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

ARK Invest CEO Cathie Wood seems to have taken the investing world by storm. In 2020, Wood's flagship ARK Innovation ETF (NYSEMKT: ARKK) outperformed the greater market by nearly 9x -- 149% versus 16% -- and earned her Bloomberg News designation as best stock picker that year.

With a focus on disruptive technology, it makes sense that ARK's exchange-traded funds would embrace crypto, but the strong conviction ARK's investments are showing to the sector is still a bit shocking. Last year, Wood assigned a $500,000 per coin price target for Bitcoin (CRYPTO: BTC), one of the most ambitious predictions on Wall Street! Unsurprisingly, ARK is well on its way to creating a Bitcoin-focused ETF.

With the crypto bear market starting to show a rebound, you don't have to wait for ARK's new ETF to get in on the positive returns. Here are three growth stocks Wood owns that are active in crypto's adoption and stand to benefit.

1. Robinhood: Derided as a meme stock, but it has a bright crypto future

Despite being on the public markets for only a short time, upstart online brokerage Robinhood Markets (NASDAQ: HOOD) has made a splash. The first week saw whiplash-inducing volatility, with a disappointing debut, a massive rally that saw share prices more than double in a few trading days, and a correction-level price drop after the company announced a massive follow-on share offering. The app that contributed heavily to the meme-stock trend appears to be a meme stock itself.

Robinhood's envious user growth has partly been due to its tremendous success among younger traders. At one point, the company disclosed that nearly 80% of its user base was under age 35, a highly coveted demographic for financial services firms as these investors have most of their earning and investing lives ahead of them.

In addition to zero-commission trading, Robinhood's crypto capabilities helped the company win this demographic. Robinhood is in high-growth mode. The company disclosed that 2020 full-year revenue grew 245% over the prior year to $960 million. A significant portion of that growth was connected to cryptocurrency trading. The company followed that up with a massive first quarter that saw revenue increase 309% from the prior period to $522 million.

Although Robinhood's opportunity is vast, there are increasing risks in its primary stock trading business. A series of high-profile operational failures -- including trading outages during the GameStop frenzy and data breaches -- have placed the brokerage in the crosshairs of the Securities and Exchange Commission.

Additionally, its primary monetization model of payment for order flow is now being copied by incumbent brokers with larger asset bases, educational materials, and customer support. Robinhood's embrace of cryptocurrency functionality is quickly becoming the true differentiator versus traditional stock brokerage firms, and the company is wise to focus on building out its crypto functionality.

2. Square: Using Bitcoin to improve its flywheel

The ARK Innovation ETF stock has sold off from recent highs, but you can't blame its stake in Square (NYSE: SQ). Shares of the digital payments company have advanced nearly 90% in the last year.

Traditional banking continues to avoid cryptocurrency, which has created an opportunity for financial technology, aka fintech, companies. Square has been aggressive on this front, adding the ability to buy and sell Bitcoin in 2018 through its peer-to-peer financial network Cash App. Bitcoin has been instrumental is helping Cash App's flywheel effect, in which added services increase user engagement.

In the short run, however, it could be Square's other business that powers the company higher. Last year Square's seller ecosystem was decimated by COVID-19. The company's host of card readers and POS systems are popular with smaller business owners like restaurants, coffee shops, nail salons, and bars, which bore the brunt of pandemic lockdowns.

Despite that, Square was able to help its vendors quickly build out their online presence and grow card-not-present transactions. At year-end, seller gross payment volume (GPV) was flat despite significant headwinds. In the most recent quarter, GPV jumped 86% over the prior year, helping to power total revenue growth of 87% (minus Bitcoin).

However, CEO Jack Dorsey has high expectations for Bitcoin, proclaiming it would be the world's "single currency" within 10 years in 2018. He continues to lead by helping to form the Crypto Council for Innovation with Coinbase (NASDAQ: COIN) and Fidelity. Square will be instrumental in increasing Bitcoin adoption.

3. Coinbase: Looking to further institutional Bitcoin adoption

Out of the three companies, Coinbase is more tethered to the underlying price of crypto. Coinbase operates multiple crypto-based currency exchanges, so it indirectly benefits from rising crypto prices, as it serves as a form of marketing for new users looking to trade. Directly, Coinbase uses percentage-based transaction fees, which benefit from higher revenue per transaction when crypto prices are higher.

While crypto has been in a bear market lately, that isn't always a bad thing. As a broker, Coinbase also benefits from crypto crashes (at least short-term). Exchanges tend to do well whenever volatility is high, because fast-moving markets are the biggest driver of transactions. Although prices might be lower, transactions and engagement will increase from people looking to buy dips and "paper-hands" looking to lock in profits or prevent deeper losses.

