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

Key Points

• Microsoft crushed the S&P 500 over the past decade.
• Its growth was driven by its “mobile first, cloud first” mantra.
• Its stock isn’t cheap, but it still has a lot of upside potential.

When Satya Nadella succeeded Steve Ballmer as Microsoft's (NASDAQ: MSFT) CEO on Feb. 4, 2014, many investors dismissed the tech giant as a slow-growth stalwart with limited upside potential. But if you had invested $10,000 in Microsoft on Nadella's first day on the job, your investment would be worth $140,000 today and paying out nearly $1,000 in annual dividends.

That same investment in an S&P 500 index fund would only be worth about $38,000 today. Let's see why Microsoft crushed the market -- and if it's still a good stock to buy. 

How did Microsoft become a growth stock again?

Under Ballmer, Microsoft struggled to keep pace with Amazon (NASDAQ: AMZN), Alphabet's Google (NASDAQ: GOOG) (NASDAQ: GOOGL), and Apple (NASDAQ: AAPL) in the mobile and cloud markets. Its Windows and Office products still relied on periodic desktop upgrades, and its Windows Phones couldn't keep up with iPhones and Androids.

But after Nadella took over, Microsoft adopted an ambitious "mobile first, cloud first" strategy. It transformed its Office desktop software into cloud-based services, expanded its Azure cloud infrastructure platform, and integrated those upgrades into Windows. It also scrapped its Windows Phone program, launched iOS and Android versions of its top productivity apps, rolled out more Surface devices, and expanded its Xbox business with new products and bold acquisitions.

Microsoft launched more AI services to process all the data that flowed through that sprawling ecosystem. It also started to accumulate a big stake in OpenAI -- the creator of ChatGPT and other generative AI applications -- in 2019. It then integrated OpenAI's tools into its Bing search engine, Azure's cloud platform, and its Copilot AI services.

Microsoft's aggressive investments in the mobile, cloud, and AI markets initially squeezed its margins. But from fiscal 2015 to fiscal 2025 (which ended this June), its revenue grew at a compound annual growth rate (CAGR) of 12%, its gross margin expanded from 64.7% to 68.8%, and its earnings per share (EPS) increased at a CAGR of 5%. It maintained that momentum even as the pandemic, inflation, rising interest rates, and geopolitical conflicts rattled the global economy.

Most of Microsoft's recent growth was driven by its cloud-based services. Azure is now the world's second-largest cloud infrastructure platform after Amazon Web Services (AWS), and its Office suite -- which was rebranded as Microsoft 365 in 2020 -- holds a near-duopoly in the productivity software market with Google Workspace.

Why will Microsoft keep growing?

From fiscal 2025 to fiscal 2028, analysts expect Microsoft's revenue and EPS to increase at CAGRs of 15% and 16%, respectively. That robust growth should be driven by the secular expansion of the cloud and AI markets. More companies should migrate their data to its public cloud, hybrid cloud, and edge deployments, while the expansion of its data centers should support the development of even more powerful AI applications across its ecosystem.

Microsoft still faces intense competition from Amazon and Google in the cloud and AI markets, but it will likely draw in big companies that compete against those two tech giants in the e-commerce, streaming media, and digital advertising markets. Its Xbox gaming business, which absorbed Activision Blizzard and many other top game publishers, could also generate more recurring revenues with its Game Pass and Cloud Gaming services. The company also still held $94.6 billion in cash, cash equivalents, and short-term investments at the end of fiscal 2025. That gives it plenty of room to expand its business via more acquisitions or buy back more shares to boost its EPS.

Is it the right time to buy Microsoft's stock?

Microsoft's stock doesn't look cheap at 33 times this year's earnings, but the robust growth of its cloud and AI businesses might justify that higher valuation. Even if it trades at a more modest 30 times forward earnings and it merely matches analysts' expectations through fiscal 2028, its stock could still rise about 26% to $645 over the next two years.

That return might not dazzle growth-oriented investors, but it would likely keep Microsoft's stock ahead of the S&P 500, which has generated an average annual return of 10% ever since its inception. Therefore, I think it's still a great stock for long-term investors to buy, hold, and forget. 

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

The post Microsoft stock keeps beating the stock market. Time to buy? appeared first on The Motley Fool Australia.

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

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

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Leo Sun has positions in Amazon and Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, 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 Alphabet, Amazon, Apple, 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.

Key Points

• Apple has underperformed the S&P 500 over the past three years.
• It struggled with slowing iPhone sales, tariffs, and other macro challenges.
• But its business is stabilizing and its future still looks bright.

Apple (NASDAQ: AAPL) is usually considered a reliable blue chip stock. It owns one of the world's most well-known brands, it locks its users into its hardware devices and sticky services, and it returns plenty of cash to its investors through its buybacks and dividends.

But over the past three years, Apple's stock only rose 51% as the S&P 500 advanced 63%. It underperformed the market as investors fretted over its sluggish iPhone sales, the Trump administration's unpredictable tariffs against China, and its lackluster artificial intelligence (AI) strategies.

Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), which still holds Apple as its top stock, even sold about 57% of its shares over the past two years. Those red flags suggest that Apple's stock is running out of steam, but will it bounce back and head higher over the next three years?

What happened to Apple over the past few years?

In the first nine months of fiscal 2025 (which ends this September), Apple still generated 51% of its net sales from the iPhone. Another 26% came from its services segment, which houses its App Store, iCloud, and various subscription-based services. The remaining 23% came from its Macs, iPads, wearables, accessories, and other products.

Apple relies heavily on the growth of its services segment, which now hosts over 1 billion paid subscriptions, to offset its slower sales of iPhones and other hardware devices. Here's how those two core businesses fared over the past few years.

Data source: Apple. YOY = Year over year.

In fiscal 2022, Apple's iPhone sales accelerated as the pandemic lockdowns passed, its supply chains normalized, and it satisfied that pent-up demand for new phones. But in fiscal 2023 and fiscal 2024, its iPhone sales stalled out again as it lapped that temporary growth spurt, it faced tougher competitors in China, and the 5G upgrade cycle cooled off. A lack of meaningful upgrades also prevented many iPhone users from replacing their aging devices.

In fiscal 2025, Apple's iPhone sales warmed up again. The iPhone 16 experienced a strong launch driven by the robust demand for its top-tier Pro models, while the threat of higher tariffs against China drove many consumers to upgrade their devices before those rates kicked in. It also cut its prices in China to benefit from a 15% subsidy on purchases of smartphones, tablets, and smartwatches under 6,000 yuan ($840), and it reached more cost-conscious consumers with the lower-end iPhone 16e. Its iPhone sales grew by the double digits across its top emerging markets -- including India, the Middle East, South Asia, and Brazil -- and offset its slower sales in its mature markets.

As Apple's iPhone sales rose again, it locked more users into its services. That strategy should continue to drive its long-term growth and widen its moat against other tech companies -- even if its Apple Intelligence efforts aren't turning as many heads as OpenAI's ChatGPT or Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google Gemini. It should also buy it more time to develop new hardware products or refine its existing ones (like the disappointing Vision Pro headset) to gradually reduce its dependence on the iPhone. Apple ended its latest quarter with $133 billion in cash and marketable securities, which gives it plenty of room for more buybacks, dividend hikes, or ecosystem-expanding acquisitions. It bought back 7% of its shares over the past three years, and it's raised its dividend annually for 12 consecutive years.

What will happen to Apple over the next three years?

From fiscal 2024 to fiscal 2027, analysts expect Apple's revenue and earnings per share (EPS) to increase at a compound annual growth rate (CAGR) of 6% and 13%, respectively. A lot of that growth should be driven by its upcoming iPhones. The latest rumors suggest it will overhaul its entire design with the iPhone 17 this year -- and follow it up with foldable or curved iPhones in 2026 and 2027. Those dramatic changes might drive more of its users to upgrade their older iPhones.

Its other potential catalysts include a more affordable Vision Pro, new smart home and wearable products, and upgrades to its AI ecosystem. It should also continue to develop more first-party chips to reduce its dependence on third-party chipmakers like Qualcomm (NASDAQ: QCOM).

Assuming Apple meets those estimates, grows its EPS another 10% in fiscal 2028, and still trades at 32 times earnings, then its stock could rise about 30% to $308 over the next three years. That would be a healthy gain that could at least match the S&P 500 -- which has delivered an average annual return of about 10% since its inception -- but it might not impress investors who expected bigger life-changing gains.  

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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Leo Sun has positions in Apple and Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Apple, Berkshire Hathaway, and Qualcomm. The Motley Fool Australia has recommended Alphabet, Apple, and Berkshire Hathaway. 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.

The "Magnificent Seven" stocks -- Apple, Amazon, Meta Platforms, Alphabet, Microsoft, Nvidia (NASDAQ: NVDA), and Tesla -- have all generated impressive returns for their long-term investors. All seven stocks are included in the S&P 500 and Nasdaq-100 indexes, and they often drive the market's performance with their size, growth, and influence.

But after years of big gains, most of the Magnificent Seven stocks are losing their luster. Apple is still overwhelmingly dependent on the iPhone, which is vulnerable to high tariffs, competition, and supply chain constraints. Amazon faces stiff competition from cheaper cross-border competitors, Alphabet's Google is being slammed by antitrust regulators and struggling to keep pace with OpenAI's ChatGPT and other generative artificial intelligence (AI) services, and Microsoft might be headed for an ugly breakup with OpenAI as the AI start-up openly rebels against its top investor. As for Tesla, Elon Musk's divisive actions are likely driving away its potential customers in the saturated EV market.

Meta and Nvidia face fewer near-term headwinds than the other five stocks. However, Meta generates nearly all of its revenue from ads, and its growth could slow down as the global economy cools off. Nvidia certainly isn't immune to economic downturns and recessions, but the secular expansion of its AI chipmaking business could offset a lot of that pressure. So looking ahead, I believe Nvidia will continue to shatter Wall Street's expectations and outperform the other Magnificent Seven stocks for the foreseeable future.

How did Nvidia become the hottest "Magnificent Seven" stock?

Nvidia is the world's largest producer of discrete GPUs. It designs its own chips, but it outsources its manufacturing to third-party foundries like Taiwan Semiconductor Manufacturing. With that "fabless" model, Nvidia doesn't need to spend billions of dollars to upgrade its own foundries or develop the smallest, densest, and most power-efficient manufacturing nodes.

Nvidia once generated most of its revenue from its gaming GPUs, which can also be used to mine certain cryptocurrencies. But in its latest quarter, it generated less than 9% of its revenue from its gaming GPUs. A whopping 89% came from its data center GPUs -- which include its older A100 chips and current-gen H100 and H200 chips.

Nvidia launched its first data center GPUs back in 2008. Unlike traditional CPUs, which only process a single piece of data at a time through scalar processing, GPUs use vector processing to process a broad range of integers and floating-point numbers simultaneously. That makes them better suited for processing complex AI tasks than stand-alone CPUs.

