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In this podcast, Motley Fool analyst Emily Flippen and contributors Travis Hoium and Lou Whiteman discuss:
The AI trade.How the economy is doing.Where certain stocks might be headed.
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This podcast was recorded on Jan. 02, 2026.
Travis Hoium: The calendar is flipped to 2026, so where are we investing? Motley Fool Money starts now.
Welcome to Motley Fool Money. I'm Travis Hoium joined by Lou Witman and Emily Flippin. Since the calendar has now moved to 2026, we're recording this a couple of days early so that we can have a little bit of time later in the week. But we are thinking a lot about how we're investing in 2026, what the economy looks like, where there's value, maybe, where we should be selling a little bit. I want to start with a couple of different themes, and the biggest theme that we have to talk about this has been the topic of the market for the last three years. That's artificial intelligence. Where are you looking at the AI trade in 2026, Lou? You can take this in any number of different directions. Is there risk? Is there opportunity? Or is this just something that you're monitoring from the sidelines and going, you know what, this is accounting for 50% of GDP growth. That's a pretty notable change in the way that we think about AI.
Lou Whiteman: The first thing is, it's 2026, and wow, we're still doing this instead of AI. Cheers to us for that.
Travis Hoium: The disruption has not hit us yet.
Lou Whiteman: Yeah, not yet. Famous last words. What strikes me about AI, and I've been thinking about this a lot is, the novelty is over. The magic has gone. When ChatGPT first came on the scene, and it was, wow. It was magic. It was all this talk about virtual friends, doing all these chores for us. Just what was new and magic before is now mundane. I think the answer from here is boring. I think this is going to be the year of the agents of all of this stuff.
Travis Hoium: Was is 2025 supposed to be the year of agents?
Lou Whiteman: Well, it was, and maybe that was the work. But here's what I think is happening here. Again, it's not going to be the cool magical stuff. They're not going to be planning our vacations or doing these wow tasks. But there is just all over the place. We're just at the tipping point where so many little automations, making so many little tasks, 10% better. I don't think that that is what we all hope for. Maybe the virtual friend, the imaginary friend is still coming, but I do think that matters. The theme this year, if it's a theme, it's specification over scale. It's no longer just this pure muscle do all things, but just creating small AIs that can just make life easier all over the place. I think that is going to be the theme for 2026 in AI. I think there is real good news for investors there because I think that this translates to revenue and profits better than the imaginary friend on our shoulder.
Travis Hoium: It's interesting you put it that way because it seems like that would just be a continuation of the last 30, 40 years in computing and software. Is that the way that you're thinking about AI now and not just we're all going to be. We're not going to have to work anymore the way that Elon Musk says, because robots or whatever are going to be doing everything for us. Is it just going to be more of an incremental technology improvement, the way that we've seen mobile phones, and PCs, and Excel spreadsheets and things like that, make things that used to be commonplace in the '70s, '80s, '90s become just more efficient. Is that the right way to think about AI?
Lou Whiteman: That's a dangerous question because it's open ended. I never want to say no to something if you give a long enough timeline. But, yeah, I think you hit it on the head. This is how progress works. Progress is not flashy. Progress is not wow. Progress is incremental. Maybe we will get to that vision. I don't think it'll be nearly as quickly as the pundens or the wow what you think. I think just incremental improvement is how tech works when it works.
Travis Hoium: Emily, when you look at artificial intelligence, where are you looking at real business models being created? Again, where does that risk reward lie?
Emily Flippen: Yeah, I love that point. To use earlier comment about us still doing this as humans, not being replaced by AI yet. I think part of the reason is because we're willing to go out there a little bit and come here with some takes that maybe wouldn't be generated by a chatbot, and then you can hold me and Lou accountable for them a year from now when they inevitably end up wrong. But to your point, Travis, it's not so much about creating new businesses. It's about evolving the business models that exist today. The thing that I'm watching with AI in 2026 is actually advertising. I think that's the midterm game for AI and AI centered companies or companies that are looking to implement it. It's not the data centers. It's not the CAPEX. It's not enterprise usage. I think it's characterized by what the Magnificent 7 and large tech companies are going to do with advertising as it relates to artificial intelligence. There's only two of the Magnificent Seven and Nvidia and Tesla that aren't dependent upon advertising revenue as a source of sales. I'd actually argue that Nvidia by proxy is actually really heavily dependent on advertising, given the fact that its larger customer base needs to sell ads in order to afford the hardware.
