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

Meta Platforms has a rare ecosystem

Meta Platforms ended the third quarter with 3.54 billion daily active users across its websites and mobile apps, an 8% year-over-year increase. The world's population is about 8.3 billion people. If we remove all those who are too young to have an Instagram account, it may well be the case that something like half of eligible adults (or young adults) worldwide visit at least one of Meta's websites and apps every single day. That user base is a veritable goldmine.

And the best part: Most of them are unlikely to go anywhere anytime soon, given the company's strong network effects. Consider why people open Instagram accounts. It could be to keep up with friends and family, to become an influencer, or to promote products for their businesses, among other reasons. For each of these uses, the platform becomes even more valuable as more people join in, and for those who are already in those networks, it makes little sense to leave.

Meta Platforms' ecosystem makes it an incredible target for advertisers. It also allows it to launch new monetization opportunities. Less than three years ago, Meta Platforms launched its X competitor, Threads -- it already has 150 million daily active users. According to management, it's on track to become the leader in its category.

Facebook Marketplace is another opportunity that fits naturally within the company's strategy. Anyone else starting an online platform to connect buyers and sellers would have to work hard to attract an audience. For Meta Platforms, it wasn't difficult since it already has a large one. So long as Meta Platforms' vast ecosystem stays in place, the tech leader should find many more monetization schemes, even as advertising remains the most important.

Meta is a buy-and-forget stock

Meta Platforms' work in AI is undoubtedly strengthening the business. For instance, AI-powered algorithms are helping it increase engagement while enhancing the return on investment marketers get from ads on its platforms. However, none of that would matter if not for the company's existing user base. Meta still has ample growth potential over the long run, and much of the fuel for that will be its vast ecosystem. That's why I am staying put.

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

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Prosper Junior Bakiny has positions in Meta Platforms. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms. The Motley Fool Australia has recommended Meta Platforms. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

The list of corporations with a market capitalization of $1 trillion is short -- but what about those that have hit $5 trillion? It's hardly a list, as it's composed of just one company, Nvidia.

However, several others aren't too far behind. One of them is Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), the parent company of Google, which has a current market cap of $3.4 trillion. Will it be the next to hit $5 trillion? 

The case for Alphabet

Alphabet isn't the corporation closest to the $5 trillion mark. Other than Nvidia, which has already achieved that milestone but is currently worth less than that, Microsoft and Apple are both ahead. The former has a market capitalization of $3.7 trillion, while the latter is valued at $3.9 trillion.

It's also worth mentioning Amazon, which is currently trailing at $2.4 trillion. However, it may be able to catch up, provided it gains significant market value while its peers decline over the next couple of years.

There are good reasons to believe Alphabet could perform at least as well as Amazon for the foreseeable future. Both are leaders in the cloud computing market. Amazon has a larger market share, but Alphabet is growing sales in that division more quickly.

The rest of their businesses put Alphabet squarely in the lead for one reason -- margins.

AMZN Revenue (Quarterly) data by YCharts.

Amazon generates higher sales, but Alphabet has higher profits and higher margins. Meanwhile, Alphabet still reigns supreme in search, despite challenges from artificial intelligence (AI) chatbots.

The company has made changes to address this issue, including an AI overview and an AI mode within its renowned search engine. Furthermore, Alphabet eliminated a major risk this year and avoided the worst outcome -- that of losing its Chrome browser, a crucial part of its advertising empire -- in its antitrust lawsuit. In my view, Alphabet has enough momentum to stay ahead of Amazon in the next couple of years.

What about Apple? Despite the iPhone maker's recent better-than-expected financial results, it's still facing significant threats.

The tariff situation is constantly evolving, and more news on that front could negatively impact Apple's stock price, as it still manufactures most of its products in China, a country President Trump has targeted with tariffs. Alphabet is also already cashing in on its AI strategy, whereas Apple has been lagging behind its similarly sized tech peers.

Alphabet's AI offerings through its cloud division, including its AI overviews and AI mode, as well as algorithms that increase engagement on YouTube -- leading to higher ad revenue -- are all important tailwinds for the company. So Alphabet could perform much better than Apple and beat the iPhone maker to a $5 trillion valuation.

What about Microsoft? Both companies are thriving in the cloud and AI spaces. Microsoft arguably has an edge over Alphabet in both. However, Alphabet appears more reasonably valued when considering traditional valuation metrics.

GOOG Price-to-Earnings Ratio (Forward) data by YCharts.

That's one reason Alphabet could overtake even Microsoft to become the next $5 trillion company.

The more important question

Of course, outcomes are always hard to predict. A lot could happen in the next 12 months (or so) that would disrupt Alphabet's path to a $5 trillion market cap, and one of its peers could get there before.

Will Alphabet perform well enough in the next couple of years to be the next company to reach this goal? That's less important than determining whether the stock is worth holding for long-term investors, regardless of what happens in the short term. In that department, Alphabet looks like a great pick. It's a leader in several industries, boasting massive growth prospects in digital advertising, cloud computing, AI, and streaming.

The tech giant also has a hand in innovative and potentially disruptive new sectors, such as self-driving vehicles. Further, Alphabet benefits from a strong competitive advantage, thanks to its brand name, switching costs in cloud computing, and network effects in internet search.

After eliminating a major antitrust threat, the company's prospects look stronger than ever. All things considered, Alphabet appears to be a buy, even if it doesn't become the next $5 trillion company. 

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

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Prosper Junior Bakiny has positions in Alphabet, Amazon, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Warren Buffett is the most famous investor in the world. Even at 95 years of age and as he is about to step down as CEO of Berkshire Hathaway, the Oracle of Omaha's investing wisdom and stock picks are worth serious consideration by anyone, considering that he has crushed it over the long run. 

With that said, let's consider two stocks that feature prominently in Berkshire's $315 billion portfolio: Apple (NASDAQ: AAPL) and Visa (NYSE: V). These two market leaders account for 24.7% of the conglomerate's portfolio; they have made Buffett and his team plenty of money, and it's not too late to invest in them. 

Apple -- 23.8% of Berkshire's portfolio

Apple has been Berkshire Hathaway's top holding for years. Many have wondered why, especially since the tech company encountered plenty of headwinds over the past few years: slowing iPhone sales in China, tariff threats, and increased regulatory oversight over alleged monopolist practices.

