Watch our Earnings Recap on Home Depot, Intuit, Workday, Cava Group, Instacart and more

Thanks for joining me, everybody. We are going to get started. I'm excited to talk about a few stocks today, several stocks. Why don't we go with, uh, one we've been warning about since, I think, the, the IPO? Yeah, here we go. We wrote about this before the IPO. We said to avoid this stock. I think it has done nothing but mostly go up. I think since I— let's go max. Yeah, it's still up, but today it got crushed. The last couple days it got crushed. Why is that? Because quite frankly, it's earnings duration score miss, and you've got, look, a lot of red here. You guys have been with me before and you know the red and orange is bad across the board. It's part of why it's in our focus list short. This is a bad company and a bad stock. If we were to open a model on this and try to look at some implied scenarios here, I think I've got one here going already. So these are the implied values for this optimistic scenario. Just keep one line in here so it's all the same. And it shows that to justify the current stock price, this business has got to grow about 10% compounded annually for 30 years. While dramatically improving its profitability. That's going from a negative 104% return on invested capital spread to a 37%. That's pretty huge. So let's see exactly what that means in terms of revenue and where that would put it compared to the S&P 500. Let's see here. We go down here and we look at the implied revenue. That's going to be at $48.5 billion. And versus the S&P, we will sort by revenue. $48.5 billion total revenue, sort by largest to smallest. $48.5 billion in revenue would put These guys around 83rd in the S&P. That's bigger than Coca-Cola, more than Nike, Broadcom, Deere, Cisco, Intel, Capital One, Tyson Foods. That's probably not going to happen. At the same time, the return on invested capital has got to go up to 83% compared to where it's been in the past. Said one good year here at 33%, but it's mostly been way down. Not surprised. So an 83% return on invested capital would put them ranked 7th in the S&P 500. So yeah, I think this is extremely high expectations for this stock. And so we're not surprised to see, you know, a soft earnings report. Q4 sales disappoints, profit outlook misses views, bad news all around. This thing's going to get crushed. I think it's going to continue to get crushed as we wrote in our pre-IPO report. This is a really tough business to be in. I think there's just, it's too competitive. I mean, this is sort of like what we see DoorDash. They're really boxed in. Like at the end of the day, if this becomes a profitable business, then the owners, the restaurants or the grocery stores, they're gonna wanna own it. They're gonna wanna own that experience. They don't wanna outsource it to somebody. We all saw that movie about Roaring Kitty where his brother was a food delivery guy and he was eating the food and drinking the drinks and stuff. Like you just don't, you know, I mean, That's a, that's an experience you're gonna want to own. Just like with what Amazon does. With Whole Foods, you got their people getting the food and delivering it to people. How much money you really gonna make delivering groceries? And how much can you scale it? Domino's Pizza, they got stores and they got franchise. They've got all this stuff to make money on this concept. Just paying people to go put groceries in a cart and then deliver it. Come on, man. It's not gonna work. The stock's way overpriced. We would avoid it, and we think you're going to see and continue to feel a lot of pain. Let's talk about a big-name stock. Home Depot came out yesterday. I believe they did pretty well, but it was a little soft on the outlook. And that stock is one that, you know, look, we want to love Home Depot, man. I want to love Home Depot, but the stock has just been too expensive for too long. We've taken a look at it a few times. I wonder, honestly, I think at some point maybe we were pretty bullish on it way back here, temp, several years ago. It has such a high return on invested capital, but you can see this is a classic good company, bad stock because of how expensive the valuation is here. You've got a, you know, you got the valuation that implies, you know, profits are going to be 280% greater than where they are today. The market implied growth appreciation period is more than 100 years. Look, again, great company, and it's probably going to make a lot of money. Is it going to make as much money as what's implied in the stock price? Probably not, right? So, so this earnings outlook is a foreshadowing. And by the way, I want to point out that for both Maple Bear, Instacart, whatever you want to call it, and The Home Depot, we had an earnings distortion score