"Public Safety's Prominent Symbol: Apple"
Hey there! Today we're diving into the world of finance with our podcast hosts, Mary Long and Jason Moser, as they discuss the latest happenings in the stock market. Here's a quick rundown of what's on the menu:
- Axon Enterprise: Earnings are revealed, and the news sends the stock tumbling. Jason gives us a sneak peek into a conversation with Axon President Josh Isner, discussing their biggest deal in company history and a significant raise in Axon's total addressable market opportunity.
- Policing AI: Jason talks about Axon's AI Era Plan, which provides customers with access to cutting-edge AI technology and insights. He explains how this investment is crucial for the future of the company.
- TJX Companies: Mary and Emily Flippen discuss the retail giant behind T.J. Maxx, Marshalls, and HomeGoods. The company's fourth-quarter sales fell slightly behind the previous year, but the stock is still up due to optimistic outlooks for the year ahead.
- Dutch Bros Coffee: Emily shares her thoughts on the fast-growing coffee chain, known for its sugary valuation, and why it could be an exciting investment opportunity.
To get more insights on these stocks and learn how to start investing, tune in to our podcast center or check out our beginner's guide to investing in stocks. Until next time, happy investing!
This podcast was recorded on Feb. 26, 2025
Mary Long: The retail apocalypse isn't over yet, but there's still hope for some brands! You're listening to Motley Fool Money. I'm Mary Long, and I'm joined today by the one and only Jason Moser. J-mo, always a pleasure having you on the show.
Jason Moser: Hi, Mary. Thanks for having me. I'm always happy to share my thoughts on the latest in the business world.
Mary Long: I'm thrilled to have you here, especially because you've had a pretty hectic morning. You chatted with Axon President Josh Isner earlier today about earnings and strategy. I'm sure you're dying to give us some juicy details! Any highlights from your conversation that you'd like to share?
Jason Moser: [Chuckles] Well, of course, I don't want to give away too much, but let's just say that there's some exciting stuff on the horizon for Axon. We'll dive deeper into that on a future episode.
Mary Long: Alright, tease us a little more! Axon is a big player in the Motley Fool universe. If listeners are less familiar with the company, can you give us a brief overview?
Jason Moser: Absolutely. Axon is a technology company focused on developing body cameras, TASERs, and other weapons for law enforcement. Their mission is to "make the bullet obsolete" by providing innovative and safer solutions for public safety. In addition to hardware, Axon offers software and services to help law enforcement agencies manage their data and improve operations.
Mary Long: Thanks for the refresher. So, Axon dropped its earnings yesterday after the bell. They beat expectations on the top line, revenue up 37%, and also on the bottom line. Gross margin grew by a few percentage points, cash flow skyrocketed 79%, and they put out strong guidance for the year ahead. What really struck me about the report was Axon's net revenue retention rate of 123%. Can you explain what that means and how Axon is growing its relationship with its existing customers?
Jason Moser: Certainly. That net revenue retention rate of 123% means that the typical Axon customer is spending 23% more with the company now than they were a year ago. This growth is driven by Axon's commitment to providing a suite of hardware, software, and services that improve as law enforcement agencies' needs evolve. For example, Axon recently signed the biggest deal in company history with a global logistics provider, further demonstrating their commitment to expanding their services.
Mary Long: That deal sounds intriguing. If you don't mind, can you share who the provider is?
Jason Moser: Unfortunately, Axon hasn't disclosed the name yet. We'll have to wait and see for more details on that partnership.
Mary Long: Fair enough. Let's shift gears to artificial intelligence in policing. Axon's AI Era Plan seems to be a big part of their strategy for the future. Can you give us a glimpse of what that looks like and how it will shape Axon's offerings?
Jason Moser: Absolutely. The AI Era Plan is Axon's answer to the growing demand for AI solutions in public safety. It aims to provide customers with access to cutting-edge AI technology and insights. One aspect of this plan is Draft One, which is a transcription service for police officers that helps them produce high-quality police reports in a fraction of the time it would normally take. This service has been well-received in the court system, as prosecutors are finding it reliable and accurate.
Another part of Axon's AI strategy is their growing suite of connected devices, which are being used to generate insights and cultivate AI advancements. This includes their body cameras, TASERs, and other devices that gather vast amounts of data. Axon is using this data to develop AI-powered solutions, such as real-time crime analysis platforms.
Mary Long: It sounds like Axon is making a big push into AI. I'm curious: what are some of the other reasons behind the growth in Axon's total addressable market (TAM)?
Jason Moser: [Excitedly] I'm glad you asked that question, Mary. One reason for the expansion in TAM is Axon's growth in the international market, particularly with governments and enterprise customers. They've also made several strategic acquisitions, which have expanded their TAM. The most recent example is the acquisition of Fusus, a deployable and automated real-time crime center platform.
Another factor is the increased opportunities around drones and real-time operations. Axon recently demonstrated a drone that can deploy TASERs from mid-air, which could have significant implications for public safety.
By focusing on these areas and continuing to innovate, Axon has raised its TAM from $77 billion to $129 billion. As you can see, the company has a long way to go to tap into that market, but they're off to a strong start.