Travis Hoium: Explain that because I think OpenAI is really the big question here. They're obviously the elephant in the room. They're the ones with what is it now $1.5 trillion in spending plans. A lot of that is in video chips. But they don't have that advertising business model, but do they need it?
Emily Flippen: They desperately need it. I think 2026 is the year where these individual consumers are going to start seeing ads and other integrations into their ChatGPT. It's not just ChatGPT, it's Gemini. It any company that has some large language consumer facing model is going to need to find a way to monetize the data that they have on the people using the application. Even if that comes alongside a subscription fee. To me, that screen ads. Without businesses generating ad revenue, they obviously, to former point, can't afford hardware to continue to expand and grow their business and their data centers, which results and by proxy, a declining sales for Nvidia. But it's not just OpenAI. Look, you can look at Meta, another Mag Seven company. Virtually 100% of their sales are ad based sales. Google is like 75% plus of their sales are ads. All of these companies are really heavily dependent upon that. What's really interesting about the world advertising is it's a zero sum game, which is to say, just because OpenAI comes out and says, hey, you could put ads on ChatGPT now, just using that as one example. Does it mean that the ad budgets for companies that are buying placement suddenly increases. They still have a finite amount of money.
Travis Hoium: Unless you've built out that, that's a longer game. Like the businesses that are built because Shopify and Facebook exist, but that doesn't happen in 2026. That's a five, 10 year story.
Emily Flippen: Exactly. Hopefully, I mean, I expect the world for advertising demand for advertising, the advertising size of the market. That is going to grow over time to your point, Travis. But thinking about it from the perspective of an individual business, if I'm into it's one of those businesses that just loves to advertise, especially around this time of year as we get into tax season. If I'm into it, I'm not saying, I have new places to advertise. Therefore, my advertising budget for the entire year has increased proportionally to the number of places I can advertise. They probably still have a set budget. Let's say it's $100 million or whatever it may be. They say, maybe I put less of that with Meta. Maybe I put more of that with OpenAI. That's when it starts to get interesting for how these AI based companies are going to monetize and advertise, because it's not just about how effective ads are by usage of AI. It's actually how search and other interactions change as a result of where the money for ads is actually spent.
Travis Hoium: Are you able to extract the same number of dollars? What's the margin? I think that's going to be another one of these questions because it is more expensive to compute with AI, than it is with traditional compute. We've seen that with margins at companies like Meta and Alphabet over a long period of time. One of the things that you touched on, Emily, that I think is interesting is are we at the point where this AI, in general, is proving to be much more of a sustaining innovation rather than a disruptive innovation. I think if you go back to that ChatGPT moment, you have stocks like alphabet dropping or going at least nowhere, despite the fact that they were growing revenue, because they thought that this was going to disrupt their business. This is going to disrupt search. It was how they make money. Are we at the point where we can say, you know what? There's going to be new businesses formed? This is going to be an opportunity for entrepreneurs, but it's not necessarily going to destroy a whole bunch of older tech businesses, the way that we saw disruption when let's say Google and Meta, Facebook came around that really destroyed the newspaper business. Is that the right way to think about it, at least where we sit today?
Emily Flippen: I definitely think it is. What's so interesting about where we sit today versus where we sat even 20 years ago when we were going through the.com crisis then boom of the Internet. Is that companies and their leaders and their decision makers are not unaware of the threat of disruption. I think everybody has become more aware. Disruption almost implies the idea that you're being taken aback by something that you didn't see coming. AI isn't so disruptive because we have companies that could see the future, so to speak, but solve the exisential threat and then decided to innovate around it. It's to your point, much more sustaining than it is disrupting for these companies because they're investing in.
Lou Whiteman: They can invest in it. That's the big thing. Like with the newspapers, they didn't have the resources. These companies have the resources to throw at the problem. Whether or not it makes everyone 100% a winner, I wouldn't say that, but I think that's the big difference is that so many of these companies have these virtual money printing machines that they can throw at the problem.
