Tuesday, 23 April 2024

We’ve Got the Latest News From Charles Schwab and Goldman Sachs

by BD Banks

In this podcast, Motley Fool analyst Bill Barker and host Deidre Woollard discuss:

  • Retail sales numbers and what people are and aren’t buying.
  • What drives good numbers for Goldman Sachs.
  • Charles Schwab‘s bounce-back quarter.

Motley Fool analyst David Meier interviews Fluence Energy CEO Julian Nebreda on opportunities in the energy storage industry.

To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

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This video was recorded on April 15, 2024.

Deidre Woollard: It’s April 15th; file those taxes, and then treat yourself. Motley Fool Money starts now. Welcome to Motley Fool Money. I’m Deidre Woollard here with Bill Barker on this tax Monday. It’s April 15th, comes around every year. Bill, are you early, on time, or a late filer?

Bill Barker: On time, but on time, meaning the day of yes.

Deidre Woollard: Are you rushing? Well, I guess we don’t brush to the post office anymore. We rush to our computers to hit submit.

Bill Barker: I’ve done that in the past. [laughs] I have delivered taxes with all the people getting in there at midnight. No longer, but I’ve got a few more of my kids taxes to finalize than my own.

Deidre Woollard: I almost miss those days of everybody rushing to the post office and trying to shove it in a level slots, and them having to stay open late in life. Now it’s easier.

Bill Barker: I remember those days more than I remember the moments of hitting sand or whatever from my desk, but I don’t know; they’re not happy memories, not really.

Deidre Woollard: No. Well, I don’t usually get the pleasure of your company on a Monday, but I do today, and I know you’re a macro guy. You look at these things. On Friday’s show, Dylan and team, they talked about inflation, a little hotter than expected. Today we’ve got retail sales numbers, also higher than expected, about 0.7% up sequentially in March, 4% year over year. February also revised upward. Interesting to see what we’re spending on, of course, furniture, and building supplies, and launch stuff, not yet, maybe later. Food and restaurants spending still up. The market, very happy about these numbers today’s evening to pay more attention to this than some of the geopolitical turmoil that we saw over the weekend. Are we just hungry for good news and happy consumers?

Bill Barker: It’s a pretty tepid amount of good news at 4% year over year, which is slightly ahead of inflation over the same period depending on which measurement of inflation you’re talking about. It’s ahead, but people are consuming on the retail side a little bit more than they did last year and with some inflation. That’s how you get up to 4%. March is interesting in that this year, Easter fell last day of March, so that moves some restaurant spending, or people going out for Easter brunches and things like that as families gatherings that you won’t have in April this year. I know that the retail sales number is adjusted seasonally. I’m not sure what adjustment it makes for that particularly difficult-to-remember part of the calendar that is; most people don’t know why Easter falls, or where it does. It’s not intuitive in the way that it moves around. But anyway, it was in March, and that’s going to help March’s numbers a little bit, and unless you make the adjustments, you might be misled by how good the numbers were. But one more piece of evidence that the economy is doing just fine.

Deidre Woollard: Anytime we get better than expected, the market seems to be happy. We just want to know the consumers are going to keep opening their wallets. Seems like they are. We had the consumer sentiment numbers out from University of Michigan last week. It seems to be on pause a bit. Maybe they’re reserving judgment after the election; at least that was the assessment. Wondering about this and about the cycle of bigger ticket spending in general because we had the post-pandemic rush of everybody buying things during the pandemic too. We haven’t gone back to big-ticket items. I’m looking at companies like Home Depot, Lowe’s, and Wayfair; they’re really waiting for things to change. How is it impacting some of the companies you watch?

