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

Collectively, the seven biggest technology companies in the world have come to be referred to as the "Magnificent Seven." Two of them are Meta Platforms (NASDAQ: META) and Amazon (NASDAQ: AMZN). And Wall Street believes this duo is worth buying.

Some investors may be surprised to hear that Meta Platforms and Amazon stock could still be good buys today. After all, they're each worth more than $1.5 trillion, and their share prices are up by around 460% and 630%, respectively, over the last decade. How much more upside could these two tech giants possibly have?

As it turns out, select Wall Street analysts believe that these two stocks could gain at least 20% over the next year. Whether or not the next 12 months will pan out like that, I'm not sure. But with an eye toward the longer term, I believe Meta Platforms and Amazon are both good investment ideas today.

1. Meta Platforms

At the time of this writing, Meta stock is down 20% from its all-time high. Investors don't like how much money it's spending on dubious projects. In the third quarter alone, its Reality Labs division, which includes its metaverse-related projects, reported an operating loss of $4.4 billion while generating just $470 million in revenue. Moreover, spending in its Superintelligence Labs division, which supports its artificial intelligence (AI) ambitions, continues to ramp up.

However, if any company has ample money to burn, it's Meta Platforms. Across its various apps, including Facebook, more than 3.5 billion people interact with the company daily. This makes it one of the greatest advertising businesses on Earth, which is why it delivered an incredible Q3 operating margin of 40%. This was its margin after laying out massive sums on its AI and metaverse efforts.

Indeed, Meta continues to make money hand over fist, and it's not stingy. Between share repurchases and its growing dividend, the company returned $4.5 billion to shareholders in Q3. In short, Meta's core business is stronger than ever, it's investing billions of dollars in its efforts to find new growth avenues, and it's rewarding its shareholders. This makes Meta stock hard to overlook.

Moreover, after its 20% pullback, Meta is now the cheapest member of the Magnificent Seven, trading at just 24 times next year's expected earnings. If the company continues to execute as it has been, that's a good bargain.

2. Amazon

It's hard to ignore Amazon's retail business in North America, considering that it now generates over $100 billion in quarterly sales. But that's what I want to do. Instead, I want to focus on Amazon Web Services (AWS), because that business unit accounts for two-thirds of the company's operating profits, making it extremely consequential to Amazon's overall performance. And the outlook for AWS remains incredibly strong.

AWS is Amazon's cloud computing platform. Enterprises worldwide continue to migrate their operations and data onto computers at data centers. The growth in AI workloads is only accelerating this trend. Revenues for AWS were up 20% in the third quarter, which is an incredible growth rate for a business that has an annual revenue run rate of more than $100 billion.

Growth should stay strong. Amazon ended Q3 with nearly $200 billion in performance obligations and said that the majority of that amount was related to AWS. That represents a 22% increase from the performance obligations that it had at the end of the third quarter of 2024. In short, the outlook remains bright for AWS' growth, which points to strong future profits for Amazon.

I believe that Meta Platforms stock may be the better bargain of these two today. That said, I believe that Amazon's stock performance could still be better than average. Historically, Amazon stock performs well when it posts strong growth in its operating profits. And given that its performance obligations for AWS continue to rise, it appears that its trend of rising operating profits will persist.

Meta Platforms and Amazon have each produced incredible gains in recent years. But there's no reason to believe they can't provide investors with further long-term share price growth. 

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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Jon Quast has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Meta Platforms. The Motley Fool Australia has recommended Amazon and Meta Platforms. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Shares of Amazon (NASDAQ: AMZN) dropped 10.7% in February, according to data provided by S&P Global Market Intelligence. The company reported financial results for 2024 on Feb. 6 which handily beat expectations. But investors were concerned about a $100 billion expense coming in the near future.

For context, Amazon just capped off a historic year. The company's operating income came in at a record $68.6 billion, which was up 86% year over year and was almost as much as the previous three years combined. And the star of the show was the cloud-computing platform Amazon Web Services (AWS). AWS supplied more than half of the year's operating income with its net sales growing by 19% to over $100 billion.

Don't misunderstand: Amazon's AWS is one of the most important cloud-computing platforms, and its growth has been stellar for years. But more recently, growth in the industry is getting a boost from interest in artificial intelligence (AI). In short, enterprises are turning to AWS to experiment with and ultimately adopt AI applications.

To provide this service to customers, Amazon is having to spend aggressively to boost its computing power. For 2025, management anticipates spending $100 billion in capital expenditures (capex). And CEO Andy Jassy said, "The vast majority of that capex spend is on AI for AWS."

Amazon's AI expenses will modestly weigh on 2025 profits

I can never quite predict what investors will choose to focus on; I'm surprised that Amazon's capex guidance troubled anyone. That said, spending is up substantially. The company spent $48.1 billion and $77.7 billion on capex in 2023 and 2024, respectively. Spending $100 billion or more is a significant step up from there. There are cases of businesses spending so much on AI that it hurt profit margins, and perhaps that's what investors are worried about.

In fairness, there is some substance to investors' concerns here. Amazon's management expects its full-year 2025 operating income to drop by $700 million compared to 2024. And as the chart below shows, Amazon stock regularly drops when operating income drops.

AMZN data by YCharts.

It's a move that Amazon can afford to make

Investors need to take care to not lose perspective. Amazon's operating income is expected to pull back by 1% as it spends to grow its AI capabilities. That still puts 2025 on pace to be its second most profitable year ever.

Moreover, I don't really think that Amazon has much choice in the matter. The reality is that AWS is massive and growing. Cloud-computing customers want more AI functionality. If Amazon wants AWS to stay massive and growing, it needs to give customers what they want. Its capex spending is necessary from a competitive perspective.

Finally, if any company can afford it, it's Amazon. Consider that the company spent nearly $78 billion in capex in 2024 and still had free cash flow of $38 billion left over. Therefore, this is something Amazon can easily afford as it grows AWS.

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

The post Why Amazon stock dropped 11% last month 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, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jon Quast has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended 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 Scott Phillips.

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

Shares of embattled cybersecurity company CrowdStrike Holdings Inc (NASDAQ: CRWD) crashed on Monday because Friday's incident is still in the spotlight. Various analysts downgraded their near-term expectations for the company from here, which might not be an overreaction. As of 10:15 a.m. ET, CrowdStrike stock was down 12% for the day and it's now down more than 30% from its all-time high hit earlier this month.

The analyst downgrades are here for CrowdStrike

On Friday, CrowdStrike updated its cloud-based software. But the update had a defect that caused an estimated 8.5 million Microsoft Windows devices to stop working, impacting financial institutions, airlines, and more. The stock obviously dropped on Friday as investors assessed the situation. But today Wall Street analysts are formally expressing their thoughts.

Wells Fargo analyst Andrew Nowinski lowered his price target for CrowdStrike stock today in expectation of higher legal fees in the near future, among other things, according to Investing.com. Guggenheim analyst John DiFucci lowered his price target because he expects potential customers to be reluctant to sign new deals for a while, until there's greater certainty that CrowdStrike won't make a mistake as big as the one it made last week.

Investors today are responding to the universally cautious tone from Wall Street.

Are the analysts right?

In short, the analyst community is expressing very valid concerns for CrowdStrike stock right now. For cybersecurity stocks, one of the biggest risks has always been reputational risk from a single failure. Over the last few years, the company has seemed unstoppable as it won new customers and as existing customers continue to add on new software modules, boosting both revenue and free cash flow. But it was still susceptible to this risk.