Travis Hoium: Well, the constraints seem completely different. If you're a newspaper, you had a geographic constraint, that was your monopoly. Google's playing in the world. The global economy. AI is going to do the same. It's just a different shift, it seems like. Lou, I wanted to ask you about robotics, because this is one of the things that we often talk about with AI, and it's this amorphous thing in the future. I Robot was the way to play this for a while. Obviously, that didn't work out. But there are these moonshots that are happening, whether it's at Tesla. One of the companies I think is interesting that's still private is figure. Is humanoid robots. Is that going to be something that's going to start impacting the economy, whether we're buying them as consumers or businesses are adopting those products?
Lou Whiteman: At least for 2026, I'm still very skeptical about the dancing robots. I don't think. This is going be similar [OVERLAPPING].
Travis Hoium: The videos are pretty funny, to be.
Lou Whiteman: They're awesome. But this is going to be similar to my boring answer on AI. I don't think this right now is about Rosie the Robot from the Jetsons making us eggs or doing our dishes. But the great thing about AI, and I think we're going to hear a lot about robotics. We'll get to this in my radar stock, even just to teas. But the great thing about AI is that all of these robotics that we have and all this automation we have, we're mostly single function machine, one task machines. AI gives us the ability to make them multi function machines and to do more with the existing technology. Again, I don't think that ends up with a robot butler in 2026, but I think all over the automation world, what we can do with automation and what we can do with what we've already invested in is just going to really accelerate, and that is a huge productivity thing. It might not be fun for consumers, but it's great for us as investors because it does, I think, over time, move the productivity curve.
Travis Hoium: I'm looking for a robot that will clean up after my kids. When that comes out, I will be an early adopter. When we come back, we're going to talk about the economy and what we think about jobs and where spending is going in the future. You're listening to Motley Fool Money.
Welcome back to Motley Fool Money. We talked a little bit about AI, but look, none of this works, all the spending in AI doesn't really work if the economy tanks. There's some signs of strength in certain places, signs of weakness in others. Emily, where do you see the economy going into 2026? What's good? What's bad? What's just worth watching as the year plays out?
Emily Flippen: I think I, like the average person, is very confused about what we're seeing today, which is to say that the data that we have is painting two entirely different pictures. If you just take the reported data at face value, it shows strong, real GDP growth that's rising and accelerating, driven largely actually by consumer spending. Inflation, while still higher than what the Fed wants, it's well managed, and it's inching downwards, and we're easing back to those Fed targets, and the economy is still adding jobs and mortgage rates have eased. But when I say that, I know the average listener is probably going, excuse me. That's not the reality that I'm living right now. Underneath the data, I think we have a lot of confusion. There's economists and even members of the Fed themselves that are doubting the data, which is to say not the numbers are inaccurate, but not paying the full picture, saying that inflation could be understated either due to the government shutdown or reporting metrics, tariff impacts are yet to show their true teeth. Layoffs are actually accelerating. Pal himself so that the jobs data could be overestimated to the extent that the US has actually been losing jobs through the majority of 2025. This is to say, it forces me to watch a lot more than I probably would want to when I head into 2026. What I'm having to do is look at ancillary data. Large scale layoffs or which companies are required to report. That's a great indicator of the job market. Credit spread or delinquencies show a lot about the average consumer as we expand to that K-shaped economy here in the United States. Obviously, CAPEX from big tech companies. These in my mind are like the canaries in the coal mine of the economy when you can't or won't or otherwise have doubts about the reported data.
Travis Hoium: What is that K-shaped economy? We talk about a lot. But can you just explain what exactly that is? Because I think that will be important as we go throughout the year.
Emily Flippen: A lot of people have summarized it as the declining middle class. But in effect, the way that we have seen the economy grow and expand over the course, especially over the last couple of years, but you can even expand it over to the past few decades, is that the rich get richer and the poor get poor to an extent. The people in the middle, so the average American who hasn't seen wage growth that matches inflation is effectively getting poor and poor. The big earners and the big spenders have been doing a lot to keep the economy afloat, which helps these reported numbers look good at face value because there's a subset of high spending, high earning Americans that are doing well. But a majority of Americans, those people who aren't seeing those raises or those increases are continuing to get worse year after year.
