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

Of all the tech titan stocks that have been clobbered this year, Amazon (NASDAQ: AMZN) is arguably one of the more surprising losers. Shares of the e-commerce and cloud computing giant have fallen over 40% so far in 2022. That fall comes despite Amazon holding onto the retail gains it picked up during pandemic lockdowns, and the continual growth in its AWS [Amazon Web Services] cloud segment by a strong double-digit percentage.  

Investors weren't pleased with the Q3 2022 report. Management indicated more slowing growth could lie ahead as a record run-up in the dollar (a result of the U.S. Federal Reserve's huge interest rate increases this year). But, despite this weakness, Amazon is putting massive amounts of cash to work to bolster its most important business. Is now a once-in-a-decade buying opportunity for this top tech stock?

Re-allocating investments from e-commerce to tech

Amazon CFO Brian Olsavsky said on the last earnings call that the company was going to wind up allocating about $60 billion on capital expenditures (or capex, spending on property, plant, and equipment) in 2022. This figure is roughly in line with capex spend in 2021, even though Amazon's growth has slowed significantly. This level of capex also dwarfs the capex spend of fellow tech titans -- even Meta Platforms (NASDAQ: META) and its huge bill on data center equipment in support of its metaverse aspirations.  

Data by YCharts

Why does Amazon spend so much more on capex than its peers? For one thing, Amazon isn't just tech. It's also an online retailer. While an online store like Amazon looks like an asset-light business, it isn't. Behind the scenes, Amazon has been spending heavily on things like distribution centers and delivery services to accommodate the explosion of sales it picked up in 2020 and 2021.

But there's something interesting going on with Amazon's capex. Specific numbers were not revealed, but Olsavsky said that $10 billion in capex has been reduced from fulfilment and transportation projects as e-commerce has quieted down. However, that $10 billion has been reallocated to "technology infrastructure, primarily to support the rapid growth, innovation and continued expansion of ... [its] AWS footprint."

Betting big on the business that matters most

This is incredibly significant, especially considering that the AWS cloud computing segment is -- and has been for years now -- the primary engine of Amazon's profitable growth. You see, as great as a seemingly endless collection of products and fast delivery times may be, e-commerce just isn't all that profitable a business for Amazon. Add-on services via Amazon Prime and selling ads within its marketplace are. But at the end of the day, it's AWS that's generating the positive income. 

Data source: Amazon

But why allocate so much extra capex to AWS now, especially given the tough economic climate we're weathering right now? After all, lots of companies out there are cutting spending to boost profits. It was even reported that AWS customers have been working with the company to reduce their spending on the cloud right now, by switching to lower-cost computing workloads and services. 

As a result, while AWS has grown revenue by 32% so far in 2022, management indicated Q4 year-over-year growth was trending toward just a mid-20% growth rate. Meanwhile, Amazon has dipped deep into the red as it puts lots of money to work to promote future (and uncertain) growth. Free cash flow (operating income minus capex) was negative $26 billion over the last 12 month stretch.  

Nevertheless, Amazon sees a big opportunity, so it's expanding its cloud footprint into new geographies and bolstering its capabilities in existing data centers. Just as disruption from the pandemic forced many organizations around the globe to accelerate their adoption of the cloud, Olsavsky said inflation (especially in energy and computing hardware costs) is having a similar disruptive impact right now. By switching their tech infrastructure to a cloud provider like AWS, a company can ultimately get more flexible with, or reduce, their expenses. Olsavsky explained:

[T]he benefit of cloud computing is really showing up right now because we allow customers to turn what can normally be a fixed expense into a variable expense, and they can let us manage the highs and lows of inflation and other cost of electricity and everything else. And they can get ... to do their business using our services in a very highly secure way. So I think just like in 2020, these time periods are good for long-term adoption on cloud computing. But the offset in the short run is that some companies have demand that drops.

Long story short, Amazon sees behavior-altering changes happening in the economy right now, which spells opportunity for AWS to get aggressive and acquire lots of new customers. Wall Street clearly isn't comfortable with the company spending so heavily, but what else is new? This is far from uncharted territory for Jeff Bezos' empire. If AWS's expansion right now pays off like it has in times past, Amazon stock's giant drop this year can mean opportunity for farsighted investors as well.

Of course, since Amazon has fallen into unprofitability at the moment, it's difficult to accurately stick a fair value on shares. However, management also said it expects to taper down its aggressive spending in the coming years, which would create some earnings leverage. In other words, this stock is incredibly cheap right now. That is, of course, assuming you think Amazon's profitability, as measured by earnings per share, will sharply spike at some point in the next couple of years, and then level back off to a high single-digit or low-teens percentage growth rate after that. (Or if you think free cash flow will spike and turn positive again).

If you have ever felt like you missed the boat on Amazon stock over the last decade, now looks like a prime opportunity to buy.

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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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. Nicholas Rossolillo and his clients have positions in Amazon and Meta Platforms, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Meta Platforms, Inc. The Motley Fool Australia has recommended 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.

Despite issues, big tech stocks are incredibly resilient investments. With the global economy up against inflation, the war in Ukraine, and a possible recession in 2023, many tech and software stocks keep chugging higher. Microsoft's (NASDAQ: MSFT) fiscal 2023 first-quarter earnings showcase this resiliency.

But pressure is mounting. A record run-up in the US dollar is only just beginning to blast corporate earnings. Microsoft is going to be more than fine, but a big speed bump looms large. 

King Dollar demands a cut

Just like the other cloud computing giants that reported earnings (Amazon (NASDAQ: AMZN) Web Services and Alphabet's (NASDAQ: GOOGL)(NASDAQ: GOOG) Google Cloud), Microsoft reported a stunning negative effect from currency exchange rates. During the first quarter of its fiscal 2023 (the three months ended 30 September 2022), total revenue increased 11% year over year to $50.1 billion.

However, blacking out the effects of currency exchange rates, revenue would have increased 16%. So, King Dollar took a hefty five-percentage-point toll.  

This is a challenge for any US multinational organization right now. Here's how it works: A sale is made outside of the US and collected in that country's currency, but that money received needs to be converted back into US dollars for reporting purposes. So far, no big deal. But what happens when the dollar increases in value against that foreign currency? Suddenly the value of that international sale gets reduced when exchanged for a stronger dollar. 

All of this is a nasty side effect of the US Federal Reserve's aggressive interest rate hikes this year. Other central banks have been slower to raise rates in their fight against inflation compared to the Fed's record-breaking pace of hikes. This has caused the US dollar's double-digit percentage spike in value this year.  

Thus, Microsoft and friends' problem right now. Revenue growth is still intact, but currency exchange rates are lowering reported financial figures by a very large amount.

A growth stock for nearly 40 years and still counting

The dollar's record run-up is even more demanding on profit margins. Again, like other tech titans, the majority of Microsoft's expenses are made in US dollars. So when those expenses are being made in a strengthening currency versus revenue collected in a weakening international one, the effect is an even larger reduction in profitability. While the dollar took a five-percentage-point cut from Microsoft revenue last quarter, it took a whopping nine-percentage-point cut from operating income -- lowering year-over-year operating profit growth to 6% (versus 15% growth excluding exchange rate effects). Ouch!  

The good news, though, is that even after nearly four decades as a publicly traded company, Microsoft is still very much a growth stock. As CEO Satya Nadella said in the earnings report, "In a world facing increasing headwinds, digital technology is the ultimate tailwind." When software is done right (paired with sticky hardware products we can't separate our lives from), it becomes an incredible growth investment for many decades. With inflation and economic uncertainty the story of the year, Microsoft is still helping its users "do more with less" in new ways.  

Of course, these currency headwinds are expected to continue into Microsoft's Q2 2023 and will likely continue for the rest of the fiscal year. Additionally, the accelerating global economic slowdown is also impacting Microsoft's currency-exchange-neutral growth. The cloud segment Azure, the primary driver of results these days, is projected to slow from a 42% year-over-year growth rate (excluding exchange rates) to about 37% (also currency-neutral) in Q2 fiscal 2023.

While these various factors are concerning, it's clear Microsoft is far more resilient than the average mega-corporation. Shares trade for 24 times trailing-12-month earnings per share (EPS) which looks like fair value to me, assuming the company can grow earnings per share at an average high-single-digit to low-teens percentage for the rest of the 2020s. After all, at some point, the dollar's strength will dissipate -- maybe even reverse -- which would be a boost to Microsoft's revenue and profits.