CrowdStrike isn't necessarily done — I think that would be an extreme overreaction. It's important to note that the company's failure was a software defect, not a failure to defend against a cyberattack, which is key. But it still may take a while for the business to fully move past knocking down that many Windows systems last week. Therefore, Wall Street is being reasonable by lowering price targets today.

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

The post Why CrowdStrike stock just crashed again appeared first on The Motley Fool Australia.

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Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Jon Quast has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CrowdStrike and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended CrowdStrike and Microsoft. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. 

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

According to Statista, global payment card fraud is a $32 billion problem and is expected to be a $38.5 billion problem by 2027. Riskified Ltd. (NYSE: RSKD) is a small company aiming to solve this big problem. And it may just be cheap enough to have limited downside from here, giving today's investor a relatively low-risk way to invest in this space.

Keep in mind that all investments are fraught with risks, and Riskified is no exception. We'll look at what's holding this company back. But it could be worth taking a speculative position.

Meet Riskified (and its risks)

E-commerce companies obviously don't like fraud and actively try to avoid it. They'll decline transactions that look suspicious. If their hunches are correct, they'll avoid losing money when transactions are disputed and chargebacks result. However, if they're incorrect, they miss out on legitimate revenue. Riskified aims to solve both of these problems for e-commerce companies.

Riskified believes its artificial intelligence (AI) software is better at identifying fraud than e-commerce companies. Companies that use Riskified enjoy higher revenue by having more transactions approved. And if the software makes a mistake, Riskified pays for it, not the e-commerce company -- it's an undeniable value proposition.

Maybe its value proposition is why Riskified has an impressive 99% customer retention rate. Or maybe it's simply because the company's customer base is small and just one customer -- presumably Wayfair -- accounted for a whopping 16% of Riskified's revenue in 2021. It's easier to have a high percentage retention rate when your business is concentrated toward just a few customers.

Riskified's small customer base makes it a risky investment. While its retention rate is impressive now, losing just one account could result in outsized damage.

The other big risk for Riskified is that its AI software doesn't appear to be making meaningful improvements, which is the crux of a bullish investment thesis to begin with. When it approves fraudulent transactions, the company refunds its customers. And this cash outflow reduces its gross profit calculations. Other things affect its gross margin as well. However, investors can get a general idea of the effectiveness of Riskified's AI by watching how its gross margin improves or deteriorates. 

Here's a look at Riskified's gross margin over the past six quarters.

Data source: Riskified's press releases. Chart by author.

Riskified's management blames its gross margin underperformance on diversification. It's picked up new customers in new categories, and its AI software needs to be trained for the particularities in each. Long term, this is a really good thing if true.

However, the point remains that Riskified stock is a risky investment. It's hard to quantify the quality of its software. And if it's not quality, the company likely won't grow and it will lose customers in time, which we've already noted would be a big deal. 

A risk-adjusted entry point?

As of this writing, Riskified has a market capitalization of $670 million -- squarely in small-cap territory. However, the company has a stellar balance sheet of $488 million in cash, cash equivalents, and short-term deposits and has no debt. Adjusting for this gives Riskified an enterprise value (the value of the business itself) of under $200 million, which is really small.

For perspective, Riskified expects to generate between $255 million and $258 million in revenue in 2022. Therefore, its enterprise value is actually below its sales, which is pretty cheap. 

The other thing to consider is that Riskified isn't profitable, but its cash burn is modest. Through the first half of 2022, the company has just negative $19.3 million in cash from operating activities, giving it a really long runway considering its large cash position.

The market isn't asking investors to pay up for Riskified stock. The company is cheaply valued, is close to profitability, and has a rock-solid balance sheet. Riskified stock is down close to 90% from its all-time high, but these factors mitigate further downside from here.

It could be a buy

The points made early in the article clearly demonstrate that Riskified is a speculative investment, not a sure thing. However, the price could be right to take a small position and add it to a larger portfolio.

If Riskified lives up to its potential, a little stake now will be sufficient for investors. With a market cap of just $670 million, it has ample room to expand in the $32 billion (and growing) payment-fraud space. And the company has additional revenue-growth opportunities not discussed here. 

From where it trades today, Riskified can be a multi-bagger investment. But it still has a lot to prove.

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

The post A relatively low-risk way to profit from a $32 billion problem? 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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Jon Quast has positions in Riskified Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Riskified Ltd. 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 Scott Phillips.

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

Google's parent company Alphabet Inc. (NASDAQ: GOOG)(NASDAQ: GOOGL) may be considering an acquisition of image-browsing platform Pinterest (NYSE: PINS). And that's because Pinterest possesses something extremely valuable that Alphabet would definitely like to have in a changing advertising economy.

Don't be fooled by a stock price that's down more than 70% from its all-time high. Here's the case for Pinterest and its potential suitor.

Where did this crazy rumor even come from?

Alphabet CEO Sundar Pichai spoke at the Code Conference earlier this month. He talked about many things going on with the company, including developments in the advertising market and concerns over artificial intelligence. Late in the talk, however, the interviewer turned the conversation toward mergers and acquisitions (M&A).

When asked if Pinterest was an acquisition target, Pichai stammered, "Look, I can't comment on a few, on any M&A deals." He then smiled sheepishly at the interviewer's suggestion that he could comment if he wanted to do so.

Perhaps Pichai was simply uncomfortable with the entire interview and struggled for an answer regarding Pinterest for this reason. However, the interviewer had just asked Pichai the same question regarding Twitter, Inc.(NYSE: TWTR), which he seemingly answered with ease. Alphabet isn't looking to buy Twitter, he said. The drama unfolding with Elon Musk has Pichai simply watching with "popcorn."

Pichai answered the question on acquiring Twitter. He didn't with Pinterest. And that leads some to believe that Alphabet has indeed reached out to Pinterest about a potential acquisition. 

Why Pinterest is a valuable acquisition target

Pichai's comments at the Code Conference is just circumstantial evidence. However, it wouldn't be the first time a big tech company would be interested in buying out Pinterest. PayPal Holdings, Inc.(NASDAQ: PYPL) was reportedly trying to buy Pinterest for $45 billion last year. PayPal's market capitalisation was around $300 billion at the time compared to Pinterest's then market cap of around $35 billion.

Both market caps have fallen mightily -- PayPal is down to about $105 billion whereas Pinterest is worth about $16 billion. And when it comes to Pinterest, its stock has been crushed because of slumping user metrics. It was once believed that Pinterest could potentially attract billions of users like Meta Platforms, Inc.(NASDAQ: META). However, the company peaked at 478 million monthly active users way back in the first quarter of 2021 and has since steadily declined to where it is today at just 433 million monthly active users.

On the surface, Pinterest's relevance is dwindling, which hardly seems like a platform worthy of PayPal and Alphabet's attention. However, Pinterest has steadily increased its monetization, going from $1.04 in average revenue per active user (ARPU) in Q1 2021 to $1.54 in Q2 2022. That's substantial.

Here's what Alphabet and PayPal are likely interested in: Pinterest has steadily increased its monetization thanks to its truly unique perspectives and insights into consumer behaviors. Year after year, the company proves it knows what people want with its annual Pinterest Predicts report -- the report was proven to be 80% correct in 2021.

For Alphabet's part, it generates most of its revenue through advertising. But the game is changing for advertising stocks. Consumers are increasingly concerned about privacy, and governments are regulating more. For this reason, Alphabet intends to do away with third-party cookies in 2024. But that risks making its ads less effective, and that would consequently lead to lower ad rates. 

Acquiring Pinterest and its consumer insights could dramatically help it remain more effective at advertising while also doing away with tracking. 

