Second-quarter earnings outcomes have been plagued by slumping gross sales and disappointing steering. Walmart threw that narrative on its head when it stated it was elevating gross sales steering for the remainder of the yr.
On this podcast, Motley Idiot contributors Tyler Crowe, Matt Frankel, and Jon Quast talk about:
- Walmart‘s secret sauce.
- Investing classes from Meta’s AI strategic adjustments.
- A smorgasboard of market information.
- Shares to observe.
- Chipotle drone supply?
- Cracker Barrel‘s rebranding.
- SPACs are again!
To catch full episodes of all The Motley Idiot’s free podcasts, take a look at our podcast middle. If you’re prepared to take a position, take a look at this prime 10 record of shares to purchase.
A full transcript is under.
This podcast was recorded on August 21, 2025.
Tyler Crowe: Walmart does one thing few retailers have performed this quarter and Meta adjustments its AI plan. That is Molly Idiot Cash. Welcome to Motley Idiot Cash. My identify’s Tyler Crowe. I am joined by longtime fools, Matt Frankel and Jon Quast. We now have a extremely fascinating present in the present day. We’ll speak about Meta’s type of altering AI technique, AI plan and the way they plan to spend and deal with that, in addition to have a look at a lightning spherical, we’ll name it a smattering of questions associated to some fascinating new tales world wide of investing that we discovered in the present day. However we need to begin off with our first section, which is speaking about Walmart’s earnings. Now, Walmart reported second quarter earnings earlier than the bell this morning and the corporate’s earnings have been barely decrease than analyst expectations. However not from the locations we might usually assume after we speak about retailers.
Administration famous issues like insurance coverage declare prices and authorized prices the place the explanation for decrease earnings, moderately than, I do not know, the factor that was on everybody else’s thoughts tariffs and the sentiment of the buyer. However I believe there was truly a much bigger theme that we need to hit on right here in the present day. Yesterday’s present we talked about targets, blah earnings and their gross sales steering together with different retailers, not likely wanting nice for the remainder of 2025 as they digest tariffs and the client sentiment. However then Walmart came visiting the off the highest rope in the present day and mainly elevated their gross sales steering for the remainder of the yr. Here is my query to each of you. What’s your opinion on why Walmart continues to thrive whereas so many different, we’ll name them traditionally profitable and good retailers, Goal, for instance, appear to be struggling on this present gross sales setting, even after a pair years of making an attempt to determine issues out submit COVID and the entire challenges that has created.
Jon Quast: Effectively, Tyler, I believe we now have a few issues happening right here. In the beginning is that Walmart is cheaper than Goal, typically talking. Now, to be honest, the costs are comparable however numerous third celebration reviews present that Walmart is mostly cheaper. That is a giant factor proper now within the economic system in 2025 with customers. They’re pulling again on spending when potential. Maybe you want Goal’s aesthetic higher, however in a pinch you are going to go to Walmart to save lots of a bit bit of cash. Now, I believe it is essential to ask why is Walmart cheaper, even simply marginally so? I believe one purpose and it is fairly massive is that Walmart solely sources a couple of third of its merchandise internationally, whereas Goal is believed to supply greater than half of its stock from abroad and particularly from China, that is a reasonably large marketplace for Goal. After we’re speaking about tariff stress, Goal’s going to really feel it a bit bit extra is subsequently a bit bit much less versatile on its pricing. Walmart has extra flexibility and might decrease costs and take market share and I believe that is what we’re seeing occur to a sure diploma.
Matt Frankel: I agree with Jon on every thing you simply stated. I might add that, customers have been reducing again on spending, particularly on discretionary gadgets and that was very true within the second quarter. Bear in mind, this was the Liberation Day quarter, after we have been at peak financial uncertainty for some time. Walmart has a protracted historical past of doing higher when customers turn into a bit extra value aware. For instance, lots of people do not realize if you have not been investing that lengthy, Walmart was the most effective performing S&P 500 inventory throughout 2008 when the monetary disaster was happening and for good purpose, its gross sales elevated. Their administration is reporting no noticeable change in shopper spending. I do not know if that is true throughout the economic system, but it surely’s at the very least true at Walmart, 4.6% comparable identical retailer gross sales development is spectacular, particularly contemplating Targets decline, so spectacular quarter.