Travis Hoium: I saw a recent stat that something like the top 10% of spenders actually account for almost 50% of spending. There is a have and have nots. Lou, what are you thinking right now?
Lou Whiteman: Again, we have to put everyone in buckets because we can't look at the individual. But really, what we're talking about here is there's a lot of pressure on some people, but a critical mass of consumers are still employed, still spending, and really, we make decisions based on our own checkbook. As long as that critical mass is there, whether or not it's a carve out in a middle class or something, I think those are all, were some things to talk about. But the bottom line is, that as of right now, there are enough people spending to keep things going. The question is, where from here? Does all of the job talk and all of these, decative signs, does it build on itself slowly swallowing more consumers and breaking down that critical mass? Or do we see inflation ease, which helps with the jobs? All of a sudden, employment picks up, and that critical mass gets us through to the other side. It's really hard to know that. I think both are possible. You mentioned the data. The other thing right now is that, look, I don't even think you need to be a cynic to question the data right now. They are saying that they are making methodology choices, which might be correct. There has been forever debates about how we do economic data. But when you do that, when you make changes, it makes apples to apples comparisons really hard. I don't even think you have to be a conspiracy theorist to say, I don't know how to read the data. That makes life a lot harder for us we're trying to have an opinion or a prediction on where things are going.
Travis Hoium: Lou, you may raise an interesting point about I think about this like a snowball. In 2008, 2009, when the economy got really bad, you'd have to go back to 2006, 2007, to see the start of this. How does that play out? Let's just talk about that downside risk. Layoffs, it isn't one layoff announcement tells us that a recession has begun or something like that. It's this trickle that becomes uncertainty for executives. I remember sitting listening to the CEO of 3M in, I believe it was 2008, saying, "We don't know where the bottom is, and so we're just going to cut as much as we possibly can." Because we don't want to be, SOL when we do hit that bottom is that the risk is that this snowball starts, maybe AI spending cuts back, and we just don't know where it goes.
Lou Whiteman: Inevitably, we always swing too far in either direction. I think the risk, we started 2025, talk about the boiling frog economy that everything's fine till it's not. I think, heading into 2026 is just going to be that same theme where everything right now from an economic perspective, from a Wall Street perspective, is good enough. Wall Street doesn't have to act with Main Street. That's one of the first lessons you learn. The stock market is not the economy. The stock market has priced some of this pressure in. It's all fine till it isn't to your point, that when this critical mass, when we stop seeing just enough people doing their economic activity, keeping things going, that's the point where we're in trouble, and by then, it's probably too late to avoid at least some impact.
Travis Hoium: Definitely a lot to think about with the economy and AI in 2026. When we come back, we are going to play a game called up or down. You're listening to Motley Fool Money.
Welcome back to Motley Fool Money. In this section, we like to play a little game, and we're going to see what Emily and Lou think about some specific stocks. I'm going to call this up or down. The idea here is, do you think these stocks are going to beat the market in 2026 or not? I have 12 stocks on the list, and I have asked them to split their votes 50, 50. You can't just say everything is going to beat the market. Lou, I'm going to have you go first with arguably one of the most important stocks for the stock market because it is the biggest piece of the S&P 500, Nvidia. Are they going to beat the market or not in 2026?
Lou Whiteman: An object in motion tends to stay in motion. I have them beating the market. Now, look, a huge caveat here. They've been going up well in excess to the market. All they have to do is go up, probably 78% to beat. I think Nvidia might do less well than it has the last few years, but still beat the market.
Emily Flippen: That's a fair take, but I have to take the other end, say they'll lose to the market, and the only reason is, look, I'm rooting for Nvidia here. But to counter lose point about an object in motion, typically, historically speaking, the largest company in the world is not the largest company in the world when you zoom out to a three-year time period. Nvidia has already been the largest company through the majority of 2025, I can't help but think 2026 is probably going to be a high bar.
Travis Hoium: Let's move way away from AI to a potential falling knife, Target. Emily, beat the market or not?