This market will continue to be wild, but Microsoft looks like a good safe-haven stock to hold for the long term.

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. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Nicholas Rossolillo and his clients have positions in Alphabet (C shares) and Amazon. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Microsoft. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Amazon (NASDAQ: AMZN) isn't my favorite e-commerce stock (I prefer Shopify's mission to put the power of commerce back in the hands of smaller merchants). Nevertheless, I've been buying Amazon because I think it's too cheap to ignore -- especially when considering the company's main breadwinner, public cloud computing pioneer AWS (Amazon Web Services).

After yet another dip for the stock in the last month or so, I recently went shopping for Amazon stock again, because I think the e-commerce segment is essentially a "freebie" at this point. Here's why Amazon is a top stock to buy for the long term right now.

Valuing different business segments can be hard

As has always been the case with giant and complex businesses, Wall Street has a difficult time getting a handle on how to value Amazon. It's a particularly hard case due to how the company attributes its revenue and operating income (or in the case of 2022, operating losses -- more on that in a minute). 

Broadly speaking, sales and operating profit are broken down into "North America" and "International" (which are further segmented into online and physical store sales, third-party seller services, advertising, and subscriptions), and also "AWS." 

The problem is these operating segments couldn't be more different. North America and International are largely consumer-facing e-commerce businesses, with some lucrative services like digital ads riding sidecar. As impressive as these businesses are, Amazon's e-commerce empire doesn't really pay the bills for shareholders these days. That's the job of AWS, the high-tech cloud titan that's still booming and ridiculously profitable. 

Data source: Amazon. 

Data source: Amazon. 

In the first half of 2021, AWS generated over half of Amazon's overall operating profit, even though it accounted for just 12% of total revenue. Things have changed dramatically this year as e-commerce has slowed, and Amazon has begun investing heavily to promote its next run of growth. Thanks to continued rapid growth in AWS, the cloud segment now makes up nearly 15% of revenue and is the only segment generating positive operating income.

Nevertheless, operating profit overall has been cut in half over the last year because of North America and International slipping back into the red. The market seems to be following this headline number and has punished Amazon stock accordingly, while overlooking the fast-and-steady advance of AWS. Shares are down over 40% from their all-time high as of this writing. 

Buy one AWS, get an e-commerce empire free

After enduring market punishment, Amazon has an enterprise value of $1.14 trillion. But here's where things get interesting: If AWS were a stand-alone stock right now and still valued at $1.14 trillion, it would currently trade for 51 times trailing 12-month operating profit (based on AWS operating income of $22.4 billion). An expensive price tag? Sure. But not an unthinkable one considering this is a massive computing technologist that still grew its operating income at a 45% pace over the last year. Quality generally fetches a premium. 

What seems off to me is the current valuation seems overly focused on operating losses in the North America and International e-commerce segments. Sure, as stand-alone e-commerce businesses, they are no AWS. Even in mid-2021 when e-commerce was still going full-force during the pandemic, North America and International generated trailing 12-month operating income margins of just 4.4% and 1.9%, respectively (compared to an operating margin of 29.4% for AWS). Nevertheless, even at these slim margins, Amazon's e-commerce (and related services) juggernaut can generate significant cash given the hundreds of billions in sales it does every year.

What I'm saying here is that AWS is the workhorse that's driving Amazon's financials, but Wall Street seems hyperfocused on the e-commerce segments that have temporarily fallen into loss-generating territory. If you believe the e-commerce segments' red ink will be temporary, this stock looks mighty cheap. That's especially true if AWS continues to grow and churn out a high level of profits along the way. Buy the stock now for the cloud computing business, and get Amazon's e-commerce ecosystem as a "free" bonus.  

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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Nicholas Rossolillo and his clients have positions in Amazon and Shopify. 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 Shopify. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

It's official: The stock market entered bear market territory a few months ago. And with the U.S. Federal Reserve poised to continue aggressively hiking interest in a fight against inflation, it's unclear when this bear market will end. 

At this point, it's too late to do anything in preparation. Nevertheless, there are still things you can do right now to help your investments weather the storm. Here are three things smart investors do to shore up their portfolios.

1. Resist the urge to chase the best-returning asset classes

If you're invested in stocks, there's a darn good chance you're sporting some hefty losses this year. You'd be in good company. The world's wealthiest people are, too, and their net worth has plummeted as a result. Even Warren Buffett, who prefers boring and predictable businesses, has reported significant declines. Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) revealed its stock portfolio lost over $63 billion during the second quarter of 2022 alone (a 21% decline)!

By and large, stocks aren't a happy place during bear markets. Heck, even bonds haven't done so hot, bucking the old wisdom that these are "safe" (bond values fall when interest rates rise, although you'll get the principal value of the bond back if you hold it to maturity). But what has done well this year? Commodities (like agricultural products and mined materials), energy, and cold hard cash. We'll get to cash in a moment, but as for the stuff that's running higher this year, resist the urge to chase those returns.

That's because commodities and energy tend to be cyclical in nature, not steady and consistent performers. Granted, if you think inflation will continue to run higher for a few years, investing some of your portfolio in top commodity and energy companies might not be a terrible idea. Nevertheless, when it comes to the commodities themselves, investing after they've already surged in value might simply be setting up your portfolio for yet another plunge. For example, oil prices are sharply down from their highs earlier this year. Something similar has happened in previous bear markets -- a sharp increase in inflationary pressure can reverse course just as suddenly and unpredictably.

I'm not saying I expect oil to plunge further from here. However, the principle is this: Don't chase the hottest trend of the moment! If you're a long-term investor (you have at least a few years until retirement, or you're already in retirement and need your portfolio to last you at least a decade or two), the best move is doing nothing at all, or making just small adjustments.

2. Sell those stocks that have been "swimming naked"

Speaking of small adjustments, one of the things bear markets do is expose companies in poor financial health. Again we tap the Oracle of Omaha for some help: Buffett has said, "You don't find out who's been swimming naked until the tide goes out." The Fed is hiking interest rates and tightening the supply of cash, and this is the proverbial "tide going out" on easy money. Now that times are a bit harder, some businesses might not be in the strong position we once thought they held.  

But how do you tell who's "swimming naked"? Falling revenue and profitability aren't necessarily a red flag. Many of these businesses will be poised for a strong recovery. However, if falling sales and profits are paired with a weak balance sheet, that's another story. Companies that have lots of debt and little to no cash, for example, could be in trouble. 

Be careful with this analysis, though. If a company is in serious financial condition, it's likely the stock has already tanked. At this stage, businesses have options that might unlock value for you, the shareholder -- they can raise more cash, or they can sell themselves to a competitor. So don't be too hasty to sell. 

In particular, check a business' recent statement of cash flows and calculate its free cash flow (operating income minus capital expenditures). Now compare that figure to how much cash and investments they have on their balance sheet. If a company is generating negative free cash flow at a rate that would deplete its coffers within a year or two, this company might be in dire straits. 

Nevertheless, if the situation looks particularly bad (not for the stock price, but for the business itself), it may just be time to cut your losses and reallocate those funds to an industry peer that is in better shape to recover once the bear market ends.

3. Make sure you have the cash you need for the next year or two

Here's another reason you might sell a stock in your portfolio: You need cash within the next couple of years.

Now, don't get me wrong: The last time you want to sell a stock is after the market has crashed. That's why always maintaining a cash position -- or other very liquid assets like bonds that will mature within a year or two or CDs at a bank -- is especially important. This is true if you're young and have many years until retirement (get that emergency fund started!) or if you're already retired.

Nevertheless, if you find you might be needing a little more cash in the short term than you originally anticipated, raising some cash now could be a good idea. Bear markets can last longer than we expect. The average duration of a bear market is about 10 to 12 months, but that's just the average. Sometimes they can last longer.  

Start with selling those businesses you've lost faith in. An important word of caution here, though, is to avoid selling high-quality businesses just because having cash in the bank feels good at the moment. Those high-quality businesses are the ones that will help your portfolio eventually recover.

Whatever you do, don't panic

Bear markets are no fun. There can be some ugly days when the market falls by a steep percentage. It's also common for some upward momentum to be undone by unforeseen economic setbacks. This leads to strong emotions. Whatever you do, don't panic and act on those strong emotions. That can simply lay the groundwork for more pain and future regret.