Tyler Crowe: I need to get into that, too, as a result of it is not simply comp gross sales from its current shops. Clearly, Walmart is beginning to department out into another locations that almost all of us in all probability do not count on as a lot to be I might say, tangible drivers of the underside line, however they’re changing into large enough now that they are price desirous about by way of investing items of Walmart. Matt, I need to begin with you with omni channel, which is the flowery phrase that administration likes to make use of for e-commerce and issues like that. Do you see this as a key differentiator, particularly with this omni channel, grocery supply, all of that stuff, or is it only a good to have for Walmart proper now?
Matt Frankel: It is actually began to make a major distinction of their gross sales, as you simply stated. It is actually humorous how completely different retailers have been successful the omni channel race at completely different occasions. For those who had requested me, 5 years in the past when the pandemic first began, I might have stated Goal was the winner. They have been those who first made, the drive up parking areas you might cease and get your stuff at. They have been doing an incredible job of pivoting to omni channel retail. However Walmart has simply performed a implausible job of constructing out their omni channel, particularly in the case of groceries. My spouse and I want to go to Publix, however we get groceries delivered from Walmart as a result of it is simpler and cheaper. They’ve performed an incredible job of that and it is actually resonating with customers and I believe that the supply facet of it’s simply going to get larger.
Jon Quast: Matt, I need to leap in right here as effectively, speaking about Walmart and what it is performed with a few of these different digital companies. If you have a look at promoting, for instance, that is an over $4,000,000,000 enterprise for Walmart, that is big, it is excessive margin and there is one other driver as soon as once more. Possibly total, Walmart’s such an enormous enterprise it does not seem to be a lot, but it surely does present that little incremental enhance to the earnings and in order that does give it much more flexibility there once more, but on its pricing. I believe when you have a look at Goal, this is a chance undoubtedly, it is one thing that the corporate is targeted on. Look, when you’re an advertiser, you need to get in entrance of huge audiences and Goal continues to be a $100,000,000,000 enterprise so it is nonetheless a giant enterprise. Advertisers, I believe, want to get in entrance of that. Goal is constructing out its third celebration market, promoting advert slots on its web site. There is a chance right here for positive, however I believe Walmart is farther forward in its technique than Goal and in order that does give it a bit bit extra of a bonus.
Tyler Crowe: The one caveat I will go away with the entire dialogue with retailers in the present day was that this was the quarter that mainly ended June thirtieth and there was plenty of adjustments by way of the tariff regime, whether or not or not it’s China, whether or not or not it’s particular person merchandise and issues like that. There’s nonetheless plenty of uncertainty as as to if or how these are going to trickle down into customers, whether or not firms like Walmart or Goal are going to need to eat these as they begin to truly influence costs downstream. Whereas this was fascinating quarter from the buyer perspective, I am actually to see what comes on this third quarter as we begin to see a few of the impacts of tariff be a bit bit extra tangible than what they have been. Now, developing, we will speak about Meta’s AI hiring freeze and what that would imply for AI buyers.
