This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Spotify Technology (NYSE: SPOT)'s business hasn't skipped a beat amid the COVID-19 pandemic. Its stock price has more than doubled year to date as investors catch on to how meaningfully its podcast investments could pay off over time. 

Let's recap 2020, dive into what's to come, and then determine whether the stock is still a buy.

2020 wrapped

Spotify has had a phenomenal year despite the pandemic. The company's total monthly active users (MAUs) were 29% higher at the end of September versus the prior-year quarter, and the midpoint of management's fourth-quarter guidance suggests more than 26% MAU growth for the year. Within that figure, management expects Premium subscribers to grow 23%.

One of the big stories of the past year has been the company's massive push into podcasting, specifically original and exclusive podcast content. This push began in earnest when Spotify spent 357 million euros ($436 million) to acquire the podcasting businesses Gimlet, Anchor, and Parcast in 2019.

But Spotify took that to another level this year with the acquisition of The Ringer, a podcast and media company started by Bill Simmons. It later signed Joe Rogan's wildly popular program The Joe Rogan Experience to a multiyear deal that went exclusive with Spotify earlier this month. Kim Kardashian West and Michelle Obama were two other huge names that joined the platform in exclusive deals.

This hasn't gone unnoticed by podcast listeners. In 2020, Spotify has overtaken Apple as the most widely-used podcasting platform, according to MIDiA Research. This rapid success has undoubtedly contributed to increasing investor enthusiasm toward the stock.

What's to come

As we look forward to next year, we can probably count on more of the same out of Spotify. That should mean continued MAU and Premium subscriber growth as streaming audio adoption continues in the company's 92 existing markets -- and the service launches in new ones.

For example, Spotify launched in Russia and 12 other European regions last July. And the company just announced this month that the service will be launching in South Korea during the first half of 2021. For Spotify, South Korea is a large untapped market -- one of the last major ones remaining.

In addition, we should expect more original and exclusive podcasting content. As Spotify's user base continues to swell, and a growing percentage of users engage with its shows, the company is also going to have more ad inventory to sell to advertisers. On top of that, its Streaming Ad Insertion technology has the potential to meaningfully increase the value of podcast advertisements, which would boost the company's revenue and profitability.

Yet another opportunity is the potential for price increases in select markets, which management has been telegraphing lately. On the company's third-quarter earnings call, founder and CEO Daniel Ek said users have responded well to price increases in test markets. He went on to state, "So as a result, you'll see us further expand price increases, especially in places where we're well positioned against the competition, and our value per hour is high."

Spotify hasn't traditionally been thought of as a company with pricing power due to the existence of competing platforms like Apple Music, Amazon Music, and others. To the extent that view among investors changes, the company -- and the stock -- should benefit.

Is Spotify a buy?

Spotify stock has had a tremendous run in 2020, beginning the year at $150 per share and closing at $317 as of this writing.

Many investors would look at those gains and conclude they 'missed out', but Spotify still has a tremendous amount of growth ahead of it, both on the top and bottom lines. The podcast advertising initiative can pay off long term thanks to the high profit margins on each incremental ad impression sold. And investors shouldn't overlook the company's opportunity to sell more promotional services to artists and labels. Some of those revenue streams have "software-type margins," according to Ek, which are far higher than the margins in the company's core business.

With a huge global addressable market, margin-enhancing opportunities, and strong prospects for price increases, there's a lot to like at Spotify over the next decade. Investors should still consider the stock a buy despite its triple-digit rally this year.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 2020 wrapped: Is Spotify stock a buy? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Andrew Tseng owns shares of Amazon and Spotify Technology. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Apple, and Spotify Technology and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

E-commerce company Chewy (NYSE: CHWY) is focused solely on the pet food and pet care category, while for Amazon (NASDAQ: AMZN), that's just one of countless categories and business lines. But within that niche, the two are battling aggressively for sales and dominance.

So which one is the better buy for investors today?

The everything store

Amazon barely needs an introduction – it's the global leader in e-commerce and cloud computing by a wide margin. And those two markets are beyond massive.

For example, the global retail market is estimated to be worth $25 trillion. The worldwide public cloud computing market is expected to top $330 billion this year. And Andy Jassey, the CEO of Amazon Web Services (AWS), also aims to push AWS into the $3.7 trillion enterprise IT market. Given Amazon's $348 billion of net sales over the last 12 months, it's clear it has much more room to grow.

And as we all know, the COVID-19 pandemic has accelerated the growth of e-commerce. Now that more people have become accustomed to shopping online, including for categories like groceries that they previously were more apt to buy in person, it is likely to remain a habit for many of them.

But the beautiful wild card of Amazon's business is its relentless culture of invention. The company is constantly investing in building new businesses that could potentially become huge – which is precisely how it grew from an online bookstore into a giant that competes in far too many markets to list here.

The pet specialist

While Amazon is an incredible business, Chewy is certainly no slouch. This is a company that was only founded nine years ago, and it's already poised to generate more than $7 billion of net sales this year. And it's still growing net sales at a rate of over 40%. This rapid success is all the more impressive considering Amazon's presence in the pet category.

And Chewy has plenty of room to keep growing. Pet spending in the US was $95.7 billion in 2019 and is forecast to reach $99.0 billion this year, according to the American Pet Products Association.

In addition, the portion of pet category spending that has migrated online is still relatively low, but it's expected to increase sharply. Six years ago, the online component of the category was about 2%. Last year, it reached around 15%. And it is now projected to surpass 35% by 2024.