Emily Flippen: Beat the market. Look, I've been meaning to buy target for the better part of the last year. I'm happy that I dragged my feet on that. I intend to make that purchase at some point in early 2026, but I think they can get the merchandising strategy, and if discretionary spin comes back, they're well positioned.
Lou Whiteman: I'm going the other way just because I think there can be a turnaround, but it's going to take more than a year. In this context, I think one year is too short of a time frame. I'll also say, look, retail is really tough. Nobody has an inherent right to exist. Ask Sears. Even Coles, some of the problems. I'm worried about Target long-term, and I don't think even if they do recover, it will be as quick as 12 months.
Travis Hoium: Let's go to another popular stock. Chipotle, Lou, are they going to make a comeback in 2026?
Lou Whiteman: I think this is a tough year for fast casual. Again, I'm not going to write them off, but I have lose here just because I think that there's a lot of choppiness. I think in general, fast casual, there's just too many people chasing this audience now, so it's hard for any of them to really thrive. That doesn't mean it can't be a good business long-term, but I'll take them losing this year.
Emily Flippen: I think Chipotle had a tough year this year because they're coming off some really strong comps in the post-pandemic period. In 2026, their comps are going to be a lot easier of a hurdle to jump over, and I think expectations are too low. I have them beating the market. What about another
Travis Hoium: one that has confused me. This one could be up 100% or down 50%, but Intel, where are they going, Emily?
Emily Flippen: This is such a hard one. I have a tepid lose to the market because when I look at the chip space, I just don't know if they're the leader that they need to be to sustain market beating performance, but it's a tepid lose.
Lou Whiteman: I have a tepid beat because I don't know what to think, too, and it's weird to live in a world where I'm not sure we even need Intel. Imagine saying that 10 years ago, but I do think they have the backing of the full faith and credit of the US government. They have that. They just closed the investment with Nvidia. I do think there's wind at their back. Long-term, I'm not sure I want to own this. I don't know where they shake out, but I think it'll be a better 2026 for them.
Travis Hoium: What about another consumer company? In this gets to what we talked about earlier. What are consumers doing? Are they spending or are they not Lou, Lululemon?
Lou Whiteman: This is another one that I need to caveat that, to me, a year, it doesn't tell the whole story. I think they do beat. I think whatever momentum comes out of this proxy fight and the new CEO, I think there will be encouragement. I worry about this company long-term as far as getting its mojo back. But I think for 2026, there probably vibes go its way.
Emily Flippen: I'm a lot less worried than Lou, but I do agree that I think Lululemon beats over the course of the next year. Now, there have been a lot of macro changes that have impacted them, both in terms of competition and fashion trends, but there is no doubt in my mind that Lululemon can work out their merchandising strategy, and I don't think that their brand has deteriorated to the point where it hurts their sales.
Travis Hoium: Lululemon's stock is down 45% over the past year. I think that would have been a shocker coming into the year. We'll see if there's some value there 15 times earnings. I don't know. Is that a value or a value trap? We'll have to see. That'll be a fun one to talk about. Along the same lines, Emily, is Nike going to make you come back? This is almost the same story, but just a different brand.
Emily Flippen: It is to an extent, and I have different answers here. I think Nike loses to the market. My concern with Nike is I actually don't see any desire to innovate to the extent that they need to to edge out the competition. When I see companies like ON Holdings just continuing to eat Nike's own lunch, I get really worried about the long-term viability of the brand.
Lou Whiteman: Look, it's just a different market. It's so much more of a crowded market. To me, I think the company can be fine and the stock cannot be fine, and so I'm lose, too. I think that this is just running to standstill, so to speak.
Travis Hoium: It's wild to think that Nike has become a little bit like Under Armour for us when we shop for gear for the kids, especially, that's Nike's where you find good deals. That's a tough spot to be in if you're in the consumer space. Let's go to AI, robotics,electric vehicles, autonomy, whatever you want them to be. Emily, is Tesla going to beat the market or lose to the market in 2026?