For PayPal, investors often forget it has a merchant side of its business -- 35 million active merchant accounts as of the second quarter of 2022, up from 32 million in the same quarter of 2021. Part of the company's strategy is to provide data on consumer intent to merchants so they can better know what to prioritize. This is exactly what Pinterest could have provided had the deal gone through.

Pinterest is still a valuable company

In the end, we don't know for sure if Alphabet is really intent on acquiring Pinterest or whether we'll never hear rumblings of this rumor again. However, I believe we have seen that Pinterest's business has value even if it's struggled to create value for shareholders since going public in 2019.

That said, I believe Pinterest is still a stock worth buying today despite its user struggles. Its ARPU growth demonstrates its value to advertisers, likely due to its perspectives on consumer trends. That could make Pinterest an even more attractive platform if the global economy goes into a recession; advertisers would likely decrease spending overall and concentrate spending on platforms where returns are the best. And Pinterest would be a top contender for those concentrated dollars.

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

The post Is Google really trying to buy Pinterest? 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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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 Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jon Quast has positions in PayPal Holdings and Pinterest. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Meta Platforms, Inc., PayPal Holdings, Pinterest, and Twitter. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Meta Platforms, Inc., PayPal Holdings, and Pinterest. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

I believe you should buy stocks right now, and I'll support this position with insights from people far more qualified to walk us through this than I am.

With so much uncertainty in the world and in the economy, I know that now can seem like a poor time to invest. But stock pickers could be in a more advantageous position now than they've been for over a decade.

Bull market geniuses or ducks in the rain?

From March 2009 through the end of 2021, the S&P 500 was up over 500%. The march upward only had a couple of brief interruptions, as this chart shows.

^SPX data by YCharts.

If you were buying and holding stocks during this period, it was almost difficult to lose money.

It reminds me of something Berkshire Hathaway Inc.(NYSE: BRKB) CEO Warren Buffett once said. Referencing Berkshire's 34% gain in 1997 in his letter to shareholders, Buffett wrote: "Last year's performance was no great triumph: Any investor can chalk up large returns when stocks soar, as they did in 1997. In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world." 

To restate Buffett's point, almost all investors look like geniuses in a bull market because stocks are going up everywhere -- just buy something. And this is partly due to the broader economy, since there's a strong correlation between that and the market. When the economy is strong, many businesses do well and their stocks go up.

However, we are entering a whole new world in 2022. The U.S. economy has declined for two consecutive quarters. And things could slow further because of the Federal Reserve, as it raises interest rates to combat inflation. As Fed Chairman Jerome Powell recently said, "Reducing inflation is likely to require a sustained period of below-trend growth."

According to Powell, increasing interest rates will continue to slow the economy. But it's also causing the cost of capital to increase, hurting businesses that need financing. 

The clock is ticking (for some)

The situation I've described is real. Even companies that have historically burned cash, like Snap Inc.(NYSE: SNAP), are pivoting. When it comes to profits, CEO Evan Spiegel recently said, "We must adapt our strategy accordingly." For this reason, the company is making several changes, including trying to better monetize its augmented-reality (AR) technology by launching an enterprise business.

But many unprofitable companies won't be able to adapt. The dot-com bubble more than two decades ago was a similar situation. The market hit its high in early 2000, but the writing was already on the wall. Talking to Forbes at the time, Ron Sege, then the Lycos CEO, said, "There is a certain sense of desperation and anxiety." Specifically, Sege was talking about insiders' desire to cash out and leave their companies in light of market conditions.

Insiders want out when their ability to generate shareholder value goes down. I believe that's the case right now for structurally unprofitable companies in light of changing economic conditions. As Etsy, Inc.(NASDAQ: ETSY) CEO Josh Silverman recently said, "I think we're going to see a reckoning." The torrential rain for Buffett's ducks is over.

However, if you're thinking about waiting to buy stocks until the shakeout is over, that might not be the best idea. The stock market looks ahead, and it sometimes starts recovering from rock bottom before the economy improves. So unless you know exactly when the economy will recover (you don't), you risk missing the stock market bottom.

^SPX data by YCharts.

To summarize up to this point, bull markets produce stock winners everywhere. Bearish market conditions like right now prioritize profits and disproportionately hurt weaker companies. And finally, timing the market bottom isn't easy. Now, here's what to do with this information.

The strong will get stronger

Sequoia Capital's Alfred Lin recently wrote in a presentation, "The slower growing companies that were doing it profitably now have the financial flexibility to take advantage of the pullback from cash burning companies." 

It's like what Motley Fool contributor Brian Stoffel says with his Antifragile Framework for investing: Stocks that are antifragile "get stronger when stress is applied." In other words, the present situation is going to be a long-term benefit for a handful of companies. And if you can identify these opportunities while the market is down, it can lead to some market-crushing results, which is why I believe now is a great time to still be buying stocks.

For instance, investors might take a look at PayPal Holdings, Inc. (NASDAQ: PYPL) stock. With so many unprofitable financial-technology companies out there, PayPal could be in a position of strength. The company has already curtailed spending to boost profits. And at a conference on Sept. 12, CEO Dan Schulman said that earnings per share (EPS) for the current quarter were "coming in a bit stronger than expected." And it's pivoting to greater profitability while still maintaining revenue growth north of 10%. 

Image-browsing app Pinterest (NYSE: PINS) and advertising-technology company PubMatic, Inc. (NASDAQ: PUBM) are two more businesses that can still thrive in the current market. Both companies are debt-free, are in cash-rich positions, and generate positive cash from operations, as this chart shows.

PINS total long-term debt (quarterly). Data by YCharts.

Granted, both Pinterest and PubMatic generate revenue from ads. And the advertising industry will likely struggle in a slowing economy. But that's kind of the point. As Lin said, these two have the financial flexibility to grab market share from cash-burning rivals.

In conclusion, investors will need to be more discerning than ever when picking stocks in 2022 and beyond. There are lots of problems, and many businesses will consequently be permanently impaired.

However, this will create amazing long-term opportunities for a select group of companies that I believe will result in life-changing gains over the years to come. I might not accurately identify all of these stocks. But it's why I want to be picking stocks now more than ever.

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

The post Should you really buy stocks now or wait a while longer? 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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Jon Quast has positions in Etsy, PayPal Holdings, Pinterest, and PubMatic, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Etsy, PayPal Holdings, Pinterest, and PubMatic, Inc. The Motley Fool Australia has recommended PayPal Holdings and Pinterest. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

On June 22, online marketplace eBay (NASDAQ: EBAY) acquired a specialty marketplace for non-fungible tokens (NFTs) called KnownOrigin. The press release said KnownOrigin was a "leading" NFT marketplace. As a cash-rich company, eBay is fully capable of funding this acquisition. 

However, with limited growth opportunities, the company needs to be careful to not lose focus on shareholder returns. And buying KnownOrigin is a step in the wrong direction for this reason, in my opinion.

Why eBay stock could be a fantastic investment

In my opinion, there are three main phases of a public company's lifecycle: needing capital, self-funding, and returning capital to shareholders. In phase one, unprofitable companies secure funding from banks and shareholders to build the business in hopes of achieving scale. In phase two, companies have achieved enough scale to be cash flow positive but they continue plowing all available resources into growing the business. By phase three, growth opportunities are limited and, therefore, cash flows should be used to reward shareholders.

These phases exist on a spectrum and the lines aren't set in stone. For example, a company can return some capital to shareholders and still invest in growth. But the takeaway point here is that investors need to know where a company is in its lifecycle to evaluate the opportunity. Stocks in each phase can be good investments if management uses cash wisely. 