Take courage, though. Bear markets don't last forever, and the end of a bear market is often called in hindsight -- after a robust recovery for the market and economy has already been made. Keep a level head, favor small adjustments over big and rash decisions, and stay focused on the long-term.

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.

What happened

Shares of fintech company Block (NYSE: SQ) -- formerly known as Square -- tanked by 61.9% during the first half of 2022, according to data from S&P Global Market Intelligence. That was a far worse performance than the S&P 500 and Nasdaq Composite indexes, which fell by 21% and 31%, respectively, from their all-time highs. 

So what

There were many reasons for Block's steep drop. The biggest factor was rising interest rates. In an attempt to get inflation under control, the Federal Reserve in March began lifting its benchmark federal funds rate from the near-zero it had cut it to at the start of the pandemic to an upward limit of 2% as of June. More rate hikes are expected following the next two Fed meetings in July and September. The federal funds rate is still at a historically low level, but the speed and magnitude of the rate changes have dragged down Block and other high-growth but richly valued stocks. There is an inverse relationship between interest rates and the present value of risk assets like stocks. Thus, rising rates generally lead to lower stock prices.

Data by YCharts

Some investors were also skeptical of Block's bets on the Bitcoin (CRYPTO: BTC) blockchain network -- the reason for the corporate rebrand from "Square" to "Block." It will take years for these efforts to pay off, if they do at all, since there are other competing crypto networks also vying for developer attention. Block also made a big acquisition, picking up "buy now, pay later" outfit Afterpay in an all-stock deal.

And, of course, there are the growing worries that the U.S. may be headed for a recession. The economy has multiple headwinds working against it this year, and some economists think a recession is already underway. If the consumer takes a hit, Block's growth momentum could be negatively impacted. 

Now what

The good news is that despite all of these issues, Block is still in fast expansion mode as individuals and small businesses rapidly adopt its digital finance platform. Gross profit (revenue minus the cost of revenue) was $1.29 billion in Q1 2022, a 34% year-over-year increase. Profitability, as measured by free cash flow, also rose to $188 million.

After its epic share price decline in the first half of 2022, Block trades for 34 times trailing-12-month free cash flow. That's still a premium price tag, but if the fintech leader can continue its growth streak over the next few years, it could be a worthwhile value for investors who buy and hold. Just remember to make Block part of a well-diversified portfolio if you do choose to invest in it. 

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

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Nicholas Rossolillo has positions in Bitcoin and Block, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Block, Inc. The Motley Fool Australia has positions in and has recommended Bitcoin and Block, 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.

What happened

Shares of Google parent Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) took a 24.8% header during the first half of 2022, according to data from S&P Global Market Intelligence.

When looking back at the chart to all-time highs of autumn 2021, Alphabet is off 28% from its peak. By comparison, the S&P 500 and Nasdaq Composite indexes are off 21% and 31%, respectively, from their all-time highs.  

So what

A confluence of events conspired to drag down the mighty Alphabet's stock -- and few of those events had much to do with business results. What started as a healthy market pullback early in 2022 widened into all-out carnage as inflation soared past 8% year over year, driven by higher energy, food, auto, and home prices.

In response, the Federal Reserve has started aggressively raising interest rates in an attempt to cool off the economy which, in turn, would cool off prices. As a reminder, higher interest rates lower the present value of risk assets like stocks.  

Thus far, the Fed's plan has done little to tame inflation, but it has pushed the economy to what some economists think is the brink of recession. Add in Russia's war on Ukraine, and it all creates a very gloomy outlook for the global economy.

About Alphabet: As just mentioned, its business seems to be doing just fine. In fact, in the first quarter of 2022, revenue and operating income increased 23% and 22%, respectively.

But since the bulk of Alphabet's revenue comes from advertising, the possibility of a recession has also weighed on shareholder sentiment. Ad spending tends to take a hit when the economy hits the skids, so there's worry that Google's growth is in for a severe cool-off.  

Now what

At this juncture, investors need to weigh Alphabet's longer-term prospects against the current valuation. Digital ads are still a steadily growing industry gobbling up traditional marketing, and the tech giant has lots of other irons in the fire, like its Google Cloud segment, that give it exposure to other secular growth trends. 

The stock now trades for 22 times trailing 12-month free cash flow and 20 times expected current-year earnings. It also has some of the deepest pockets around with cash and short-term investments of $121 billion net of debt.

If Alphabet can sustain its growth momentum over the long term, now might be a fantastic buying opportunity -- if you don't mind some ongoing elevated volatility this year and can sit on your hands for at least a few years.

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. Nicholas Rossolillo and his clients have positions in Alphabet (C shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares) and Alphabet (C shares). The Motley Fool Australia has recommended Alphabet (A shares) and Alphabet (C shares). 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 Nvidia (NASDAQ: NVDA) continue to get clobbered. As of this writing, the stock is now down more than 40% from all-time highs reached in late 2021. Several worries are conspiring to bring down Nvidia, the semiconductor industry, and tech in general right now.

These include the Federal Reserve's aggressive rate hike posturing, calls for a slowdown in consumer spending, and a possible reduction in demand for graphics processing units (GPUs) needed in cryptocurrency mining. 

Nvidia faced challenges like this just a few years ago. It overcame those issues then, but what about now?

Nvidia is a cyclical stock

All businesses are cyclical for one reason or another -- meaning business ebbs and flows based on supply and demand and other economic factors. For Nvidia and chip stocks in general, the cyclicality tends to come from the pacing of hardware purchases. Every few years, consumer and business demand for computing hardware slows, and chip stocks fall. Later, as signs emerge that hardware purchasing might pick up pace again, chip stocks rally.

This is what happened to Nvidia in 2018. GPU sales fell (the crypto market crashed, the US-China trade war pressured demand for chips, the Fed was raising interest rates, too), and Nvidia's stock tanked. But then it went on an epic tear starting in 2019 as a new generation of chips for video gaming, data centers, and artificial intelligence (AI) came out.

Data by YCharts.

Is the current environment a simple repeat of history? Probably not. Nvidia is a different company than it was four years ago. It's more diversified now with other chips outside of its GPU bread-and-butter product. And though some of the themes dragging down the chip industry rhyme with the 2018 situation, the economy is also facing very different issues today.

If chip sale growth stumbles at some point later this year or next (Nvidia forecast 43% year-over-year revenue growth for the fiscal first quarter, which will be reported on May 25, there's no guarantee it will return to the torrid pace of expansion it has enjoyed during the pandemic.

Plus, even after falling 40% in recent months, shares still trade for 60 times trailing 12-month free cash flow and 28 times one-year forward expected earnings. This is no cheap stock.

The case for Nvidia as a $1 trillion company

In spite of mounting worry of an economic slowdown and the fact Nvidia is already a giant among tech stocks, Nvidia's diversification today could actually be a benefit in the next few years. More than a designer of semiconductors like many of its peers, this is a full-blown tech platform. Nvidia is designing hardware and software, that puts the power of AI into the hands of all industries -- from healthcare to the automotive industry, and even other tech companies. 

These are powerful secular growth trends that could help propel Nvidia higher for many years to come. For what it's worth, some analysts think Nvidia's revenue will more than double to over $65 billion in five years (compared to $26.9 billion in revenue during the recently-completed fiscal year ended in January 2022). If Nvidia delivers on those lofty expectations, a $1 trillion valuation doesn't seem out of the question (the company's enterprise value sits at $489 billion as of this writing).  

Of course, if you're the type of investor who wants to see a company "prove it" and only buys when a stock is a reasonable value, take a pass on Nvidia right now. But if you believe this tech giant will continue to sink its roots into the global economy with its AI platform in the years ahead, you don't mind extreme bouts of volatility, and can make periodic purchases to add to your position (dollar-cost averaging), now looks like a great time to go shopping for some Nvidia shares.

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

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Nicholas Rossolillo and his clients own Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns 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 Bruce Jackson.

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Shopify (NYSE: SHOP) just joined Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), and Tesla (NASDAQ: TSLA) in announcing stock splits. Shares of the e-commerce software company will undergo a 10-for-1 split, and a "founder's share" for co-founder and CEO Tobi Lütke is also being proposed (which would give Lütke 40% of total Shopify voting power).