miss. We were warning you, and what happened? They missed. And again, whether it's the actual numbers or the foreshadowed numbers, at the end of the day, it's management admitting the numbers aren't as good as you think. That's what we're seeing here with Home Depot earnings distortion. You see a separation begin to occur between reported and GAAP earnings. Reported earnings getting better as a percentage of assets—that's a material number. Earnings distortion going up. Not good, right? And so it's an expensive stock. So you're going to see this get hammered pretty good. Not as much as some other stocks, not as bad as Instacart or some of these other super high valuation stocks. But still, you know, Home Depot is sort of a core holding. They love it. It's a good solid business. They've done a great job, really well run, great company, bad stock. And that's why we just haven't had the desire to make this one of our own picks, even though we love the business, everything about it. Really well positioned. It's just that's all priced in. Crowded trades, my friends. If you don't want to be in crowded trades, you need to get in our Super Stock Bundle 2.0. That's where we are going to where the puck is with respect to the market. That's how you make money in this world. You work harder, you do more diligence, you create an advantage for yourself, and then you make decisions that are anticipating where the market's going to go, not jumping into crowded trades. Again, I don't believe in crowded trades. Go somewhere else. New Constructs is going to give you information you can't get anywhere else. I'm here to give a real advantage. I'm not a hype guy. I'm not going to sell you meme stocks or NFTs or meme coins or anything like that. I recommend you turn and run for people who try to do that to you. The New Constructs we can hand on heart give you superior information and insight. That's what we're doing. All right, let's take another look here. Intuit, good company, bad stock. Same exact situation. What happened with Intuit today? Nice jump here. Down a little bit yesterday, up mostly yesterday. 5 days up 8%. Today up pretty big, 13%. That's a good number. Strong quarter results and reiterates guidance. So Intuit strong. We are about to get a new 10-Q any day now. And yeah, I don't really know what to say except, you know, it's a good company. It's got expensive valuation. it's become a very crowded trade. Let's take a look here about how— yeah, you can see accounting earnings doing, looking better. I don't like this divergence. Economic earnings are still strong, by the way. It's so rare that we see strong economic earnings that this gets a good grade. The one thing our, our rating system does not capture or really highlight enough is when economic earnings are greater than accounting earnings. That's like a super signal. That's a big part of what drives some of our top stock picks. Our top stock pick for 2025, that's in the Super Stock Bundle 2.0. Those are stocks that get— that have the benefit of both an overall attractive or very attractive rating and economic earnings greater than accounting earnings. Super rare. And when it does, we think you got to back up the truck. So that's a super powerful signal. And into it not looking so great. I mean, returns have been even better, Now they've come down a ton, a ton. You got them pretty, pretty close to whack here. Not as much of a spread as before. Margins down, capital turns down, free cash flow. What's that look like? Pretty good. I think there's a big acquisition here during this period. Otherwise, free cash flow is pretty good. It's a pretty low yield. I think I mentioned to you all that a free cash flow yield above 10% is something that really gets us excited. And then here, this is not looking good. Economic book value has been stuck around $100 a share or below, and the stock price just keeps going up. So yeah, it's been an expensive stock for a while. This is not something that our system says looks good. Let's see here. We get people double voting here on the list or just counting votes? No, that's okay. Those are independent votes. Good, good. Check in the chat. I got a good question here. It says, David, you seem to be down on the gig economy platforms in general. Do you envision a scenario in which they could be profitable? Not many, no. And, and look, I'm not down on any kind of business. I just honestly, I believe in math and I believe in the numbers. And I feel comfortable because when I can, with a click of The mouse or typing, you know, the speed I can type in a ticker. What's another gig stock we can take a look at? I just don't believe that the stocks, when they're this unprofitable— I'm not saying they won't ever be profitable because Uber did make it to profitability. They do have positive