However, Coinbase is leading efforts to expand the cryptocurrency ecosystem and create more revenue sources than retail trading by increasing institutional adoption. Coinbase recently acquired Bison Trails, now known as Coinbase Cloud. The IaaS platform allows institutions to quickly integrate blockchain infrastructure into their operations. As of the first quarter, Coinbase had more than 8,000 institutions on its platform that conducted 64% of its total trading volume.

With that deep (and still growing) institutional userbase, it's likely Coinbase will be on the vanguard of Bitcoin adoption.

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

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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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Jamal Carnette, CFA owns shares of Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin and Square. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

Aside from a visit from Santa, Christmas 2020 was significantly different than in years past. This was glaringly apparent at your local cinema. Traditionally, the week between Christmas and New Year is considered one of the most important for the movie industry, but lockdowns and fear of contagion have slowed box office receipts to a crawl.

However, two of the most anticipated movies this year found their way to audiences via streaming delivery. Walt Disney Co's Soul debuted exclusively on Disney+, and AT&T Inc's Warner Bros. studio released Wonder Woman 1984 at the box office and on its HBO MAX streaming service.

It's easy to make the mistake of thinking that the direct-to-consumer streaming model will end with the pandemic. However, the century-old movie business model is in desperate need of disruption. Apple Inc (NASDAQ: AAPL) is in a unique position to shape this segment of the media industry for years to come, and it could do so by acquiring MGM Holdings, best known for the James Bond films.

MGM is on the selling block

Last month, The Wall Street Journal reported that MGM Holdings is prepping itself for a sale. The privately traded company was recently valued at $5.5 billion and is, according to The Guardian, trying to fetch a price of "more than $5 billion." Per the Journal, Apple has expressed interest before. In 2018, MGM then-CEO Gary Barber was fired for having preliminary sales discussions with Apple without permission from the board.

MGM's assets include the name recognition of one of Hollywood's oldest and most respected studios, a library of approximately 4,000 films -- most notably, ownership interest in the James Bond franchise -- and nearly 20,000 hours of TV programming, primarily through its Epix Network subsidiary.

We don't know if Apple is interested in buying MGM now, but it would be an interesting move.

Apple the disruptor

Make no mistake: What's starting to happen with the movie industry is the same as what's happening with the television industry, and what the music industry went through two decades ago. Delivery methods are changing. Apple was able to take advantage of this in the music industry, essentially becoming the de facto gatekeeper for digital downloads via its iPod -- and introducing users to its sticky ecosystem in the process. Buying MGM would allow Apple to quickly scale its movie ambitions and compete against Disney and AT&T, as their movie monetization strategy will continue to depend on wide-scale theater releases.

In the short run, Apple TV+ would get what it's sorely missing: more streaming content. Since its debut, Apple TV+ has focused on original content, often with smaller-scale studios owned by famous actors. This affords Apple more control but makes it hard to rapidly scale and develop a deep library, particularly for adult scripted content. Earlier this year, the company had reportedly started to engage with Hollywood for licensed content, but nothing concrete has come to fruition thus far.

Simply put, it's hard to rapidly scale content in the beginning. You might recall that Netflix built out its steaming service by licensing third-party content before networks and studios discovered they were mostly competing with themselves and started to pare back on this front.

A big price tag

Admittedly, this would be an unconventional acquisition for Apple. Before now, its biggest acquisition was the $3 billion it paid for Beats headphones. Additionally, it is well known that CEO Tim Cook weighs in on content, with reports indicating that violence, profanity, drug use, and anything considered portraying China in a negative light are no-gos. Likely a significant percentage of MGM's host of content would run afoul of guidelines looking to keep content tame. And at $1.5 billion in revenue, a price tag of $5 billion would exceed 3.5 times sales -- expensive for the broader industry and likely the reason Apple has balked at the deal thus far.

Still, there are reasons to believe this could be a good acquisition for Apple. First, Wall Street is catching on to the durability of the subscription-based billing model. Disney has seen its valuation multiples significantly increase thanks mostly to Wall Street's bullishness on its streaming plans.

Apple's multiples have also expanded based on growth in its services segment, and the company has started to offer its first subscription-based bundle, dubbed One. Making Apple TV+ a stickier product would likely lead to growth in services for years to come and allow the tech giant to be a major player in the evolution of the movie industry.