Chewy is also expanding into new segments of the pet market such as pet telehealth and compounding pharmacy services. Management has also suggested it will eventually roll out a suite of online services, which could include things like a marketplace for groomers, dog walkers, and other service providers. That could be a lucrative new business for Chewy because it has a huge number of regular customers who could utilize those services. 

The better buy

Both Amazon and Chewy are fantastic at what they do, but Amazon is the better buy.

Clearly, Amazon is the much larger business – but that alone doesn't make its stock the better investment. Nor is the key point that it has vastly bigger addressable markets with far more white space available for it to exploit.

No, the real differentiator here is Amazon's culture of invention. A decade from now, Amazon will likely have multiple additional huge business lines that it's only getting started with today. We can't know for sure which ones they'll be, but we can anticipate that at least one of the areas where the company is investing will pay off in a big way.

It could be the global logistics business that it is investing aggressively in. It could be Amazon Pharmacy, which it just recently debuted. It could be physical retail stores, including supermarkets, that utilize its Amazon GO "just walk out" technology. It could be a self-driving robotaxi fleet, made possible by its recent acquisition of start-up autonomous technology company Zoox.

Or Amazon's biggest new business of tomorrow could be one we don't even know about yet. The beauty of all this is that Amazon's shares don't appear to have the value of these potential big new revenue drivers baked into the stock price yet, because these businesses barely even exist. That's why Amazon shares could actually remain consistently undervalued while also appreciating nicely in the years to come. Investors should buy this stock and hang on for a decade or longer.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Better buy: Amazon vs Chewy appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Andrew Tseng owns shares of Amazon. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Chewy, Inc and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Amazon.com, Inc (NASDAQ: AMZN) is the ultimate growth stock. That's not just because it has a ton of room to grow in the huge retail and cloud computing markets, but also because it's constantly working to invent big new businesses from scratch. No other company continuously surprises investors with unexpected value creation from new ventures. So where could Amazon be in 10 years?

Retail and cloud businesses  

It's no secret that Amazon's e-commerce business is a juggernaut, and it's only been getting stronger because of the acceleration of e-commerce adoption due to COVID-19. There just aren't a lot of compelling reasons to frequent physical retail stores in a post-COVID world when you can order online from your couch, usually at lower prices, and receive your order in a day or two. That's especially true when Amazon offers such a great customer value proposition.

But what's less appreciated is Amazon's still tiny market share of the global retail market. The global retail market is a massive $25 trillion market. Over the last 12 months, Amazon's e-commerce business had $202 billion of net sales, which is only about a 0.8% share of the retail market. So as much of a juggernaut as Amazon's retail business is, it's still a tiny – but rapidly growing – fish in a huge pond.

The same is true with public cloud leader Amazon Web Services (AWS), which also has a tiny market share of a huge market. AWS boss Andy Jassey said late last year that AWS was addressing the $3.7 trillion global enterprise IT market. If that's the case, then AWS's $40 billion of net sales over the last 12 months is only 1.1% of the opportunity.

Known and unknown emerging ventures

The most underappreciated aspect of Amazon is the company's constant work to build additional big new businesses from scratch. The third-party marketplace and AWS were one-time development stage ideas that have grown into wildly successful businesses.

One newer initiative is Amazon's interest in physical retail, specifically technology-enabled grocery stores. The company started out with the Amazon GO convenience stores with "just walk out" technology, where customers scan their phones on the way in, grab items off the shelves, and then just walk out. Amazon's slew of cameras and sensors can tell what the customer left with, and informs the company what to charge the customer's Amazon account.

This year, Amazon has parlayed that technology into Amazon GO Grocery stores, a full-size grocery store version with the same concept. And it's recently launched a different grocery store concept altogether called Fresh, which uses the Amazon Dash Cart and Alexa-based technology to improve the grocery store shopping experience.

Amazon has a huge interest in the grocery segment because grocery stores are a massive $682 billion category in the US alone. That's why the company is developing at least two different concepts in order to learn and optimise its approach. Given Amazon's track record, it won't be surprising if Amazon eventually captures a sizable share of the category. 

Amazon is also perfecting its drone delivery capabilities, and recently got approval from the Federal Aviation Administration (FAA) to begin testing its drone delivery program. In the future, this should help Amazon deliver packages to more rural customers more efficiently by saving on last-mile delivery costs. 

In addition, the company's rapidly growing advertising business has quickly become the No. 3 online advertiser in the U.S. after Alphabet subsidiary Google and Facebook. Amazon also acquired autonomous car technology company Zoox earlier this year, which could minimise transportation and fulfillment costs in the long term.

These are just a few of the newer initiatives, and there are almost certainly more that we don't know about yet.

Much bigger and more profitable in 10 years

Amazon should be much bigger and more profitable just from the continued growth of the retail and AWS businesses. But it has so many additional irons in the fire that it should have surprising growth coming out of nowhere in the years ahead.

Not all of Amazon's pioneering efforts work. Online auctions, the Fire phone, online travel, and high-end jewellery are a few examples of the company's failures. But failures help the company learn, make adjustments, and change course. For example, the online auctions failure led to the development of the third-party marketplace, which now represents the majority of retail units sold.

Over the next decade, Amazon should grow enormously and could grow to 2% or 3% of global retail sales, 3% of the global enterprise IT opportunity, 25% of the online advertising market, and 5% of the U.S. grocery market. And it would still have a huge runway ahead.

Considering its still low market shares of these big categories, investors should consider the Amazon of 2030 to be just getting started.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Where will Amazon be in 10 years? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Andrew Tseng owns shares of Amazon and Facebook. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Facebook and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Facebook. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.