Immediately’s theme is a bit bit about observe up questions from some discussions that I had yesterday on the present. We talked yesterday about Sam Altman’s quotes to media about AI being in a bubble and a few excessive flying AI shares which have been tumbling as of late in an increasing number of market chatter about, hey, are we in a bubble or one thing like that? However, had I identified this story from the Wall Road Journal that Meta was freezing its hiring at its AI division I believe we might have actually talked about it much more however that is what we’re right here in the present day to do is dive into this a bit bit extra. Based on the Wall Road Journal, Meta has frozen hiring at its AI divisions and goes via what they will name a company overhaul, a bit little bit of a restructuring. Now, I discover this information moderately placing, at the very least on the floor as a result of it looks like only a few weeks in the past, Meta was making an attempt to signal different folks, leaders within the AI area away from opponents with bonuses within the 9 figures. It was, we’re speaking about giant contracts for a few of the largest sports activities gamers on the market. It is onerous to fathom, for me, at the very least, to see a few of these numbers being tossed out. As a substitute of making an attempt to gaze into the AI crystal ball once more like we did yesterday, I need to get to each of your ideas extra particularly on Meta within the AI race. Round what might be, what I want to categorize a bit bit is we might name it erratic spending for Meta over the previous couple of yr and I do not simply imply about AI. It is spent a substantial sum of money on its digital actuality enterprise. I believe to date, I do not know who could be calling {that a} resounding success it appears to be a bit little bit of a battle. This AI spending trajectory, it appears like a bit little bit of a spend cease, once more, feels a bit erratic on the enterprise planning area. Does this information about Meta spending, hiring freeze change the way you view meta as an funding or the way it plans to assault the AI area?
Matt Frankel: For one factor, Fb is such a profitable platform and so worthwhile that the quantities of cash you are speaking about are comparatively small for the corporate. As a result of on one hand, Meta burn via billions of {dollars} on AI spending and Fb continues to be going to maintain the corporate actually worthwhile. However alternatively, the technique does appear to be rent as quick as you may. Don’t fret concerning the cash after which we’ll determine it out. From studying the article on this one of the vital placing issues to me is Meta’s dividing its AI personnel into 4 groups and one in all them is internally known as the TBD staff, that means to be decided, that means they do not actually have a transparent function but. I do assume the pause is a wholesome transfer. I do know I am the optimist of the three of us right here in the case of issues like this, I applaud the transfer if it leads to extra group and a clearer path, however it’s erratic. You are proper.
Jon Quast: The way in which that that is getting spun by many retailers is that perhaps Meta has some an issue and they also’re hitting paws they usually’re perhaps not spending anymore in the case of AI and that is merely not what is going on on. Meta PR is on the market in the present day clarifying what is going on on. They’re hitting pause simply to get organized, as Matt stated. Tyler, as you alluded, they’re saying that perhaps in some circumstances, they employed folks with a $100,000,000 signing bonus. Starbucks CEO Brian Niccol’s has one of many largest pay packages I’ve seen within the restaurant area and it is not even that. It is like 96 million someplace in there. Meta, simply to get these folks is spending an unimaginable sum of money, it is obtained the staff, but it surely must get organized now and develop its plan. That is what the pause is all about. I say, I agree with Matt, that is an incredible thought. Let’s get organized and let’s acquire our technique right here. I agree with Matt, as effectively. Metas earned the proper to throw gobs of cash at what it needs. It isn’t prefer it’s not rewarding shareholders. It is repurchasing shares, it is paying a dividend, web earnings is at an all time excessive. It’s giving again, it is not being stingy. On the identical time, when you’re an investor you do need it to not hoard its money, you need it to give you a giant concept that’s going to maneuver the needle for the enterprise. Now, clearly, you need to see a return on that funding in some unspecified time in the future and to your level, I do not assume we have seen that with the metaverse, I do not know if we are going to see that with the metaverse. You undoubtedly need to see that with AI, however I am not against the corporate spending generously to construct a giant technique.