Buffett has held on (though the conglomerate has decreased its stake) throughout it all. And Apple recently showed why, with a better-than-expected quarterly update. The company's sales and earnings are rising at a good clip thanks to its newer releases, especially the iPhone 16 and the iPhone 17.

Management said there were supply constraints that prevented the company from meeting the demand for those two products. As the company solves this problem, its iPhone sales and overall revenue should continue climbing at a good clip through this cycle of renewals.

So, even though the iPhone franchise is no longer the growth driver it was a decade ago, it is still driving growth in a more mature business that generates far higher sales. And there are plenty of other reasons to consider investing in Apple stock. Here are just two of them.

First, the company continues to grow its installed base. Apple's progress in this area helps strengthen its services ecosystem, which generates high-margin recurring revenue that will rise as its installed base and active paid subscriptions grow.

Second, Apple is a terrific dividend stock, especially compared to most of its peers in the trillion-dollar club. It increased its payouts by 100% in the past decade. The company also has a robust share repurchase plan, and in its fiscal year 2025, ended on Sept. 27, it returned $24 billion through dividends and share repurchases.

Apple has the cash to maintain that pace. It generated $98.8 billion in free cash flow over the trailing-12-month period. The company's capital allocation priorities are another great reason to buy the stock.

Visa -- 0.9% of Berkshire's portfolio

Visa has been part of Buffett's portfolio since 2011, and the shares of the payments leader have soundly beaten the market since then. One major reason is that Visa is helping push the cash displacement phenomenon. Customers are increasingly using credit and debit cards instead of cash.

Visa helps facilitate these digital transactions and charges a fee for each. There are several reasons credit cards have an advantage over cash and checks. First, speed. Card transactions are approved in the blink of an eye. Checks can take longer.

Second, convenience and security. Carrying loads of cash is burdensome and dangerous. And if someone steals it, there is little to do to stop them from using it. Credit cards, on the other hand, are easier to carry and conceal and can be restricted once stolen.

And lastly, digital payment methods are better adapted to our changing world, especially the rise of e-commerce.

All these and more have helped Visa significantly increase its total payment volume, revenue, and earnings over the past decade.

Here's another driver of its success: The company has a strong competitive advantage thanks to network effects. As the number of debit and credit cards with its name and logo grows, it becomes more attractive to merchants to accept them, granting them access to a large pool of potential customers.

Visa practically runs a duopoly with Mastercard, and it still has plenty of growth fuel: There remain trillions worth in cash and checks to bring into its ecosystem. The company should ride this tailwind for years to come.

Lastly, it's also a great dividend pick. Visa has increased its payouts by 378.6% over the past 10 years. In typical Buffett fashion, this is a top stock to buy and hold forever.

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

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Prosper Junior Bakiny has positions in Berkshire Hathaway and Mastercard. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Berkshire Hathaway, Mastercard, and Visa. The Motley Fool Australia has recommended Apple, Berkshire Hathaway, Mastercard, and Visa. 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 wasn't that long ago that some were starting to doubt Amazon (NASDAQ: AMZN). The company was losing ground to its closest competitors in the cloud computing infrastructure market, while tariffs threatened the profits of merchants on its e-commerce platform as well as its financial results. However, recent developments have given the stock a positive jolt. While Amazon hasn't completely resolved all its issues, the stock climbed to an all-time high following a strong quarterly update and a key move in the cloud industry. But is it still worth investing in Amazon at current levels?

The business is booming

In the third quarter, Amazon's sales grew by a solid 13% year over year to $180.2 billion. All three of the company's core segments posted revenue growth in the double-digit percentages, but the market particularly honed in on Amazon Web Services (AWS), its cloud unit. AWS' sales jumped 20% year over year to $33 billion. That's still below the growth rate of some of its peers in the cloud industry. For instance, Alphabet's Google Cloud revenue soared 34% year over year in Q3, but its sales of $15.2 billion were less than half of AWS'. 

AWS sales growth in the quarter was higher than the segment's average over the past few years. As CEO Andy Jassy noted, that was the fastest pace it has recorded since 2022. Meanwhile, Amazon's net earnings per share came in at $1.95, about 36% higher than in the year-ago period.

There was one business unit that grew even faster than AWS: advertising. The company's ad sales for the period totaled $17.7 billion, up 22% from the prior-year quarter.

Potential growth catalysts

Even with strong growth from advertising and cloud computing, Amazon's total sales increased only 13% year over year, as its core e-commerce business generates the lion's share of revenue. However, that's a fairly low-margin operation, and as advertising and cloud computing grab a larger percentage of revenue, the company's sales growth should improve. This will also affect its earnings and margins, as AWS already accounts for most of Amazon's operating profits.

Thankfully, there should be a long growth runway for both advertising and AWS. Amazon has the top market share in cloud computing and is the fourth-largest digital advertising platform worldwide.

The company also boasts a wide economic moat that positions it to keep profiting from these long-term tailwinds. In advertising, Amazon is one of the most visited websites in the world, has a strong brand name, and deep network effects within its e-commerce platform that practically guarantee it will continue to attract both buyers and sellers. In cloud computing, the company benefits from high switching costs. Further, Amazon entered into a partnership with OpenAI, the company behind ChatGPT, and will provide cloud services to it. That deal is worth $38 billion over seven years.

While that doesn't seem like a lot -- it amounts to about $1.4 billion per quarter for Amazon -- the deal should help cement its leadership in the cloud infrastructure space in the face of intensifying competition.

Is the valuation reasonable?

Amazon is a leader in several industries that are still growing rapidly and boasts a solid competitive edge. But is the stock still attractive at current levels? Shares are trading at 28.6 times forward earnings. That's slightly lower than the average forward P/E ratio of 30 for consumer discretionary stocks, despite Amazon's outstanding prospects. And it doesn't even account for other aspects of its business, including its vast ecosystem of Prime members and its growing ambitions in healthcare. For all those reasons, Amazon stock remains a buy even near its all-time highs.

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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Prosper Junior Bakiny has positions in Alphabet and Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet and Amazon. The Motley Fool Australia has recommended Alphabet 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.