For eBay, it's in phase three because growth opportunities are limited. Consider that in the fourth quarter of 2017, the company generated $2.7 billion in revenue. In the fourth quarter of 2021, it generated just $2.6 billion. In short, quarterly revenue was down almost 4% over this time period.

However, eBay's revenue per share was up a whopping 62% over this time period because management has repurchased billions of dollars worth of its own shares.

EBAY Revenue (Quarterly) data by YCharts.

Even though eBay isn't growing anymore, it's still a cash flow machine. As a marketplace, it doesn't carry inventory, which keeps costs low. It's merely connecting buyers and sellers and collecting a fee. This is why the company was able to have a free cash flow (FCF) margin of 25% in 2021 -- few businesses have higher margins.

Through stock repurchases, shares are taken out of circulation and remaining shares become more valuable -- thus rewarding eBay shareholders. The company also pays a fast-growing dividend -- up 58% over the past five years -- which contributes to overall returns. This is great use of cash by eBay's management. 

As of the first quarter of 2022, eBay has $4.7 billion left on its share repurchase authorization plan. Considering its current market capitalization is just $24 billion, this plan is significant. But the company has ample resources to pull it off. It has over $5 billion in cash and short-term investments on the balance sheet, generates over $500 million in quarterly FCF, and even has $5.3 billion in long-term investments in other e-commerce and financial-technology companies. 

What's so great about NFTs?

Hopefully you're salivating over eBay's potential to return capital to shareholders in coming years. It can be a path to market-beating returns. However, it assumes management doesn't get too distracted. 

By acquiring KnownOrigin, I fear it might be taking its eyes off the prize. Terms of the deal weren't disclosed, but I assume it paid a price that was well within its means. However, even if it's affordable, I doubt the NFT marketplace space is a path to growth. This is why I don't like the acquisition. Moreover, according to DappRadar, KnownOrigin only ranks 41st in NFT marketplaces by volume -- at least, in the past 30 days.

We don't have time to go down the NFT rabbit hole here. But suffice it to say that NFTs can be more than just collectibles. They can be used for record keeping, live-event ticketing, reservations, and more. But it doesn't appear that eBay is interested in this potentially innovative side of the NFT market.

Ebay is interested in NFT collectibles and has experimented in the space since May 2021. But according to data from NonFungible, NFT sales volume (in dollars) has plummeted 90% over the past year. And unique buyers have also decreased 42%. 

Management's desire to stay relevant is understandable. But unless eBay finds viable growth opportunities, it should focus on shareholder returns. Given current trends, NFT collectibles aren't going to be what management hoped. And so jumping into this cooling space could distract management from its best use of cash right now. 

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

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Jon Quast has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended eBay and has recommended the following options: short July 2022 $57.50 calls on eBay. 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 Scott Phillips.

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

What happened

So what

Now what

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

The post Why this small cryptocurrency kept making waves today 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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• Is this the best ASX dividend share to buy in August?

Jon Quast has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Scott Phillips.

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

U.S. dollar stablecoin Tether (CRYPTO: USDT) is the largest stablecoin by market capitalization in the world and the third largest cryptocurrency period, trailing only Bitcoin and Ethereum. And on May 12, Tether did something it's never done before. The stablecoin is supposed to always be worth $1. But during the early morning hours, it dropped to about $0.95 -- a shocking drop.

Tether's 5% deviation from its $1 peg is particularly jarring right now because of what just happened with rival stablecoin TerraUSD (CRYPTO: UST). TerraUSD lost its $1 peg a few days ago and has traded as low as $0.30 per coin. And it's possible it will never recover.

In this article, let's briefly look at stablecoins and what might be next for Tether and for the cryptocurrency space as a whole.

How the top five stablecoins work

According to CoinMarketCap, the top five stablecoins are Tether, USD Coin (CRYPTO: USDC), Binance USD (CRYPTO: BUSD), TerraUSD, and Dai (CRYPTO: DAI). Yes, shockingly, TerraUSD is still a top five stablecoin by market cap even though it's only worth $0.45 as of this writing.

These stablecoins have different approaches to keeping their values at $1. Tether, USD Coin, and Binance USD keep real dollars in a bank and issue new digital coins at a one-to-one ratio.

This is probably the most intuitive way to build a stablecoin. However, the cryptocurrency community has been reluctant to embrace this approach. After all, what's the point of all of this if we still need real dollars at the end of the day? That's why Dai and TerraUSD approached the problem from different angles.

With Dai, users deposit cryptocurrencies like Bitcoin into vaults using The Maker Protocol from MakerDAO. Once deposited, new Dai is created. But there's supposed to be more collateral in vaults than Dai in circulation. This absorbs volatility in the underlying collateralized cryptocurrencies and the system has historically worked ok -- in times of extreme volatility Dai has deviated from its peg, but it's always managed to regain its $1 value.

Finally, we come to TerraUSD. This stablecoin attempted to control supply to always meet demand. More TerraUSD could enter and leave circulation based on demand by swapping it with Luna. This algorithmic stablecoin was an attempt to be fully decentralized.

Why TerraUSD failed

As mentioned, Tether recently started teetering. But it all started with TerraUSD.

People were putting their money into TerraUSD largely because of the high yield they could get for holding it through the Anchor Protocol. The annual percentage yield (APY) is about 20% -- extremely generous. However, according to DefiLlama, roughly $2.2 billion of TerraUSD was withdrawn from Anchor in 48 hours (May 7 through May 9) while the price of TerraUSD was still near $1.

This quickly flooded the market with TerraUSD coins. Ideally, users would have burned TerraUSD coins and exchanged them for Luna tokens to remediate the sudden supply and-demand imbalance. However, Luna was also falling hard at the time, demotivating users to exploit the arbitrage opportunity. And once this tandem downward spiral started, it couldn't recover. Luna has dropped 99% in value and TerraUSD hasn't been within 1% of its peg in almost four days.

There's much more to this story. But the point is, TerraUSD seems to have failed. And, more broadly, the market has lost total faith in the algorithmic stablecoin system. Consider that Neutrino USD and Waves is a similar algorithmic approach to stablecoins like TerraUSD and Luna. But Neutrino USD is also off of its peg and Waves token has dropped in value.

Some suggest that what happened with TerraUSD was a premeditated attack and there's some evidence of that. However, whether or not someone intentionally flooded the market to shake confidence in the system, the fact is it did happen. And if it happened once, it could happen again.

What's next for Tether

Now we finally come to Tether. During the early morning hours, Tether dropped from its peg. It's hard to decipher exactly what's going on but here's one data point: Curve allows people to exchange cryptocurrencies and its liquidity pool is supposed to be perfectly balanced between Dai, USD Coin, and Tether. As of this writing, Curve is 82% Tether, suggesting people are exchanging it for Dai and USD Coin in masse.

Whether or not someone is behind this isn't the point. The point is confidence in Tether appears to be shaken and it lost its peg as a result.

Unlike TerraUSD, Tether holders have options if it loses its peg. Since it's supposed to be backed by real dollars, holders can redeem them. According to the Tether team, $300 million has already been redeemed directly and it's on track to process a whopping $2 billion so far.

These redemptions are perhaps calming panic and restoring confidence to Tether. As I write, its price has climbed back to within 1% of $1. And the crypto community is certainly breathing a collective sigh of relief. The crypto market is rife with leverage -- something I don't recommend using for investing in stocks or cryptocurrencies. If Tether falls like TerraUSD, it could set off a chain reaction of margin calls to the detriment of the entire space.

Many have questioned Tether's reserves in the past and predicted a doomsday scenario if what's happening today actually happened. So far, Tether is mostly holding up against the extreme market volatility. But it looks like the situation is far from over. Therefore, cryptocurrency investors should be watching for further developments with extreme interest. 

