Earnings Anticipation: The Fools Cant Wait to Hear From Visa, Mastercard, Snap and Chipotle
In this segment from the Market Foolery podcast, host Chris Hill asks whatMillion Dollar Portfolio's Jason Moser and Stock Advisor Canada's Taylor Muckerman are most looking forward to. For Muckerman, it's a tie between credit card giants Visa (NYSE: V)and MasterCard(NYSE: MA), both of which could be in for big gains thanks to a political push toward electronic transactions in India. For Moser, while he's curious to see how Snap(NYSE: SNAP) is maturing, his real interest is in Chipotle Mexican Grill(NYSE: CMG)and its recovery from its E. Coli troubles and the advancement of its push for clean food.
A full transcript follows the video.
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This video was recorded on April 17, 2017.
Chris Hill: Let'sget to an earnings preview, andall the public companies that are out there. Taylor, I'llstart with you. What is a company that you're curious to see their results, either forgood reasons or for bad? We'll get to who needs a hit in a few minutes. But, in terms of, "Ireally don't know what's going to happen with their next report," what's a company that you're looking at?
Taylor Muckerman: I'm going with a tandem, Visa and MasterCard, becauseIndia, when it hadstripped out two thirds of thephysical currency in their circulation, about six months ago. We sawa little bit of an impact in the fourth quarter of 2016. Digital payments way up in India. Butdigital card payments, not so much. So,I'm interested to see how Visa and MasterCard are going to address this issue,because this market is potentially huge, with only about 2% oftransactions taking place non-cash. You're looking at thegovernment trying to hit 25 billionnon-cash transactions fromMarch of this year to March of next year. Toput that into a little bit of perspective,Americans average about 8.6 billion non-cash transactions per month. So,India is still way behind, but they'retrying to get more point of sale terminals out there to more rural areas, to increase theavailability for non-cash transactions in India. AndVisa and MasterCard are currently lobbying the government,because the government is coming out with government-sponsored ways to pay without cash, anda lot of these are bypassing cards, they'reusing QR codes, ortrying to use fingerprint identification. So,Visa and MasterCard aremaybe starting to get a little worried about a market that they probably bet a lot of their future on with over a billion people in India, and the dearth of non-cash transactions. Big part of their future plans, up to about six months ago, and now they'reprobably wondering how the heck they're going to really attract this market without thegovernment getting involved.
Hill: That'sinteresting to see. Those are twocompanies, kind of likeHome DepotandLowe's, thattend to track one another in terms of their results. They're not identical, of course. But they do tend to move in the same direction.I like that you're doubling down,because it basically doubles the chances that India is going to come up on the conference calls.
Muckerman: I would hope so. It's only six months removed,and like I said, you have seen the original bump was todebit and credit cards. But now, starting 2017, non-card payments without cash have really taken the lead, and that's because the government has stepped in and provided different options for Indians to use outside of yourtraditional debit or credit card.
Hill: Jason,what about you?
Jason Moser: I think I'll go ahead and say,with honorable mention here,I'm going to be very interested to see what Snap looks likewhen they release their earnings.
Hill: Snap is the honorable mention?
Moser: Yeah,that's the honorable mention. I'm not expecting big things. I think, probably ...it's hard to believe thatthese guys can paint any kind of growth story of aFacebook-esqueproportion. The market would have you believe that today. I just can't help but wonder if maybe they're going to have to figure out a way to wrap a bow around some questionable growth prospects there. So,that'll be interesting, to see their first call, how they present themselves,what kind of metrics they use and whatnot.
Muckerman: Also tied to India, though,I guess the CEO of Snaphas called the whole country of India poor, and he'staking some heat for that.
Moser: Yeah,I feel like he's probably made life a little bit more difficultfor himself then he really needed to. He justdoesn't seem to quite have that level of maturity, maybe, that ...
Hill: That's the thingI'm interested to see with Snap's call. It's less the results and more, what is thedemeanor of Evan Spiegel, the CEO? Does he have aSheryl Sandberg of his own to help with the call? Oris he just going to fly solo on this?
Muckerman: Shootfrom the hip.
Moser: I don't think he does not. That's not to say ...I mean, Mark Zuckerbergcertainly didn't have it nailed downfrom the very beginning, either. We watched him grow up.
Hill: No,he didn't, but he had a team in place.
Moser: He did. AndI think that's going to be important for Snap,especially as they pivot away from this soleidentity as Snapchat andtrying to become a camera company, and whatever else they want to do. It'sgoing to be an interesting story to play out, and the market obviously has some pretty lofty aspirations with the stock today. But, we'rea little bit more than a year and a half into when Chipotle 's health crisis came out. People got sick,there were E. coli concerns,they never really pinpointed exactlywhat happened, and I think that was part of the problem, that Chipotle's supply chain was so local and not quite as transparent as it should be. So, about a year and a half later, they'rerecovering nicely. It's been a very good year forthe company, particularly the last few weeks, the stock has really taken off. There have been some rumors out there that, perhaps, same-store sales are rebounding. I think it's very tough not to rebound when you've seen the abyss like they have. At some point, you have to be able to clear that hurdle. ButI think it's also interesting to notefrom the perspective that their menu is completely GMO-free, I thinkartificial ingredient-free, or whatever. Steve Ells, the founder and CEO,continues to get out there and tout this, they'rethe cleanest food company out there. And I think that's great. I think to a point, though,you have to be very careful with this,because that could turn out to be, ultimately, something that cuts them again. If they start serving up moldy tortillasbecause they don't havepreservatives, that's going to be just as bad,if not worse, because it's going to be yet another health scare that theymay not be able to recover from.
So,it's been a very good year so far. Itseems like they're recovering,it seems like they're doing the right things to generate traffic. I think they still have a very good product. The food is good. I think they still have, generally speaking, a pretty loyal customer base. I don't think we're going to see the same Chipotle that we were used to two years ago. I don't think we see a company trading at those lofty multiples anymore. But I do think there's stillenough growth left in that restaurant concept that if they do recover those comp sales, and we can see some accelerating traffic again ...I said before, I think this is a stock that's $500 or betterby the end of the year, as long as they can show that growth and traffic is coming back.
Hill: And,among other things,if you're Steve Ells,you just want to change the narrative. You would love to havenot just a solid quarter, but an above-average quarter that makesanalysts and the media, in genera,l say, "Oh, OK, they are turning it around."
Moser: Yeah. And you havePaneranow that's going tobasically be out of this game,because they're going private. So, Chipotle really is going to occupy that limelight as being,they stand for something,the food with integrity. Again, I think that's fine, but there's a point in time where you need to get off your pedestal,recognize the fact that you are a restaurant,people eat there,in most cases, they eat there because they like the food. We've looked at this before, you ask plenty of people why they go there, andmost people go therebecause they like the food. So,keep on serving up food that, A,people like, and B, doesn't make them sick, and I likeyour chances.
Chris Hill owns shares of Chipotle Mexican Grill. Jason Moser owns shares of Chipotle Mexican Grill. Taylor Muckerman owns shares of Chipotle Mexican Grill and Home Depot. The Motley Fool owns shares of and recommends Chipotle Mexican Grill, Facebook, Mastercard, and Visa. The Motley Fool owns shares of Panera Bread. The Motley Fool recommends Home Depot. The Motley Fool has a disclosure policy.