In 2021, social media company Facebook changed its name to Meta Platforms (NASDAQ: META), partly to reflect its new focus on its metaverse ambitions. Although it is still working on that project, over the past two years, Meta's work in artificial intelligence (AI) has become the company's primary focus. The tech leader is making moves, and if enough things go right, these initiatives could lead to superior returns in the next five years and beyond. Here's why Meta Platforms could potentially double investors' money by the end of 2030.

Meta Platforms is sparing no expense

Meta Platforms has been investing a significant amount of money in its AI ambitions. The company announced it would build AI data centers, a project it expects will cost hundreds of billions of dollars. Meta Platforms has made other strategic moves. It recently acquired Play AI, a company that generates human-like voices through AI. The financial details of the transactions were not disclosed.

Elsewhere, Meta Platforms deepened its partnership with EssilorLuxottica, the company that owns RayBan and Oakley, both of which sell glasses and eyewear accessories. Meta Platforms and EssilorLuxottica have been working together for years, but the recent investment, estimated at roughly $3.5 billion, brings their partnership to a new level. Meta Platforms has also been trying to poach top AI talent from competitors, including OpenAI.

How will Meta Platforms' AI investments pay off? Consider the company's AI hardware vision. CEO Mark Zuckerberg predicted that AI glasses will likely dominate the industry within the next five to 10 years. Perhaps he is being too optimistic, but it's worth pointing out that Meta's AI glasses, developed in collaboration with EssilorLuxottica, have impressive features. They can be controlled through voice command, take pictures and videos, and users can even share what they see on video calls on WhatsApp.

Meta Platforms' revenue from these glasses currently makes up a tiny percentage of its total sales. However, provided Zuckerberg's vision for the future is even close to the truth, that segment could see incredible sales growth in the next five years and perhaps contribute more meaningfully to the tech leader's financial results. And that's just one example. Here's another: Meta Platforms' large language model (LLM), Llama, is available for free. That may seem counterintuitive. It certainly wasn't free for Meta Platforms to create Llama.

However, the company aims to attract talented developers to work on and refine its LLM, ultimately (hopefully) making it the leading one on the market. Since Llama powers some of the company's AI-related initiatives, including its virtual assistant, Meta AI, this strategy could, eventually, have positive spillover effects across all these other initiatives.

Revenue and earnings could double by 2030

Meta Platforms' work in AI will also help improve its advertising business, from which it currently generates the overwhelming majority of its sales. The company is looking to automate the ad creation and launch process, something that will almost certainly increase ad demand and related revenue for Meta Platforms. With an ecosystem of 3.43 billion daily active users as of the end of the first quarter, Meta Platforms' websites and apps will remain favorite targets for businesses looking to advertise to a large audience.

Further, Meta Platforms has also improved engagement on its apps thanks to AI-powered recommendation algorithms. The company's business is being transformed thanks to AI, with improved productivity and more lucrative opportunities across its business. In the next five years, we could see Meta Platforms' revenue and earnings double. It almost accomplished this feat in the past half-decade.

META Revenue (Annual) data by YCharts

But with a laser focus on AI and multiple avenues for growth, the Facebook parent can pull it off, even with some potential headwinds, such as President Donald Trump's trade policies that have already decreased ad demand from some Asia-based companies -- not that this prevented Meta Platforms from delivering strong results in the first quarter. It's also worth mentioning that Meta Platforms now pays a dividend. Investing in the stock today while setting up automatic dividend reinvestment could lead to the kinds of returns that will more than double your initial capital by the end of 2030.

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

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Prosper Junior Bakiny has positions in Meta Platforms. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms. The Motley Fool Australia has recommended Meta Platforms. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Nvidia (NASDAQ: NVDA) has been firing on all cylinders over the past two years, and the company just added one more accomplishment to its long list of medals: The chipmaker became the first stock to hit the $4 trillion mark. It now sits as the most valuable company in the world, but others are close behind.

Other corporations will eventually reach that valuation too, perhaps even sooner than many think. And the stock most likely to get to $4 trillion next is Microsoft (NASDAQ: MSFT). Read on to find out why.

Why Microsoft has the clear edge

Most of the members of the "Magnificent Seven" have market caps above $1 trillion, but some are much closer to the $4 trillion mark than others. The two largest companies behind Nvidia are Apple, valued at $3.16 trillion, and Microsoft, at $3.72 trillion. The others are much further behind.

And while there's the possibility that they will soar while these two drop, assuming they all perform relatively similarly in the next few months, Microsoft will get there first simply because it's the closest.

However, Microsoft has an excellent chance of performing better than, at the very least, its closest competitor, Apple. The iPhone maker has been hit hard this year due to the current U.S. administration's trade policies. The Trump administration aims to bring manufacturing back to the United States, which poses a challenge for Apple, as the company outsources most of its manufacturing to countries such as China, a favorite target of Trump's aggressive tariffs, and other Asian nations.

Trump recently doubled down on his threat of aggressive tariffs. Additionally, Apple has fallen behind Microsoft and its tech peers in the artificial intelligence (AI) race. While I think Apple could still perform well over the long run, the company's short-term prospects don't look attractive.

What about Microsoft? The tech leader delivered excellent results during its latest update, which covered the third quarter of its fiscal year 2025, ending on March 31. Microsoft's cloud computing and AI businesses are booming. It has been gaining ground on Amazon in the competitive cloud field.

Further, the company's latest update provided strong guidance, indicating a growing demand for its services, despite a somewhat shaky macroeconomic environment. The smart money is on Microsoft outperforming Apple in the next few months.

Amazon, Alphabet, and Meta Platforms are also performing well, but with market caps of $2.36 trillion, $2.15 trillion, and $1.82 trillion, they are too far behind to make serious runs at the $4 trillion mark before Microsoft.

For all these reasons, Microsoft seems by far the most likely to join Nvidia in the $4 trillion single-company (for now) club next.

To $4 trillion and beyond

$4 trillion isn't a finish line. Once Microsoft reaches that point -- whenever that may be -- there will still be plenty of upside left for the company afterward. In fact, here is another prediction: Microsoft will reach a $10 trillion valuation within the next decade.

From its current levels, that would require a compound annual growth rate of at least 10.4%. That's no easy feat, but Microsoft can pull it off as the company continues to make headway within its two biggest sources of growth: AI and cloud computing.