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

The post This acquisition could boost Apple TV+ to the next level 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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Jamal Carnette, CFA owns shares of AT&T. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple, Netflix, and Walt Disney and recommends the following options: short January 2021 $135 calls on Walt Disney and long January 2021 $60 calls on Walt Disney. The Motley Fool Australia has recommended Apple, Netflix, and Walt Disney. 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.

What a wild ride it's been for Big Tech. After decades of Washington applying a relatively soft-touch regulatory approach to the sector's leaders, there's been a sharp turn toward much fiercer rhetoric over the last two years. The sentiment that it's time to rein in those companies is widespread. Big Tech has drawn the ire of congresspeople on both sides of the aisle, and it is increasingly taking heat from officials at the state level as well.

However, one mega-cap tech company has been noticeably absent from the list of those that are earning lawmakers' ire: Microsoft (NASDAQ: MSFT).

Lawsuits and regulatory pushback

Facebook (NASDAQ: FB) has been the most visible target of governmental scrutiny and pressure of late. President Trump has been aggressive in his efforts to overturn social-media friendly Section 230 of the Communications Decency Act, first by issuing an executive order in May and then threatening to veto the annual National Defense Authorization Act if the provision's repeal is not included in it.

However, the executive order has been challenged in court on legal and constitutional grounds. Meanwhile, the bill Trump was threatening has passed both houses of Congress with veto-proof majorities.

An antitrust lawsuit originating at the state level with 46 state attorneys general and the FTC challenging Facebook's earlier acquisitions of Instagram and WhatsApp appears to be the bigger risk to the company at the moment.

Apple's (NASDAQ: AAPL) biggest legal challenges relate to its App Store marketplace's policies. The first is a lawsuit from Fortnite creator Epic Games, which does not want to keep paying Apple a 30% cut of the revenue that the popular title generates through in-app transactions.

More recently, Cydia has sued Apple. Similarly to the Epic suit, it alleges that the iOS App Store model is an illegal monopoly. In a federal court filing, Cydia claims its own (unauthorized) iPhone app store existed before Apple's, and that due to Apple's anticompetitive conduct, it has essentially been shut out of the iOS distribution market. 

Amazon is facing a similar marketplace-related class-action lawsuit. Plaintiffs allege it uses its monopoly power to essentially dictate prices on third-party products. Finally, in October, the U.S. Justice Department and 11 state attorneys general filed a lawsuit alleging Alphabet's search business constitutes an illegal monopoly. A recent report from The Wall Street Journal suggests there are additional lawsuits in the works against the search giant.

How does this help Microsoft?

There are a few ways that keeping out of the courtroom benefits Microsoft. The first is that legal problems are a bandwidth issue. The more time C-suite occupants spend responding to government inquires and ensuring that their company is complying with injunctions, the less time they have to think about high-level strategy. The second is that court cases carry the possibility of monetary penalties. Ultimately, both of these tend to be minor concerns for the largest tech companies, but they are risks nonetheless.

The biggest risk appears to be that the results of court cases could force changes to some Big Tech business models, most notably on the mergers-and-acquisitions front. The multistate lawsuit against Facebook is interesting in that it seeks to revisit acquisitions that were sealed five or more years ago. While this may portend a more hostile environment toward all acquisitions in tech, Microsoft has been aggressively snapping up businesses recently with no pushback from regulators.

The company spent $9 billion on 20 acquisitions in its fiscal 2019 -- though most of that sum went toward its $7.5 billion acquisition of GitHub -- and tacked on another dozen acquisitions in its fiscal 2020 (which ended June 30). It's likely that fiscal 2021's M&A outlays will exceed 2019's, as Microsoft announced in September that it was spending $7.5 billion to buy ZeniMax Media.

What should you do if you own these companies?

Investors generally employ one of two approaches when evaluating legal and regulatory risk, and both tend to be overreactions. The first is to quickly sell stocks at the prospect of a legal or regulatory challenge without knowing its full ramifications. The second -- which has admittedly been an effective strategy over the last decade -- is to haphazardly wave off any concern without applying proper due diligence.

The better long-term approach is to critically evaluate these risks in their proper perspective. Ironically, we can draw from Microsoft's history for some context about how stronger regulation might impact today's tech powerhouses. In 2000, a federal judge initially ruled that Microsoft's tactics in bundling Internet Explorer with its Windows operating system had violated antitrust laws. He ordered the company to be broken up.

On appeal, the breakup order was rescinded. That led the Department of Justice to settle its case in exchange for a host of concessions from Microsoft, including an agreement to share its APIs with third-party developers. Use of the Internet Explorer browser plunged and -- for a host of reasons not all related to the legal loss -- a "lost decade" followed for Microsoft investors. I don't expect such an aggressive result for the current targets of governmental ire, but some in Washington are looking to make a statement to Big Tech. Microsoft, though, is clearly out of their crosshairs.