Tyler Crowe: Very profitable companies. Do for to a sure diploma, have a bit bit extra leeway in the case of making massive bets and spending some huge cash as a result of, heck, when you make some huge cash, you bought to do one thing with it. However I believe between this story and yesterday’s dialogue that we had about AI bubbles there is a widespread thread I believe buyers ought to bear in mind as we begin to contextualize the AI world and investing in AI is that progress on this business and like so many different industries is not going to be solely exponential or go parabolic within the subsequent couple of years there shall be stumbles alongside the way in which. The challenges with a few of the latest iterations of ChatGPT and Llama is that progress will possible are available stepwise features the place we’ll see these breakthroughs after which in all probability lengthy intervals of flat or frustration as a result of the progress appears to get muted for some time. I believe that is going to be par for the course for this business for some time. However desirous about it from an investor’s standpoint and the tenants that Motley Idiot hidden gem investing has been for therefore lengthy, it is not nearly acumen of figuring out good concepts, it is also the temperament to hold onto them via the ups and downs. This implies each being prepared to carry on to companies you imagine in via tough patches and in addition setting targets and expectations, the shares wherein we make investments are cheap. I believe making an attempt to guess that that is going to 100 X the inventory in a few years goes to be unreasonable. I promise everybody on the market this isn’t going to be the final time that we speak concerning the trials and tribulations of AI as a result of it is an incredible story, it is enjoyable to observe and lots of people are going to care about it, but it surely’s not going to be linear. Typically it may look superior, typically it may look powerful. Having the ability to see via the quick time period challenges and holding nice companies over the long run is likely one of the benefits that we particular person buyers have over the institutional world and we have to use that benefit properly. With that, we will go on to a fast lightning spherical after the break.
We’re going to get into a bit little bit of a lightning spherical quick tales. Some fascinating little nuggets that we noticed within the information not too long ago that relate to plenty of firms we love to speak about and greater than something, they’re enjoyable. We need to hit a complete bunch of various matters and get some fast reactions to it. The primary one was, Chipotle is definitely seeking to get into drone supply. Matt, you introduced this to the desk. It was mainly the concept that they are going to be testing drone supply of Chipotle within the Dallas Metro space, the thesis being, hey, if we will do drone supply we will in all probability truly facilitate higher supply from fewer kitchens, which might clearly assist with effectivity. I will ask you each actually fast questions right here. Chipotle drone supply, is that this going to make you extra more likely to order in your space?
Jon Quast: Look, Tyler, I come from a farming/blue collar household in Buffalo, New York. We worth onerous work. This simply feels actually lazy to get a burrito delivered to me by drone. No, I cannot be ordering, I am no more more likely to order due to this.
Matt Frankel: It relies upon. For me, it is not about being lazy or not it is about effectivity. Particularly if they will determine tips on how to get the drone via my third flooring window right here so I do not even need to go downstairs it may well simply convey me lunch. However this does really feel like an fascinating transfer within the submit Brian Niccol period.
Tyler Crowe: Zipline is the corporate that they are partnering with and if you have not checked out Zipline, this is likely one of the cooler personal firms on the market doing a little actually nice work in Rwanda with some blood supply to some distant outposts. Positively test them out and study extra about it. All the time good tales out of typically essentially the most critical tales. On market reactions, I believe all of us bear in mind the SPAC increase of 2021. Effectively, I believe we’re making an attempt to get one other model of that. What will we name that? A SPAC aftershock after the primary earthquake? Chamath Palihapitiya, God, I hope I pronounced that proper, is seeking to begin up the SPAC sport once more with a latest clean test firm with the thought of investing in American exceptionalism. By no means blame the man for advertising as a result of that appears to be one factor he does extraordinarily effectively. The fast query for each of you, what’s one lesson you realized from the 2021 SPAC increase bust interval that we had that you just need to carry into maybe the following model of a SPAC increase?
Matt Frankel: I might say, for me, the large lesson is do not imagine any projections you learn. Not like conventional IPOs, when SPACs file with the SEC they’re allowed to make projections, even utterly outlandish ones to buyers. Do not be caught up in that, consider the enterprise by itself deserves.
Jon Quast: For me, I might encourage buyers to undoubtedly take a look at what number of shares are being offered to retail buyers and what number of shares are being held again for insiders and for pipe buyers, as a result of plenty of occasions up to now it was only a few shares going out to the retail buyers. This created all provide and demand points after which insiders and the pipe buyers dumped when the share value spiked. You undoubtedly want to know the incentives behind the SPAC that you just’re investing in as a result of plenty of occasions these incentives aren’t aligned with retail buyers.
Tyler Crowe: Then the final one, Jon, this was for you as a result of I imagine you’ve got a bit bit extra of a private reference to Cracker Barrel. However there was fairly a little bit of lower than hospitable response to Cracker Barrels, we’ll name it redesign or advertising push. Look, I’ve by no means been to a cracker barrel, there weren’t precisely many the place I grew up. Someone who work there, I do need to ask, what do I must get the primary time I’m going to a cracker barrel?