While the company is already generating significant sales from these businesses, this is likely still the early stages of these industries' growth stories. According to Andy Jassy, CEO of Amazon, more than 85% of IT spending still occurs on-premises. Meanwhile, AI applications reached a new level a little less than three years ago with the launch of ChatGPT by OpenAI, a Microsoft-backed company. Both technologies enable businesses across all industries to reduce costs and increase efficiency.

Companies that don't use cloud computing or AI services might, eventually, become like modern businesses that don't use computers: They hardly exist. That could be the scale of the revolution investors are witnessing, and Microsoft is one of the leaders driving it. Though competition will continue to intensify, the tech giant has a strong competitive edge due to switching costs. Plus, it has already proven it can perform well despite competitive pressure from Alphabet and Amazon.

Microsoft's long-term prospects look attractive thanks to this duo of massive growth drivers. Investors shouldn't buy the stock because it could soon reach $4 trillion. They should purchase it because it will likely continue performing well long after that.

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, former 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. Prosper Junior Bakiny has positions in Amazon, Meta Platforms, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

There is a small, elite group of companies with a market cap above $1 trillion. The number of corporations that have cracked the $3 trillion cap is even more exclusive. Meta Platforms (NASDAQ: META), a social media specialist, belongs to the former group; its market cap is $1.8 trillion as of this writing. However, there is an excellent chance that the tech leader will join the latter group by 2030. It needs a compound annual growth rate (CAGR) of 10.8% over the next five years to achieve this. Read on to find out why Meta Platforms has what it takes.

Here is what could go wrong

Let's start by discussing the challenges Meta Platforms could encounter in the next five years that could lead to poor performances. First, an economic downturn would affect the company's financial results. When the going gets rough, consumers tighten their purse strings and businesses decrease ad spending. That's Meta Platforms' primary source of revenue. A slowdown in the ad market -- like the one it experienced a few years ago -- might sink Meta's share price. Some fear that President Trump's aggressive tariff policies could, eventually, lead to a recession.

Even if it doesn't, the current administration's policies have affected Meta Platforms' results in other ways. Ad demand from Asia-based businesses decreased on the company's websites and apps after the administration ended the de minimis exemption that allowed low-cost packages from China to come into the U.S. duty free. Beyond marketwide issues, Meta Platforms could face some company-specific problems that might slow its growth in the next five years.

For example, Meta Platforms' forward price-to-earnings multiple currently tops 28.4, well above the average for the communication services sector of 19.9. Richly valued growth stocks can see their shares plummet if they fail to live up to the market's expectations. That's something else to keep in mind. But despite these potential problems, Meta Platforms' prospects through 2030 (and beyond) still look attractive. Here's why.

The artificial intelligence tailwind

Meta Platforms remains the leading social media company. It ended the first quarter with 3.43 billion daily active users across its websites and apps, an increase of 6% compared to the year-ago period. So long as Meta Platforms boasts such a massive ecosystem, it will be an attractive hub for advertisers to target potential customers. The tech giant's top and bottom lines should grow accordingly. In Q1, Meta Platforms' revenue increased by 16% year over year to $42.3 billion, while its net earnings per share came in at $6.43, 37% higher than the year-ago period.

Though a recession might indeed harm the company's financial results, Meta Platforms' artificial intelligence (AI)-powered initiatives should have the opposite effect: It will increase demand for advertising space within its ecosystem. To be clear, Meta Platforms would see growing revenue and earnings thanks to the increased popularity of digital advertising even without AI, but the technology should help the company reach new heights by making the ad-launch process more efficient for businesses.

Meta Platforms plans to automate every aspect of it by the end of 2026, from defining a company's target audience to creating pictures, videos, text, and more. Meta Platforms is investing heavily in AI infrastructure to support its ambitions, which extend beyond helping businesses optimize their advertising campaigns. Meta has successfully increased engagement on its apps in the past couple of years thanks to AI-based recommendation algorithms that keep its users glued to their screens longer.

This aspect also helps attract advertisers. Meta Platforms' AI work should yield strong financial results over the next five years even in the event of an economic slowdown. That's before we bring up other growth avenues, such as the company's paid messaging on WhatsApp. A 10.8% return is above the broader market's historical performance. However, Meta Platforms' lucrative underlying business and strong prospects -- which also justify the stock's premium -- should allow the company to deliver the performance it needs through 2030 to become a $3 trillion company.

Expect Meta Platforms to perform well even beyond that. The company has been firing on all cylinders lately, and there is plenty more where that came from. Long-term investors can safely add this stock to their portfolios.

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

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

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

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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. Prosper Junior Bakiny has positions in Meta Platforms. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms. The Motley Fool Australia has recommended Meta Platforms. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Warren Buffett is often considered the greatest investor of all time. His views on this topic (and related ones) carry significant weight on Wall Street, with investors and analysts alike often hanging on his every word during Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) legendary annual meetings.

In the latest installment of this much-anticipated event, the Oracle of Omaha said positive things about Tim Cook, the CEO of Apple (NASDAQ: AAPL), a company whose shares his conglomerate has owned for a while. Let's see what Buffett had to say and what it means for investors.

Apple has been a terrific investment for Buffett

Berkshire Hathaway first purchased Apple shares in the first quarter of 2016. At the time, the tech company was flying high, still riding the wave of its successful attempt to revolutionize the smartphone industry. Buffett and his team clearly didn't think it was too late to get in on the act, though, and their decision to put money into Apple paid rich dividends, literally and figuratively. Since early 2016, Apple's stock has delivered market-crushing returns.

AAPL Total Return Level data by YCharts.

That brings us to what Buffett recently said about Tim Cook, who has been the CEO of Apple since 2011. To quote the man himself:

Tim Cook has made Berkshire a lot more money than I've ever made [for] Berkshire Hathaway.

Now, let's remember that Warren Buffett has been at the helm of his company since the 60s, and in that time, the business has performed exceptionally well. Is this statement about Tim Cook meant to be taken literally? Maybe not, but the thing to note here is that Buffett, an excellent CEO in his own right, thinks very highly of Tim Cook.

Here's something else the Oracle of Omaha said some years ago about the tech company. He called Apple "probably" the best business in the world. Here's why these comments should matter to investors, especially right now.