Mary Long: That's impressive growth. It's worth noting that Axon is currently trading at a high valuation. What do you think about the company's valuation at the moment? Is Axon justified in its current price, or are investors overpaying?
Jason Moser: I think it's worth mentioning that any high-growth company like Axon is going to command a premium valuation. That being said, investors should always consider the company's growth potential and its ability to deliver long-term value. In Axon's case, its aggressive strategy, strong customer base, and commitment to innovation make it a compelling investment opportunity, even at a high valuation.
Mary Long: Before we move on, there was some negative news swirling around Axon last week. They cut ties with their former partner, Flock Safety, an automated license plate reader. This move sparked a sneeze on Wall Street, as analysts downgraded the stock. Can you tell us more about Flock Safety and how this breakup will impact Axon moving forward?
Jason Moser: Sure. Flock Safety is a tech startup that specializes in automated license plate reader technology. They had been partners with Axon since April 2020, but they recently parted ways. The reason for the split is unclear, but there's speculation that they may become competitors in the future. However, I don't believe this is a major concern for Axon. The company has a strong portfolio of products and services, and they're well-positioned to succeed in the public safety market.
Mary Long: Alright, time to wrap up the Axon discussion. Let's shift gears to TJX Companies, the retail giant behind T.J. Maxx, Marshalls, and HomeGoods. They released their fourth-quarter earnings this morning, with sales coming in below expectations. However, optimism for the year ahead has pushed the stock up slightly. Emily Flippen, one of our Motley Fool analysts, is here to break down the company's performance and prospects. Emily, thanks for joining us today.
Emily Flippen: You're welcome, Mary. It's always a pleasure to discuss retail trends and insights on the show.
Mary Long: Let's dive right in. TJX saw sales of $16.35 billion come in just below last year's figures, and their profits stayed flat compared to the previous year. Management is forecasting a slight increase in comparable sales for the year ahead. What does success look like for a retailer like TJX in today's challenging climate?
Emily Flippen: In today's retail landscape, success comes down to a few key factors: growing top-line revenue, increasing gross margins, managing expenses, and delivering positive comps. TJX has been successful in growing its top line and expanding its store base, which helped to drive revenue. However, it's important to note that this growth came with increased costs, such as store expansion, which affected margins.
In general, TJX is successful because it offers customers great value and a wide selection of merchandise. The company's focus on branded apparel and home goods has been a consistent driver of sales, and its ability to keep costs low by sourcing products off-price helps to differentiate it from other retailers.
Mary Long: TJX has been a dependable performer in the retail sector. As we mentioned earlier, Coresight Research predicts that the US will see approximately 15,000 store closures in 2025—a significant increase from the peak pandemic numbers. What do you think is driving this trend in retail, and how is TJX navigating it?
Emily Flippen: The retail apocalypse we're seeing today can be attributed to a few key factors, including a shift to online shopping, changes in consumer preferences, the impact of the pandemic, and increased competition. It's important to note that this trend is not limited to traditional brick-and-mortar retailers—even e-commerce giants like Amazon are facing challenges.
TJX is navigating this climate by focusing on its off-price model, which offers consumers great value and drives foot traffic to its stores. The company is also investing in its omnichannel capabilities, ensuring that customers can access its products both in-store and online. By staying focused on its strengths and adapting to changing consumer preferences, TJX is well-positioned to succeed in today's retail environment.
Mary Long: Thanks for sharing your insights, Emily. That wraps up our discussion on TJX. Before we go, I want to touch on the coffee chain Dutch Bros. Their stock is up 160% over the past year, and Emily has some thoughts to share on this fast-growing chain. Emily, can you tell us a little about Dutch Bros and what makes it so intriguing for investors?
Emily Flippen: Dutch Bros is a rapidly growing coffee chain based in Oregon. The company is known for its drive-thru service and unique array of coffee drinks, which often include unconventional flavors like Birthday Cake and Churro Chai. Dutch Bros has expanded aggressively in recent years, opening hundreds of new stores across the country.
What makes Dutch Bros so intriguing for investors is its astounding growth—the company's same-store sales have grown by nearly 10% for the past few years, while competitors like Starbucks have struggled to maintain their performance. Additionally, Dutch Bros offers investors a unique value proposition, as the company's highly automated drive-thru model allows it to operate with lower costs than traditional coffee shops.
Mary Long: Thanks for that rundown, Emily. That does it for today's episode of Motley Fool Money. Join us next time for more insights, analysis, and predictions on the world of finance. I'm Mary Long, and I'll see you next time!
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Mary Long: Selling sugar and caffeine can be a great business. My colleague Ricky Mulvey caught up with Motley Fool senior analyst Emily Flippen to talk about the fast-growing coffee chain Dutch Bros. Its stock is up about 160% over the past year. They break down the business model, the valuation, and the chocolate-covered strawberry mocha.