Nvidia's sales of data center GPUs rose from 2016 to 2022 as the cloud and AI markets expanded, but they didn't explode until 2023 (fiscal 2024) -- when OpenAI's launch of ChatGPT in late 2022 sparked a global AI infrastructure race. Here's how rapidly that growth engine expanded from fiscal 2022 to fiscal 2025 (which ended this January).

Data source: Nvidia.

From fiscal 2025 to fiscal 2028, analysts expect Nvidia's revenue and earnings per share to grow at compound annual growth rates of 30% and 28%, respectively, as the AI market continues to expand. Its stock still looks reasonably valued relative to those estimates at 36 times forward earnings.

But those estimates could be too conservative -- since Nvidia has comfortably beat Wall Street's top- and bottom-line expectations for nine consecutive quarters. So as the top seller of the picks and shovels for the AI gold rush, Nvidia's revenues and profits should keep crushing analysts' expectations.

Why will Nvidia remain the hottest Magnificent Seven stock?

Nvidia controls about 98% of the data center GPU market, according to TechInsights. It locks in those customers with its proprietary Compute Unified Device Architecture (CUDA) programming platform. When developers write their AI applications on CUDA, they become optimized for Nvidia's GPUs and can only be executed on its chips. If they want to run that same application on another GPU, they need to be rewritten in other frameworks. That stickiness widens its moat against AMD and other challengers.

Nvidia's sales in China are being throttled by the U.S. export curbs, but it can easily offset that pressure with its stronger chip sales in other markets. It can also keep selling less powerful variants of its flagship chips (like its modified H20 chip) to its Chinese customers. Simply put, Nvidia has plenty of ways to keep growing. It's already had a great run over the past decade, but it has an easy path toward outperforming the market and its Magnificent Seven peers.

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.

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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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Amazon, Apple, and Meta Platforms. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. 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 Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. 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.

Nvidia (NASDAQ: NVDA), the world's largest producer of discrete graphics processing units (GPUs), saw its stock surge 25,250% over the past 10 years as the S&P 500 advanced less than 180%. From fiscal 2015 to fiscal 2025 (which ended this January), its revenue rose at a compound annual growth rate (CAGR) of 39% as its net income increased at a CAGR of 61%.

That explosive growth was initially fueled by its brisk sales of gaming GPUs, which were also used to mine certain cryptocurrencies. But over the past few years, its expansion was primarily driven by its soaring shipments of data center GPUs for the artificial intelligence (AI) market.

Unlike central processing units (CPUs), which process single pieces of data at a time, GPUs process a broad range of integers and floating numbers simultaneously. That advantage makes them better suited than stand-alone CPUs for processing complex AI tasks, so the rapid expansion of the AI market generated explosive tailwinds for its sales of data center GPUs.

But since the start of 2025, Nvidia's stock rose less than 4% as the S&P 500 stayed nearly flat. The Trump administration's unpredictable tariffs, tighter curbs on exported chips, and the delays for its latest Blackwell chips all caused Nvidia to lose its luster. However, I believe Nvidia's stock can stay ahead of the S&P 500 this year for five simple reasons.

1. It still dominates the booming AI chip market

Nvidia controlled 82% of the discrete GPU market at the end of 2024, according to JPR. Its closest competitor, AMD, held a 17% share, while Intel -- which returned to the discrete GPU market in 2022 -- controlled just 1% of the market. Nvidia also controls about 98% of the data center GPU market, according to TechInsights. The remaining 2% is split between AMD and Intel. Nvidia's dominance of that booming market, which is supported by the widespread usage of its older A100 chips and current-gen H100 and H200 chips, makes it tough for its competitors to gain a meaningful foothold.

The global AI market could still expand at a CAGR of 31% from 2025 to 2032, according to Markets and Markets. If Nvidia merely matches that growth rate, its annual revenue would surge from $130.5 billion in fiscal 2025 to $1.31 trillion by fiscal 2032. So assuming it maintains roughly the same valuations, its stock still has a clear path toward delivering a ten-bagger gain over the next seven years.

2. Its ecosystem is sticky

Nvidia reinforces its dominance through its proprietary Compute Unified Device Architecture (CUDA) programming platform. When software developers write their AI applications in a parallel code (such as C++ or Python) on CUDA, those applications become optimized for Nvidia's GPUs but can only be executed on its chips.

If a developer wants to run that same application on an AMD or Intel GPU, it needs to be rewritten in other frameworks. In addition, most libraries, frameworks, and deep learning models are optimized for CUDA instead of other platforms. That stickiness should keep Nvidia well ahead of its competitors for the foreseeable future.

3. It can keep growing without China

China accounted for just 12.5% of Nvidia's revenue in fiscal 2025, compared to 16.9% in fiscal 2024 and 21.5% in fiscal 2023. That decline was mainly caused by America's tighter export curbs on its high-end data center GPU shipments to China.

Nvidia tried to counter those challenges by selling less powerful, modified versions of its flagship GPUs. However, those versions (like the scaled-back H20 variant of its H100 and H200 chips) were also recently added to the growing list of banned U.S. chip shipments to China.

That sounds like grim news for Nvidia, but it can still easily offset its declining revenues in China with its growth in its other, less controversial markets. That's why its revenue grew at a CAGR of 120% from fiscal 2023 to fiscal 2025, even as the export curbs choked its Chinese business.

4. Its other smaller businesses are growing

Nvidia generated 89% of its revenue from its data center chips in the first quarter of fiscal 2026. However, its smaller gaming, professional visualization, automotive, and OEM segments also grew year over year alongside its core growth engine.

Its gaming business benefited from its rollout of its new RTX Super GPUs. Its professional visualization segment grew as it launched more design-oriented chips and expanded its Omniverse platform for digital projects, and its automotive chip sales improved as more Chinese automakers integrated its Drive platform into their electric vehicles. These oft-overlooked businesses should continue expanding in the shadow of its massive AI data center business.

5. It still looks reasonably valued

From fiscal 2025 to fiscal 2028, analysts expect Nvidia's revenue and earnings per share to grow at CAGRs of 31% and 29%, respectively. Yet its stock still looks reasonably valued at 34 times this year's earnings. So once investors realize that its near-term issues won't affect its long-term growth, Nvidia's stock should outperform the market for the rest of the year.

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

The post Prediction: Nvidia Will Beat the Market. Here's Why appeared first on The Motley Fool Australia.

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

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More reading

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Leo Sun 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 Intel and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: short August 2025 $24 calls on Intel. The Motley Fool Australia has recommended Nvidia. 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.

Many investors look toward the tech sector for potential millionaire-maker stocks. But for every stock like Nvidia, which minted new millionaires, there are plenty of stocks like Intel which shrivelled over the past decade.

So if you're looking for the next Nvidia and trying to avoid the next Intel, you should look for companies that are establishing an early mover's advantage in their nascent markets, growing rapidly, widening their moats, and outlasting their competitors. I believe these three stocks fit that description: IonQ (NYSE: IONQ), Opendoor (NASDAQ: OPEN), and DigitalOcean (NYSE: DOCN). Here's how these three stocks can eventually become millionaire makers.

1. IonQ

IonQ is a provider of cloud-based quantum computing services. Quantum computers store binary bits of zeros and ones simultaneously in "qubits," which enable them to process data faster than traditional computers which process those bits individually. Quantum computers can be used to accelerate a wide range of tasks, but they're big, expensive, and make more errors than binary CPUs. IonQ aims to resolve those issues with a "trapped ion" miniaturisation process which shrinks the average width of a quantum processing unit (QPU) from a few feet to a few inches.

By miniaturising and scaling up those systems, IonQ aims to reduce the costs of quantum computing and improve the accuracy of the devices' calculations. From 2021 to 2023, its revenue rose from just $2 million to $22 million. From 2023 to 2026, analysts expect its revenue to grow at a compound annual growth rate (CAGR) of 89% to $148 million.

IonQ expects to keep expanding as it gains new customers, acquires smaller companies, and increases its own quantum computing power. It's still bleeding red ink and its stock is expensive at 47 times its 2026 sales, but it's gradually establishing an early mover's advantage in the nascent quantum computing market. If it maintains that lead, its stock could skyrocket as more companies use its quantum computing services.

2. Opendoor

Opendoor is an online "iBuyer" (instant buyer) that makes instant cash offers for homes, fixes them up, and relists them for sale on its first-party marketplace. That digital home-flipping business model streamlines the home-selling process, but it's a capital-intensive business that is highly exposed to rising interest rates. The iBuying model is also heavily dependent on AI-powered pricing, but those algorithms can sometimes misprice its properties.

Inflation and supply chain constraints can also make it expensive and challenging to renovate all of its purchased properties. That's why the online real estate listing platforms Zillow and Redfin both shut down their first-party iBuying platforms in 2022.

But with Zillow and Redfin out of the picture, Opendoor is now the largest remaining iBuyer. Its revenue plunged 55% in 2023 as rising interest rates chilled the housing market, and analysts expect another 28% decline in 2024. That near-term outlook seems bleak, but they expect its revenue to grow at a CAGR of 27% from 2024 to 2026 as interest rates decline and the housing market warms up again.

Opendoor will likely stay unprofitable for the foreseeable future, but its stock looks dirt cheap at 0.3 times this year's sales. If it finally gets its act together as the macro environment improves, its stock could generate millionaire-maker gains for its patient investors.

3. DigitalOcean

DigitalOcean is a cloud infrastructure platform provider that carves out tiny "droplets" of individual servers for smaller customers at lower prices than enterprise cloud giants like Amazon or Microsoft. Its acquisition of Paperspace last year also added GPU-powered AI capabilities to its servers.

The bears claimed DigitalOcean would struggle to grow in the shadow of Amazon, Microsoft, and other cloud infrastructure giants. But from 2020 to 2023, its revenue grew at a CAGR of 30%. It also turned profitable in 2023 as it streamlined its spending.

From 2023 to 2026, analysts expect its revenue and EPS to grow at CAGRs of 13% and 85%, respectively. That growth should be driven by the growing demand for its cloud infrastructure and AI services from smaller businesses and individual developers. DigitalOcean's stock isn't cheap at 47 times next year's earnings, but the dominance of its niche market and improving profitability could justify its premium valuation and drive it even higher.

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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Leo Sun has positions in Amazon John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, DigitalOcean, Intel, Microsoft, Nvidia, and Zillow Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Opendoor Technologies and has recommended the following options: long January 2026 $395 calls on Microsoft, short February 2025 $27 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Amazon, DigitalOcean, Microsoft, and Nvidia. 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.

ASML's (NASDAQ: ASML) stock plummeted 16% on 15 October after it accidentally posted its third-quarter earnings report a day ahead of schedule, and the numbers weren't impressive.

