'm right there with you, Dan. You got to dig a little bit deeper.

Hill: Sounds like an implicit questioning of the brand. Ron Gross, what are you looking at this week?

Gross: I'm looking at the Toro Co (NYSE: TTC), TTC, a recent recommendation in our Total Income service. They design and manufacture professional and residential landscaping equipment. They're a leader in the residential professional landscaping market, solid track record growth, and market outperformance. They're making acquisitions, interestingly, in robotics and AI. They're tapping into the opportunity to shift the industry toward autonomous systems. Near-term tailwinds include 5G infrastructure investments that should bolster sales of equipment. They've increased their dividend for the last 17 years. We like that in Total Income. Current yields are just under 1%.

Hill: Dan, question about Toro?

Boyd: Absolutely. Well, not really a question. More of a comment again. Sorry, everyone. Last year I had to buy a new lawnmower because my old one had broken. I went to consumer reports to look at what the best lawnmower company is, and Toro was ranked as the highest.

Gross: Nice.

Boyd: For like a couple of years in a row also, but then I did a little more research and I realized that Toro, on their push mowers, uses Honda motors. I cut out a couple hundred dollars from my purchase and just bought a Honda instead with the same motor. Maybe not the same [...] of Toro, but a couple of extra hundred dollars cheaper and the same grass-cutting power.

Gross: A shrewd purchase, Dan. I can't argue with good shopping.

Hill: What do you want to add to your watch list, Dan?

Boyd: You know what, Chris, just because I saved a couple hundred dollars, doesn't mean it's not a good company. I'm going with Toro.

Gross: Nice.

Hill: Jason Moser, Ron Gross, guys, thanks for being here.

Gross: Thank you.

Moser: Thanks.

Hill: That's going to do it for this week's Motley Fool Money. The show is mixed by Dan Boyd, our producer is Mac Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Chris Hill owns shares of Amazon, Okta, and Walt Disney. Jason Moser owns shares of Amazon, Apple, Autodesk, and Walt Disney. Ron Gross owns shares of Amazon, Apple, Costco Wholesale, and Walt Disney. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Autodesk, Costco Wholesale, Elastic, Okta, Salesforce.com, Slack Technologies, Tesla, Ulta Beauty, and Walt Disney. The Motley Fool recommends Comcast, The Toro Company, and Williams-Sonoma and recommends the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.


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