Ricky Mulvey: Emily, in preparation for this, yesterday, I did go to a Dutch Bros, and it was 9:15 AM on a Monday. I waited in line, and then I made it about one third of the way through a chocolate-covered strawberry mocha to fully appreciate the experience of what they sell. I made it through about a third of that drink before I had to stop, but this is an intensely popular coffee chain that I wanted to dive into. You covered the company. Have you been to a Dutch Bros? What was your experience like there?
Emily Flippen: Ironically, actually haven't been to a Dutch Bros. They're expanding eastwards, so I'm here in Maryland, but I grew up in Texas. When I visited Texas recently, I planned to visit one before I realized they didn't even offer brewed coffee, which is actually the only thing I drink. I do think calling this a coffee chain is being somewhat generous with your definition of a coffee chain. But I will just note, they do a really strong business outside of what you would imagine as your typical coffee-flavored beverages. They have protein shakes. They have smoothies. They have energy drinks. They have protein coffee. They do a good job of offering a diverse range of products.
Ricky Mulvey: You're not lining up for the sweet cereal sips that could be a cinnamon swirl or one that has marshmallows on the top that promises to taste just like the bottom of a sugar cereal bowl.
Emily Flippen: I guess only if I'm trying to replace my lunch with it.
Ricky Mulvey: Fair enough. This is what's interesting to the investors on this show, and that is, this is a company that is taking off in valuation and in sales. We'll compare this to Starbucks. Dutch Bros is launching a lot of new stores as they try to push eastwards. During that time, the same-store sales have grown by almost 10% for company-operated stores. This is at the same time where Starbucks global North America sales have declined, same-store sales at about 4%. What's happening with this disconnect? Why is Dutch Bros taking off while Starbucks is in decline during this Brian Niccol transformation?
Emily Flippen: I think there's a couple of different factors at play. One element of it, I do think is innovation. I think we have slightly a more innovative product line here in Dutch Bros. They've been faster to change their menu to add new products, to take away products that aren't working to drive customers to come and transact at their locations. I think Starbucks has been arguably a little bit more stuck in their ways. They've had a harder time driving those transaction growth. I also think that Dutch Bros has been a little bit more approachable in a more cost-conscious environment. I do think it's that push towards innovation as well as just a tighter consumer environment, which driven that disconnect.
But I will say this is a hard environment for coffee chains. It's incredibly competitive, and it's not just Dutch Bros that's popping up around the corner. We see a lot more local coffee shops, as well as alternative beverage shops opening up. I think Starbucks here just has a brand image issue that is showing in their same-store sales here, whereas Dutch Bros is the antithesis to that, which is to say, it's cool, it's new, it's trendy, and it has a brand that is rising. Whereas Starbucks is arguably declining.
Ricky Mulvey: You mentioned just a moment ago that Dutch Bros has been able to drive more transaction growth than Starbucks. Can you explain how that's possible, given their similar business models?
Emily Flippen: Well, I think in large part, it's the product - Dutch Bros has a more appealing product line to customers. They've been creative by introducing new flavors and offerings and iterating on their menu to stay fresh and exciting. On top of that, their focus on convenience, with their drive-thru-only model, allows them to capture a broad customer base and maintain high levels of efficiency. These factors all play a role in driving higher transaction growth compared to their competitors.
Ricky Mulvey: Dutch Bros has been on a roll—their stock has been up 160% over the past year. Surprisingly, the company is still profitable, with a net income margin of 7%, which is impressive compared to Starbucks, which has been struggling to maintain profitability in recent years. What do you think investors should be focused on when evaluating the valuation of Dutch Bros?
Emily Flippen: For Dutch Bros, I think you're best off focusing on their growth potential. The company's strategic expansion into new markets, combined with their momentum in sustainable growth, positions them for long-term success. While their current valuation is high, the company's strong growth prospects and market positioning make it an attractive investment for those looking to profit from the coffee craze.
Ricky Mulvey: Last question—it's a simple one: what's the chocolate-covered strawberry mocha like?
Emily Flippen: [Chuckles] It's delicious. I've heard rave reviews from everyone I know who's tried it. The combination of chocolate, strawberry, and coffee is a winning formula for coffee lovers everywhere.
Ricky Mulvey: Dutch Bros, those of you listening, you'll want to check them out. Emily Flippen, thanks for joining us today.
Emily Flippen: You're welcome.
Mary Long: And that's it for today's episode of Motley Fool Money. If you're not already a subscriber to our podcast, be sure to check us out on Apple Podcasts, Spotify, or wherever you get your podcasts. Have a great week, and happy investing!
- Jason Moser was thrilled to share details about his conversation with Axon President Josh Isner, discussing the company's biggest deal in their history and a significant raise in Axon's total addressable market opportunity.
- Emily Flippen expressed her thoughts on the fast-growing coffee chain, Dutch Bros, known for its sugary valuation, and suggested it could be an exciting investment opportunity.
- The sensors in Axon's body cameras, TASERs, and other devices gather vast amounts of data, which are being used to develop AI-powered solutions, such as real-time crime analysis platforms.
- Maybe Dutch Bros' offering of unique drinks like chocolate-covered strawberry mocha and its aggressive expansion strategy contribute to its high valuation, making it a compelling investment opportunity, even at a high valuation.