economic earnings, but it's— I'm telling you, it's more than all priced in. And I think so many of these gig businesses have no moat. They were sold because they were gig businesses and they were hyped up by Wall Street. That was a hype phase back in 2019, 20, I think. I can't remember exactly when, but you know, it, it culminated with Workday, kind of like the ultimate gig stock. And that was like one of the worst attempted IPOs of all time. So bad it didn't even make it through. And by the way, we were the first to, to call that one out. We called it the most ridiculous IPO of 2019. You can Google that and you'll see. We were early on telling people to avoid that. So I'm not saying that these aren't great products, right? To your point, Carl, great product. I use this stuff all the time and it's better than a taxi. Now, taxi service has gotten a lot better, but again, to be clear that the difference between the value that, that ends up going to the consumer versus the shareholder, you know, that's what happened with the internet. Everyone thought, oh, internet companies, oh, blah, blah, billions and billions of dollars. Most of that value was effectively almost immediately accrued to consumers and to very few companies. Same is true with the car business. There were like 25 different automobile startups back when the automobile started being made. Now we're down to a handful. Why? Most of the value accrued to the consumer. That's what technological innovation does. We don't see television companies anymore. You know, television was a major technological achievement. We don't see radio companies anymore. Right? Major technological achievement. All that value accrued to the consumer and everything else is commoditized. Commoditized. They have a business that specializes in TVs or radios, right? Unless it's some super specialty kind of TV or radio, commoditized, right? Giving people a ride in a car, that's a commodity. Nothing you can do that's special about that. And if you do want to make it special, you got to charge a lot more and then it's got to be non-commoditized. In which case you're charging enough to afford that differentiation. You, you gotta get that differentiation paid for. And even then, it's kind of tough if your differentiation is having a nice car. Be hard for you to make money on that. So for me, it, it all comes down to, let's be real, let's be honest, let's be smart. Let's look at stuff based on numbers and then speak candidly about whether or not those numbers are achievable. So with Uber, if you're talking about going from an 11% return on capital to whatever it takes to achieve the stock price while also growing at a huge amount, I'm just saying I'm not buying that. Just like I'm going to say I'm not buying this for Carte. I'm not buying that they're going to go to an 80% return on invested capital while growing revenues at 10% compounded annually for 30 years. All right. So I just think it's about being honest. It's about being honest about how businesses work. And by the way, Wall Street's not going to be honest with you about that because they make too much money. And few people know better than I do because I was on Wall Street during the tech bubble, before, during, and after, at Credit Suisse, the number one tech IPO firm on Wall Street during the tech bubble. I saw from the inside the rot, the moral bankruptcy of the analysts when it came to writing about these internet IPO stocks. They threw integrity out of the window. They threw analytics out of the window because guess what? The analytics wouldn't support it. They had to throw the analytics— they had to throw the numbers out of the window because if they looked at the numbers, they— it didn't help, made them feel more guilty. So that's how I feel about those kinds of stocks. Similarly, let's look at First Solar. Now, good to see that this has gotten profitable. That's a definite improvement. Let's look at returns on capital over time. Let's see, economic earnings coming up, return on capital. Yeah, coming up quite a bit. It's been pretty low. I think you look at the whole history, it was a lot lower, but now you're getting up here, 11 points. That's not bad. But a lot of this is priced in, my friends. A lot of it is priced in. So again, crowded trades. You want to go to where the market has not already figured it out. You know, especially we're dealing in markets today for the last week or so, it's volatile and there's more bad news every day. The bloom is coming off the rose. Tesla's lost a quarter of its market cap. Their sales were down 30-plus percent in Europe when EV sales overall were up 30-plus percent. It's going in the opposite direction. People are finally realizing, oh my God, these super overpriced gig companies, they're not so great. Well, I want you