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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• Is this the best ASX dividend share to buy in August?

Jon Quast has positions in Bitcoin and Ethereum. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Ethereum. The Motley Fool Australia owns and has recommended Bitcoin and Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. 

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

What happened

Cryptocurrency prices are falling hard across the board today, with Maker (CRYPTO: MKR) being a notable exception. At 11:15 a.m. ET, the price of Maker tokens was up a whopping 19% over the previous 24 hours. And it's likely because TerraUSD (CRYPTO: UST) and Terra's Luna tokens (CRYPTO: LUNA) are trending toward zero at the moment. 

So what

For context, a stablecoin is a cryptocurrency for which the price is supposed to always be equal to a government-issued currency -- most often the U.S. dollar. MakerDAO is the organization behind a stablecoin called Dai (CRYPTO: DAI). Terraform Labs is behind a stablecoin called TerraUSD. 

There are other U.S. dollar stablecoins as well, including Tether and USD Coin. And to be clear, different stablecoins use different mechanisms to keep their values, well, stable. And right now, these various stablecoin models are trying to demonstrate their merits in order to gain widespread adoption.

Tether and USD Coin both hold real U.S. dollars in reserve, making them close competitors. By contrast, Dai issues new tokens based on crypto assets locked up in the system. Similarly, TerraUSD isn't backed by dollars but rather by a burning-and-minting symbiotic relationship with Luna.

Without going too far into the weeds, the rivalry between TerraUSD and Dai isn't imaginary. On March 23, Terra founder Do Kwon said on social media, "By my hand Dai will die." 

The sad irony is that over the past couple of days, TerraUSD and Luna entered a death spiral, with the value of each declining faster than its algorithmic mechanisms can repair the damage. As of this writing, TerraUSD has bounced off its lows, but it's still down more than 50% from $1, and it's fair to wonder if it will ever recover.

Now what

While TerraUSD's demise would be good for Dai because there'd be one fewer player, I'd be cautious approaching the stablecoin space right now. I believe the true takeaway with TerraUSD's decline is that these models are still new and still being tested. Because of this, weaknesses are sometimes unexpectedly uncovered, and the fallout can be swift. 

Therefore, if you do chose to buy Maker tokens because of what's happening with Terra, be sure that -- like always -- it's a disciplined investment and not more than you could afford to lose if something goes wrong. 

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

The post Why a crypto called Maker is surging higher as others fall apart 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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Jon Quast has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Scott Phillips. 

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

I had been on a wait list to purchase my very first non-fungible token (NFT). The wait list was randomized, so I didn't know when or if my number would be called. And as the people ahead of me in line snapped them up, I experienced a surprising jolt of adrenaline and anxiety. But once the final NFT from the collection was purchased, I started calming back down, assuming I missed out. I felt my heart rate slowly coming back down to normal. 

I assumed wrong. Checking my email later that day, the adrenaline came rushing right back. The launchpad where I bought my NFT allowed people to prefund their accounts, automatically purchasing a NFT if your number got called. I had taken advantage of this feature, so that's how the purchase went through without me knowing it. 

Let me explain why I'm scared of the NFT space as I reflect on my emotionally charged experience. If you want to buy a NFT, I believe it's crucial to have a healthy dose of self-awareness to prevent you from falling headfirst down a dangerous hole.

Why I bought an NFT in the first place

Simply put, a NFT is digital property with verifiable ownership. Often this is an image, but it could be other things, like trading cards, music, and more.

And I won't beat around the bush: I became curious about NFTs because I've seen people make money in the space -- in some cases, a lot of money.

The most extreme example is the Bored Ape Yacht Club. You could have purchased one of these images new in April 2021 for 0.08 Ether, the native token of the Ethereum blockchain. As of this writing, the cheapest Bored Ape for sale is 97 Ether (roughly $300,000) -- a 1,200-bagger in under a year.

Finding a NFT project that enjoys even just a fraction of the Bored Ape Yacht Club's success could result in a 100-bagger -- a life-changing-caliber investment. It might sound shallow. But let's be honest: You probably wouldn't be reading this article if there weren't money in NFTs.

That said, I'm not naive enough to believe that all NFT projects will have the same potential -- they don't. 

Therefore, I began my journey with cautious curiosity. I found a NFT project that looked differentiated enough to have potential. But it was one that I wouldn't feel terrible if the value plummeted and I was stuck with the picture I bought. Moreover, it was cheap enough to dip my toes in the water but expensive enough to teach me a financial lesson if needed.

The NFT lesson I'm learning

After spending time in online NFT communities, I'm convinced most people are simply trying to get rich quickly. This is reflected by the oft-repeated motto of NFT investors, WAGMI -- "we're all gonna make it." 

Most people are approaching NFT as a trade. And a trade is intrinsically short term and based on greater fool theory -- simply trying to offload something onto someone else for a higher price. The way many traders do it, it's not much different than a pump-and-dump scheme. NFT projects are hyped on social media until the floor price rises significantly and early buyers cash out.

However, I found the entire process of buying my first NFT to be exhilarating. Adrenaline and dopamine were flowing freely as I imagined the possibility of lightning-fast profits. This short-term mindset is dangerous and can cause people to abandon sound financial decision-making, myself included.

Investing great Charlie Munger said, "If you take the modern world where people are trying to teach you how to come in and trade actively in stocks, well, I regard that as roughly the equivalent to trying to induce a bunch of young people to start off on heroin."  

Illicit drugs both impair judgment and create addictions. I believe investors would be wise to heed Munger's warning here when it comes to trading anything, including NFTs.

What now?

Don't misunderstand: Some NFT projects have A-list creators with detailed roadmaps, creating communities committed to holding their NFTs for the long term. And the NFT space may scare me, but that doesn't mean I'm avoiding it -- I've since purchased my second NFT.

I'm simply advocating for a healthy investing mindset. Nothing can derail your investing journey faster than nurturing bad investing behavior. As Munger also says, "It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent."

Left unchecked, buying NFTs can induce feelings that motivate bad investing behavior. If you're buying a NFT, it's important to have a good, established investing mentality and a healthy dose of self-awareness to make sure you're, as Munger put it, "consistently not stupid." 

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

The post Here's what scared me about buying my first NFT 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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Jon Quast owns Ethereum.  The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and recommends Ethereum. The Motley Fool Australia owns and recommends Ethereum. 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 happened

In 2019, cryptocurrency exchange Bitfinex was hacked and almost 120,000 Bitcoins (CRYPTO: BTC) were stolen. Most of those have just been recovered, according to today's press release from the US Department of Justice. Valued at roughly $3.6 billion, these Bitcoins represent the largest seizure of funds in history.

And, shockingly, it's not Bitcoin that's surging today but rather Unus Sed Leo (CRYPTO: LEO). As of 3:30 p.m. ET, Leo crypto tokens were up a whopping 46% over the past 24 hours. And there's a good explanation why.

So what

Leo is a utility token created for the Bitfinex exchange. When Bitfinex was hacked, it did what it could to financially help those who were negatively impacted -- an expensive decision. By issuing up to one billion Leo tokens, the company was able to raise money to help with its suddenly stretched financial situation.

When it created Leo, the company established a system of repurchasing tokens monthly until they were all gone. But in the official white paper -- kind of an equivalent to a prospectus for IPO stocks -- it states that whenever stolen Bitcoin was recovered, it would use at least 95% of those funds to repurchase Leo tokens and burn them. Because of the Department of Justice's announcement today, the value of Leo tokens is skyrocketing in anticipation of this event.