Apple can overcome its current obstacles

Apple has faced a barrage of headwinds. Here are three of them. First, the company's sales growth has slowed considerably since the iPhone no longer generates the buzz it once did. Second, Apple has been the target of antitrust lawsuits due to alleged anticompetitive practices. Third, the tech leader will feel the effect of Trump's tariffs more than most other companies since it does significant manufacturing in China.

The question for long-term investors is whether Apple can overcome these challenges and still deliver strong performances in the long run. Here's the connection with Buffett's recent comments: One of the best predictors of a company's success is the team leading it. And clearly, Apple has excellent stewardship. Since Tim Cook became the CEO, the company has performed incredibly well. That doesn't guarantee it can continue doing so. A lot has changed since 2011.

But one thing hasn't. Tim Cook is still CEO. A leader of this caliber can find ways to navigate the issues the company has encountered. And when looking at the business, we can see signs of a bright future. For one, Apple remains an incredibly popular company with arguably the world's most valuable brand name. The company's brand allows it some degree of pricing power, even with stiff competition across all device categories, simply because consumers, at least many of them, want to own one of the tech giant's devices and are willing to pay a premium for it.

Apple's installed base of more than 2.35 billion devices recently reached all-time highs across all categories and geographical regions. Further, the company's services segment continues to make progress. This high-margin unit has grown faster than the rest of Apple's business in recent years and boasts over a billion paid subscriptions. Apple's large installed base will allow it to create more monetization schemes.

Lastly, Apple generates significant amounts of cash. Its trailing-12-month free cash flow is $98.5 billion. The company has the financial means to adapt to changing economic situations. It recently announced a $500 billion U.S. investment initiative, partly to shore up its local manufacturing capacity, which will help mitigate the impact of tariffs.

Apple won't overcome all its issues overnight, but thanks to the strong business it has already built and with an excellent leader at the helm, the stock still looks attractive to long-term investors.

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

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

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

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Berkshire Hathaway. Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Like many companies, Meta Platforms (NASDAQ: META) started 2025 splendidly, performing well through the first few weeks of the year. And like many of its peers, the tech giant's shares have dipped in the past month due to a combination of factors, with President Trump's trade wars playing a prominent role.

Though it might be tempting to avoid the stock as the market remains volatile, Meta Platforms looks attractive to buy and hold for a while despite near-term uncertainty. Let's consider three reasons to invest in the company.

1. It is doubling down on artificial intelligence

The artificial intelligence (AI) field looks incredibly promising. Amazon CEO Andy Jassy wrote in a recent letter to shareholders, "Generative AI may be the largest technology transformation since the cloud (which itself, is still in the early stages), and perhaps since the Internet."

While several AI companies are grabbing most of the attention, Meta Platforms looks like a notable player in the space. Several years ago, it launched an AI assistant, Meta AI, and its family of large language models (LLMs), called Llama.

Management hopes Llama will become the most used open-source LLM this year; meanwhile, Meta AI has more than 700 million monthly active users. The impact of AI on the company's financial results has been limited since much of its efforts are available for free. Perhaps we can point to the company using AI-powered algorithms to drive greater engagement on its websites and apps, leading to higher ad revenue.

Its AI monetization efforts might be in their early innings, but management sees the potential and plans to pursue this opportunity. CEO Mark Zuckerberg says Meta will invest hundreds of billions of dollars in AI infrastructure. It could see rich dividends from its current AI-related initiatives, considering the trajectory of the industry and the company's already notable work in the field.

2. It has an unparalleled ecosystem of users

One of Meta Platforms' greatest strengths is its large installed base of people who use at least one of its websites or apps daily. The company ended 2024 with 3.35 billion daily active users, a 5% year-over-year increase.

It benefits from the network effect. Consider Instagram, an app that allows people to keep in touch with friends and family members, influencers to attract a large following, and companies to advertise their products. The more users it has, the more valuable it becomes to those on the outside looking in.

This network effect means it likely to remain the leading social media platform for the foreseeable future. So, companies will continue to pay small fortunes to launch targeted ads.

Meta Platforms is also looking for ways to monetize its deep ecosystem. It has launched initiatives such as paid messaging on WhatsApp. And it is still working on its metaverse ambitions, which could provide another meaningful revenue source. As long as the company attracts billions of users daily, there should be more initiatives in the future.

3. It is reasonably valued currently

Investors can also buy the stock at prices that do not look prohibitively expensive, judging by traditional valuation techniques. The company's forward price-to-earnings (P/E) ratio is 23.5.

META PE Ratio (Forward) data by YCharts.

True, that's higher than the 18.1 average for the communication services sector it belongs to, but Meta's higher forward P/E multiple is well justified considering its excellent financial results and strong prospects. And as a bonus, it is now a dividend payer, having initiated a quarterly payout last year.

Meta Platforms may or may not go on to become an excellent income stock; only time will tell. But the payout certainly will not make it less attractive. And the company's many growth avenues -- including AI, its strong competitive advantage, and massive ecosystem of users -- make it an exciting long-term option.

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, former 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. Prosper Junior Bakiny has positions in Amazon and Meta Platforms. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Meta Platforms. The Motley Fool Australia has recommended Amazon and Meta Platforms. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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

Few companies have attracted more attention this year than Nvidia. The chipmaker is on a roll thanks to the rapid rise of artificial intelligence, and its revenue, earnings, and stock price continue to grow incredibly fast. Nvidia's shares are up by 137% this year.

Some companies have performed even better, including one many investors may never have heard about: Summit Therapeutics (NASDAQ: SMMT). The biotech's performance this year makes Nvidia's look mediocre: Summit's shares are up by almost 900% year to date.

What exactly is driving this performance? Are Summit Therapeutics' shares still attractive? Let's find out.

SMMT data by YCharts.

Summit is taking on a giant

Summit focuses on developing cancer medicines. As is usually the case when a drugmaker rises this fast, it owes its recent run of form to excellent clinical progress related to its leading pipeline candidate, ivonescimab.

Originally developed by a China-based company called Akeso, Summit entered into an agreement with the former to license the drug in certain countries, including the U.S., in exchange for an up-front payment, potential development and sales milestones, and royalties. Ivonescimab is already approved in China for a particular variant of lung cancer.

It recently aced a phase 3 clinical trial in the country in treating another variant of non-small cell lung cancer (NSCLC). Ivonescimab was pitted against Merck's Keytruda, the standard of care in NSCLC and the best-selling drug in the world since last year, in this phase 3 study.