Bill Barker: Well, the companies you mentioned are going to see people waiting perhaps for the interest rates to improve if you’re doing a remodel, or an addition, or something like that where some of the revenue is going to fall to Home Depot and Lowe’s, and you may just wait a little bit longer for a better rate on the loan that is probably going to be involved in a big-ticket item, a car, a purchase of a vehicle of any sort, whether it’s a boat and RV car. Lots of things are almost always financed, and there are choices about when to make those purchases and the constant evaluation and half-promise that, oh yes, interest rates are going to go down. But they have not yet, allows people to maybe move some of that spending currently into one more meal at a restaurant than they otherwise were a little bit more. In the experience category, a vacation is sometimes finance, but not as much as a larger purchase. I think that experiences, there’s still a backlog of experiences that people wanted to have and had to delay for a couple of years because of COVID. If you look at the number of people talking about sentiment, the number of people who anticipate making a foreign trip this year is, I think, record highs. It’s not to say that they have done it. It’s not to say that they purchased the plane fare yet, although I think Delta came out the other week and indicated that advanced plane fares looked very good to them, and they were anticipating that the rest of the year would go well. It’s still in that category. People are giving themselves the experiences and pushing off for a little bit for the moment stuff that they have to take out a loan for.

Deidre Woollard: Well, let’s move on to some earnings. We’ve got a couple of today; much more coming later in the week. We’re really getting into the hardest season pretty soon, which is always exciting. Goldman Sachs, good quarter, CEO David Solomon. People were not thrilled with him over the last year, so before giving him a hard time about these side hustles that DJ, he’s retired, I guess on that, it seems. But really improving at Goldman Sachs; they’ve shaken off their misstep into consumer banking they’re like, we’re done with that market stuff. But a lot of the story is just that the macro is working for them, so more activity, more M&A, giving them the opportunity to really do what they do best, it seems like.

Bill Barker: I think so. I think their fortunes are going to track the stock market largely as they have in the past. It’s a company that has achieved great things more for its employees than for its investors. You really struggled to find a prolonged period during which Goldman Sachs investors have outperformed the market.

Bill Barker: They do a great job of rewarding their employees. They ask a lot of their employees and they get a lot in return and the amount that is leftover for investors is fine. It often matches market returns, but you look at today’s numbers and if you annualize the earnings per share, it was a good quarter. You multiply those by four and you see what the stock price is, it’s trading at about an eight or nine multiple to the run rate earnings now. As they say, it’s a good quarter and maybe annualizing those is a little unfair in this equation. But still, the market is not looking at Goldman’s report which easily surpassed the anticipated earnings and revenues and saying, look, there’s great growth here, let’s start pricing this stock like a growth stock. It’s a cyclical.

Deidre Woollard: No, it is not. Not primed for massive growth, but it is doing better and that is good to see.

Bill Barker: Yeah, for the shareholders, for the employees, I’m sure you can find somebody who will say it’s not good to see Goldman doing well. That must mean somebody is doing poorlyas good as Goldman does well. But, yeah, I think that they are up about 3% today off of really stellar numbers. Market looks at those numbers and is pleased, but does not take those as an indication that this is a new age dawning for Goldman. If it’s going to trade at something less than 10 times run-rate earnings then it’s being traded like a cyclical.

Deidre Woollard: Yeah, really need a lot more activity to see those numbers really go up. We’ve also got earnings from Charles Schwab, which the market did not like as much revenue. The revenue beat expectations but down year-over-year. But there was this word in the press release that caught my eye and they said it too on the call, momentum, so they are talking about momentum. Sometimes when a company is talking about momentum, I roll my eyes because I’m like yeah, you’ve got momentum. But I don’t know. They had 14 billion in net inflows to manage investing solutions, which I found was interesting because that gives them a lot of fees. They’re also nearly done with the Ameritrade sort of ingestion. They’ve got about 10% of the people they’re bringing into that left and those are mostly the super active traders. It seems to be a little similar to the Goldman story, they’re regrouping and on a more steady path. What do you think? Momentum, do they have it?