While legal and regulatory risks have been minimal for this sector in recent years, investors now need to be more alert to them when doing their due diligence. Ultimately, your investment decisions should not be dictated by these concerns, but they are definitely worth keeping an eye on.

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

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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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Jamal Carnette, CFA owns shares of Amazon. 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. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, 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. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, and Microsoft 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 Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Facebook. 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.

At first glance, this has been a great year for investors in Facebook (NASDAQ: FB). As of this writing, Facebook's 33% year-to-date stock price gain is nearly three times greater than the S&P 500 Index's (INDEXSP: .INX) return during the same period.

Despite the strong performance, it's been a difficult year in Menlo Park, California, as the company finds itself increasingly in the crosshairs of government regulators.

At the federal level, President Donald Trump issued an executive order in May to overturn Section 230 of the Communications Decency Act, a provision that protects social media companies against lawsuits related to content posted on their sites. In a move that raised the ante on earlier threats, Trump announced he would veto the yearly defense bill if Section 230's repeal was not included in the legislation.

As the biggest news distribution outlet in the world, it was likely Facebook would eventually clash with a president who's pugilistic attitude toward anything or anyone who challenges him is part of why his supporters like him, but what's notable is the significant erosion in support for the company from Trump's detractors as well. Early this month a consortium of attorneys general for 46 states, the District of Columbia, Guam, and the FTC filed an antitrust suit seeking to break up the company.

As the company faces increased regulatory threats and lawsuits, founder Mark Zuckerberg should consider if it's time to step aside as CEO of Facebook.

Bigger problems than antitrust

It's clear the bigger risk to Facebook currently is the antitrust lawsuit originating at the state level, but even it's an odd case. Led by New York Attorney General Letitia James, the antitrust lawsuit seeks to revisit prior corporate acquisitions – Instagram in 2012 and WhatsApp in 2014 – that were approved by the US government.

More telling was AG James' retweet of US Rep. Alexandria Ocasio-Cortez's (D-New York) statement that Facebook "abused its market power to ... manipulate democracies and crush journalism". It's apparent that US politicians have broader concerns with Facebook than 5-year-old acquisitions, and the fact that nearly every state attorney general signed on points to the fact that this is a rare area of bipartisan agreement.

Suffice it to say, Facebook is entering a radically different regulatory environment, and this requires a different mindset from the C-suite. Mark Zuckerberg has been a tremendous founder and CEO, but the skillset he embodies – "move fast and break things" – might no longer be the right one for a company that now controls the digital publishing industry and essentially dictates the national conversation.

Facebook is no longer a scrappy start-up. Instead, it's the biggest, most influential social media company in the world. As such, what Facebook needs is not a growth-oriented mindset, but rather a CEO with a level of emotional intelligence that rivals Mahatma Gandhi's and who can balance the needs of a long list of critical stakeholders, politicians being key among them.

If anybody thinks this means Zuckerberg will have no influence, think again. He will remain as board chair and maintain his dual class of shares that gives him a majority of voting rights. Simply put, no big decisions will be made without his approval.

Who's on deck?

Recently, there's been a host of op-eds attacking Zuckerberg for seemingly everything wrong in American discourse, often in deeply personal framing. Let me be clear, this article is not one of them. Zuckerberg created a company from nothing that is on pace to become a trillion-dollar giant before Zuckerberg reaches the age of 40. It also made him a very young billionaire. In strict Peter Principle framing, Zuckerberg's plateau is enviable and unlikely to happen again.

However, with much power comes much responsibility: Facebook at its best is a community builder, a relationship enabler, and a connector. However, these tools can be used to spread misinformation, encourage violence, and destabilise governments. These are legitimate and hard-to-solve issues that require careful consideration.

Stepping down in favor of a new CEO isn't a failure for Zuckerberg, but rather an acknowledgment that the company has entered a new phase in its development. While his age is often mentioned, what's less discussed is that he's been the CEO since Facebook's founding in 2004, a period significantly longer than the average S&P 500 CEO tenure of 10 years.

There's also precedent in this move, most notably from early-stage Alphabet (then operating as Google) when Larry Page handed the CEO reins over to Eric Schmidt. A succession plan is never easy, but it's a critical component of a multi-generational company. Facebook should lead here by starting these discussions in earnest.

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

The post Is it time for Facebook to do the unthinkable? 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.

More reading

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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. Jamal Carnette, CFA has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.