Companies split their stocks for good reasons, like to better manage stock-based compensation to employees or share buybacks. However, a stock split by itself doesn't change a company's fundamental value, so business health should be assessed rather than stock price when contemplating a buy. With that in mind, here's why each of these stock split companies is a worthwhile long-term buy-and-hold right now. 

1. Shopify: A 100-year mission still early in its development

I'll start with Shopify, because this is my favorite company among the stock split candidates discussed here. I believe this stock also has some of the biggest upside potential in the next decade and beyond. 

Shopify is on a "100 year mission to make commerce better for everyone." Since its IPO in 2015, shares are up over 2,300%, and that's despite the recent 60%-plus sell-off from all-time highs. Suffice to say the journey has been highly profitable so far. Shopify's software suite helps aspiring entrepreneurs, small businesses, and fast-growing retail brands manage their sales online and via traditional in-person channels. Services include everything from website management to social media marketing to digital payment acceptance. 

Shopify's focus over the next couple of years will be scaling its Fulfillment Network, local warehouses from which Shopify users can manage inventory and quickly ship orders to customers. In an era of fast fulfillment, giving small merchants similar shipping options as bigger retailers will be a big challenge for Shopify -- but one that could be highly profitable if it can pull it off. 

Given the expectation for continued double-digit percentage growth, Shopify stock appears cheap at just 27 times trailing 12-month earnings. It isn't, especially considering Shopify Fulfillment Network is going to cost about $1 billion to build over the next few years. Nevertheless, this company has proven its worth in the retail world, and it has a mission that aligns with the benefit of its large and expanding user base. Shopify looks like a fantastic buy right now ahead of its proposed stock split.

2. Alphabet: The internet is a secular growth megatrend

In July, Google parent company Alphabet will undergo a 20-for-1 stock split. The last time the internet search leader underwent such activity was in 2014. Since then, Alphabet shares have risen over 350%.

There are plenty of reasons to believe Alphabet will continue to provide steady growth for many years to come. For one thing, its bread-and-butter business selling digital ads is still steadily gobbling up global market share of the overall advertising industry (on pace to reach $1 trillion a year in global spending). Digital ads have a lot of benefits for marketers, and they're highly profitable for Google. 

Alphabet is using those profits from its core Google business ("Google Services" generated an operating profit margin of 37% in 2021) to fuel lots of other projects. Google Cloud is chief among them. Organizations are migrating their IT workloads to data centers and adopting cloud-based services, providing Google with a second secular growth megatrend beyond just digital ads. Add in Google Payments, YouTube, various subscription services, self-driving cars, and more, and Google has no shortage of directions to take its business. 

Plus this is one of the deepest-pocketed organizations around. Alphabet had $140 billion in cash and short-term investments on hand at the end of 2021, offset by debt of only $14.8 billion. Trading for just 26 times trailing 12-month free cash flow, Alphabet stock looks like one of the best long-term values out there right now.

3. Tesla: Still massive upside for the EV market

Tesla had its last 5-for-1 stock split over the summer of 2020, and shares have doubled in value since then. In recent regulatory filings, the company has indicated it will put another stock split on the table for shareholders to vote on.

The real reason to invest in Tesla right now, though, is the massive consumer migration from traditional internal combustion engine vehicles to electric vehicles. Of the nearly-67 million vehicles sold worldwide in 2021, only about 6.5 million were electric vehicles (EVs). Tesla delivered just over 936,000 vehicles in 2021.

As legacy automakers and other EV start-ups fire up their assembly lines for next-gen cars, it isn't reasonable to expect Tesla to continue commanding such a large slice of the EV market share. However, management thinks it can continue growing sales at roughly the same rate as the EV space overall, about 50% per year, for the next few years. For an automaker that just cranked out over $45 billion worth of vehicle sales in 2021 (less environmental regulatory credits sold to other automakers), that's an ambitious growth rate.

A few catalysts could help Tesla supercharge its way to $100 billion in annual sales and beyond. Its new Gigafactories in Berlin and Austin, Texas, are now live. Though temporarily shuttered due to a coronavirus outbreak, the Gigafactory in Shanghai will handle production in Asia. More factories are likely on the way, as are new models like the Cybertruck. At 71 times one-year forward expected earnings, fantastic execution of its expansion plans is already priced into this stock. But if you think the move to EVs will continue at a rapid pace for the next decade, there's a lot to like about Tesla even at these sky-high prices.

4. Amazon: A fantastic allocator of capital goes on a spending spree

For in-the-know investors, Amazon's mind-boggling run higher isn't simply a story of e-commerce expansion. It's true, Amazon used its early lead in selling online to its advantage, but that's not really what has made the stock move nearly 155,000% higher since its IPO in 1997. Rather, it's been the company's success in allocating capital to highly profitable new projects adjacent to its e-commerce empire that has been the key ingredient to its success. 

Amazon Web Services (AWS), the cloud computing segment that started simply by "renting out" extra data center capacity from the e-commerce segment, generated only 13% of all revenue last year. However, AWS operating profit accounted for 75% of Amazon's grand total. Other services like advertising on its merchant platform accounted for much of the rest of operating income. 

Amazon spent an incredible $65 billion on capital expenditures (property, plant, and equipment) to support its long-term growth last year. With infrastructure costs only increasing thanks to inflation, that pace of spending isn't likely to abate anytime soon. For reference, Amazon's capital expenditures were $20 billion in 2020. The explosion in spending in support of steady expansion has put pressure on the e-commerce giant's bottom line. Shares currently trade for 47 times trailing 12-month earnings, and 240 times trailing 12-month free cash flow.

However, if you believe Amazon will continue to be an excellent allocator of capital to the right projects at the right time, there's a lot to like about that explosion in capital investment. Amazon is also undergoing a 20-for-1 stock split in May, but there is a multitude of longer-term reasons to buy and hold beyond this one-time stock split event. 

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

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Nicholas Rossolillo and his clients own Alphabet (C shares), Shopify, and Tesla. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Alphabet (A shares), Amazon, Shopify, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Alphabet (C shares) and has recommended the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

Bitcoin (CRYPTO: BTC) has nearly doubled in value so far in 2021 with just a month to go until the new year. It's been a wild ride getting there, though. After a big surge last winter, the original cryptocurrency was halved in price over the summer, only to reclaim all-time highs again in the autumn.

But with the new omicron coronavirus variant sending investment markets into turmoil again, the arbitrary but long-awaited $100,000 Bitcoin milestone (74% higher than the going price as of this writing) is still a ways off at this point and looks unlikely to be reached in 2021.  

But cryptocurrency prices are volatile, both on the way down and the way up. It's possible Bitcoin could reach the $100,000 mark in 2022. Here's how it could happen.

Three catalysts for another Bitcoin run higher

Bitcoin enjoys first-mover status since it launched in 2009, six years ahead of what is now the second-largest cryptocurrency, Ethereum (CRYPTO: ETH). With a market cap of over $1 trillion, Bitcoin also sits high atop the crowded cryptocurrency field and has picked up plenty of adopters among individual and institutional investors alike.

But since it's a type of scarce resource (presently, nearly 18.9 million coins have been mined, out of a long-term maximum of 21 million coins), Bitcoin could go higher if demand increases. Here are three catalysts that could edge it to $100,000 next year:  

• Bitcoin is viewed as a store of value if inflation persists.
• Adoption spreads among companies, institutional investors, and sovereign nations.
• Increased adoption of the Bitcoin network as a decentralized finance (DeFi) solution after the Taproot update.

A better value-storing alternative to cash?

With prices for basic goods and services soaring in 2021 due to the effects of the pandemic, Federal Reserve Chairman Jerome Powell frequently called inflation a "transitory" event. I, too, have thought of inflation as being temporary, and perhaps it could start to ease in 2022. But with supply chains still constrained, that "transitory" adjective has been retired for now at the Federal Reserve as we enter the second year of an inflationary environment.  

As inflation erodes the buying power of cash, one reason many investors have begun to accept Bitcoin as a legit asset class is its potential to keep up with (or outpace) higher prices in the economy. That's because of the cap on the number of coins that can ever be mined, versus fiat currencies like the U.S. dollar that have no limit to how much can be printed. If inflation concerns persist in 2022, more investors might seek out Bitcoin as an alternative to their cash, which could help send it toward that $100,000 goal line. 