Jon Quast: I labored there proper out of highschool. What I often obtained was the biscuits and gravy as a result of it was low cost on the menu and I actually do like biscuits and gravy. I just like the hen fried steak once I’m there that is all the time a winner for me. So far as the rebrand goes, I believe that Cracker Barrel could be barking up the fallacious tree. I do not see their largest downside as being a buyer loyalty downside, a restaurant visitors downside. There’s a little little bit of a difficulty there, however I do not assume that is its largest downside. I believe its largest downside is in retailer operations and people earnings that associate with that. Proper now it is utterly redesigning its shops, utterly redesigning its aesthetic. I get it. The entire nation kitchen thought it is stylish, it might work effectively, however I believe that what Cracker Barrel’s doing is risking alienating its loyal buyer base and that’s one factor it may well’t afford to lose. I might have appreciated them to focus extra on the menu and the kitchen and tips on how to drive extra earnings out of their retailer earlier than they checked out actually a significant overhaul within the branding.
Tyler Crowe: We’ll get out of right here. However earlier than we go, good solution to wrap up the week. Let’s do three shares on our radar, Matt, you go first.
Matt Frankel: I am Trex, T-R-E-X. It is down fairly massive after earnings, however as rates of interest hopefully fall over the following two to a few years and individuals are extra snug with utilizing their residence fairness to faucet it to fund massive initiatives it might get a significant development tail one so that is what I am this week.
Tyler Crowe: I will cheat a bit bit as a result of I am taking the host chair and I will invoke host privileges in doing that. As a substitute of a single inventory I will say I am small regional banks. There may be this handful of banks within the lower than $1,000,000,000 market cap vary which might be all buying and selling effectively under their tangible ebook worth when nationwide and tremendous regional banks, just like the DP Morgans of the world, are buying and selling at fairly dimension ready premiums. Now, most of them haven’t got the extra features, like wealth administration, like these massive ones do and mortgage books are extra associated to the communities they serve. However I believe credit score high quality has been excellent nationally to date and comparatively stable. It isn’t as if we’re speaking about compromised mortgage books right here. I believe there is a compelling pocket of worth in these very small, underserved, below coated space of the banking business. Jon, what it is on in your radar?
Jon Quast: I am Tripadvisor, ticker image TRIP. To be sincere, I do not actually care concerning the Tripadvisor model. The corporate truly owns a number of manufacturers, together with a model known as Viator. Viator is a bookings and expertise platform and it’s truly doing very well and lots of people do not realize it is there simply buried within the firm. It is generated over about 900 million in trailing 12 month income at a 90% gross margin. It is rising at a double digit price. I believe if it was a stand-alone firm it could truthfully be price someplace round 5 occasions gross sales, at the very least. You are a 4.5 billion greenback market cap. For perspective, Tripadvisor is price lower than two billion. I might say that this firm is considerably undervalued. I might assume in some unspecified time in the future, Tripadvisor goes to spin out by way of tour and create shareholder worth that means so I am fairly on this firm.
Tyler Crowe: Couple enjoyable concepts whereas everybody’s desirous about shares going into the weekend and definitely away from the large themes of AI and every thing else we’re speaking about. I need to thank Matt, Jon, thanks for becoming a member of me in the present day and sharing our ideas on all of these items. I will hit the disclosure and we will get out of right here. As all the time, folks on this system might have curiosity within the shares they speak about and the Motley Idiot might have formal suggestions for or towards so do not buy shares primarily based solely on what you hear. All private finance content material follows Motley Idiot Editorial requirements and isn’t accredited by advertisers. Ads are sponsored content material and offered for informational functions solely. To see our full promoting disclosure, please take a look at the present goes. For producer Dan Boyd and the remainder of the staff at Molly Fold Cash, I am Tyler Crowe. Thanks for listening and we’ll chat once more quickly.