Emily Flippen: This is where the time frame catches up to me here, because here's what I'll say about anybody who's investing in Tesla. You're not doing so because you think it's going to do well in 2026. You're doing so because you think a decade, two decades, 50, 100 years from now, Tesla is going to continue to be an innovator that is leading the way in whatever it may be robotics, cars, you name it. I actually have Tesla losing to the market over the course of 2026, and the reason is pretty obvious, in my opinion, we've seen a decline in demand for electric vehicles. A lot of tax credits have rolled over. There's a lot of stiff competition from international sales, especially, lots of near term headwinds for Tesla. But does that change anything for the long-term investor? Probably not.
Lou Whiteman: Spot on. I don't have much to add. Tesla, there's a lot of headwinds for this year, but I don't think that affects the bull case at all, so I'm losing too.
Travis Hoium: Are either of the two of you going to be in a Robotaxi with no safety driver in 2026?
Lou Whiteman: No.
Emily Flippen: Personally? Probably not.
Travis Hoium: That's the theory, though, is that they're supposed to be doing that? It's supposed to be by the end of this year.
Emily Flippen: 2027 is always just around the corner.
Travis Hoium: It is. Next year is always just around the corner for Tesla. Alphabet, this was the surprise one that beat the market in 2025. Lou, is it going to do the same in 2026?
Lou Whiteman: This is similar to Nvidia for me. I think that they are a leader, and I think they will remain a leader, and so I'm going to have them beating, but I don't think it's going to be a wow beat. I think a lot of that catchup was this year. But I don't think advertising or anything they're doing is going to fall off a cliff, and I do think that they're a pretty good bet to just beat what I think could be a boring market in '26.
Emily Flippen: I completely disagree, and I love that. I have Alphabet losing to the market because I do think that advertising risks falling off a cliff in 2026. Now, they've been heavily investing in Gemini and their own AI ambitions, which is important, but what they're doing is fighting to retain the three quarters of their revenue that comes from advertising. They need that to succeed, and they need no competition to take even at the margin a portion of their ad sales. I have a lot of reasons to believe that in terms of the ad revenue that's going to be headed toward Alphabet in 2026 is going to be less than what it was in 2025.
Travis Hoium: Emily does that extend over to a company like Meta, too?
Emily Flippen: Certainly does. Meta, I will say, the difference between the Alphabet and the Metas of the world is that Meta has better click-through rate ROI for an advertiser than a lot of Alphabet platforms. Withholding YouTube, that's the wildcard, in my opinion. We don't have a lot of data about how well ads convert on YouTube. You have to imagine pretty darn well, considering the performance of Alphabet, but that could be the saving grace here.
Travis Hoium: I have to throw in one of the most talked about stocks on the market, trading for 111 times sales. Emily, will Palantir beat the market this year?
Emily Flippen: What a read? You have to say that right before I about to tell you that I do think Palantir is going to beat the market. My reasoning is not sophisticated, it's not based off the fact that I think it should be trading for 200 times sales. It's that I see no fundamental changes in their core client base and government spending over the course of the next year, I have reason to believe that there'd be a rerating on the stock and the near term.
Travis Hoium: The vibes will remain high.
Emily Flippen: The vibes are high.
Lou Whiteman: I think Emily has the right answer there, and I just still can't get my head around it, so I have lose just because on all the history of me looking at stocks, I don't think there is a valuation that was harder for me to understand. I'm just going to assume that it's not sustainable, although as Emily says, I don't know what's changing.
Travis Hoium: Historically, buying stocks at 100 times sales doesn't work out well. It has for Palantir's investors, so it has confused me, and hopefully for them, I will be wrong again in 2026. Let's go to another popular company. I'm going to give you a couple stats here about Apple. Over the last three years, the revenue has grown at a compound annual growth rate of 1.8%. Their price to earnings multiple is 36, and yet, over that period of time, three years, their stock is up 110%. Lou, are they going to continue their market beating ways?
Lou Whiteman: I think they will. Again, I don't think it's going to be a crazy great year, but I do think that they are finally getting AI which is, let's just get someone's AI on our phones. I do think that will help support maybe not this huge super cycle, but continued sales. Apple is the definition of fine.
Travis Hoium: What an inspiring call from Lou.