In the trial, ivonescimab led to a median progression-free survival of 11.14 months, compared to Keytruda's 5.82 months. It also reduced the risk of disease progression or death by 49% compared to Keytruda and posted a similar safety profile.

According to Summit, ivonescimab is the first drug to post better clinical results than Keytruda in a phase 3 study in NSCLC.

Ivonescimab's potential

Although Keytruda has earned dozens of indications worldwide, NSCLC is unquestionably one of its biggest growth drivers. According to the World Health Organization, lung cancer was the second most-common cancer in the world as of 2020. However, it was the leading cause of cancer death.

About 85% of lung cancer cases are of the NSCLC variety. In 2017, about 40% of Keytruda's sales came from the various indications it has earned in treating NSCLC, although that has likely changed as the drug's indications expanded.

But using this as a baseline, and considering that Keytruda generated $25 billion in sales last year, about $7 billion to $10 billion of it could have come from NSCLC indications. Ivonescimab, if approved in the U.S., Canada, Japan, and other countries where Summit owns the rights to license it, could capture much of that revenue and redirect it toward Summit's financials.

The medicine is also being investigated in other indications, including colorectal cancer, the second leading cause of cancer death in the world.

Is Summit a buy?

There is no question that Summit has a winner in ivonescimab, a medicine that could become a "pipeline in a drug," just like Keytruda. The problem for investors is that the market has already priced some of ivonescimab's success into the shares. Despite not having a single drug on the market, the company is worth $17 billion. The stock could fall off a cliff at these levels if anything goes wrong with its leading pipeline candidate.

The good news is that funding likely won't be an issue. Summit ended the second quarter with $325.8 million in cash and equivalents, which the company said could help it run its operations until the fourth quarter of 2025. Since then, it has raised even more money, taking advantage of ivonescimab's recent success.

Summit Therapeutics does look a little risky, but ivonescimab's potential makes it worth it for biotech investors who can stomach the risk. If the company can continue posting ivonescimab-related wins, the stock might be highly lucrative in the long run.

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

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

The post This US stock is crushing Nvidia's performance this year: Is it too late to buy? appeared first on The Motley Fool Australia.

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

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

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Merck, Nvidia, and Summit Therapeutics. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

It's been a painful year for Shopify Inc. (NYSE: SHOP) and its shareholders. The company's coronavirus tailwind came to a screeching halt, leading to financial results that haven't been up to par. The e-commerce specialist's 10-for-1 stock split did little to improve its stock market performance; as things stand, Shopify is currently hovering near its 52-week low.

However, Wall Street has faith in the tech giant, and analysts' average price target of $79.45 is close to triple its $27.85 share price as of this writing. Is the Street right about Shopify?

What's wrong with Shopify?

Shopify has been the victim of various market-wide headwinds. Among these are interest rate increases that can impact the value of corporations. In an environment with higher interest rates, borrowing -- one of the main ways companies raise money -- becomes more expensive, and businesses tend to do less of it, leading to reduced investments and lower future earnings. 

Knowing this, investors are less likely to invest in stocks, especially those speculative growth stocks with high valuation metrics that aren't consistently profitable. That description fits Shopify to a T. Its net loss in the second quarter came in at $1.20 billion, compared to the net income of $0.88 billion reported during the year-ago period.

The company's current forward price-to-earnings (P/E) ratio is 220.5. Even given the premium growth stocks often enjoy, that seems too high. The S&P 500's forward P/E is just under 17. In that context, Shopify's performance on the market over the past year isn't too surprising, especially when you factor in company-specific issues. Notably, Shopify's revenue growth rates have slowed as well.

Data by YCharts.

Perhaps that isn't a "problem" -- at least not in a vacuum. Shopify benefited from the accelerated switch to e-commerce in the early days of the pandemic, and year-over-year comparisons were always going to be difficult as those tailwinds subsided. Still, when added to the overall challenging macroeconomic environment, that's not what investors want to see. 

Moreover, Shopify will likely continue to struggle, at least for a little while. There will probably be more interest rate increases in the near future. Shopify's stock performed exceptionally well between its initial public offering in May 2015 and the end of last year -- an environment marked by historically low interest rates. Moving forward, it will be harder for the tech giant. 

Are there any reasons to be optimistic?

Solid long-term prospects

There is more context to Shopify's relatively disappointing second-quarter financial results. As already mentioned, the slower top-line growth was partly a product of the company's abnormally strong performance in 2020 and 2021, when people were stuck at home and practically forced to shop online. This activity decreased somewhat once pandemic restrictions eased.

There is also more color to Shopify's red ink on the bottom line. For instance, in the second quarter, much of the tech company's net loss was due to unrealized losses in various equity investments. That includes Shopify's holdings in Affirm Holdings, Inc.(NASDAQ: AFRM) and Global-e Online Ltd. (NASDAQ: GLBE). That's not ideal, but at the very least, it reflects less poorly on Shopify's day-to-day operations.

The company's adjusted net loss during the second quarter -- which ignores the impact of unrealized losses and other items -- came in at $38.5 million, down from an adjusted net profit of $284.6 million in the year-ago period.

Importantly, Shopify's long-term prospects remain strong. There is still plenty of room for e-commerce to grow; as long as it does, merchants will look to open online storefronts. Some analysts see the industry expanding at a compound annual growth rate of 14.7% through 2027. It won't stop there. E-commerce penetration in many developing countries lags what it is in the U.S.

In my view, online shopping will continue growing for decades. Shopify's strength is that it gives merchants all the essential tools they need to run an online store. As a result, the company benefits from high switching costs. Building and customizing an online storefront is hard enough, and attracting loyal customers to it is even more challenging.

But having to restart the entire process from scratch is not something anyone wants to do unless necessary. That's why Shopify's merchants won't want to jump ship. As of last year, Shopify was No. 2 among companies with the highest retail e-commerce market share in the U.S. That, coupled with an estimated $160 billion addressable market and its solid competitive advantages, strongly suggests Shopify can turn things around.

Don't lose perspective 

Will Shopify meet Wall Street's expectations within the next 12 months? Probably not. But more importantly, the company still has solid prospects, especially when you put its recent struggles in context. For those focused on the long game, Shopify is worth holding onto. The company will likely deliver solid returns in the next decade and beyond.