to know there's a lot of risk in those stocks. They got a long way to go. Now, First Solar with a 1.3 price to economic book value, not that bad. What happened here with First Solar with earnings? Up a lot today. They had a good call. Over the last 2 days, down. I guess it was down a lot, bouncing back today. Not enough to compensate for how much it went down. But revenue beat, challenges ahead. Surprise, surprise. How many publicly traded roofing companies do you know of? Solar panel roofing is not going to be that much different than traditional roofing, assuming it gets adopted, right? So, you know, publicly traded roofing companies don't really exist because guess what? There's no differentiation. There's no profitability. There's no scale in it. And so I think the same thing is true for First Solar. for solar. Creating solar panels has mostly been a government subsidy business. Unless they have some magic technology, not going to make a difference. If you were trying to pitch me on a technology company that was going to create a better technology for solar panels, I would say that's interesting, a lot of growth potential there, but not in a company that's just producing something that's going to eventually be mass-produced. So not impressed. Again, decent company. Not such a great stock. What's free cash flow like? I think these are pretty capital intensive. So even if return on capital is looking pretty good, free cash flow is pretty bad. Yeah, look, not making any real money, friends. This is not sustainable forever. Negative free cash flow keeps staying negative. Not good, not good long term. So not quite as good a business. It just means they're capitalizing potentially a lot of costs, capitalizing a lot of costs. And so you That's the first thing I always like to do is just make sure the balance sheet's not hiding stuff. And in this situation, I think the balance sheet's hiding some bad stuff. And yeah, free cash flow to debt, not good. Could be worse. I think the business has gotten better. Alrighty. If you guys aren't familiar with our community, I highly recommend you check it out. It's free to join. Let me drop a link into the chat here for how to get in the community. Just fill out this form. And you get in there. I mention it because we got a lot of great comments, especially this guy John, for shorting as well as option strategies. So look, there's a million ways to use superior data. My favorite way is to create a better rating system and better models and better signals. Those signals can be used and leveraged to create all kinds of value— option strategies, shorting, long strategies, all kinds of stuff. We've got a lot of great posts. There's even a post in here about how to get the most outta your Stock Tracker 50 membership for people who are looking to talk about how good our stuff is. And this is a community-driven thing. You see a few comments from me, but mostly it's community members. I recommend taking a look. Some good stuff in here. A lot of stuff going on. All right, let's get to the rest of our list. Let's see, who have we not done? Let's take a look at COP. We've got a lot of requests for tickers in here today, so let me get on it. Kava, not a good company, not a good stock. Oh my gosh, 111.5. This stock's valuation is so nuts. Let's see what's going on here with this. Yeah, I created an optimistic scenario a while ago and, and it wasn't good enough. So let's go with 30, 30, 30, 30, 30. 30 for 15 years, 30 for 20 years. And restaurant margins, look, friends, they're just not that high. I mean, they've never had a positive margin. I mean, restaurant margin, best case, Chipotle. Let's go look at what Chipotle's margin is. CMG, best margin, one of the best margin restaurant businesses. Let's see, their margin is 14.9%, NOPAT margin. Impressive. Okay, so let's go. Let's give awesome revenue growth and awesome margins, like best-case scenario margins. Let's see how these 2 scenarios play out. Let's actually do a little bit of a skip. Actually, all right. So 16 years of 30% compound annual revenue growth, and you see return on capital rise up return on capital versus cost of capital spread rise to 10.2%. So that's 30% compounded annual revenue growth for 16 years, assuming they get to the— to Chipotle margins immediately. And that's probably way too optimistic. So let's say they're going to get there. Let's say over the next 3 years. So we're going to go 7, 10, 12, and then 15. Let's see what that shows us with respect to how long they got to grow at 30% compounded annually. And folks, I think we're just being kind of realistic here, right? I mean, better than realistic, but it— but what I mean by realistic is that we're looking— we're doing a no-frills, unbiased take on, okay, 16 years doesn't matter. Doesn't matter