Lou Whiteman: I wish I had more. I wish I knew what the next big thing was, but I think Apple just will continue to be Apple. That's the safest prediction I'll make.
Travis Hoium: Fair enough. Emily?
Emily Flippen: I completely agree with Lou. I think Apple beats the market. Maybe it's a bit higher conviction than Lou has, though. If I don't think Nvidia is going to be the largest company in a year, I think it's probably going to be Apple. For all the reasons Lou mentioned, Apple, I think, out of all the MAG 7 companies, is the most disciplined with its capital management. They haven't over invested in AI, but they also haven't been sitting on their hands with regards to it. The upgrade cycle is still really strong for this company, and they're not heavily dependent upon services or advertising more so than their on hardware. I think it's a lot easier to motivate consumers to upgrade, even in the environment we're operating in, as opposed to heavily relying upon software.
Travis Hoium: I may help Apple in 2026, a computer, a new iPhone, probably on my list at some point in the year. Lou, what about Amazon next year?
Lou Whiteman: Again, I have this as a beat. In part, Travis, because you made us even up our beats and misses, and this was the one I was on the fence about. I will say I'm on the fence. Amazon has a lot of CapEx in a lot of their business, and they have a lot of low margin, but AWS is just AWS, and I think that's enough to drive this truck forward.
Emily Flippen: I also have Amazon as a beat. I'm not doubting myself as I think about it. The logic at the time when I want to consider this is Amazon is well positioned regardless of the market environment we're operating in. AWS does generate a sizable portion of their operating income. That's enterprise spending. Consumers generally go to Amazon for low-cost goods when they're shipping or changing where they shop, Amazon still gets a big portion of that. I do have some concerns for Amazon in regards to the CapEx, though, and a muted free cash flow year could be bad for them.
Travis Hoium: They also have a huge advertising business. That accounts for a vast majority of the profitability for the retail business.
Emily Flippen: Yes, around 10% of sales and the retail business is low margin to begin with, so the margin that's coming from ad placements is good for them. But I will say, those are ad placements that I think again, convert really well for the people who are advertising on amazon.com and other platforms that I see less existential threat from versus the search engines.
Travis Hoium: Emily, are you seeing value in Airbnb, or will this continue to be a market loser?
Emily Flippen: I unfortunately view it as a market loser over the next year. I do hope that I'm wrong, but there's some skepticism built in for Airbnb. They changed their policy in regards to upfront payments for a lot of their member base, so they get this strong high margin interest income on revenue that they collect at the time of booking, even if they end up having to give that back to the person in case of cancellations or refunds. That margin has been really profitable for them. Interest rates are coming down, which is hurtful, but they also change that policy, so less people are paying upfront, which also impact some of their high margin revenue. I don't see any other massive tailwinds here that would cause their sales to otherwise be market beating, and I don't know where they're going to make up for the margin on that. In my mind, I think it's a great company and probably fine as an investment, but I don't view it as a market beater in the next 12 months.
Lou Whiteman: I'll admit I'm biased because I just came from an Airbnb, and I had all of the eye rolls that you get when you're at an Airbnb, just all the little things. But I think Emily said it best. There's another one of these just love the company, love the business, but I don't know where market beating growth comes from, so I had them losing to the market.
Travis Hoium: When we come back, we are going to talk about some more stocks on our radar. You're listening to Motley Fool Money.
As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows the Motley Fool's editorial standards, and it's not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. One of the things I wanted to bring up quickly here at the end is commodities. This has been a hot topic over the past month. Gold outperformed the S&P 500 this year. Emily, how are you thinking about commodities going into 2026?
Emily Flippen: I'm not thinking about commodities in 2026, maybe that's a hot take, but I think it's a mistake to assume that just because a commodity moves, it's a recession indicator. The classic example is the inverted yield curve, which is what predicted 10 of the last three recessions. There's so many different factors that impact commodity pricing. Some people may view gold as a safe haven, but silver and other commodities are obviously have industrial usage. Demand for gold was driven largely by central banks recently. There's so many different factors here, and I don't view them as investment so much as for an individual investor, a panic button and a lot of places, even though core demand is driven by lots of other factors. When I look at the actual track record, which is episodic at best and misleading at worst, it's not something that makes you want to pay attention.