More adoption by big investors

All indications point to a growing list of big institutional investors getting involved with the cryptocurrency industry. For example, the bank Silvergate Capital (NYSE: SI) operates an exchange (called SEN) that facilitates digital currency payments 24/7, a crucial capability for cryptocurrency investors and traders since the market is always open. SEN had 1,305 institutional users at the end of the third quarter, up from 1,224 three months prior and only 928 in the year-ago period.

Besides big investors, the Central American republic of El Salvador recently became the first country to accept Bitcoin as legal tender. Other countries, especially in Latin America, have also expressed interest in following suit one day. And a handful of big companies have also replaced some or all of the cash on their balance sheet with Bitcoin.

Paired with institutional investor support, these cryptocurrency adopters could also spur on smaller retail investors. A boost in demand from all of the above could push the value of Bitcoin toward $100,000 in 2022.

An update to Bitcoin's everyday functionality

In November 2021, the Bitcoin blockchain network underwent its first major update since 2017. Known as Taproot, the upgrade is aimed at making Bitcoin a more viable solution for everyday DeFi services and apps (online-based digital payments, lending, etc.). This is an area Bitcoin has struggled in, as features of its blockchain have made it difficult to use for an everyday payments solution. In contrast, Ethereum was purpose-built for DeFi and dominates on this front.

It took years for the last major Bitcoin update (known as SegWit) to be adopted by miners and other holders of the cryptocurrency. Nevertheless, Taproot received overwhelming support among its ecosystem of users and investors, and a gradual update to the ecosystem could attract developers who are building new financial services and products using cryptos. More daily use of Bitcoin as a means of transacting business would also be good news for its value in 2022.  

Should you invest in Bitcoin for 2022?

What I'm not saying here is that you should pile into Bitcoin. Investing in cryptocurrencies of any kind -- including the original and largest token on the block -- isn't for everyone. Even if Bitcoin should arrive at $100,000 in 2022, it's going to be a wild ride. If you do invest in this volatile space, keep those bets a small percentage of your total investable net worth.

And if you decide to replace any cash position in your investment portfolio with Bitcoin, don't use up all your dollars. Inflation does eat away at your buying power over time, but cash has its merits. It doesn't fluctuate in value as cryptocurrencies do, and having some cash laying around affords the opportunity to buy on the inevitable dips in investment values. 

Nevertheless, Bitcoin is picking up interest from all sorts of big organizations around the globe, and a rally higher in 2022 is quite possible. If you're interested in investing in cryptocurrencies, Bitcoin is a great place to start. 

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

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Nicholas Rossolillo owns shares of Bitcoin and Ethereum. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin and Ethereum. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

Just a few months after Facebook (NASDAQ: FB) CEO Mark Zuckerberg said his business was going to bet big on the "metaverse" (a virtual world where real people can play and work together), Facebook is readying some extra transparency on this business segment. And for good reason. Facebook Reality Labs (or FRL, the augmented and virtual reality unit that's building the metaverse) is receiving massive amounts of cash to develop new hardware and software technology, and could already be quite large today. Here's what you need to know.

Building the foundation of the metaverse

Starting in the fourth quarter of 2021 (which the company will report in January 2022), Facebook will add a new line item for FRL results and disclose the massive investments the company is making. This will separate Facebook's virtual reality operations from the advertising empire, which will now be called "Family of Apps" and include Facebook, Instagram, Messenger, WhatsApp, and other services. But what exactly is Facebook Reality Labs?  

The Oculus augmented and virtual reality (AR/VR) business is the core of FRL. It includes hardware like Oculus Rift, designed to be used with a VR-ready PC; Oculus Quest, a stand-alone unit that delivers virtual worlds without the need for a separate computer; and mobile AR/VR headsets designed for use with a smartphone, like the now-discontinued Samsung Gear VR powered by Oculus.  

Facebook is only beginning to put the foundation into place for the metaverse. Besides the development of better hardware and VR headsets, it will also need to build software, expand on its commerce platform, make new social tools, and of course construct new infrastructure like data centers to support it all. 

On the third-quarter earnings call, Zuckerberg said that this will be a "business story" later this decade, but for now, the team is focused on building the right products before assessing the financials. Management stated these FRL investments will reduce Facebook's operating profit by about $10 billion this year. To put that figure in perspective, it's just over half of Facebook's total expected capital expenditures on property and equipment in 2021. This investment will also increase in size in each of the next few years. Given the massive scale of the price tag, it will be nice to see some extra numbers to assess the metaverse's progress.  

Zuckerberg and company said FRL won't be profitable anytime soon. Nevertheless, they think the metaverse will become the successor to the mobile internet one day. Therefore, they are focused on getting the right products in place to get people and businesses introduced to the whole idea. Facebook thinks it can get 1 billion people using VR by the end of the decade, at which time it could generate many billions of dollars in annual revenue. 

How big is this Facebook metaverse right now?

Facebook has presumably been reporting the progress of FRL in non-advertising "other revenue" up to this point, but included in that catch-all segment are other things like commerce marketplace and digital payments income (remember, Facebook has aspirations in the cryptocurrency world, too). 

Nevertheless, "other revenue" does offer an opaque glimpse into what FRL is already accomplishing. When FRL the stand-alone line item makes its debut in Q4 2021, management said to expect revenue to be down year over year because of the strong launch of the Oculus Quest 2 VR headset last October. But if non-ad other revenue is any indicator, Facebook's AR/VR is already generating some big numbers. 

Data source: Facebook. YoY = year-over-year.

Clearly, a lot of people have already given Facebook's AR/VR products a spin, including businesses that are using the platform for things like employee training and efficiency gains. But Facebook is on a roll here and thinks the metaverse will be far larger than it is now in a decade. Be ready for some added clarity on what's going on at Facebook Reality Labs when the company reports on the final quarter of 2021. 

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Nicholas Rossolillo and his clients own shares of Facebook. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Facebook. The Motley Fool Australia has recommended Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

What happened

Shares of social media titan Facebook (NASDAQ: FB) fell 10.5% in September, according to data provided by S&P Global Market Intelligence. The stock kicked off October with another 5% decline in the first two trading days as pressure mounts against the company's accused use of data and control of information. A service outage in Facebook, Instagram, and WhatsApp on Monday, Oct. 4 didn't help either.

So what

While the stock market overall has been dealing with potential economic risks (higher interest rates, supply chain woes, and a possible U.S. government debt default if the debt ceiling isn't raised), Facebook's problems as of late are of an altogether different nature. The company has been dealing with a Federal Trade Commission antitrust lawsuit that seeks to retroactively unbundle Facebook's acquisitions of Instagram and WhatsApp, claiming the company has used its dominance to squash competitors.  

Additionally, a whistleblower (now revealed to be former employee Frances Haugen) who first started publishing documents taken from Facebook with The Wall Street Journal last month could add to the burden of evidence against the social media giant. The backlash against big tech's data practices isn't going away anytime soon, and it's Facebook that continues to bear the brunt of accusations.

Now what

For all of its flaws and the angst voiced against it, Facebook's popularity has been enduring. Its user base -- which numbers over 3 billion worldwide across all of its apps -- continues to grow, as does global advertising activity across its platform. Facebook is far from being unseated as the leader in social media anytime soon. 

Shares are up 25% over the last trailing-12-month stretch even after the recent tumble. Perhaps a breather was overdue, and recent news simply added fuel to the fire. While Facebook's legal woes and impact on society at large are worth keeping an eye on, it's the financial results that matter most -- and Facebook is doing more than just fine financially right now. Sales and profits keep climbing, especially as the initial effects of the pandemic from a year ago are lapped. 

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Nicholas Rossolillo and his clients own shares of Facebook. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Facebook. The Motley Fool Australia has recommended Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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What happened

So what

Now what

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Nicholas Rossolillo and his clients own shares of PayPal Holdings, Shopify, and Square. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Affirm Holdings, Inc., PayPal Holdings, Shopify, and Square. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $75 calls on PayPal Holdings, long January 2023 $1,140 calls on Shopify, and short January 2023 $1,160 calls on Shopify. The Motley Fool Australia has recommended PayPal Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Image source: Getty Images.