whether or not the margins get that high that soon or not. Still takes 16 years. So Revenue will go hockey stick. I mean, it's practically zero here, and then it's going to go from what it is now up to $48.5 billion. Didn't we just look at this a minute ago? We looked at the stats for the S&P. That was around where what we saw for Maplecart or Maple Bear Instacart. That's assuming that Cava is going to be bigger than Nike, Bristol Myers, Coca-Cola. Dow, US Bancorp, Best Buy, Uber, Abbott Laboratories. You know, is there, is there a restaurant anywhere in here? Anyway, you get the idea. While also seeing profits go, you know, margins skyrocket. So no cost advantage. Anyway, you get the idea. This is an extremely expensive stock. Can't say that we would recommend anyone buy this. Would not. So I, I would avoid. Look, you know, my kids actually love Cava. I've never been. We've got a lot of great places near us. And so I can't say it's a bad product, but what I can say is that however good it might be, it's all priced in. I'd love to actually do an analysis on the market share comparison. We're seeing pretty good trends. I bet free cash flow is really bad. Yeah. Negative, negative, negative. I know they're growing the store base, but it's just Yeah, it's up there with Sweetgreen. Not a big fan of that one either. John knows. John, we got some veterans here who know us all too well. All right, what haven't we covered? Workday. Excited to cover this because it's been a request. Workday strong miss. What happened with Workday? We should probably let John run this one because he probably knows more about Workday and what happened the last few days than I do. I think it had a good report and is up a fair amount. Beats estimates for revenue and the stock jumps. Yeah, this is one that we've kind of called out as expensive, put in the danger zone a long time ago. The business model's not that strong, and yet the valuation is super high. They don't have a really differentiated product. Workplace and, and task management stuff is just not that— it's not a big deal. It's not a big deal. Everybody uses it. It's a commodity. I think at new— I know new constructs, we use Asana. We love it. It's awesome. So cheap and it's amazing. This stuff is going to become such a commodity. It's going to be like signage in an office building. It's going to be like a PC. Like there's just no margin in it. It's going to be like desks. Once you start running your business on this stuff, there's just sort of no way to go back. We've been doing it since the almost inception of New Constructs. We started with Bugzilla and then we moved to Asana. It's amazing. It's amazing. It's amazing for everything, for planning, for management, for accountability, and everyone's going to have it. And there's no differentiation here. This thing is priced to probably have like 70%, 80% market share to justify this valuation. So I'd watch out for that. I'd avoid it. All right, so we got a bunch of votes in here. I'm seeing some double votes on 3 stocks. Let's take a shot getting through 3 of these. I can't wait for tomorrow, by the way, and to be able to talk about Nvidia. That's an exciting one. If you guys have not seen our research on Nvidia, you need to, you need to make that happen soon because that's some good analysis on why the stock is too expensive. This is a good one, the SteepSeek report. Take a look at that. I believe that's free. And then, and that'll have a link to the Nvidia report that we've done. My secret weapon for calling the top in Nvidia. Yeah, this is just, I think, you know, what we end up showing is back when it was down this low, the stock price implied the revenue was going to be— here's the revenue— going to get up over $1 trillion, even in this fast-growing, more profitable scenario, $1.3 trillion. That puts it like at number 7 or 8 in the world in terms of GDP. Nutty, nutty. Okay, let's get, let's get back to business here. We want to look at TSMC. Good company, not as good a stock. That's pretty expensive. I wouldn't— this wouldn't make it into consideration for our long model portfolio, not even close. 