Bill Barker: I don’t know about that. They’ve got momentum in terms of all the assets that are in Schwab having gone up along with the market, all the ones that were in index funds and any other mutual funds or individually held stocks. People are employed and there are more people employed every month as we get those numbers and a lot of people have their company 401(k)s at Traub. It’s a strong economy and the stock market is the strongest part of a strong economy and I think that that all accrues to Schwab’s benefit. Of course, a year ago they were looking like they were in some trouble as they got caught up in the commercial bank. The proximity to it, and the amount of assets that were leaving Schwab for better interest rate accounts and that Schwab got caught up in, I think, a misguided anticipation that they were in real trouble regarding anything. But their stock was hammered along not as badly as there’s sort of the companies that really did go belly up during that time but if you watched Schwab a year ago, you’re pretty happy.

Deidre Woollard: Well, Bill we started by talking about tax day, you’ve still got some work to do it sounds like. This day is also becoming a weird retail event holiday. I’m not even sure what to call it. You’ve got all these freebies and deals, you’ve got Krispy Kreme in on it. You’ve got Arby’s, our producer, Ricky Movis that you get the 50% off the Dave & Buster’s menu, sounds like that really caught his eye. Companies are also advertising ways to spend your tax refund. What is happening here? Have we unlocked a new spending holiday?

Bill Barker: I don’t know. It may be. I get with Krispy Kreme, if you’re going through, this is a stressful day.

Deidre Woollard: You want to give yourself a little treat.

Bill Barker: You get a little reward to offset the stress or a reward finally getting the work done. Arby’s a little less easy for me to see this straight-line connection between the two. Dave & Buster’s could be a night out after getting everything done and you get the reward of the media, including us right now, telling you the names of these places and what they will offer for you without having to spend the money yourself. That is the number of times that tax day is going to be mentioned along any media that you’re looking at. They’re going to throw in something like this just as we are. I think Krispy Kreme is right now getting a little free advertising. Let’s give Arby’s some too while we’re at it and Dave & Buster’s and there are probably more that we could and they’re getting something out there. If you can actually get your name out there without having to pay for it, that’s pretty good marketing.

Deidre Woollard: It is indeed. Treat yourself. Economy continues. Thanks for your time today, Bill.

Bill Barker: Thank you.

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Deidre Woollard: Last week, my colleague, David Meier caught up with Julian Nebreda, the CEO of Fluence Energy, a provider of energy storage solutions and services in the renewable space. We’re playing a cut on today’s show and get a look at the challenges and opportunities of battery storage around the world.

David Meier: Why is the demand for energy storage products growing so quickly and how is Fluence working to fulfill that demand?

Julian Nebreda: We’re a global company, we work globally. We don’t work in China, which is a very important market, so when I say globally it’s outside of China. We have a very strong presence in the U.S.

David Meier: Yes.

Julian Nebreda: Clearly, we have a very strong presence in Europe, and I’ll walk you through the countries where we’re working and then a strong presence in Asia Pacific. In the Americas, we’re in the U.S. and Chile. Our main markets, with Canada opening up

David Meier: What do you see? How do these markets come about?

Julian Nebreda: They come about today, our technologies use mostly to integrate renewals. Not the only thing that this technology is going to lowered time, but that’s what we’re doing and that’s a function. We are providing support for the grid to integrate with it. We are, in a way, a function of renewal integration. We will have to ask renewal integration goals into the market. You start needing services, football, frequency, time, shifting of energy points, helping the congestion on the grid here or there, that batteries can do better than any other energy. The US, clearly our biggest market is started with this, and when you see the US, sounds like a big number. The US are a lot of the work occurs in California and Texas. In Texas, there are some connections in Arizona, but generally those two areas. Will go through the systems they represent from 19–2024; they will too represent like two-thirds of the demand for any storage in the US. Then the next, [inaudible] not in all the different high source in the US, and you see it picking up coming. We’re seeing Chile as our main demand center for a reason, most of Chile has this wonderful solar resource in the north of Chile, but most of the demand is in the south. Why is that? What’s happening to Chile? There are difficulties, as you know, if you went to Chile is a very long country with a mountain range in the middle of building. Transmission is costly, complicated. There are restrictions in the way of transmission. You have very low prices in the north of Chile, and that you need to in a way figure out a way of transferring it to a set. That’s what we do as factories there, we charge during when the peak hours come, we help reduce the total cost. That’s Chile. Also, when they can ask picking up Canada, there what’s interesting in Canada is that when you see these markets, some of them start with small projects. They came out with very good product. Then we’ll have Europe. In Europe, I think the two markets that are today, the UK and Ireland, not the same quadruple the UK and Ireland, so the western side of the European continent.