The Dutch semiconductor equipment maker's net sales rose 20% year over year to 7.47 billion euros ($8.14 billion), missing analysts' estimates by 430 million euros. Its net bookings only increased 1% to 2.63 billion euros ($2.86 billion), missing the consensus forecast by a whopping 2.73 billion euros.

ASML's gross margin also declined by 110 basis points year over year to 50.8%. On the bottom line, its earnings rose 10% to 5.28 euros ($5.75) per share but missed analysts' expectations by 0.28 euros.

ASML followed up those grim headline numbers with a disappointing near-term outlook.

It expects revenues to rise 22% to 28% year over year in the fourth quarter but to only rise about 1% to 28 billion euros ($30.5 billion) for the full year. That would represent its slowest full-year growth in nine years.

For 2025, it expects its revenue to grow between 7% and 25% -- compared to its previous outlook for up to 43% growth. Should investors buy, sell, or hold ASML stock after that disappointing earnings report?

Why is ASML's growth cooling off?

ASML's photolithography systems optically etch circuit patterns onto silicon wafers. It's the world's leading manufacturer of deep ultraviolet (DUV) lithography systems, which are used to produce older chips, and the only supplier of extreme ultraviolet (EUV) systems, which are required to produce the world's smallest, densest, and most advanced chips.

A single EUV system costs about $180 million and requires multiple planes to ship, but all of the world's leading chip foundries -- including Taiwan Semiconductor Manufacturing Company (NYSE: TSM), Samsung, and Intel Corp (NASDAQ: INTC) -- use those machines for their high-end chips.

ASML's new "high-NA" EUV systems, which are used to produce even smaller chip traces, currently cost about $380 million.

That's why ASML is widely considered a linchpin and bellwether of the semiconductor market. However, its growth is highly cyclical and tethered to the major chipmakers' upgrade cycles. Tighter export curbs also prevent it from shipping its high-end DUV and EUV systems to mainland China, which accounted for 26% of its net sales in 2023.

From 2020 to 2023, ASML's annual revenue rose by double digits as its gross margins expanded. That growth was driven by higher PC sales throughout the pandemic, new 5G smartphones, and the market's soaring demand for new AI chips.

But in 2024, ASML expects its revenue to stall out as it grapples with the tighter export curbs for Chinese chipmakers, laps the AI market's initial growth spurt, and transitions toward its newer high-NA EUV systems.

That outlook wasn't surprising, but the bulls had expected a stronger recovery in 2025 as it overcame those headwinds and ramped up its high-NA EUV shipments.

However, TSMC only recently ordered its first high-NA EUV systems and isn't in a hurry to replace its existing low-NA EUV systems with those pricier systems.

Intel, which installed its first high-NA EUV systems before TSMC, is now reportedly considering a spin-off or sale of its entire foundry unit -- and those plans could disrupt its orders from ASML. Samsung is only expected to install its first high-NA EUV systems at the end of 2024.

Meanwhile, the rapid growth of the AI market is driving many chipmakers to focus on adding new AI features to their existing chips instead of developing smaller chips. That trend could exacerbate the sluggish adoption of its high-NA EUV systems.

As ASML's top customers adopt conservative high-NA EUV strategies, EU regulators are preventing it from shipping its higher-end systems to China. In other words, it's being cut off from the one market that needs its systems the most.

Is it the right time to buy, hold, or sell ASML stock?

At $730 per share, ASML stock looks reasonably valued at 27 times forward earnings. However, it could remain under pressure until it overcomes its near-term headwinds and its bookings growth accelerates again. So, if you already own ASML stock, it's smarter to simply hold it and ride out the cyclical downturn instead of selling it.

But if you don't own ASML stock yet, I don't think it's the best time to buy it. Its shares could head lower as its top customers postpone their high-NA EUV purchases, the chip market cools off again, and it gets slapped with even tighter trade restrictions in China.

For now, I'd personally prefer to buy more balanced chip plays like TSMC instead of ASML.

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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Leo Sun has positions in ASML. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ASML and Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Intel and has recommended the following options: short November 2024 $24 calls on Intel. The Motley Fool Australia has recommended ASML. 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.

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

Nvidia (NASDAQ: NVDA) stock has already soared 2,420% over the past five years, but Wall Street is still overwhelmingly bullish on its future. Out of the 64 analysts who cover the chipmaker, 51 rate its stock as a buy, nine rate it as overweight, and four rate it as a hold. Not a single analyst has given it a dreaded underweight or sell rating.

But over the past 12 months, Nvidia's insiders actually sold more than 10 times as many shares as they bought. One of those major sellers was its own CEO Jensen Huang, who liquidated nearly 6 million shares from June 13 through mid-September. Should investors follow Huang's lead, or should they tune out that noise and keep holding the stock?

How many shares does Jensen Huang own?

As of Sept. 16, Huang still directly held 75.4 million shares of Nvidia. At $116 per share, that personal stake is worth $8.75 billion. However, Huang also indirectly owns another 785.6 million shares of Nvidia across five other trusts and a partnership. Those combined shares account for the lion's share of his net worth of over $100 billion.

In other words, Huang's liquidation of 6 million shares -- worth about $700 million today -- represents a tiny percentage of his total stake in Nvidia. All of Huang's recent sales were also made through a trading plan, which he adopted on March 14 to automatically execute stock trades whenever certain market conditions are met.

Those exact trading conditions aren't publicly known, but they're usually based on technical factors like a stock's price and trading volume. Those automated plans are designed to prevent insiders from placing trades with nonpublic information.

Huang also receives most of his salary as stock awards. Some $26.68 million of his $34.17 million in compensation in fiscal 2024 (which ended this January) was paid out in Nvidia's shares instead of cash. So Huang might simply be selling some of those shares to raise more cash -- and those sales don't necessarily mean Nvidia's stock is overvalued.

What should investors focus on instead?

Jensen Huang is clearly invested in Nvidia's future, and the chipmaker still has a bright future. The rapid expansion of the artificial intelligence (AI) market is driving more companies to buy more of its data center GPUs to process complex machine learning and AI tasks, and that feverish demand continues to outstrip its available supply.

In the first half of fiscal 2025, Nvidia generated a whopping 87% of its revenue from its data center chips -- compared to 78% of its revenue in fiscal 2024 and just 39% of its revenue in fiscal 2022. That rapid expansion turned Nvidia into an all-in AI play and significantly reduced the importance of its PC gaming GPU business.

If you believe Nvidia will continue to sell the best picks and shovels for the AI gold rush, then its stock could have plenty of room to run. From fiscal 2024 to 2027, analysts expect its revenue to continue expanding at a compound annual growth rate (CAGR) of 50% as its EPS increases at a CAGR of 56%. At 41 times this year's earnings, Nvidia's stock still looks reasonably valued relative to those explosive growth rates.

But Nvidia could struggle to match those expectations as it faces more competitive, regulatory, and macro headwinds. Advanced Micro Devices is gradually gaining a foothold in the data center market with its cheaper GPUs, and many tech giants are developing their own AI chips to gradually curb their dependence on Nvidia. U.S. regulators could further tighten their export restrictions to completely block its remaining chip sales to China, while an unexpected recession could cause many of its top customers to rein in their AI spending. Those challenges could throttle Nvidia's growth and end its historic rally.

Ignore the noise and focus on the facts

Jensen Huang's stock sales are attracting a lot of attention from the bears, but it's just a lot of sound and fury that signifies nothing. So instead of following his lead, investors should weigh the pros and cons to see if it's still worth buying. I think Nvidia's stock could head even higher over the next few years as the AI market expands, but investors should temper their expectations, stay patient, and recognize its potential long-term challenges.

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.

The post Nvidia's CEO keeps selling shares: Is it a red flag? 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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Leo Sun 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 Nvidia. The Motley Fool Australia has recommended Nvidia. 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.

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

Warren Buffett once told investors to be "fearful when others are greedy and to be greedy only when others are fearful." That's why it was alarming when Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) started selling a lot of its top positions -- including Apple and Bank of America -- in recent months and boosted its cash holdings to a record high.

That shift suggests the market is getting overheated and heading for a pullback. That wouldn't be too surprising, since the S&P 500 only trades about 3% below its all-time high and looks historically expensive at 22 times forward earnings.

Yet Berkshire has still been buying some stocks as it prunes its other holdings. One of those stocks is the cosmetics retailer Ulta Beauty (NASDAQ: ULTA). In the second quarter, it bought 690,106 shares of Ulta for $266 million at an average price of about $406. That equals 1.5% of Ulta's shares and accounts for 0.1% of Berkshire's portfolio.

Warren Buffett isn't making any money on that new investment yet. But at $380 a share, its stock still looks ridiculously cheap at 15 times forward earnings -- and it might just bounce back once the market warms up again.

Ulta Beauty's business model

Ulta Beauty went public in 2007, and it carved out a niche with its in-store salon services, wide range of high-end to low-end products, partnerships with hot brands like Kylie Jenner's Kylie Cosmetics, and social media marketing campaigns that targeted younger customers. It also rapidly opened new brick-and-mortar stores as it expanded its sticky loyalty program.

Unlike LVMH's (OTC: LVMUY) Sephora, which was tethered to J.C. Penney's dying stores and struggling malls for years, Ulta opened big stand-alone stores. It also opened more shop-in-shops in Target's stores over the past three years.

From fiscal 2007 to fiscal 2019 (which ended in February 2020), Ulta's revenue grew at a robust compound annual growth rate (CAGR) of 19%. Its gross margin expanded from 31.1% to 36.2%, and its net income increased at a CAGR of 32%. It increased its total number of year-end stores from 249 locations to 1,254 locations.

So why did the bulls retreat?

Ulta suffered a major slowdown during the pandemic's height as it temporarily closed its brick-and-mortar stores and people bought fewer cosmetics. Yet it continued to open new stores throughout that slowdown in fiscal 2020.

The company recovered quickly in fiscal 2021 and 2022 as those headwinds dissipated, and its gross margins expanded in both years as it opened even more stores. But in fiscal 2023, its comparable stores sales growth decelerated to the single digits, its gross margin contracted, and it slightly eased off its brick-and-mortar expansion.

Data source: Ulta Beauty.

Ulta mainly attributed that slowdown to inflationary headwinds and a tougher promotional environment. At the end of fiscal 2023, it predicted its comps would grow 4% to 5% in fiscal 2024. But it cut that guidance over the past two quarters, and it now expects its comps to decline 0% to 2% for the full year. Analysts expect its revenue to stay nearly flat.

As its top line growth decelerates, Ulta plans to ramp up its own promotions and increase its investments in its new store openings, remodels, IT infrastructure, and supply chain. It expects that pressure to reduce its gross and operating margins, and analysts expect its earnings per share (EPS) to decline 10% for the full year. That's why Ulta's stock retreated more than 30% after it hit its record high of $567.18 in March.