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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Prosper Junior Bakiny has positions in Shopify. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Affirm Holdings, Inc., Global-e Online Ltd., 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Equity markets have been southbound for a while now, and last month, the S&P 500 officially dropped below bear market territory as defined by a 20% or more decline from its most recent high. Even the most battle-tested investors can panic in situations like these; it's only human to do so. 

That's especially the case considering the state of the economy. Some analysts have predicted that a recession could be on its way, and with inflation at 40-year highs, things could get even worse for the stock market. With that said, there are important missteps investors should avoid in a bear market. Here are just two examples.

Mistake #1: Constantly checking your portfolio

When stocks are struggling, it can be tempting for investors to constantly check how the performance of their portfolios stacks up against that of the broader market -- or if, by any chance, they are managing to defy the sell-off. The temptation is understandable but a bit unwise. In a bear market, most investors will be in the red. But until one presses the sell button, losses remain unrealized.

Peeking into the performance of the stocks you own regularly can increase anxiety and provoke panic-selling. Of course, that would be a mistake for investors with a long-term mindset. The market will recover -- history tells us that it always does. And provided the stocks you own are those of quality companies, they will bounce back too. Staying the course is generally the correct thing to do.

Not being obsessed with how your portfolio performs helps you do just that. 

Mistake #2: Avoiding buying stocks 

For opportunistic investors, downturns are practically the stock market equivalents of a "sale" sign on the window of a retail store. Sell-offs don't discriminate. Even robust companies find themselves in the red, creating the perfect opportunity for you to scoop them up on the dip.

Of course, investing best practices still apply. It's essential only to invest money that you can afford to lose, particularly if the downturn in question is accompanied by economic troubles (as we are currently experiencing).

Furthermore, just because a stock is down doesn't mean it's worth buying at its current levels. Doing your due diligence before pressing the buy button is always critical. But if you play your cards right, bear markets can help you increase your returns in the long run.

With that in mind, here's one beaten-down stock worth buying now: Moderna (NASDAQ: MRNA). The biotech is down big this year, but it is well-positioned to rebound eventually. Here's why. 

Down but not out

One reason Moderna is down recently -- besides the broader sell-off -- is that its prospects seem uncertain to some investors. What will the COVID-19 vaccine market look like after this year? Will Moderna continue to generate strong sales from its sole product on the market in 2023 and beyond?

These are reasonable questions, but Moderna seems to have the means to bounce back from a potential drop in sales of its coronavirus vaccine after this year. The company has a pipeline full of promising programs and enough funds to bring at least a couple of brand new products to market (without resorting to dilutive financing) -- two key things biotech companies need to be successful.

Moderna is running several non-coronavirus-related phase 3 clinical trials, including a potential vaccine against the flu and two others against respiratory syncytial virus (RSV) vaccine and the cytomegalovirus, neither of which has an existing, approved vaccine. Additionally, it has plenty more programs in phase 2 or phase 1 testing.

The biotech ended the first quarter with $19.3 billion in cash and cash equivalents, more than double the $8.3 billion it had as of the end of Q1 of the previous fiscal year. Moderna's shares have lost 35% of their value this year. But I believe patience will be rewarded for those who get in now. 

Play the long game 

Bear markets aren't fun, but investors can make the best of them by avoiding the unnecessary stress of constantly checking stocks and taking advantage of the opportunity to buy great stocks like Moderna or many other companies that fell along with the rest of the market. Trading may be a short-term game, but investing is a long-term one. Focusing on that can help investors get through these challenging times.

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

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

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

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Moderna Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

There is no shortage of reasons for people to be skeptical about investing in equities right now. The S&P 500 is in a full-blown bear market, the economy isn't doing well, and, according to some analysts, we are heading toward a recession. Meanwhile, geopolitical tensions remain, and the COVID-19 pandemic isn't officially over. 

However, there are also good reasons to invest in stocks, even in these volatile times. Long-term investors know that these market downturns can provide excellent opportunities to make a buck. Let's look at what happened following the past two bear markets.

The financial crisis of 2008 and the 2020 coronavirus bear market

The most recent bear market (other than the one we are currently in) happened in 2020. It was relatively short-lived and bottomed out in late March of that year. It is instructive to see how the S&P 500 has performed since then.

^SPX data by YCharts

Even considering its current struggles, the S&P 500 has provided solid returns since it bottomed out following the market crash caused by the COVID-19 pandemic. Now let's look at the bear market between 2008 and 2009. The S&P 500 bottomed out in March 2009; the index has risen substantially since then. 

^SPX data by YCharts

We could go back and look at what happened after other major market crashes, and the result would be the same. The trend is clear: Bear markets don't last forever, and are usually followed by bull markets. Further, bull markets tend to last longer than bear markets.

Of course, it's impossible to time the market. No one knows when the current downturn will bottom out. But those who invest in stocks right now will likely be well rewarded in the long run, especially considering many stocks are trading for a discount -- and that's the silver lining of market crashes. 

This streaming giant hasn't said its last word 

Let's look at one stock currently experiencing plenty of headwinds that could be an excellent long-term bet: Netflix (NASDAQ: NFLX). 

Netflix's recent struggles on the stock market are largely due to company-specific issues. In the past few quarters, the streaming specialist's subscriber growth hasn't been impressive, to say the least, and that trend will likely continue in the second quarter, at least according to management's predictions.

Netflix faces plenty of competition in a crowded streaming market, contributing to its subscriber growth woes. Further, the company is dealing with the problem of password sharing. It estimates that 100 million households are accessing its platform through password sharing, in addition to its 222 million net paid subscribers as of the end of the first quarter.

That means that nearly half of households watching Netflix aren't paying for it. So the company is leaving a lot of money on the table. 

But there are reasons to be optimistic about Netflix's future too. First, consider that streaming arguably still has room to grow, particularly in many international markets where the market enjoys lower penetration than it does in North America. Projections vary, but some have it that the industry will register a compound annual growth rate of 21.3% through 2030.

Netflix is, of course, carefully weighing how it will handle its challenges, including password-sharing. The company has considered introducing a lower-priced subscription that would display advertisements. The move could entice password sharers to open their own accounts. Importantly, Netflix's winning formula will always include original content. 