1. Zoom takes pole position in a new cloud communications competition

2. Video conferencing is a new standard feature to build around

3. Zoom gets to keep its cash hoard

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Nicholas Rossolillo and his clients own shares of Twilio and Zoom Video Communications. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Five9, Twilio, and Zoom Video Communications. The Motley Fool Australia has recommended Twilio and Zoom Video Communications. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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What happened

Data by YCharts.

So what

Now what

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

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Nicholas Rossolillo owns shares of Lemonade, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The COVID-19 pandemic has forever changed the way some consumers make purchases. And with access to high-speed internet greater than ever, online shopping activity has experienced a sea-change in the last year, even in countries that have been slow to adopt e-commerce and digital payment systems in the past.

These changes have played right into the hands of Latin America's leading online commerce platform MercadoLibre (NASDAQ: MELI) and social media titan Facebook (NASDAQ: FB), which is slowly rolling out its own digital payments and shopping tools to cash in on the global trend as well.

While each has significant growth opportunities ahead, both stocks present investors with unique risks. Which one is the better buy right now?

MercadoLibre: All-out expansion, but local economy headwinds

MercadoLibre was a growth stock before COVID-19, but the pandemic has accelerated Latin America's migration to online shopping. Revenue has skyrocketed into triple-digit percentage territory over the last 12-month stretch, notching a 111% year-over-year gain in Q1 2021 (or up 158% when excluding the effects of currency conversion) to $1.4 billion.  

E-commerce remains a small fragment of shopping activity in most Latin American countries, still just a single-digit percentage of the grand total spent on retail in the most populous countries like Brazil and Mexico. But MercadoLibre is reporting a sharp uptick in activity on this front. In Q1 alone, it said it had 69.8 million active users, 62% more than a year ago. That's only about 10% of the total population of Latin America, though, so there's no shortage of room for the company to continue expanding.

One way it's extending its reach is with its digital payments business. Many people in Latin America don't have a basic banking relationship but do have a smartphone. Mercado Pago and Mobile Wallet -- MercadoLibre's digital payments and mobile money management applications -- are opening up access to basic checking and payments services to millions of people. The result? More online shopping on MercadoLibre. Total payment volume increased 82% year over year in Q1 (129% excluding currency conversion) to $14.7 billion, $2.9 billion of which was transacted with Mobile Wallet. The company reported that some three-quarters of respondents plan to continue using digital payment options even after the pandemic ends.

MercadoLibre is the primary beneficiary from a massive move to online activity south of the border, but there are risks. Many countries the company operates in have been experiencing persistently high inflation, which erodes the value of the company's profitability and assets on its balance sheet over time. MercadoLibre may have begun to address this issue with its recent (and still rather small) purchase of Bitcoin to facilitate transactions in the currency, which could help it stave off inflationary effects. But for now, investors should keep an eye on how inflation is throttling growth (which is apparent in the difference between currency conversion-neutral revenue and the much lower realized revenue figures in Q1). 

Facebook: A tech platform with massive optionality, but regulatory concerns

Facebook needs little introduction. Its family of apps (including Instagram and WhatsApp) had 3.45 billion monthly users during the first three months of 2021, a 15% increase over a year ago. In spite of its massive size and reliance on advertising, it's still growing at a rapid pace. Revenue was up 48% year over year to $26.2 billion in Q1 2021, and management expects a similar rate of growth in Q2 before moderating in the second half of the year.  

Like other massive tech platforms, Facebook is highly profitable. It generated $24.2 billion in free cash flow over the 12 months that ended March 31, 2021 (a 26% free cash flow profit margin). This gives Facebook massive wiggle room to invest in new ventures. One area is digital payments and small business e-commerce. Facebook tapped software firm Shopify to power Facebook Shops, online Facebook, Instagram, and WhatsApp storefronts for merchants. It has also launched WhatsApp Payments in India and Brazil, allowing users to transfer money to each other and to small businesses that use the platform. This payments service could eventually make it a bigger rival of MercadoLibre.

Facebook's aspirations on this front extend far beyond that, though. It's still hard at work getting Diem -- a blockchain-based stablecoin (a type of cryptocurrency with a value pegged to a fiat currency, in this case the U.S. dollar) -- up and running. Diem is being designed to power Facebook's ambitious global digital payments system. If it can overcome regulatory hurdles, Diem could be a big deal considering the social media company has billions of users already.  

Speaking of regulatory hurdles, though, Facebook has many on the horizon. It has frequently come under scrutiny for its practices related to personal user data, and Apple and Alphabet's Google have started eliminating app activity tracking on smartphones this year (which makes digital ads that Facebook relies on less valuable to marketers). Also, a looming worry is the Federal Trade Commission's (FTC) lawsuit to unwind the acquisitions of Instagram and WhatsApp (purchased in 2012 and 2014, respectively), citing anti-competitive practices at Facebook to squash its competition. If the FTC gets its way, Facebook's empire would be broken up. The individual parts would likely still remain formidable players in the tech space, but not as dominant as the sum of their individual parts right now under the Facebook umbrella. 

Which is the better buy?

MercadoLibre is earlier on in its growth journey as it expands e-commerce across Latin America, but it trades for a premium 111 times trailing-12-month free cash flow. That metric will moderate over time as the company reaches a more profitable scale, but along the way, there will be some wild swings in stock price -- especially considering the uncertain economic situation surrounding some of the countries it operates in.

For now, Facebook is a far more stable company and is still growing at a fast pace. It trades for 40 times trailing-12-month free cash flow, a reasonable value given its expected expansion this year and even faster-growing bottom line. A possible break-up of its business could be a problem in a couple of years as the antitrust lawsuit progresses, but it won't be the end of the line for Facebook if the FTC wins the case. At this juncture, I prefer the regulatory risk over the inflation pressure MercadoLibre faces, and I think Facebook is the better buy (though MercadoLibre is certainly worth a look too).

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

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Nicholas Rossolillo owns shares of Alphabet (C shares), Apple, Facebook, and Shopify. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Apple, Facebook, MercadoLibre, and Shopify. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $1,140 calls on Shopify, long March 2023 $120 calls on Apple, short January 2023 $1,160 calls on Shopify, and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Apple, and Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

Even after getting clobbered in the last month, cryptocurrency prices are still flying high. Investor interest in the nascent digital currency market remains strong, and Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) prices are up a respective 370% and 1,600% since the start of 2020. 

This is having a real-world impact on some businesses. NVIDIA (NASDAQ: NVDA) is a prime example. It launched new hardware designed specifically for crypto mining (the process in which digital assets are created and managed) just a few months ago, and sales are skyrocketing.

The crypto industry is notoriously volatile, though, and this has created headaches for NVIDIA in the past. But this isn't the semiconductor giant's first rodeo. This time around, it has quite a bit more visibility into how the young crypto market is impacting it financially.

A $400 million windfall

NVIDIA announced the launch of a new chip lineup called the CMP (cryptocurrency mining processor) in Feb. 2021. CMPs are off to a hot start.

NVIDIA CFO Colette Kress said on the first-quarter fiscal 2022 earnings call (NVIDIA's current fiscal year ends in Jan. 2022) that CMP sales totaled $155 million. Pretty impressive for a fresh product launch that's only been available for a couple of months, even from a semiconductor industry leader like NVIDIA.

In spite of wildly volatile crypto prices (Bitcoin and Ethereum are each down about 45% from their all-time highs as of this writing), Kress said CMP sales are staying strong. The company is forecasting CMP revenue of $400 million during the fiscal second quarter, the three-month period ending in July 2021. 

Could crypto prices tank NVIDIA?

While a new chip contributing $400 million in quarterly sales is impressive, this is still a relatively small number for NVIDIA. The company is forecasting total revenue of $6.3 billion in the current quarter, up a whopping 63% year over year. CMP would thus be only about 6% of sales.

It's nevertheless a notable new contributor to growth, but it's still video game and data center GPUs that are the driving force here, not cryptocurrencies. Gaming and data center sales were 85% of the total in the fiscal first quarter.

The extra detail from NVIDIA's top brass is a nice luxury, though. Back in 2018, plummeting prices for Bitcoin and other cryptocurrencies dragged NVIDIA along with them. Though designed for high-end video game graphics, many NVIDIA GPUs are available for purchase through retailers and are programmable for other uses.