Why is Warren Buffett investing in Ulta right now?

Ulta faces near-term challenges, but it should warm up again as the macro environment improves. It's still firmly profitable, it isn't shouldering any interest-bearing debt, and it launched a new $2 billion buyback plan (compared to its current market cap of $17 billion) this March. It still had $1.6 billion remaining in that authorization at the end of the second quarter.

Ulta also ended the quarter with 43.9 million Rewards members, which represents 5% growth from a year earlier, and it continues to open new brick-and-mortar stores. That expanding foundation could make it a great discount play at its current valuations -- so investors should consider following Buffett's lead and buying this unloved retail stock.

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.

The post This ridiculously cheap Warren Buffett stock could make you richer 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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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Leo Sun has positions in Apple, Berkshire Hathaway, and LVMH Moët Hennessy-Louis Vuitton. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Bank of America, Berkshire Hathaway, Target, and Ulta Beauty. The Motley Fool Australia has recommended Apple and Berkshire Hathaway. 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.

Nvidia's (NASDAQ: NVDA) market cap exceeded Apple's (NASDAQ: AAPL) for the first time in more than two decades on June 5. The chipmaker's market cap reached $3.01 trillion at the end of the day, compared with Apple's market cap of $3.00 trillion, and made it the world's second most valuable publicly listed company after Microsoft.

As of this writing, Nvidia's valuation has pulled back to $2.97 trillion as Apple's valuation rose to $3.02 trillion. But based on Nvidia's recent growth trajectory, it could easily overtake Apple again and close in on Microsoft's $3.15 trillion valuation. So can Apple maintain its position as the world's second most valuable company through 2025?

Why is Apple's growth slowing down?

From fiscal 2013 to fiscal 2023, which ended in September of last year, Apple's revenue grew at a compound annual growth rate (CAGR) of 8% as its earnings per share (EPS) increased at a CAGR of 16%.

That growth was driven by its robust sales of iPhones (especially the iPhone 6 in 2014 and the 6S in 2015), the Apple Watch's launch in 2015, and the expansion of its services ecosystem. It also bought back more than a third of its shares over the past ten years. But over the past two years, Apple's growth engines gradually cooled off.

In fiscal 2023, its revenue declined 3% as its EPS stayed nearly flat. That deceleration was caused by the end of the 5G upgrade cycle for its iPhones, sluggish sales of Macs and iPads in a post-pandemic market, and tough currency headwinds.

For fiscal 2024, analysts expect Apple's revenue and EPS to rise just 1% and 8%, respectively, as its iPhone sales stabilize, its Mac sales rise again, and it expands its services division. However, those are arguably tepid growth rates for a stock which trades at 27 times forward earnings. Its recovery could also be derailed by its market share losses in China, competitive challenges in India, and antitrust investigations of its services division in the U.S. and Europe.

So for now, Apple's valuation doesn't seem to be supported by its near-term growth rates. Instead, investors still seem to be paying a premium for it as a safe haven stock in a high interest rate environment. With $162 billion in cash and marketable securities at the end of its latest quarter, Apple can easily weather the near-term headwinds, buy back more shares, raise its dividend, and continue to expand through smart investments and acquisitions. Its plans to integrate OpenAI's generative artificial intelligence (AI) services into its own first-party services could also keep it in the AI race.

But it could struggle to stay ahead of Nvidia

Apple's deceleration coincided with Nvidia's acceleration. Back in fiscal 2023, which ended in January of that year, Nvidia's revenue growth flatlined and its adjusted EPS fell 25%. That slowdown was mainly caused by its weak sales of gaming GPUs for PCs in a post-pandemic market and macro headwinds for the data center market.

But in fiscal 2024, Nvidia's revenue and adjusted EPS soared 126% and 288%, respectively. That acceleration was driven by its skyrocketing sales of data center GPUs for AI applications. The growing popularity of OpenAI's ChatGPT and other generative AI platforms caused the market's demand for those chips to quickly outstrip its available supply. Analysts expect its revenue and adjusted EPS to grow 98% and 109%, respectively, in fiscal 2025.

Nvidia can't maintain those hypergrowth rates forever -- and it will probably face more competitive and regulatory headwinds over the next few years -- but its stock still looks reasonably valued at 47 times forward earnings. So if its data center GPU business keeps firing on all cylinders, its stock could have a lot more upside potential than Apple's.

Apple probably won't be worth more than Nvidia by 2025

Analysts expect Apple's earnings to grow 10% in fiscal 2026. If it's still trading at 27 times forward earnings, its stock price could rise to $215 at the end of calendar 2025, which ends in September of that year. That would only boost its market cap to around $3.3 trillion.

Nvidia's adjusted earnings are expected to increase 33% in fiscal 2026. If it's trading at 47 times forward earnings, its stock would be trading at about $170 with a market cap of nearly $4 trillion at the end of calendar 2025.

So even if their valuations cool off, Nvidia has a clear shot at eclipsing Apple's market cap again next year. That said, investors shouldn't forget that Apple has a solid track record of recovering from its cyclical downturns and reinventing itself with fresh products and services -- so it's far too early to claim that its business has fully matured.

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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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Microsoft, and Nvidia. Leo Sun has positions in Apple. 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 Apple, Microsoft, and Nvidia. 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.

Nvidia's (NASDAQ: NVDA) stock jumped 9% to a new all-time high on May 23, after the company posted its latest earnings report. In the first quarter of fiscal 2025, which ended on April 28, the chipmaker's revenue surged 262% year over year to $26.0 billion and exceeded analysts' estimates by $1.5 billion. Its adjusted earnings surged 461% to $6.12 per share and also cleared the consensus forecast by $0.54.

Those growth rates were explosive, but does Nvidia's stock still have room to run after rallying about 2,720% over the past five years? Let's review the four reasons to buy Nvidia's stock — as well as the four reasons to sell it — to decide.

The key numbers

Back in fiscal 2023, which ended in January of that year, Nvidia's revenue flatlined as its adjusted EPS fell 25%. Its sales of gaming GPUs cooled off as PC shipments declined in a post-pandemic market, and the macro headwinds curbed its sales of data center chips. But in fiscal 2024, its revenue and adjusted EPS surged 126% and 288%, respectively.

That abrupt acceleration was driven by the rapid expansion of the artificial intelligence (AI) market. Nvidia's data center GPUs are used to process complex AI tasks, and the market's demand for those chips quickly outstripped its available supply. Nvidia generated 87% of its revenue from its data center chips in the first quarter of fiscal 2025.

Nvidia also announced a 10-for-1 stock split that will take effect on June 7. The split won't alter Nvidia's valuations, but it might attract some interest from smaller retail investors while boosting the stock's liquidity through more options trading.

The four reasons to buy Nvidia

The bulls still love Nvidia for four reasons. First, they believe it will continue to dominate the AI market with its data center GPUs. The global AI market could still expand at a compound annual growth rate (CAGR) of 37% from 2023 to 2030, according to Markets and Markets, and Nvidia could be the simplest way to profit from that secular boom.

Second, its first mover's advantage in the AI space gives it tremendous pricing power. Its top-tier H100 GPUs cost more than $40,000, and it can keep raising those prices to boost its gross margin. Third, Nvidia's gaming business, 10% of its first-quarter revenue, is gradually recovering as the PC market stabilizes.

Lastly, Nvidia's stock still looks reasonably valued relative to its growth potential. From fiscal 2024 to fiscal 2027, analysts expect its revenue to grow at a CAGR of 43% as its EPS increases at a CAGR of 49%.

Based on those estimates, Nvidia's stock trades at just 41 times forward earnings. Advanced Micro Devices (AMD -3.77%), which is growing at a much slower rate and has less exposure to the AI market, trades at 46 times forward earnings.

The four reasons to sell Nvidia

Meanwhile, the bears are skeptical about Nvidia for four reasons. First, they believe Nvidia will lose its first mover's advantage in the data center GPU market as more competitors carve up the market. AMD's new Instinct data center GPUs already cost less than Nvidia's top-tier GPUs, and tech giants such as Microsoft, Alphabet's Google, and Meta Platforms have all been developing their own in-house AI chips to reduce their long-term dependence on Nvidia.

Second, U.S. regulators recently barred Nvidia from shipping its top-tier AI GPUs to China. That pressure could drive Chinese chipmakers to accelerate their development of comparable AI accelerators. If those efforts are successful, Chinese companies could eventually flood the global market with cheaper AI chips and crush Nvidia's gross margins.

Third, Nvidia's insiders sold about twice as many shares as they bought over the past 12 months. That cooling insider sentiment suggests that Nvidia could be running out of room to run as the market hovers near its all-time highs. Last but not least, the recent buying frenzy in AI chips could eventually lead to a supply glut if the market finally cools off.

The strengths still outweigh the weaknesses

Nvidia faces some long-term challenges, but I believe its strengths still clearly outweigh its weaknesses. Its business is still firing on all cylinders, its margin is expanding, and its stock still looks reasonably valued. Therefore, it's not too late to accumulate more shares of Nvidia if you believe the AI market will continue flourishing over the next few decades.

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

The post Nvidia stock: 4 reasons to buy, 4 reasons to sell appeared first on The Motley Fool Australia.

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 Leo Sun has positions in Meta Platforms. 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Alphabet, Meta Platforms, Microsoft, and Nvidia. 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 Alphabet, Meta Platforms, Microsoft, and Nvidia. 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.

Facebook rebranded itself as Meta Platforms (NASDAQ: META) on Oct. 28, 2021. Since that fateful day, Meta's stock declined more than 60% as it repeatedly disappointed its investors with its sluggish growth, feverish spending, and opaque plans for the future. Rising interest rates and other macro headwinds exacerbated that painful sell-off.

That crash stunned many investors who considered Meta to be reliable blue-chip tech stock. Let's compare the main reasons to buy, sell, and hold Meta to see if this out-of-favor tech giant will finally bounce back in 2023.

Image source: Meta Platforms.

The main reasons to sell Meta

Before we discuss Meta's turnaround potential, we should review why its stock collapsed over the past year. First, the growth of its core advertising business stalled out for three main reasons: 1. Apple's (NASDAQ: AAPL) iOS update crippled its targeted ads; 2. ByteDance's TikTok lured users and advertisers away from Facebook and Instagram; and 3. The macroeconomic headwinds disrupted the growth of the broader advertising market.

Meta aggressively invested in the expansion of Instagram Reels to counter TikTok, but it warned that those short videos would be more difficult to monetize than its Feed-based ads. But instead of streamlining its business to offset those costs, Meta doubled down on expanding its Reality Labs segment, which houses its virtual reality products. That segment's revenue rose less than 3% year over year to $1.43 billion in the first nine months of 2022, but its operating loss widened from $6.89 billion to $9.44 billion. During last quarter's conference call, Meta's CFO Dave Wehner warned that the Reality Labs division's operating losses would still "grow significantly year over year" in 2023 as it rolls out its next Quest headset. Wehner also estimated that Meta's total expenses would rise from $85 billion-$87 billion in 2022 to $96 billion-$101 billion in 2023.