Now what

There are a couple of caveats here. First, there are still legal proceedings and it's unclear when exactly Bitfinex will receive the recovered Bitcoins. Second, the white paper says that tokens will be burned within 18 months of recovery. So it may take some time for the company to actually repurchase and burn Leo tokens.

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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Jon Quast owns Bitcoin. The Motley Fool owns and recommends Bitcoin. The Motley Fool has a disclosure policy.

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

What happened

The price of Bitcoin (CRYPTO: BTC) was bouncing back on Tuesday, hovering around $48,700 as of this writing. That's about a 5.1% increase over the past 24 hours, according to CoinDesk. Normal volatility could be the explanation, but there have been some interesting developments over the past 24 hours that could be contributing to today's gains. 

So what

Block CEO Jack Dorsey is in the news this morning after saying that Bitcoin will eventually replace the US dollar. The dollar is widely considered to be the world's reserve currency, and many countries have actually dollarized their economies, replacing local currency with American greenbacks. Therefore, saying that Bitcoin can replace the dollar is a bold statement.

However, anyone can make a bold statement, and Dorsey has long been known to be an ardent Bitcoin supporter. It will be interesting to see whether he will be proved correct in the future. But, generally, if demand for Bitcoin continues to grow, the price could increase in future days and months, as it is doing today.

One possible driver for demand could be an exchange-traded fund (ETF) based on the spot price of Bitcoin. On 8 December, WisdomTree Investments submitted amended paperwork to the Securities and Exchange Commission in the hope its WisdomTree Bitcoin Trust can gain approval. If it does, this is one potential catalyst for Bitcoin's price.

Year-to-date returns for Bitcoin and the S&P 500. Bitcoin price data by YCharts

Now what

As the price of Bitcoin has gone up, some previously dormant Bitcoin wallets have started awakening, making investors wonder what's going on. According to online crypto community Whale Alert, a Bitcoin address with 321 bitcoins just activated after sitting dormant since 2013. That's a relatively small amount of bitcoins, but dormant accounts suddenly coming back to life has been an ongoing trend. It causes some to wonder whether these Bitcoin holders are finally firing up the ol' wallets so they can cash out after record prices in 2021.

Unfortunately, there's a lot of things that investors can't be sure of today. We don't know whether drivers (like ETF approval) will materialize. And we don't know whether these old wallets intend to sell, which would hurt demand. It's a good reminder that there are a lot of moving parts when it comes to cryptocurrencies like Bitcoin, which is why it's healthy to try to see things from both sides before making decisions like investing or selling.

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

The post Why the Bitcoin price was bouncing back today 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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Jon Quast owns Bitcoin and Block, Inc. The Motley Fool Australia’s parent company The Motley Fool Holdings Inc. owns and recommends Bitcoin and Block, Inc. The Motley Fool has a disclosure policy.

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

What happened

The price of NEAR Protocol (CRYPTO: NEAR) was skyrocketing on Wednesday, up a whopping 28% over the previous 24 hours, according to CoinMarketCap. Pushing the price higher was higher demand from investors as evidenced by its heavy trading volume. As of this writing, trading volume was up more than 125% from this time yesterday.

So what

It's not clear what exactly catalyzed the higher trading volume of NEAR today. But here's one possibility: MoonPay has a cryptocurrency trading app with around five million users. Today, MoonPay announced that it was allowing its users to buy NEAR tokens worldwide. 

There are cryptocurrencies that aren't available on major cryptocurrency exchanges. Interested investors can still get tokens, but they need to do so natively by participating in the project. This limits how many investors might buy tokens since it's more work, and there are people who prefer the simplicity of an exchange like MoonPay or Coinbase. By announcing support for NEAR, MoonPay made the pool of potential investors deeper, which could partly explain the increased trading volume today.

Now what

Many technology services are available to consumers for free, meaning you're the product. Companies collect your data and use it to monetize their businesses. Web 3.0 is a newer trend seeking to flip this incentive structure on its head. There are new web browsers that allow you to earn rewards for using, blockchain games that pay you to play, and more. And NEAR Protocol is a project seeking to facilitate this shift to Web 3.0. 

Right now, NEAR is handling around 300,000 transactions per day, which is just a fraction of its capability. But the developers see a need to go ahead and transition to a more efficient system called Nightshade. It's still in what it calls "phase zero," meaning it's not quite ready for mainstream adoption. But phase one is scheduled to begin early next year, and phrase three is expected to be implemented before the end of 2022.

According to an official blogpost, phase three "is not the final phase of evolution for NEAR Protocol. Rather, we hope it's just the beginning." 

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

The post Why was a crypto called "NEAR Protocol" skyrocketing today? 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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• How much passive income can $100,000 in these ASX shares generate at today's yields?
• Buy, hold, sell: Boss Energy, Northern Star, and Woodside shares
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• Is this the best ASX dividend share to buy in August?

Jon Quast has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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.

What happened

Cryptocurrency mining stocks were up big on Tuesday, thanks to a price rebound among cryptocurrencies including Bitcoin (CRYPTO: BTC) -- and thanks to a hot stock market. As of 12:30 p.m. ET, the S&P 500 was up 2%, which is a big move for a single day. And Bitcoin is up 4% over the past 24 hours and up around 14% from its weekly low.

Cryptocurrency mining stocks up today include Canaan (NASDAQ: CAN), Marathon Digital Holdings (NASDAQ: MARA), and HIVE Blockchain Technologies (NASDAQ: HIVE), up 11%, 9%, and 9%, respectively.

So what

There were several factors negatively impacting the price of Bitcoin over the past week. For example, cryptocurrency exchange BitMart was hacked on Saturday and the bad guys got away with between $150 million and $196 million in digital assets, according to CNBC. Whenever an exchange is hacked like this, it can spook investors in cryptocurrencies.

Besides Bitcoin, investors were recently reminded that there's a big need for discernment when it comes to cryptocurrencies. Trading platform Bitget is based in Singapore. But this week, the Monetary Authority of Singapore reportedly suspended Bitget's license because it promoted an obscure cryptocurrency based on the popular music group BTS from South Korea.

These kinds of things can rattle confidence in the cryptocurrency market. But the stock market has been far more rattled of late, especially with stocks that are labelled as growth stocks. The ARK Innovation ETF, a popular exchange-traded fund (ETF) with a plethora of high-flying growth stocks, is down 35% from its 52-week high and down sharply over the past month as investors fret over surging coronavirus cases and institutional investors make year-end moves to lock in gains.

Whatever the exact reasons may be, both the stock market and the cryptocurrency market rebounded sharply on Tuesday, which was doubly helpful for stocks like Canaan, Marathon Digital, and HIVE Blockchain Technologies. To be clear, none of these companies had news today. Marathon Digital did have a filing with the Securities and Exchange Commission (SEC) yesterday. However, this was merely an official filing of previous press releases. So there wasn't anything materially moving these stocks today other than general market conditions.

Year-to-date returns for these cryptocurrency stocks, Bitcoin, and the S&P 500. CAN data by YCharts

Now what

Canaan manufactures hardware for mining Bitcoin and this is a good business to be in right now. Historically high profit margins for Bitcoin miners have sparked a spending frenzy as companies try to increase their mining capabilities to take advantage of these favourable economics. Strong demand was reflected in Canaan's third-quarter results, released on Nov. 16. Hashing power sold was up an impressive 128% year over year. However, Q3 revenue was up over 708% from the previous year, reflecting a higher price per mining unit. 

As long as these favourable economics are in place, it's likely that Canaan's products will be in high demand. However, the other side of this equation is that mining companies like Marathon Digital and HIVE Blockchain Technologies are getting more competitive, attempting to increase their market share. 