One such prominent use-case is crypto mining. Given the lack of visibility on who was making retail purchases, it only became apparent after Bitcoin tanked that many gaming GPUs were actually getting scooped up by crypto miners. And when Bitcoin fell in price, those miners stopped buying. 

CMP thus represents an important chip product. It helps ensure the company's new RTX 30 GPUs end up in the hands of actual gamers (the RTX 30s can detect Ethereum mining and cut computing power to make them less desirable to miners, encouraging the purchase of a CMP unit instead). It also helps NVIDIA get more insight on where its products are being used, which should help with forecasting future financial results. 

That doesn't mean RTX 30 GPUs aren't getting bought up by crypto miners at all. However, the CMP lineup should help disaggregate video game sales from other end markets.

Long story short, if crypto price volatility continues and CMP demand suddenly dries up, investors have a clearer picture on how this will impact NVIDIA going forward. Though the company is deriving benefit from the digital-currency industry, this is still first and foremost a video game and data center chip business.

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

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High-flying electric vehicle leader Tesla (NASDAQ: TSLA) knocked one out of the park during the first quarter of 2021. Total revenue increased 74% from a year ago, and net income hit a new record of $438 million. However, the usual boost to the headline profitability metric (the sale of regulatory credits) was joined by yet another controversial line item: The sale of Bitcoin (CRYPTO: BTC). Nevertheless, the company's free cash flow operating metric shows this automaker is rapidly approaching a profitable scale even without the aid of any footnotes.  

EV credits and cryptos are only part of the story

First, let's address the $438 million in net income. Tesla detractors will often point to the company's sale of regulatory credits as being the primary driver of bottom-line profitability. Indeed, at $518 million in the first quarter, the sale of these credits (which Tesla receives from some governments for renewable energy, and which it can sell to other companies that need the credits to offset their carbon footprint) did the heavy pulling once again on the bottom line. As other automakers ramp up their own EV efforts in the coming years, this source of revenue isn't likely to be as lucrative as it is now.  

As for Bitcoin, Tesla made waves back in February when it said it used $1.5 billion in cash from its balance sheet to buy Bitcoin. However, before the end of the first quarter, it promptly sold some of it for a net gain of $101 million. Potential legal ramifications aside (owing to CEO Elon Musk's frequent tweeting about cryptos and a checkered past with the Securities and Exchange Commission), Bitcoin won't be a sustainable source of income either. It instead used its purchase to jump-start acceptance of the cryptocurrency as a form of payment for cars. 

Personally, I think the sale of regulatory credits and Bitcoin are opportunistic plays on the part of Tesla. I hear the argument that neither source of income is going to last forever, but bear in mind Tesla is still a relatively small manufacturer that is trying to rapidly scale across the globe. It's getting creative with how it tries to fund the cost of said expansion, and it's paying off. Free cash flow (which includes income from regulatory credits, excludes Bitcoin proceeds, but also subtracts capital expenditures like the purchase of property and equipment that isn't fully recognized in net income) was positive $293 million during the first quarter. For the sake of comparison, this basic profitability metric was negative $895 million one year ago. 

What does that imply? It implies Tesla is rapidly reaching a very profitable scale all on its own. When backing out the extra $164 million in regulatory credits it sold ($518 million this year versus $354 million in the first quarter of 2020), Tesla's operations generated $995 million more free cash flow year over year. More importantly, it's closing in on break-even, even without the help of regulatory credit sales. 

Data source: Tesla.  

An argument that no longer holds any water

Tesla delivered nearly 185,000 EVs during the first three months of the year, all of which were built at just two factories: One in Fremont, California, and the other in Shanghai, China. The big jump in capital expenditures this last quarter is attributable to new factories under construction in Berlin and Texas, and the ongoing expansion of the factory in Shanghai. These are big projects. Once complete and auto production begins, Tesla's free cash flow is on track for even more dramatic increases as those capital expenditures ease. No doubt new factory projects will break ground to support future EVs like Cybertruck and Semi, but capital expenditures will nonetheless decrease as a percentage of revenue over time.  

Put another way, the argument that Tesla's profitability is only attributable to unsustainable sources of income doesn't hold water. Sure, it's juicing the bottom line with regulatory credits and Bitcoin, but that's simply creative and opportunistic activity. Businesses are supposed to make hay when the sun is shining. Perhaps Tesla's methods are unconventional, but that doesn't mean its manufacturing business is a slouch. Rather, its young manufacturing operation is simply getting some help while it scales to the point where it can sustain itself. 

Whether all of this warrants Tesla stock's premium price tag is a different story altogether. But it is time to stop the commentary that Tesla's EV business isn't profitable without regulatory help -- because it is indeed well on its way.

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

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Nicholas Rossolillo owns shares of Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Bitcoin and Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

There was plenty to unpack (and a lot to like) from the NVIDIA (NASDAQ: NVDA) fourth-quarter earnings report. The company's 61% year-over-year revenue growth that was driven by record video gaming and data center sales captured the headlines. But NVIDIA is benefiting from other trends in the economy too, namely cryptocurrencies, autonomous vehicles, and energy efficiency. Here's why that matters.

Separating gaming hardware from crypto hardware

Cryptocurrency prices have soared in the last year, along with a renewed interest in "mining" (simply, when a computer is used to create more of a cryptocurrency). NVIDIA's graphics processing units (GPUs) are built for high-end video games, but they're programmable and ideal for handling cryptocurrency work too. Thus, it seems many commercial miners have started picking up NVIDIA's new RTX 30 series GPUs and have added to the massive demand the company has experienced since the new processors were announced last autumn.

Demand is good. But the last time there was a boom in digital currency prices like Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETC) a few years ago, the ensuing downturn in crypto prices dragged NVIDIA's stock along with it as its GPU sales slowed. Management wants to make sure its RTX 30 series GPUs end up in the hands of gamers, not crypto miners, so it reduced the hash rate (the processing power for a cryptocurrency network) on its RTX 3060 (the cheapest GPU in its 30 series) by half to discourage its use in this fashion. 

That's not to say NVIDIA is leaving miners out in the cold, though. It simultaneously released a new chip specific for crypto miners: the CMP, or Cryptocurrency Mining Processor. This will help the millions of gamers around the world waiting in line for an RTX 30 series GPU and fulfill demand for commercial digital currency miners. As CFO Colette Kress explained on the earnings call:  

Since our GPUs are sold to graphics card manufacturers and then on to distribution, we don't have the ability to accurately track or quantify their end-use. Analyst estimates suggest that crypto mining contributed $100 million to $300 million to our Q4 revenue, a relatively small portion of our Gaming revenue in Q4.  

CMPs will start shipping in March and will give NVIDIA some increased clarity on where their hardware is being used. Kress said CMPs could contribute about $50 million in revenue in Q1, a significant sum for a brand new chip launching two-thirds of the way into the new quarter. Digital currency is picking up steam and adoption is growing, so this move bodes well for NVIDIA long term. 

What gives with the automotive segment?

NVIDIA hit it out of the park with its Q4 report, but not everything was perfect. Its automotive segment revenue ($145 million, just shy of 3% of total sales) fell 11% compared to a year ago. What happened to NVIDIA, the leader in autonomous vehicles and advanced driver-assist systems?  

First, it's important to bear in mind this segment is in decline because the company has chosen to sunset its legacy infotainment business. But its AI cockpit and self-driving software development is building momentum. Kress said on the call that NVIDIA is growing the list of electric vehicle makers that are signing on to its NVIDIA DRIVE platform for autonomous vehicles. Mercedes-Benz also signed a large deal last year to expand its use of AI cockpit tech. Kress explained: "We are in the early innings of a significant opportunity. We have built a multi-billion dollar design win pipeline for our self-driving AI cockpit solutions, which will drive a material inflection in revenue over the next few years."  

Given the auto segment hauled in just $536 million in sales last year, that pipeline of new business will be significant. Investor patience will pay off here as electric and autonomous vehicle tech gradually picks up momentum.

Cloud computing equals energy efficiency

There has been much talk of the poor condition of the nation's energy grid. Renewable energy and carbon footprint reduction is gaining traction, and it appears the Biden administration will support these endeavors. NVIDIA could be a beneficiary here.