That toxic mix of slowing growth and rising expenses drove away the bulls. Analysts expect its revenue and earnings to drop 2% and 33%, respectively, this year. For 2023, they expect its revenue to rise 5% -- but for its earnings to tumble another 15% as its expenses continue to climb. We should take those estimates with a grain of salt, but we should also recall that Meta's insiders sold nearly four times as many shares as they bought over the past 12 months.

The main reasons to buy or hold Meta

The bulls believe Meta's stock is a screaming bargain at 12 times forward earnings. That makes it the cheapest FAANG stock by a wide margin. They'll also note that Meta's recent decision to lay off 13% of its staff, or about 11,000 employees, indicates CEO Mark Zuckerberg is finally ready to make some tough calls to stabilize its near-term margins. In an open letter to his employees, Zuckerberg said Meta needed to "become more capital efficient" to cope with the "macroeconomic downturn, increased competition, and ads signal loss." In addition to those layoffs, Zuckerberg said Meta was also "scaling back budgets, reducing perks, and shrinking our real estate footprint" as it prioritized the growth of its core businesses.

Those statements suggest that Meta will pour a lot less cash into its money-losing Reality Labs division while prioritizing the development of better first-party data mining services (which could reduce its dependence on third-party data from Apple or other operating system providers) and the expansion of Instagram Reels to keep pace with TikTok.

During Meta's last conference call, Dave Wehner said the company was "working to close" the monetization gap between Reels and its higher-value Feed and Stories, but that it could take another 12 to 18 months to do so. That process could be accelerated significantly if the U.S. Government finally bans TikTok over its ties to the Chinese government.

Meta's growth will likely remain sluggish over the next few quarters, but the worst-case scenario has arguably been priced in. Meanwhile, the potential tailwinds for the tech giant -- including a revival of its ad business with first-party data, the downsizing (or complete shutdown) of Reality Labs, and a national ban on TikTok -- aren't reflected in its current valuation yet. If the market merely values Meta at 18 times forward earnings, its stock price could easily rise about 50%.

Which argument makes more sense?

I personally think it's too late to sell Meta at these levels, especially if cooler inflation drives stocks higher over the next few months. Meanwhile, investors who already own Meta's stock should probably simply hold it for a few more quarters and see if its business improves or deteriorates. However, I also think it's still too risky to buy Meta's stock before a few green shoots actually appear. Therefore, I believe Meta will be a stock to hold -- instead of being too bearish or bullish on -- in 2023.

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

The post Meta Platforms stock: Buy, sell, or hold in 2023? 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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Leo Sun has positions in Apple and Meta Platforms, Inc. 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Meta Platforms, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple and Meta Platforms, Inc. 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 Apple (NASDAQ: AAPL) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) moved in opposite directions after their latest earnings reports. Apple's stock jumped nearly 8% on Oct. 28 after it soundly beat Wall Street's expectations, but Alphabet's stock tumbled 9% on Oct. 26 after it broadly missed analysts' expectations on both the top and bottom lines.

Apple's stock has still declined 12% this year as of this writing, but Alphabet fared much worse with a 34% drop. Let's see why Apple outperformed Alphabet by such a wide margin and if it will remain the better bear market buy.  

The key differences between Apple and Alphabet

Apple generated 79% of its revenue in its latest quarter by selling iPhones, iPads, Macs, and other hardware products and accessories. The remaining 21% came from its Services business, which houses its App Store and subscription-based services. It ended fiscal 2022 (which ended in September) with over 900 million subscribers across all of its services.

Alphabet generated 79% of its revenue in its latest quarter from Google's advertising business, which houses the ads from its core search engine, its advertising network, and YouTube. The rest of Alphabet's revenue came from Google's Cloud platform (10% of its revenues), its subscription-based services, hardware products, and other smaller businesses.

Apple's hardware business faced supply chain constraints throughout the first nine months of fiscal 2022, but that pressure eased in the fourth quarter. It was also affected by intermittent COVID-19 lockdowns in China, but its sales in the Greater China area (19% of its fiscal 2022 revenue) still increased nearly 9% for the full year.  

Alphabet's main challenge is the slowdown of the digital advertising market. Its ad sales had recovered quickly from the pandemic in 2021, but inflation, rising rates, and other macro headwinds all caused companies to buy fewer ads this year. YouTube, which suffered its first year-over-year revenue decline last quarter, also struggled to keep pace with ByteDance's TikTok in the short video market. Google's Cloud business continued to grow, but it couldn't fully offset its slower ad sales.

Which tech giant is growing faster?

Apple's revenue rose 33% to $365.8 billion in fiscal 2021, driven by robust sales of the iPhone 12 (its first family of 5G devices), while its EPS surged 71%. Its growth cooled off in fiscal 2022 as it lapped those 5G upgrades and it faced persistent supply chain headwinds, but its revenue still increased 8% to $394.3 billion as its EPS rose 9%. Analysts expect its revenue and earnings to grow 4% and 5%, respectively, this year.

Those growth rates might not seem impressive, but they don't factor in any new devices -- including its long-rumored AR (augmented reality) headsets -- or services that Apple might launch in 2023. Apple ended fiscal 2022 with $169 billion in cash and marketable securities, so it could still easily expand into new markets with big investments and acquisitions.  

Alphabet's revenue rose 41% to $257.6 billion in 2021 as its advertising business posted a strong post-pandemic recovery. Its EPS also increased a whopping 91%. But in the first nine months of 2022, its revenue only grew 13% year over year to $206.8 billion (and decelerated throughout all three quarters) as its EPS declined 14%. Analysts expect its revenue to rise 10% this year but for its earnings to decrease 15%.

That slowdown can be entirely attributed to the market's softening demand for digital ads. Its overseas revenues are also being gobbled up by a strong dollar, which could continue to strengthen as interest rates continue to rise. Nevertheless, analysts expect Alphabet's revenue and earnings to grow 9% and 14%, respectively, as some of those headwinds dissipate.

Alphabet ended the third quarter with $22 billion in cash and equivalents, which also gives it ample room for fresh investments and acquisitions. But for now, Alphabet plans to rein in its spending until its core advertising business recovers.

The valuations and verdict

Apple's stock outperformed Alphabet's this year because its core business seemed more resistant to the macro headwinds. But at 24 times forward earnings, Apple's stock looks a bit pricey relative to its near-term growth. Alphabet trades at just 17 times forward earnings, but that lower valuation suggests that investors aren't too optimistic about its future. 

I own both of these stocks, and I think they're still great long-term investments. But if I had to buy more shares of one of these stocks right now, I'd pick Apple instead of Alphabet because its near-term growth is more predictable, it's better insulated from the macroeconomic headwinds, and it's widely expected to roll out new products and services -- which the market probably hasn't fully priced in yet -- in 2023 and beyond. Alphabet's stock might seem cheaper, but it probably won't command a higher valuation until the broader digital advertising market recovers. 

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

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Leo Sun has positions in Alphabet (A shares) and Apple. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. 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.

Netflix's (NASDAQ: NFLX) stock surged 14% on Wednesday, Oct. 19, following Tuesday evening's release of its third-quarter earnings report. The streaming video giant's revenue rose 6% year-over-year to $7.93 billion, which beat analysts' expectations by $90 million. Its earnings per share declined 3% to $3.10, but still cleared the consensus forecast by $0.97.

More importantly, Netflix gained 2.42 million paid subscribers sequentially, which finally ended its two-quarter streak of subscriber losses. Do those positive developments indicate it's finally safe to buy Netflix's stock, which remains about 60% below its all-time high from last November?

Its revenue growth is still decelerating

Back in April, Netflix rattled investors with its first sequential loss of subscribers in over a decade. It mainly blamed that slowdown on tougher competition in the streaming space, the impact of the Russo-Ukrainian war, and users sharing their passwords. It said it would crack down on those shared passwords and roll out a cheaper ad-supported tier to attract new users, but those moves also suggested it was running out of ways to gain new subscribers.

During the third quarter, Netflix's number of paid subscribers grew again as hit shows like Stranger Things, Monster: The Jeffrey Dahmer Story, Extraordinary Attorney Woo, The Gray Man, and The Sandman drew in more viewers. It expects its number of paid subscribers to grow 2% sequentially (2.6% year-over-year) to 228 million in the fourth quarter.

Data source: Netflix. YOY = Year-over-year.

Netflix's stabilizing subscriber growth is encouraging, but its revenue growth continues to cool off. It attributes that slowdown to its growing dependence on international markets, which generate lower revenue per subscriber than its slower-growth U.S./Canada market, as well as the rising dollar's impact on its overseas revenue.

That's why it only expects revenues to rise less than 1% year-over-year -- and decline nearly 2% sequentially -- to $7.78 billion in the fourth quarter. However, that amounts to a 9% year-over-year increase under constant currency terms.

To stabilize its revenue growth, Netflix will start rolling out its cheaper "Basic with Ads" tier, which costs $6.99 per month in the U.S., on Nov. 3. That tier, which costs $1 less than Disney's (NYSE: DIS) ad-supported Disney+ and Hulu tiers, will stream videos at up to a 720p resolution and feature about five to five minutes of commercials each hour.

During the conference call, chief operating officer and chief product officer Greg Peters predicted the cheaper ad-supported tier would "bring in a lot more members" and become a "significant incremental revenue and profit stream" over the long term. However, Netflix's fourth-quarter revenue suggests those tailwinds won't really kick in by the end of the year. Those currency exchange headwinds are powerful.

Its margins are still shrinking

Netflix's operating margin of 19.3% in the third quarter beat its own forecast of 16%, but still contracted sequentially and year-over-year. It attributed most of its year-over-year decline to the appreciation of the U.S. dollar -- which will likely continue as interest rates continue to rise.

Data source: Netflix.

It expects that pressure, along with the infrastructure investments related to its new ad-supported tier, to reduce its operating margin to just 4.2% in the fourth quarter. It also expects its earnings per share to plummet 73% year-over-year.

Netflix didn't provide an exact fourth-quarter estimate for its free cash flow (FCF), which fluctuates wildly based on its production of new content. But it expects to generate about $1 billion in FCF for the full year, which implies its FCF will likely turn negative again in the fourth quarter (since it already generated $1.3 billion of FCF in the first nine months).

Its valuations are debatable

Analysts expect Netflix's revenue to rise 7% this year as its earnings decline 10%. Next year, they expect revenue and earnings to grow 8% and 6%, respectively, assuming it continues to gain new subscribers and expand its ad-supported tier.