As of December 1, Marathon Digital had a hash rate of 3.2 exa-hashes per second (EH/s), which was around 2% of the total hash rate of the Bitcoin network. But the company is rapidly adding power and expects to have 13.3 EH/s roughly six months from now.

However, companies like HIVE Blockchain Technologies aren't going to just sit there while Marathon Digital expands. For its part, HIVE Blockchain mines both Bitcoin and Ethereum (CRYPTO: ETH) and has 1.31 EH/s for mining the former. It expects to roughly double this by the summer of 2022. Of course, that won't keep up with Marathon Digital quadrupling its capacity. 

As long as the price of Bitcoin continues to rise, the economics of mining cryptocurrencies should keep making sense, motivating companies to buy more mining hardware from providers like Canaan. That's good for now. However, investors will need to be sure to develop a balanced long-term perspective on this space, recognizing that prolonged pullbacks have happened in the past and can create tough operating environments for all of these companies.

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

The post Why Cryptocurrency Mining Stocks Were Up Big Today 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

• What could spark a Bitcoin price rebound in 2026?
• Down 48%, why a Bitcoin price rebound may be off the cards
• Could US lawmakers drive a rebound in the beaten-down Bitcoin price?

Jon Quast owns shares of Bitcoin and Ethereum. The Motley Fool owns shares of and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.

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

What happened

So what

Now what

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

The post Here's why Bitcoin hit a new all-time high on Wednesday 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

• What could spark a Bitcoin price rebound in 2026?
• Down 48%, why a Bitcoin price rebound may be off the cards
• Could US lawmakers drive a rebound in the beaten-down Bitcoin price?

Jon Quast owns shares of Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin. 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.

What happened

Shares of Square (NYSE: SQ) pulled back 10.5% in September, according to data provided by S&P Global Market Intelligence. I believe the drop can be attributed to general market volatility; the S&P 500 was down almost 5% for the month. I don't believe the drop resulted from a problem with the business because everything Square announced in September was positive. 

So what

During September, Square didn't update financial results but it did make some product announcements. For example, the company made progress in its international expansion plans. On Sept. 16 it announced small businesses in Spain could get early access to its suite of products launching there. And on Sept. 21 it announced it had officially launched in France following success with an early access program like the one it has in Spain.

Outside of Europe, Square is hopping on consumer trends in Canada. A Square survey reports that 80% of Canadians are committed to buying from local merchants more frequently and 72% believe cashless solutions are important going forward. To help empower small local businesses to offer these cashless transactions, the company launched Square Register on Sept. 8. Register isn't a piece of hardware only. The company's solutions also include software to help manage these digital transactions. 

Square also made an announcement for its U.S. business in September. The company has partnered with popular social media app TikTok, allowing creators to merge their TikTok accounts with an online Square store. As a result, TikTok content creators can conveniently drive traffic from their videos to their online stores. 

September returns for Square stock compared to the S&P 500. SQ data by YCharts

Now what

Square stock has continued falling along with the entire stock market in October and now sits roughly 20% below its all-time high. Sometimes stocks fall because of poor business execution and therefore those aren't good buying opportunities. By contrast, Square stock has fallen for no fault of its own. This kind of situation can be a good buying opportunity. 

Of course, the most important thing is not how much shares of Square have fallen. Rather, the most important thing is what Square's business will do over the next three, five, or 10 years. Generally speaking, I believe that financial technology will only become more important over the long term, positioning a fintech stock like Square very well. If Square stock wasn't on your radar before, I believe it should be after September's pullback. 

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

The post Here's why Square stock pulled back 10% in September 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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Jon Quast owns shares of Square. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended 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.

What happened

The price of popular cryptocurrency Bitcoin (CRYPTO: BTC) has gone back over $40,000 per coin following a comment made by Elon Musk on social media. Musk is the founder and CEO of electric vehicle company Tesla (NASDAQ: TSLA) and said his company will once again start accepting Bitcoin as a form of payment once certain renewable-energy criteria are met. Considering some blame Musk for the current Bitcoin bear market, it seems only fitting that it's getting a boost from him today.

Stocks tied to Bitcoin are also getting a boost today. As of 12:30 p.m. EDT, Riot Blockchain (NASDAQ: RIOT) stock is up 21%, Bit Digital (NASDAQ: BTBT) is up 25%, and Marathon Digital Holdings (NASDAQ: MARA) is up 18%. Finally, shares of cryptocurrency fund Grayscale Digital Large Cap Fund (OTC: GDLC) are up 12%.

So what

The price of Bitcoin crashed in May after Musk said Tesla would no longer accept Bitcoin as a form of payment, citing concerns over lack of sustainable energy used in the mining process. At its high in May, Bitcoin was around $58,000. Following Musk's comments, it plummeted to around $35,000. But in a social media post yesterday, Musk said that Tesla isn't banning Bitcoin payments forever. First, the company needs to confirm around half of Bitcoin's electricity comes from green sources. Second, the mining process needs to be trending greener in general.

It's unclear how Tesla will confirm Bitcoin's energy sources exactly. By some estimates, the blockchain network already far surpasses Musk's 50% benchmark. For example, according to a December 2019 study from CoinShares Research, 73% of Bitcoin's energy comes from renewable sources. However, the exact percentage is hotly debated. After all, not all miners disclose where they get their electricity.

This uncertainty has some calling for more transparency among Bitcoin miners. Therefore, some companies have voluntarily coalesced to form the Bitcoin Mining Council. These companies met for the first time on May 23. MicroStrategy is a founding member of the council, and its CEO Michael Saylor said on social media that the council will "standardize energy reporting."

Riot Blockchain, Bit Digital, and Marathon Digital are all companies that mine Bitcoin, and they know how important this renewable energy issue is becoming for Bitcoin. For example, on June 8, Bit Digital provided a transcript of CEO Bryan Bullett's presentation at the LD Micro Conference. There Bullett said, "As of April 2021, we estimated that we used a majority carbon-free energy, on an annualized weighted average basis, accounting for these seasonal migrations." By "seasonal migrations" Bullett is referring to Bit Digital's strategy of moving miners to places that may have cheaper, renewable energy at certain times of year.

Now what

Today's news about Tesla and Bitcoin may send the price of Bitcoin higher only in the short term -- it doesn't seem fundamental to a cryptocurrency-investing thesis. Consider that during the short time Tesla was theoretically allowing Bitcoin as a method of payment, it doesn't seem like anyone actually did it. And in reality it's hard to see what the advantage would be for a consumer anyway. Bitcoin investors believe the value will continue to rise over time. Therefore, it behooves them to hold Bitcoin rather than spend it.

Comments today from billionaire Paul Tudor Jones are more fundamental to a long-term Bitcoin thesis. Jones appeared on CNBC today and said he wants 5% of his investments in Bitcoin. Jones cited concerns over inflation of the U.S. dollar and high stock valuations, but the implications are far reaching. If more people, companies, and even countries buy and hold Bitcoin as Jones and others suggest, that could create a surge in demand that drives the price higher in the long term.

A higher price for Bitcoin would obviously be good for companies like Marathon Digital, Riot Blockchain, and Bit Digital that directly operate in this space and even hold bitcoins on their balance sheets in some cases. But it would also be good for funds like Grayscale Digital Large Cap Fund -- a diversified cryptocurrency fund that's 69% invested in Bitcoin. 

If you decide to take Jones' advice regarding Bitcoin, be mentally prepared for volatility. Even though Bitcoin's market capitalization is roughly $750 billion, a simple social media post from a celebrity still amazingly has the power to send coins moving by 10% or more with ease. Expect many more headline-grabbing endorsers and detractors in the coming weeks and months, making for one choppy ride. That may be more than most investors can mentally handle with 5% of their portfolios. 