280% improvement in profitability, that's a big number. And this is a pretty competitive industry too. So I'm not seeing a lot there. What happened? Did they report today? Is this why you guys are asking? Down a little bit in the last couple of days. There was 2 others. These were requested twice. I like Hershey's. You know, it's in both of our dividend portfolios. Nice significant dividend, strong free cash flow, profitable business. Look how close economic earnings are to accounting earnings. It's really high. That's impressive. And cheap valuation. Stock prices implying profits will permanently decline by 10%. This used to be a focus list stock. I think we got out of it a little bit while ago. I wonder how much we missed. It got expensive. It's cheap again. Worth considering. We just got a new 10-K, so this data is fresh. You're getting good stuff here. This is a fresh stock. This looks good. I wouldn't get in your way if you said you wanted to buy that stock. Let's see here. Upgraded from very unattractive. Wow, that's a huge flip. That rarely happens. Look at that. That's a flip. So we must have seen a pretty big jump here in profits. Interesting. What happened to this stock? It's up. Not so good. Looks like the market hasn't picked up on this. I will tell you that when all the, like, super nerds, Harvard Business School and all these quant folks were studying our data. They did say that there was a 2-week window on average consistently before the market picked up on— before the market picked up on changes in this company. Look, this was even in the Most Dangerous Stocks model portfolio last month. Interesting. A new 10-K dramatically changed things. That's pretty nutty. I haven't seen that happen before. That's a major— we're going from 5.9 to 63.6. I'm going to have to take another look at this model. Let's take a look here. I'm curious, do we see just like a major change in the business income statement-wise? Yeah. Let's see here. Revenue up a little, cost of revenue the same, same gross margin, foreign currency. Earnings before taxes doubled, operating profit more than doubled. So you net out this interest stuff. So this is like a triple. So yeah, looks like things just got a lot better for this business. Interesting. I don't think I've ever seen a stock flip from most dangerous to this before. So yeah, interesting window of opportunity. I've never seen green in this, so it'll be coming off the list. Strong miss. I would say this is probably not that bad. It's good to know that core earnings didn't stay flat and accounting earnings just went up by themselves. Yes, they're up a little bit more, but you see a huge improvement in core earnings too. Unbelievable. Wow. Well, I think you guys got a gift today. Whoever asked for that stock just tipped off everybody that's on this call to potentially one of the best investments in 2025. That's an impressive change. Impressive change. All right, I'm gonna look for any last questions. We got a couple more of these this week. If you're interested in the Super Stock Bundle, let me drop that into the chat here for you. That's the best— that's our top stock picks for the year. That's a very, very rare combination of stocks where you've got economic earnings greater than accounting earnings and A very attractive rating. Let me jump on here about another something really, really cool thing I actually noticed that I meant to share. I forgot. If you want to know how good our ratings do, take a look at this Very Attractive Stocks Fund that Bloomberg put together. This is an index that does nothing but track our very attractive stocks. It's a potential fund. It's not a fund yet. It's just an index. But Bloomberg's doing this because they want it to turn into an ETF. But it just, it says we're going to create a fund based on new constructs, very attractive stocks. If you're not happy with how the S&P's done this year, check this out. Very attractive stocks are crushing the S&P 500, right? Up 5.2%. The S&P is just up 1.45%, right, year to date. So if you think our very attractive stocks do well by themselves, think about how well they can do when you also combine it with economic earnings greater than accounting earnings. That does not happen very often. One of the original stocks that had economic earnings greater than accounting earnings was Domino's Pizza. We noticed it years ago. That stock has been one of the top performers. Warren Buffett's just now jumping in. Now it's not a super stock anymore because it doesn't have an attractive or very attractive rating. But when we combine very attractive rating and economic earnings greater than accounting earnings, that's a super stock. Super stock because it goes beyond even what our ratings do. And the reason I didn't have it in there before is because honestly it was too rare a thing to happen. Economic earnings greater than accounting earnings is so rare we couldn't build it into a stock rating system because just too few companies would qualify. But for the purposes of like really identifying great stock picks and special bundles like we are, it's terrific. So yeah, very attractive stocks. Index doing extremely well. Proof is in performance. Add in economic earnings greater than accounting earnings and you've got something really special. So wanted to share that. I hope you guys have a great day. I'll see you tomorrow when we get to talk about Nvidia earnings coming out right now. Get ahead. Thank you, and we'll see you tomorrow.