Lou Whiteman: Agreed. I think, if anything, it's geopolitical, and we don't have to get into that now, and it doesn't mean the end of the world. It doesn't mean the end of the dollar. One piece of advice, though, I don't know if it'll continue or not, but if you do think so, just buy the metals, buy the ETFs. I've seen so many people saying it's time to buy the miners. Mining is really hard, and mining stocks traditionally have not gone well. Please do your homework. Just buy an ETF with metal if you believe in the metal. Don't just start buying penny stock, copper mines or silver mines, please.
Travis Hoium: This is a much more complicated area than a lot of people think, and there are people that spend their entire lives just looking at metals, whether it's gold, silver. Maybe not something for everyone to just jump in, but definitely something to watch in 2026. We like to end the show with stocks on our radar, and I'm going to give you some thoughts. Lou, you are up first. What's on your radar this week?
Lou Whiteman: Travis, one of the stocks I find most intriguing heading into 2026 is Honeywell. Ticker HON. For a while now, this has been a great group of businesses that somehow haven't worked together as far as stock gains. Times are changing. Honeywell has already split off its advanced materials business. It's now Solstice, I think it is. It's already trading publicly. This year, 2026, they will separate the remaining businesses, Aerospace and Automation into two independent companies. These are all very interesting businesses on their own. I'm hoping thinking we might see something similar to what happened at GE. Another multi-year disappointing conglomerate split itself in three. We saw the strength of these businesses, and the parts have all taken off. Honeywell, and its many pieces I'm really watching in 2026. Really intrigued.
Travis Hoium: If I have to pick one Solstice Honeywell Automation and Honeywell Aerospace, which one should I be looking at?
Lou Whiteman: We talked about robotics before. The automation business is a lot of the tools behind that. That and Aerospace are probably the two that I might want to add to my portfolio one day.
Travis Hoium: Emily, what's on your radar?
Emily Flippen: I know this is going to be a hard sell for you, Travis, but hear me out. Novo Nordisk, the ticker NVO is on my radar. This is the Danish drugmaker who's best known for making Ozempic and Wegovy, and there's so much skepticism on this company right now. A lot of it earned, but I think at this point, has become entirely overdone. They are losing to Eli Lilly in the interim, and there's issues around reimbursement, obviously really expensive. But I do think that Novo Nordisk has one of the most effective methods of weight loss on the market today with a strong pipeline of new drugs and a lot of potential of your treatments associated with semaglutide, which it mostly still has on her patents. I think there's opportunity left in front of this company that investors are just writing off.
Travis Hoium: GLP ones are about half of Novo Nordisk's revenue. As more and more of these products hit the market, we've got the oral product coming. It just seems like there's more and more competition. Is that a worry that both sales growth and also margins are going to be impacted negatively?
Emily Flippen: That's certainly what the market is pricing in today, but I will say, the reason why these concerns exist around competition and pricing is because demand is so high. There are so many people that can benefit from these drugs that don't have access to them. Prices should and rightfully will come down, but I still think demand will be there for Novo Nordisk.
Travis Hoium: Emily, I'm sorry, but with Honeywell hitting at least splitting off that automation business, I'll give Lou the nod here, but I'll at least take a look at Novo Nordisk. An interesting space for 2026. That's all the time that we have. Thanks to Emily and Lou and Bart behind the glass, I'm Travis Hoium. Thanks for listening to Motley Fool Money.
Emily Flippen, CFA has positions in Airbnb. Lou Whiteman has positions in Nike. Travis Hoium has positions in Airbnb, Alphabet, Intel, and On Holding and has the following options: long December 2027 $50 puts on Palantir Technologies. The Motley Fool has positions in and recommends 3M, Airbnb, Alphabet, Amazon, Apple, Chipotle Mexican Grill, Honeywell International, Intel, Lululemon Athletica Inc., Meta Platforms, Nike, Nvidia, On Holding, Palantir Technologies, Target, and Tesla. The Motley Fool recommends Novo Nordisk and Under Armour and recommends the following options: short March 2026 $42.50 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. |