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

The post Bitcoin stocks soar following Elon Musk's Tesla announcement 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

• What could spark a Bitcoin price rebound in 2026?
• Down 48%, why a Bitcoin price rebound may be off the cards
• 5 things to watch on the ASX 200 on Friday
• Could US lawmakers drive a rebound in the beaten-down Bitcoin price?

Jon Quast owns shares of Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended MicroStrategy. 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.

What happened

About a month ago, Colonial Pipeline was attacked with ransomware by a group we now know is called DarkSide. The fuel-supply chain for the Eastern U.S. faced disruption, so the company reportedly elected to pay the nearly $5 million ransom in popular cryptocurrency Bitcoin (CRYPTO: BTC) to quickly return to normal operations.

But the general public lamented the loss. There was no hope of catching the bad guys because Bitcoin is completely untraceable. Or is it?

According to a press release from the Department of Justice yesterday, U.S. federal authorities have recovered 63.7 bitcoins, worth over $2 million, and this appears to have caused a sell-off in the cryptocurrency market. According to CoinDesk, the price of Bitcoin has plummeted roughly 12% over the past 24 hours. And Bitcoin stocks like Marathon Digital Holdings (NASDAQ: MARA), Riot Blockchain (NASDAQ: RIOT), Grayscale Bitcoin Trust (OTC: GBTC), and Grayscale Digital Large Cap Fund (OTC: GDLC) are all down as a result. As of noon EDT, these were down 8%, 7%, 11%, and 13%, respectively.

So what

There are a lot of reasons someone might buy Bitcoin. But security is among the reasons many are bullish on cryptocurrencies and blockchains, in general -- people perceive these as untraceable, immutable ledgers. But authorities were somehow able to track down Colonial Pipeline's ransom payment, break in, and recover a large part. This seems to fly in the face of one of the key Bitcoin tenets and is the reason Bitcoin and other cryptocurrencies are down so sharply today.

But perhaps there's a fair bit of misunderstanding surrounding this situation. Bitcoin is stored in Bitcoin wallets, and these wallets have addresses. People can send and receive bitcoins if they know each other's addresses.

However, each wallet comes with a set of keys -- an assigned password so to speak -- to keep things safe. But storing keys in a safe place has always been a problem. Those who hold bitcoins are urged to hide their keys, lest someone steal them.

It's not yet apparent how the FBI got hold of DarkSide's keys. And with the keys, it obtained a warrant to seize the bitcoins. But here's the thing: The Bitcoin blockchain ledger is public information. You can see how much is being sent and to which addresses. You just don't know the identity of the person who owns the Bitcoin wallet. For example, I just watched a roughly $200,000 transaction go through by looking in the Explorer section of Blockchain.com.

Because the ledger is public, it was relatively easy to track Colonial Pipeline's payment to the right address. How the FBI got DarkSide's keys is another matter. But either way, nothing was "hacked" with the Bitcoin blockchain network itself.

The transaction went through like it's supposed to. Therefore, I believe it's still fair to say that Bitcoin is a secure network. Whether your personal Bitcoin wallet is secure, however, is another matter.

Bitcoin may or may not be down because of confusion surrounding this issue. But either way, it is down. And that's why these other Bitcoin stocks are down, as well.

Now what

For funds like Grayscale Bitcoin Trust and Grayscale Digital Large Cap Fund, their values are directly tied to the cryptocurrencies they hold. The former holds only Bitcoin and is therefore 100% tied to Bitcoin. The latter holds Bitcoin, Ether, Bitcoin Cash, Litecoin, and Chainlink. But 65.5% of its holdings are Bitcoin, so it's still very much tied to this single cryptocurrency. Moreover, alt-coins like these others have historically gone up and down with Bitcoin, so it's unlikely they'll rise significantly while Bitcoin is going down.

Turning to Bitcoin mining stocks, production has been increasing for companies like Marathon Digital and Riot Blockchain. For example, Marathon Digital mined just 50 Bitcoins in January but almost 227 Bitcoins in May. But this didn't just happen -- both companies have been purchasing and installing new mining equipment to increase production. The result is more Bitcoin, but a side effect is higher operating costs.

Both Marathon Digital and Riot Blockchain intend to continue installing new mining rigs through 2021 and into 2022 under the assumption that the price of Bitcoin will continue rising. But this is a risk to the business completely outside their control.

We don't know what the exact breakeven price is for these companies, but if Bitcoin keeps falling at this rate (now down almost 50% from its April high) both companies risk mining Bitcoin at a loss -- which obviously wouldn't be good. 

Therefore, if you're a long-term investor with either Marathon Digital or Riot Blockchain, it doesn't really matter how well they're managed if Bitcoin doesn't start heading back up. That's the most important thing to watch going forward.

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

The post Bitcoin stocks tumble after authorities recover ransom paid by Colonial Pipeline 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

• What could spark a Bitcoin price rebound in 2026?
• Down 48%, why a Bitcoin price rebound may be off the cards
• Could US lawmakers drive a rebound in the beaten-down Bitcoin price?

Jon Quast owns shares of Bitcoin and Ether. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin. 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.

What happened

Shares of GameStop (NYSE: GME) were trading moderately higher on Wednesday until about 1 p.m. EST, when they started gaining a little momentum. Then, seemingly out of nowhere, the stock absolutely exploded higher. Trading was halted several times as it rapidly climbed to finish 104% higher for the day. And it's still climbing after hours.

So what

Earlier this year, GameStop stock had an epic short squeeze, orchestrated by a group on Reddit called Wallstreetbets. This group noticed that short interest for GameStop stock was over 100%. With a clever combination of buying common shares and call options (called a gamma squeeze), the group was able to cause the price per share to go up, forcing many short-sellers to close their positions for massive losses.

When the dust from the short squeeze settled, short interest for GameStop stock plummeted. Only about 40% of the float was shorted as of Jan. 29. More recent data isn't available yet to know what it is exactly today. But the decline in short interest appeared to mark the end of the GameStop saga. The stock fell roughly 90% from peak highs.

Except, apparently, everyone simply regrouped for round two. 

Traders were out in full force late this afternoon, bidding GameStop stock back up. To be clear, 40% short interest is still significant enough to spark a mini short squeeze. However, it's possible shorts decided to short GameStop again, thinking it was all over. After all, the stock was still trading more than 10 times where it traded before all of this began. If short interest has increased any since Jan. 29, then this could be a wild ride yet again.

Now what

Last time, many GameStop bulls felt cheated because of the trading restrictions Robinhood and other brokerages put on the stock. In a recent interview with Dave Portnoy, Robinhood's CEO said it moved to restrict trading because it feared an impending liquidity issue if it didn't act. Since then, the company has raised a lot of money, seemingly mitigating this risk. Considering all the negative press it received last time, it's fair to wonder if Robinhood would restrict the buying of GameStop stock again. If it doesn't, it will be interesting to watch just how high GameStop stock can fly.

For me, I'll be watching with interest. But I'm not a GameStop stock buyer today. When I invest, I'm looking for strong companies with long runways for growth. GameStop doesn't fit that description for me.

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

The post Here's why GameStop stock just exploded higher appeared first on The Motley Fool Australia.

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• Buy, hold, sell: Boss Energy, Northern Star, and Woodside shares
• How much superannuation do you need to retire on $80,000 a year?
• Is this the best ASX dividend share to buy in August?

Jon Quast has no position in any of the stocks mentioned. 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.