Based on those estimates, Netflix trades at 21 times forward earnings -- which is historically cheap but doesn't make it a bargain compared to traditional media companies. For example, Disney trades at 18 times forward earnings, while Paramount Global (NASDAQ: PARA) has an even lower forward price-to-earnings ratio of eleven.

At its current growth rates, I believe Netflix deserves to trade closer to its legacy media counterparts -- which also offer streaming video platforms -- instead of higher-growth tech companies. Therefore, I still don't think Netflix is a compelling buy after its latest earnings beat, especially as its revenue growth cools off and its operating margins continue to shrink. 

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

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Leo Sun has positions in Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Netflix and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool Australia has recommended Netflix and Walt Disney. 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.

Back in April 2020, Amazon's (NASDAQ: AMZN) market cap briefly eclipsed Apple's (NASDAQ: AAPL). At the time, both tech giants were worth about $1.2 trillion. But today Amazon is still worth $1.2 trillion, while Apple's market cap has roughly doubled to $2.4 trillion. Let's see why Apple pulled so far ahead of Amazon -- and if Amazon can catch up again by 2025.

Why did Amazon pull ahead of Apple?

In early 2020, Amazon seemed like a more appealing investment than Apple. Amazon's e-commerce and cloud businesses were both well-poised to grow throughout the pandemic as brick-and-mortar stores shut down, consumers stayed at home, and people accessed more cloud-based services and apps.    

In 2020, Amazon's revenue rose 38% to $386.1 billion, its net income increased 84% to $21.3 billion (even as it racked up billions of dollars in COVID-related expenses), and its earnings per share (EPS) grew 82%. The bullish thesis was simple: Amazon's e-commerce business would continue to expand as it locked in more shoppers with Prime, while the growth of its higher-margin Amazon Web Services (AWS) cloud platform would subsidize the growth of its lower-margin retail businesses. 

At the time, Apple was still selling 4G iPhones as new 5G Android devices hit the market. It was also losing ground in China to popular domestic smartphone brands like Xiaomi, Oppo, and Vivo. Its own first family of 5G devices, the iPhone 12, wouldn't arrive until late 2020. The trade war also threatened to disrupt its production capabilities in China.

As a result, Apple's revenue only grew 6% to $274.5 billion in fiscal 2020 (which ended in September of that calendar year). Its net income rose 4% to $57.4 billion, while its EPS -- boosted by buybacks -- grew 10%. Those uninspiring numbers suggested that Apple's high-growth days were over, so many investors seemed to favor Amazon over Apple.   

Why did Apple pull ahead of Amazon again?

But as the pandemic-related tailwinds faded away, Amazon's growth cooled off against some tough year-over-year comparisons. Yet its revenue still rose 22% to $469.8 billion in 2021, while its net income increased 57% to $33.4 billion and its EPS grew 55%.

Unfortunately, several macro challenges this year will exacerbate Amazon's post-pandemic slowdown. Inflation will curb the spending power of its retail consumers while boosting its marketplace expenses, and macro headwinds will gradually reduce the enterprise market's appetite for its cloud-based services. The resignation of founder and CEO Jeff Bezos last July also strongly indicated that Amazon's growth and valuations had reached a near-term peak.

For 2022, analysts expect Amazon's revenue to rise just 11% as higher investments reduce its net income by a staggering 98%. That jarring slowdown spooked investors, and its stock tumbled 33% this year.

As Amazon's growth cooled, Apple's growth accelerated as it launched the iPhone 12 and expanded its subscription-based services. In fiscal 2021, its revenue jumped 33% to $365.8 billion, its net income grew 65% to $94.7 billion, and its EPS increased 71%. As a result, Apple became an attractive growth stock again as pandemic-era plays burned out.

Analysts expect Apple's revenue and net income to grow 7% and 5%, respectively, in fiscal 2021 as it laps the launch of the iPhone 12. Those stable growth rates -- and the inflation-resistant nature of its affluent customers -- have arguably made it a more appealing stock than Amazon. That's why its stock only dipped 15% this year.

Will the tables turn again by 2025?

Amazon's growth should stabilize after the inflationary and supply chain headwinds dissipate, but investors shouldn't expect it to grow as fast as it did during the pandemic. Between 2021 and 2024, analysts expect its revenue to grow at a compound annual growth rate (CAGR) of 14% as its EPS increases at a CAGR of 6%.

Meanwhile, Apple is widely expected to launch new AR devices over the next few years to diversify its top line away from the iPhone, iPad, and Mac. It's also expected to launch an electric vehicle sometime in the future. It already ended its latest quarter with over 860 million paid subscriptions across its services ecosystem, and that massive walled garden should drive the launches of its future products and services. That roadmap is still murky, but analysts expect Apple's revenue to grow at CAGR of 6% between fiscal 2021 and 2024, while its EPS increases at a CAGR of 8%.

Amazon might generate stronger revenue growth than Apple, but its earnings growth should remain weaker because it operates at much lower margins and spends less cash on buybacks. And at around $120 per share, Amazon actually trades at more than 30 times its projected earnings for 2024. At around $150, Apple trades at just 22 times its 2024 estimate.

Therefore, Amazon's higher multiple could cool off as investors brace for several more years of single-digit earnings growth. Apple's multiple could hold steady -- or even rise -- as it launches new products and services.

I'm not sure exactly where Apple and Amazon will end up by 2025. But based on these facts, it seems highly unlikely that Amazon's market cap will eclipse Apple's within the next three years. 

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

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Leo Sun has positions in Amazon and Apple. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Amazon and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.  

Twitter's (NYSE: TWTR) stock tumbled to a four-month low on 8 July after Elon Musk formally terminated his $44 billion takeover bid for the company. In a Securities and Exchange Commission (SEC) filing, Musk's legal team said Twitter had breached the terms of the deal by making "false and misleading representations" regarding the social media platform's number of "fake or spam accounts".

The legal team also said Musk had "reason to believe that the true number of false or spam accounts on Twitter's platform is substantially higher than the amount of less than 5% represented by Twitter in its SEC filings" and that an inability to gauge its true monetizable daily active user (mDAU) count obfuscates the growth prospects of its core advertising business.

Twitter responded by filing a lawsuit against Musk. In a tweet, chairman Bret Taylor said the board remained "committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement".

As this legal battle drags on, Twitter's stock is likely to stagnate and remain far below Musk's "best and final offer" of $54.20 per share. Is it too late to buy Twitter's underwhelming stock, which has actually delivered a negative return since its first post-IPO trade in November 2013?

Why did Twitter underperform the market?

When Twitter went public, then-CEO Dick Costolo claimed the platform could reach 400 million monthly active users (MAUs) by the end of 2013. It broadly missed that target, started losing MAUs instead, and ultimately replaced that metric with its current mDAU metric in 2019.

Twitter's mDAUs rose 13% to 217 million in 2021, and it claims it can reach 315 million mDAUs by the end of 2023. That target seems extremely bullish since it would require Twitter's mDAU growth to accelerate to about 20% in both 2022 and 2023. It also claimed it could generate $7.5 billion in revenue in 2023 -- which would require its revenue to grow at a compound annual growth rate (CAGR) of 21.5% over the next two years.

Data source: Twitter. YOY = Year over year.

Twitter hasn't withdrawn that guidance yet, but analysts expect its revenue to only rise 16% this year and then grow just 22% to $7.2 billion in 2023.

In April, Twitter also admitted that it had miscalculated its mDAUs over the past three years by counting multiple accounts for single users as separate mDAUs. Twitter claims that miscalculation only affected about two million mDAUs, but that mistake -- which only surfaced after Musk placed his bid -- raised red flags regarding its spam accounts.

Twitter's co-founder Jack Dorsey, who succeeded Costolo in 2015, launched new features like its short-lived "Fleets" feature, organized "topics" for tweets, new tipping services, and "Twitter Blue" verified subscriptions for top accounts -- but it still struggled to expand beyond its niche.

Dorsey resigned last year and was succeeded by Parag Agrawal, who focused on increasing Twitter's mix of higher-value ads and rolling out new e-commerce features to become a "social shopping" platform like Pinterest and Meta Platforms' Instagram.

Twitter shouldn't have sued Musk

Twitter has continued to grow over the past three years, but its earnings growth has been messy. In 2019, its net income was inflated by a $1.21 billion tax benefit. In 2020, it posted a net loss after incurring a $1.1 billion tax charge and COVID-19 expenses.

In 2021, it racked up another net loss after paying $766 million in legal fees to resolve a class action lawsuit regarding its MAU growth forecasts back in 2014. The impact of those taxes and legal fees can be seen in the gap between its reported and adjusted earnings, which exclude those charges:

Data source: Twitter.

This May, Twitter settled a privacy lawsuit with the Department of Justice (DOJ) and Federal Trade Commission (FTC) for $150 million. If Twitter sues Musk, it could rack up even higher legal fees this year.

Analysts expect Twitter to generate a net profit of $540 million this year, partly due to its recent sale of MoPub to AppLovin (NASDAQ: APP) for $1.05 billion, but to post a much lower net profit of $130 million in 2023.

Twitter would net a $1 billion termination fee from Musk if it simply lets him walk away. That seems to be a smarter and more cost-efficient decision that would finally allow Agrawal to reset Twitter's business.

It's not the right time to buy Twitter stock

Twitter's stock still isn't cheap at nearly 40 times next year's adjusted earnings. The macro headwinds will likely force it to abandon its ambitious growth targets for 2023, and its decision to sue Musk instead of accepting the termination fee raises additional red flags. Simply put, it's still not the right time to buy this volatile social media stock.

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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. Leo Sun has positions in Meta Platforms, Inc. The Motley Fool Australia’s parent company has positions in and recommends Meta Platforms, Inc., Pinterest, Tesla, and Twitter. 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.

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Amazon (NASDAQ: AMZN) and Alibaba (NYSE: BABA) might initially look very similar. Both companies are e-commerce leaders that have built up massive cloud infrastructure platforms as their secondary businesses. Both have also expanded their sprawling ecosystems into adjacent markets such as video games, streaming media, and smart speakers.

But dig a little deeper and those superficial similarities quickly fade away. Today I'll examine the key differences between Amazon and Alibaba, how they affect the market's perceptions of both stocks, and if either tech giant is still worth investing in.

Don't call Alibaba the "Amazon of China"

Alibaba is often referred to as the "Amazon of China," but that casual comparison glosses over three key differences.

First, Alibaba actually generates all of its operating profits from its commerce (online and offline retail) businesses. Its cloud segment, Alibaba Cloud, continues to rack up operating losses and can only squeeze out a razor-thin profit on an adjusted earnings before interest, taxes, and amortization (EBITA) basis. That makes it the polar opposite of Amazon, which consistently generates most of its operating profits from Amazon Web Services (AWS), the largest cloud infrastructure platform in the world.