Computing power is increasing, but with greater computational power comes greater energy consumption. However, NVIDIA's data center hardware (which is being implemented at a rapid rate to handle AI and other data-intensive tasks) doesn't just act as a computing accelerator. Its next-gen cloud computing devices are also energy efficient, and Kress said a growing list of companies are using NVIDIA to adopt cloud computing and meet climate change goals.

By way of example, Kress said the NVIDIA A100 (the GPU at the heart of its data center business) "performs AI computations with one-twentieth the power consumption of CPUs" -- or central processing units, the old industry standard general computing chip. In this new age of cloud computing, the A100 puts NVIDIA at an advantage not just in terms of computing power, but also as an ancillary play on climate change and lower energy consumption. With a new upgrade cycle in data center hardware just getting underway, this division is expected to continue growing for the foreseeable future.

NVIDIA is quickly emerging as the leader in next-gen semiconductors and compute systems, and the Q4 report reinforces this. The company is helping pioneer tech advances on many fronts as a new era dominated by cloud computing and AI gets underway. The reasons for staying invested for the long haul keep growing.

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. owns shares of and recommends NVIDIA. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Bitcoin. 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 Bruce Jackson.

Nicholas Rossolillo owns shares of NVIDIA. His clients may own shares of the companies or cryptocurrencies mentioned. The Motley Fool owns shares of and recommends NVIDIA. The Motley Fool recommends Bitcoin. The Motley Fool has a disclosure policy.

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

The FAANG stocks – Facebook, Amazon.com, Inc (NASDAQ: AMZN), Apple, Netflix, and Google parent Alphabet Inc (NASDAQ:GOOGL)(NASDAQ: GOOG) – have now all reported second-quarter 2020 earnings. One fact is abundantly clear: A new era dominated by these tech giants is here, and it isn't going away anytime soon.

Barring the advice to just buy them all, which is the better buy right now?

Amazon is a standout winner that – even valued at over $1.5 trillion – continues to find new ways to separate itself from the pack. The pandemic is driving a surge in e-commerce demand. Meanwhile, it could be argued that Google is the biggest loser compared to its tech titan peers, posting its first-ever quarterly revenue decline. Right at the moment, it's easy to argue Amazon is by far the better buy, but a few items bear consideration first. 

All-out growth versus incredibly high profit margins

Amazon and Google will both benefit from long-term secular growth trends: Amazon from the migration to online retail (shockingly, the latest Census Bureau numbers imply less than 20% of retail purchasing happens online in the U.S.), and Google from the switch to internet advertising (half of ads were digital in 2019 for the first time, and the percentage is expected to keep rising).

But with COVID-19 rapidly reshaping the global economy, e-commerce is the winning investment theme of the moment. Amazon's overall revenue surged 40% in Q2 2020 to $88.9 billion, driven by 43% growth in North American sales, slightly offset by a gain of "only" 38% internationally and a 29% gain for the Amazon Web Services (AWS) cloud computing platform. Meanwhile, Alphabet revenues fell 2% from a year ago to $38.3 billion, with Google, YouTube, and partner ad sales falling 9%, offset by Google Cloud's 43% advance (as it slowly narrows the gap with AWS) and "other" revenue (YouTube subscriptions, Play app store, hardware, etc.) increasing 26%.

Thanks to Amazon's top-line momentum, its stock is up 72% this year to Alphabet's 10% gain. Amazon predicted 24% to 33% growth in the third quarter, with no outlook provided by Google. Clearly Amazon wins the momentum stock challenge, but the amount of cash a company can hang onto is also important.

The bulk of Amazon's sales comes from retail and related services, and operating profit margins are far lower here than in other areas of the tech world. Total operating profit in the quarter was $5.84 billion (good for an operating margin of 6.6%), with $3.36 billion of that coming from AWS alone. Google, on the other hand, posted an operating profit of $6.38 billion (a 17% operating margin). Granted, both of these figures factor in the large sums of money Amazon and Google spend on disruptive investments to foster future growth and innovation. Still, when using free cash flow (revenue minus only cash operating and capital expense outflows), Amazon's $19.4 billion over the last 12 months is far smaller than Google's $31.2 billion.

In terms of valuation, that makes Alphabet stock something almost resembling a value -- at least for a high tech name. Based on the current market cap of $1 trillion, Alphabet trades for 32.1 times trailing 12 month free cash flow to Amazon's 81.5. The relative value on Google counts for something.  

Don't ignore the war chest

What does free cash flow matter? It's the sum of cash that gets added to (or subtracted from) the balance sheet at the end of each quarter. And it matters a great deal, especially in the next decade as big tech gets bigger and needs to find new projects to keep growth going. 

At the end of Q2, Google had $120 billion in cash and marketable investments on its balance sheet, and a paltry sum of debt at just $4.55 billion. Amazon is no slouch here with $55.0 billion in cash and marketable securities, but long-term debt of $23.4 billion. Google's war chest wins, against Amazon or any other mega-tech name out there.

Put another way, Google is one of the most deep-pocketed organizations on the planet and its lead is growing. That too counts for something when deciding which stock is a buy. For now, Amazon looks like the better buy of the moment, with e-commerce expanding at a torrid pace and the company carrying the torch of world-shaping disruption. But over the long term, don't for a second write off Google.

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

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

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

Cash is less and less popular with consumers, and is being steadily replaced by digital payment methods. Taking advantage of this -- and an economy that's been growing since the 2008 financial crisis -- Visa (NYSE: V), the leader of the electronic payment industry, has been one of the best blue chip stocks since going public in March 2008.

Data by YCharts.

Rather than worry about missing the boat, investors should give the company a look today. Proven winners tend to keep winning, and Visa has a lot going for it that should keep the stock rising over the long haul.

Visa paying the bills, and then some

Visa operates a digital network that handles cash and financial transactions. The company does no lending itself, but instead charges a small fee every time a transaction is made -- often referred to as a toll, much like a tollbooth collects fees from vehicles before they can cross a bridge or enter a highway. 

It's an incredibly simple but powerful business model. Paired with other ancillary services like payment security, cross-border transaction services, and fraud protection, operating a payment network (rather than actually issuing cards or credit, or providing direct banking services) means the company keeps costs low and operates at an incredibly high profit margin -- 65.9% in the trailing 12-months ending June 30, 2019, to be exact. That's substantially higher than the margins of its smaller peers, and it made that margin while raking in nearly $4 billion a quarter through the first nine months of fiscal year 2019. Visa is also using its sizable operating profits to invest in continued growth and return cash to investors. 

Data by YCharts.

That has equated to bottom-line growth that's stronger than revenue gains. For example, during the fiscal 2019 third quarter, Visa's revenue was up 11%, but earnings per share adjusted for one-time items grew 14%. That is due in large part to the $2.7 billion returned to shareholders through stock repurchases (which reduces share count, thus boosting earnings per share), as well as a dividend payment currently yielding 0.6% per year.

The war on cash

Visa wasn't the inventor of cashless payments, but it was the first nationwide credit card payment processing company in 1958. Mastercard (NYSE: MA) came out a few years later, but Visa's early move means it's still in pole position today -- Visa's trailing 12-month revenue as of this writing was $22.3 billion, compared to Mastercard's $15.7 billion.

Myriad other digital payment networks have arrived on the scene in recent years, including companies like PayPal (NASDAQ: PYPL) and Square (NYSE: SQ). Other technologies like blockchain are also gaining traction in an effort to better secure merchant, consumer, and multinational organization transactions in a world that is fast becoming digital-first.

All of this rapid change hasn't meant Visa is in trouble, though. Cash is still largely the default method of purchasing goods and services in most of the world, meaning Visa and friends have plenty of places to do battle. The company also has ample money on hand to keep updating its systems and evolving with the times. Plus, researcher McKinsey expects digital payment revenue to keep growing in the high single-digits, and reach nearly $3 trillion in 2022. 

Put simply, there is plenty of growth to go around, and Visa is still very much at the forefront of the conversation when it comes to digital payments. The company is certainly worth consideration, along with other big digital payment processing networks like Mastercard and PayPal.

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

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Nicholas Rossolillo and his clients own shares of Mastercard and PayPal Holdings. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard, PayPal Holdings, Square, and Visa. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has the following options: short October 2019 $97 calls on PayPal Holdings and short January 2020 $70 puts on Square. The Motley Fool Australia has recommended Mastercard and PayPal Holdings. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.