Now Germany has come, and then Germany is picking up, and that’s where I think Europe will. We see the Middle East as a potential market to grow. Now if you go to Asia, we’re in Taiwan and the Philippines, and now Australia. Australia is where the demand is picking up. Clearly, a country that has acquired, you’ll see transmission lines crossing over the continent there has to be all around. It requires that they need and also put out a lot. Australia made a huge bet on distributed solar, rooftop solar. Till now that we are billing need the writers to support that technology. I’ll say the next market that’s coming up is India. Like I said, the Middle East and Europe for Asia [inaudible]. A lot of announcements, but India, it’s always requires a lot of work. Why do I went over all this panoramic view? We believe that in order to build a company, like when we are first on our mission, transform the way we parallel world we need to our [inaudible]. Putting that aside from a mission perspective, from a risk perspective, some markets due to differences will cool and heat up. Hiring a global exposure allows us to ensure that we can manage our growth as we, if growth is a big driver of our ability to create value for our shareholders. Next year, Australia is going to be very important. Some point India, some point Germany, you will see that. Then we are able to manage, as these markets cool and heat up.

David Meier: Well, Julian, and we really appreciate you taking the time to speak to us this afternoon. For me, Fluence is such an interesting company as well as an interesting investment opportunity because it combines growth and scale than an attractive stock price. That’s not something that you necessarily see in the markets all the time. But with that, is there anything else that you’d like viewers to know about Fluence before we wrap up?

Julian Nebreda: Thank you so much. Again, thank you for the opportunity. This is something I already said it, but I want to make the point again. Battery storage is a very versatile technology. It is just starting to do what it will do for the grid and for the way we power the world. The way we consume energy. If you want to change completely the architecture of how we consume electricity, how we produce it, how we transmit it, and how we consume it,. We’re committed to that world. Today, we’re doing what we have to, but we’re committed to that world of it. They’re all in many other companies committed to this in different ways. But we are one of the few, we are the only ones publicly listed, but we’re one of the few that only lost this. What I think about in the morning, what I dream about when I’m running, what I’m thinking about, what stresses me or pleases me come from this technology. Fifty hundred people in this company are the same. I think the importance of the technology requires that level of attention. Totally, investors were outside, clearly, we believe this is a great investment opportunity one-on-one. I wanted to add that this is a year when I think that the people want to be so poor, transformed in the world that they want to understand the importance of this technology and understand the complexity of what we are doing. Having companies that only [inaudible] is tremendously important for the success of this technology and changing the way we’ll succeed. I embody all to read our fluids radio, you can read the short sellers and the many more reports are outside you took writable.

David Meier: You should read them all, absolutely.

Julian Nebreda: You should read them all. The per one-third seller reports, there are hundreds of buy-sells. I’m not concerned at all that go with it and figure it out. Come talk to our investor relations people ask off question, we love to talk a lot, we love to communicate. Hopefully, we can bring some of you to help us in football. As we continue transforming the world with power or continue to run.

Deidre Woollard: I’ll go with people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. Don’t buy or sell stocks based solely on what you hear. I’m Deidre Woollard. Thanks for listening. We’ll see you tomorrow.

Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Bill Barker has no position in any of the stocks mentioned. David Meier has no position in any of the stocks mentioned. Deidre Woollard has positions in Goldman Sachs Group and Lowe’s Companies. The Motley Fool has positions in and recommends Charles Schwab, Fluence Energy, Goldman Sachs Group, and Home Depot. The Motley Fool recommends Dave & Buster’s Entertainment and Lowe’s Companies and recommends the following options: short June 2024 $65 puts on Charles Schwab. The Motley Fool has a disclosure policy.

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