In other words, Alibaba at this point is still subsidizing the expansion of its cloud platform, which is the largest in China, with the growth of its retail marketplaces. Amazon subsidizes the expansion of its lower-margin retail business with its ongoing expansion of AWS.

Second, Alibaba still generates most of its revenue in China, but it's been a top target of the country's antitrust regulators. It was slapped with a record $2.8 billion fine last year, then forced to end its exclusive deals with top merchants and rein in its promotional deals. Those setbacks arguably made it easier for rivals like JD.com (NASDAQ: JD) and Pinduoduo (NASDAQ: PDD) to gain ground on Alibaba. Amazon also faces some regulatory challenges across the world, but its business is much better diversified, with more than a dozen region-specific marketplaces.

Lastly, the Securities and Exchange Commission has threatened to delist Alibaba and other Chinese stocks from U.S. stock markets as early as next year if they don't comply with U.S. auditing standards. That unresolved threat could prevent most investors from buying Alibaba as a long-term investment. 

Alibaba faces a tougher slowdown than Amazon

Alibaba's revenue rose by 19% to 853.1 billion yuan ($134.6 billion) in its fiscal 2022, which ended March 31. Its Chinese commerce revenue rose 18%, and its cloud revenue increased 23%.

But in its fiscal 2023, analysts expect its revenue to increase by just 9% as it grapples with macroeconomic and competitive headwinds for its e-commerce business, as well as a slowdown in cloud spending by large internet companies.

Amazon's revenue rose 22% to $469.8 billion in 2021. Its North American sales grew by 18%, its international sales increased by 22%, and its AWS sales jumped by 37%.

However, Amazon expects its e-commerce growth to cool off in a post-lockdown world, with supply chain and inflationary headwinds exacerbating that pressure. As a result, analysts expect Amazon's revenue to rise by only 12% this year. On the bright side, they expect AWS to continue growing at a healthy clip.

But Amazon faces a steeper earnings decline

Alibaba and Amazon both intend to ramp up their spending as their revenue growth slows down. Alibaba plans to pour more cash into its discount marketplaces (Taocaicai and Taobao Deals) to counter Pinduoduo and JD's Jingxi in the lower-end market, and to continue increasing its mix of first-party sales -- which will squeeze its margins, but will help it address the quality control and logistics issues across its third-party marketplaces. It will also continue expanding its lower-margin overseas marketplaces.

Analysts expect Alibaba's net income to rise by 53% in its fiscal 2023, but that's only because it's lapping a very easy comparison to its 59% decline (which included its antitrust fine) in fiscal 2022.

Amazon is grappling with higher fuel and labor costs, as well as the ongoing pressure to allow its workers to unionize. At the same time, it's increasing its investments in its digital ecosystem (videos, music, and games) to lock in its Prime subscribers. Analysts expect all those headwinds to reduce Amazon's net income by 76% in 2022.

Which stock is the better buy?

Alibaba trades at less than 10 times this year's adjusted earnings estimate, while Amazon has a much higher forward price-to-earnings ratio of 48. Both multiples have been slightly skewed by the companies' elevated spending plans for their current fiscal years, but both stocks still look cheap relative to their top-line growth, trading at about 2 times this year's sales. 

Alibaba might initially appear to be the better bargain, but its stock won't command a higher premium until it stabilizes its e-commerce businesses and overcomes its regulatory headwinds in China and the U.S. As for Amazon, its stock could also remain in limbo until it reins in its spending again.

That said, I believe Amazon is still a better buy than Alibaba now because it's growing faster, it's better diversified, and it doesn't face any delisting threats. 

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

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Leo Sun has positions in Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and JD.com. The Motley Fool Australia has recommended Amazon and JD.com. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), the parent company of Google, will execute a 20-for-1 stock split on July 15. That split will lower Alphabet's trading price from about $2,300 to $115, but it won't actually change its market capitalization or valuations. 

Nonetheless, Alphabet might attract some extra attention from retail investors due to its lower price tag. It could also generate more liquidity through options trading, since a single options contract represents 100 shares. And its lower share price could eventually lead to its inclusion in the price-weighted Dow Jones Industrial Average. 

Alphabet might seem like a wobbly investment after its first-quarter revenue and earnings miss, but I believe it's still a great stock to buy ahead of its split for four simple reasons. 

1. An unbeatable advertising business

In the first quarter, Alphabet generated 80% of its revenue from Google's advertising business (including YouTube). Its ad business certainly isn't immune to macro headwinds -- it suffered temporary slowdowns during both the Great Recession and the COVID-19 pandemic -- but it has always bounced back from such downturns.

Between 2011 and 2021, Google's annual advertising revenue rose from $36.5 billion to $209.5 billion, a compound annual growth rate of 19.1%. This year, eMarketer estimates Google will control 27.7% of the digital ad market in the U.S. -- putting it in first place ahead of Meta Platforms (NASDAQ: FB) (24.2%) and Amazon (NASDAQ: AMZN) (13.3%) -- and remain the market leader in most markets outside of China.

Therefore, if you expect Google to ride out the current macroeconomic headwinds, then this is still a great time to invest in its market-leading digital advertising business.

2. An expanding and inescapable ecosystem

Google's core business has grown so rapidly because its ecosystem is practically inescapable. It owns the world's largest online search engine, the most widely used mobile operating system (Android), the most popular web browser (Chrome), the top webmail service (Gmail), the leading online mapping service (Google Maps), and the largest free streaming video platform (YouTube). It also operates a growing list of adjacent services like YouTube Music, Google Workspace, Google Pay, and Google Photos.

Those digital tentacles consistently gather personal data from its users, which it uses to better target ads across its ecosystem. That approach is controversial, especially among privacy advocates and antitrust regulators, but it's remarkably effective for advertisers.

3. A rapidly growing cloud business

Google operates the third-largest cloud infrastructure platform in the world after Amazon (NASDAQ: AMZN) Web Services (AWS) and Microsoft's (NASDAQ: MSFT) Azure. Google Cloud held an 8% share of the global market in the first quarter, according to Canalys, compared to a 33% share for AWS and a 21% share for Azure.

Google Cloud won't catch up to AWS or Azure anytime soon, but its revenue rose 53% to $8.9 billion in 2019, 46% to $13.1 billion in 2020, and 47% to $19.2 billion (amounting to 7% of Alphabet's total revenue) in 2021. That means it's growing faster than AWS and at a comparable pace to Azure.

Google Cloud should continue to grow over the long term as it attracts retailers that don't want to work with Amazon or tether themselves to Microsoft's sprawling ecosystem of enterprise software. That expansion should gradually reduce Google's dependence on its advertising business. 

4. High growth rates and a low valuation

Alphabet's scale and diversification have enabled it to generate robust growth over the past decade. Looking ahead, analysts expect its revenue to rise both 15% in 2022 and 2023. They expect its earnings to dip 1% this year as it ramps up its spending, but to increase 19% in 2023.

Over the next five years, they expect Alphabet's annual earnings to grow at an average rate of about 17%. Investors should take those long-term estimates with a grain of salt, but they give it a low 5-year price-to-earnings-growth (PEG) ratio of 0.8. Stocks with a PEG ratio below 1.0 are considered undervalued, so Alphabet looks dirt cheap relative to its growth potential. By comparison, Meta and Amazon have 5-year PEG ratios of 1.2 and 3.0, respectively.

It's still a great long-term investment

Alphabet's share price might struggle over the next few quarters due to investors' concerns about macroeconomic headwinds for advertising and the recent slowdown in YouTube's ad sales.

But as a long-term Alphabet investor, I'm not too worried about these near-term speed bumps. I'm confident Google's platforms will continue to grow over the next decade, and I believe Alphabet's upcoming stock split will generate fresh interest from retail investors and options traders. Simply put, this tech titan remains a rock-solid investment in a tumultuous market. 

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

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Leo Sun has positions in Alphabet (A shares), Amazon, and Meta Platforms, Inc. John Mackey, CEO of Whole Foods Market, an Amazon 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 Meta Platforms CEO Mark Zuckerberg, 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Meta Platforms, Inc., and Microsoft. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Meta Platforms, Inc. 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.

Twitter (NYSE: TWTR) and Meta Platforms (NASDAQ: FB) became two of the most talked-about social media companies in recent months.

Twitter's drama started in early April after Elon Musk took a 9.2% stake in the company. Shortly afterwards, Musk launched a hostile bid to acquire all of Twitter at $54.20 a share in a $44 billion deal. Twitter accepted the deal after initially adopting a "poison pill" defense against Musk's offer.

But over the past month, Musk tried to back out of the deal by accusing Twitter of failing to provide adequate information about its spam and bot accounts. As of this writing, the deal is still in limbo, and Twitter's stock price remains about 26% below Musk's "best and final" offer.

Meta's downfall started in February after it provided dismal guidance for the first quarter of 2022. Its actual first-quarter report in April was lackluster, and the company continued to blame its recent slowdown on Apple's (NASDAQ: AAPL) iOS update and competition from ByteDance's TikTok.

Meta also remained committed to burning billions of dollars each year on its messy metaverse efforts, and the recent resignation of chief operating officer Sheryl Sandberg stunned investors. Snap's sudden reduction of its second-quarter guidance in late May, which it attributed to a deteriorating macro environment for digital ads, raised even more red flags.

That's why Twitter and Meta have both been terrible investments over the past 12 months. Twitter's stock has tumbled more than 30% during that period, while Meta's stock has plummeted over 40%. But could either of these stocks bounce back over the long term?

Twitter might grow faster than Meta this year

Twitter's revenue rose 37% to $5.08 billion in 2021. Its total number of monetizable daily active users (mDAUs) increased 13% to 217 million.

In the first quarter of 2022, its revenue grew 16% year over year to $1.2 billion. Excluding its sale of MoPub from both periods, its revenue increased 22%. Its mDAUs grew 16% to 229.0 million.

Meta's revenue rose 37% to $117.9 million in 2021. The total number of daily active people (DAP) across its entire family of apps (Facebook, Messenger, Instagram, and WhatsApp) increased 8% to 2.82 billion.

But in the first quarter of 2022, Meta's revenue only grew 7% year over year to $27.9 billion as the aforementioned headwinds throttled its growth. However, its family DAP still rose 6% to 2.87 billion.

Analysts expect Twitter's revenue to rise 16% to $5.88 billion this year, but they only expect Meta's revenue to increase 7% to $126.6 billion. We should take those estimates with a grain of salt, but that gap likely reflects Twitter's lower exposure to Apple's iOS changes (since it also relies heavily on first-party and contextual data for ads) and direct competition from TikTok's videos.

Twitter might generate stronger near-term profit growth

Twitter posted a net loss of $221 million in 2021, but that red ink was mainly caused by a one-time litigation charge of $766 million. On an adjusted basis, which excludes that charge and other one-time expenses, it generated a net profit of $165 million, or $0.20 per share.

Analysts expect Twitter's adjusted earnings per share (EPS) to surge 730% to $1.66 this year as it laps those litigation expenses and realizes the gains from its $1.05 billion sale of MoPub to AppLovin. In 2023, they expect Twitter's revenue to rise 22% to $7.15 billion but for its adjusted EPS to dip 22% against those tough year-over-year comparisons. 

Meta's net income increased 35% to $39.4 billion, or $13.77 per share, in 2021. However, analysts expect its EPS to dip 14% this year as it ramps up its spending on its short video platforms (Facebook Watch and Instagram Reels) and continues to expand its Reality Labs business.

But in 2023, analysts expect Meta's revenue and earnings to grow 17% and 18%, respectively, if those investments pay off. Therefore, if you have faith in CEO Mark Zuckerberg's turnaround plans, then 2022 might merely be a short-term speed bump for the company. 

The valuations and verdict

Twitter is trading at a steep discount to Musk's offer, but it still can't be considered a bargain at 41 times forward earnings. Its $6.3 billion in cash, cash equivalents, and marketable securities could also limit its ability to expand through investments and acquisitions.

Meanwhile, Meta has become the cheapest FAANG stock at just 16 times forward earnings, which suggests investors don't have much faith in its ability to address Apple's platform changes, counter TikTok's growth, or rein its metaverse spending. However, Meta was still sitting on $43.9 billion in cash and marketable securities last quarter, so it can easily afford to buy additional companies or switch gears to address those challenges.

Therefore, Twitter might initially seem like the better buy, but I believe Meta's larger audience, better diversified portfolio of apps and services, stronger balance sheet, and lower valuation all make it a more compelling long-term investment. As for Twitter, its willingness to sell itself to Musk -- who is now trying to hastily back out of the deal -- seems like a bright red flag. 

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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Leo Sun has positions in Apple and Meta Platforms, Inc. 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Meta Platforms, Inc., and Twitter. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple and Meta Platforms, Inc. 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.

Many video game companies have launched non-fungible token (NFT) projects over the past year. Ubisoft (OTC: UBSFF) released NFTs for Ghost Recon: Breakpoint, Konami (OTC: KNAMF) auctioned off NFTs for its classic Castlevania series, and Square Enix (OTC: SQNNY) sold its biggest Western developers -- including the creators of Tomb Raider and Deus Ex -- to fund the development of new blockchain and NFT projects.

But will NFT projects generate meaningful revenues for gaming companies? Let's review the potential profits and pitfalls.

How do NFTs work?

NFTs, like cryptocurrencies, are minted on a decentralized ledger called a blockchain. But unlike cryptocurrencies, they aren't "fungible," or equivalent to each other. For example, a single Bitcoin can be directly traded for another Bitcoin because they have the same inherent value. NFTs can't be exchanged that way because they contain data that is linked to a digital asset like a picture, video, or song.

Simply put, NFTs are digital logs that allow a person to own the underlying digital asset. Digital artists can mint their artworks as NFT token. These represent the 'originals', as opposed to the 'copies' that can be downloaded online -- or they can use algorithms to randomly generate unique digital artworks with a wide range of traits.

Critics claim NFTs are inherently worthless because they're simply links to digitally-copied assets. However, NFT evangelists believe it's the scarcity of those links that give them value -- in the same way physical collectibles like paintings, baseball cards, coins, and comic books are valued.

Why do video game companies want to sell NFTs?

It's easy to see why video game companies would want to sell NFTs. Sales of in-game items, which are used to monetize most modern games, have already trained gamers to accept the concept of digital ownership.

At the same time, higher-end 'triple A' video games have become more expensive to produce over the past decade. Ubisoft's original Assassin's Creed (2007) reportedly cost $20 million to develop, but the company reportedly spent $100 million on Assassin's Creed IV: Black Flag (2013). Square Enix reportedly spent $60 million to produce Final Fantasy XIII (2009), but Shadow of the Tomb Raider (2018) cost nearly $100 million.

Those rising costs have made it difficult for video game companies to recoup their production costs with an average price tag for a game of $60. That widening gap is pushing them to launch more downloadable content (DLC) packs and paid in-game content to maximize revenue per player. 

Therefore, creating NFTs as rare collectibles, which can then be sold on third-party marketplaces, makes strategic sense for gaming companies.

But will gamers actually buy NFTs?

Unfortunately, gamers don't seem as enthusiastic about that plan. Ubisoft minted thousands of NFTs for Ghost Recon: Breakpoint and gave them to users free, but its users then resold fewer than 100 in the first 120 days, according to Ars Technica. That indicates that excitement was low. Konami reportedly generated about $150,000 in revenue by selling its Castlevania NFTs earlier this year, but that's still a drop in the pond for a company that is expected to generate $2.31 billion in sales this year.

That's why Square Enix's decision to sell its Western studios for about $300 million to chase NFT-based games raised some eyebrows. It might consider creating NFTs to be a lower-risk strategy than funding triple-A games like Shadow of the Tomb Raider -- which broadly missed its own sales targets -- but it seems doubtful that NFTs or NFT-driven games will generate as much revenue as its divested franchises.

Most video game companies will shun NFTs

NFTs seemed like the next big thing last year as retail investors piled into blockchain-related assets. However, inflation and rising interest rates have driven investors away from those riskier assets over the past six months, and the prices of cryptocurrencies and NFTs have plummeted. That decline is reflected in the crash of Defiance Digital Revolution (NYSEMKT: NFTZ), the NFT-oriented exchange-traded fund (ETF) that launched last December.

That ongoing market rotation, which could continue for the foreseeable future, could easily wipe out the weaker 'altcoins' and most NFTs. I believe that a wake-up call will convince most video game companies to simply abandon their NFT projects and stick with regular DLCs and in-game content instead.

So for now, investors should consider NFTs to be experimental side projects -- and not meaningful sources of revenue -- for most gaming companies.

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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Leo Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and recommends Bitcoin. The Motley Fool Australia owns and has recommended Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Ubisoft Entertainment. The Motley Fool Australia 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.

Twitter (NYSE: TWTR) and Netflix (NASDAQ: NFLX) recently became two of the market's most talked-about tech stocks.

Twitter's stock went on a wild ride after Elon Musk launched a hostile takeover bid for the company on April 14. The $43 billion bid, which values Twitter at $54.60 per share, came after Musk already bought 9.2% of the company but declined to take a seat on its board of directors.

Netflix's stock sank to its lowest levels in over four years after the company released its dismal first-quarter earnings report on April 19. The streaming media giant lost 200,000 subscribers, marking its first sequential decline since 2011, and predicted it would lose another two million subscribers in the second quarter.

Should investors who can stomach the near-term volatility consider buying either of these divisive stocks right now? 

What happened to Twitter?

Despite being widely used by news outlets, public figures, and brands, Twitter's active user base remains small relative to its cultural influence. Its monetizable daily active users (mDAUs) rose 13% to 217 million in 2021, but it's still smaller than Snap's Snapchat, which ended last year with 319 million DAUs.

Last February, Twitter claimed it could reach 315 million mDAUs by the end of 2023, which implies its year-over-year growth will accelerate to more than 20% over the following two years. It also claimed it would more than double its annual revenue from $3.7 billion in 2020 to $7.5 billion in 2023 by gaining new users, selling higher-value ads, and launching new products.

But a mere nine months after setting those ambitious goals, then CEO Jack Dorsey resigned and was succeeded by controversial CTO Parag Agrawal, who previously declared Twitter should "focus less on thinking about free speech" in a 2018 interview. Under Agrawal, Twitter quickly banned more controversial accounts and ramped up its spending on new features.

Analysts expect Twitter's revenue to rise 18% this year, but for its earnings to remain in the red as it increases its headcount by 20%. Twitter's messy outlook, its mediocre long-term returns, and Agrawal's views likely all brought Musk -- a vocal critic of Twitter's censorship policies -- to the table.

Twitter recently adopted a poison pill plan to fend off the takeover bid, but Musk could still team up with other investors or launch a tender offer to directly buy more shares from its existing investors. It's unclear how this ongoing drama will end, but Twitter's current price of $46 suggests the market isn't too optimistic about Musk closing the deal at $54.60 a share.

What happened to Netflix?

Netflix is still the largest paid streaming video platform in the world with 221.6 million paid subscribers. But over the past few years, well-funded competitors like Disney, Amazon, Apple, and Warner Bros. Discovery carved up the market. 

Newer ad-supported challengers like the Roku Channel and Comcast's Peacock also provide free alternatives to Netflix and other premium platforms. The saturation of this market throttled Netflix's growth.

Netflix was initially dismissive of these threats, but it started to cite competition as a major headwind over the past two quarters. Co-CEO Reed Hastings also said Netflix would finally develop a new tier for "ad-tolerant" viewers during its latest conference call, which reversed his previous opposition to adding any advertisements to the platform. That change of heart suggests that Netflix is running out of ways to gain new viewers.

Netflix also blamed its slowdown on users sharing their passwords to an additional 100 million households worldwide. COO Gregory Peters said Netflix would start asking members to "pay a bit more to share the service with folks outside their home" to monetize those viewers -- but that jarring change could also alienate its core audience. 

Netflix's abrupt slowdown and seemingly desperate changes prompted Pershing Square's Bill Ackman, who took a $1.1 billion stake in Netflix after its previous post-earnings plunge in late January, to liquidate his firm's entire position for a loss of more than $400 million.

Analysts expect Netflix's revenue to rise 9% this year as its rising content costs reduce its net income by 3%. Its business isn't doomed yet, but its high-growth days certainly seem to be over.

Is either stock worth buying?

Twitter trades at more than 50 times its adjusted earnings estimate for 2022, which excludes its big stock-based compensation expenses. For reference, Meta Platforms trades at just 16 times forward earnings following its massive pullback over the past several months.

Netflix trades at 20 times forward earnings, but that's still not a low valuation for a company with slowing growth and rising costs. If Netflix traded at multiples similar to those of more diversified media companies like WBD or Paramount, its stock could still be cut in half.

I'm not a fan of either stock right now. But if I had to pick one over the other, I'd stick with Twitter because it's merely treading water instead of sinking. The recent takeover interest in the company, while chaotic, also indicates it has more near-term upside potential than Netflix in this challenging market. 

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

The post Better buy: Netflix vs. Twitter 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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Leo Sun owns Amazon, Apple, Meta Platforms, Inc., Walt Disney, and Warner Bros. Discovery, Inc. John Mackey, CEO of Whole Foods Market, an Amazon 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 Meta Platforms 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 and has recommended Amazon, Apple, Meta Platforms, Inc., Netflix, Roku, Twitter, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Comcast and has recommended the following options: long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Amazon, Apple, Meta Platforms, Inc., 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.