The company has become one of the most successful studios around. Original content drives engagement (i.e., viewing hours), and in that department, Netflix still has a long way to go. As of February, Netflix accounted for 6.4% of total television time in the United States, while the entire streaming industry accounted for an unimpressive 28.6%.

Cable is still popular despite the seeming ubiquity of streaming and the so-called cord-cutting trends. In the long run, Netflix is looking to replace cable TV, and it still has miles of whitespace available to do that, both in the US and abroad. But the company's recent struggles scared off many investors. 

The result? Netflix looks substantially cheaper than it did just one year ago.

NFLX PE Ratio (Forward) data by YCharts

At these levels, long-term investors might want to consider adding the streaming giant's shares.

Along for the ride

Things may get worse for Netflix and the rest of the market before they get better, especially if a recession hits. But as we've seen, the market is sure to recover eventually. In my view, Netflix will follow a similar trajectory. The company's stock cratered earlier this year. However, given its long-term prospects, leadership in streaming, and growing original content library, Netflix still has plenty of market-beating days in its future.

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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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Netflix. The Motley Fool Australia has recommended Netflix. 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.

Stock market headlines aren't pretty right now. The S&P 500 Index (SP: .INX) experienced its worst first half of the year since 1970. It is in a full-blown bear market and with lingering economic issues, things could get worse before they get better. It can be difficult for investors to navigate these stressful times.

However, the basic game plan shouldn't change for those focused on the long term. Let's look at two steps that long-term investors can take to sail through this challenging period.

1. Avoid panic selling

When the going gets rough, it can be tempting to resort to panic selling (that is, offloading shares of companies you own in anticipation of a coming stock decline). This tendency is a bit understandable. If markets are going to keep falling, perhaps it's best to limit your losses. But it is not a wise strategy, at least not for those focused on the long game.

Market downturns don't last forever and, on average, bull markets tend to last longer than bear markets. That's why holding onto shares of excellent companies even through the worst market crash is worth it. Here is some evidence. The S&P 500 bottomed out in March 2020 following the coronavirus-induced bear market. Since then, the index is up by 71% -- even after its recent slide.

^SPX data by YCharts

However, reassessing your investments can be great when a bear market hits. Has the investment thesis of any of your holdings fundamentally changed for the worse? If so, it might be worth considering selling. If not, dumping your shares is the opposite of a good idea. If anything, a bear market is a good time to purchase more shares of the excellent companies you own. This brings us to our second point.

2. Pick up bargain stocks 

Market crashes don't discriminate. Even companies performing exceptionally well or those with excellent prospects often end up being pulled down by the rest. The result: You can find plenty of great stocks that have been thrown in the discount bin. And once the market does recover, you will reap the benefits.

Let's look at a company that looks too cheap to ignore at current levels: Teladoc (NYSE: TDOC). True, the telemedicine specialist has had its share of troubles. That includes the company's massive $6.7 billion net loss in the first quarter, although it was due to a non-cash impairment charge related to its 2020 acquisition of Livongo Health. Teladoc overpaid for this acquisition.

Despite this and other issues, Teladoc looks far too cheap as its shares have now fallen below their pre-pandemic levels. That makes little sense, considering the company's standing in the telemedicine industry and its progress during the pandemic. In all likelihood, telemedicine is here to stay.

The technology is convenient for physicians and patients and helps the latter save money. The flexibility of telehealth services can also allow healthcare providers to attend to more patients overall. All these benefits should lead to greater utilization of telemedicine in the coming years.

Teladoc has already built a network of physicians offering hundreds of sub-specialties, along with more than 11,000 associated care locations. Plus, more than 50% of the Fortune 500 companies and some of the largest health insurers are on its client list. Meanwhile, the company's business keeps growing.

In the first quarter, Teladoc's revenue increased by 25% year over year to $565.4 million, while its total visits jumped by 35% to 4.5 million. Average revenue per U.S. member and total paid memberships were also on the rise. Despite the red ink on the bottom line, Teladoc continues to make headway in the telemedicine market.

And given that the industry seems to have a bright future, Teladoc is an excellent healthcare stock to consider buying on the dip. 

Keep your eyes on the prize

Bear markets can be stressful, but a disciplined and patient approach can help you get through them. Reassessing your investments and taking advantage of others' decisions to panic sell are great moves to consider in these troubling times. In five years, the market will almost certainly be substantially up from its current levels, and those who held on will be glad they did.

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

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

The stock market hasn't performed well this year. As of this writing, all three major U.S. market indexes are comfortably in negative territory for the year with the worst-performing of the bunch, the Nasdaq Composite Index (NASDAQ: IXIC), down by 11%.

Given current geopolitical tensions and their effect on worldwide economies, many investors might fear that we will experience a market crash at some point this year. 

Of course, no one knows whether that will happen, but it can't hurt to prepare in advance. And in doing so, it's worth taking a page out of Warren Buffett's playbook. The Oracle of Omaha is known for not fearing downturns since they can present great opportunities to buy shares of excellent companies on the dip.

Let's look at two of Buffett's favourite stocks that might be worth loading up on in the next market crash: Apple Inc (NASDAQ: AAPL) and Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). 

1. Apple

At first glance, Apple might not seem like the kind of company investors might want to bet on during a downturn. After all, the tech giant is best known for its sleek technology products, most notably its iPhone.

While the quality of Apple's hardware is top of the line, the company's products aren't known for being cheap. When economic troubles hit and lead to a market crash, consumers might choose to cut back on products like the iPhone first.

But let's look at the bigger picture. Historically, bear markets have lasted 9.6 months on average. By contrast, bull markets have lasted 2.7 years.

Economic recessions also tend to be shorter than expansions. Even if Apple suffers during the next downturn (whenever it happens), investors can rest assured it will perform exceptionally well once things settle. After all, the company has soundly beaten the market in the past three years, a period that includes the recession and bear market caused by the COVID-19 pandemic.

Further, Apple is looking to decrease its reliance on its hardware. To be clear, the company's products segment still makes up the bulk of its revenue. During its 2021 fiscal year -- which ended on 25 September 2021 -- Apple racked up $365.8 billion in total net sales, 33.3% higher than the previous fiscal year.

The company's products unit accounted for about 81% of its net sales. The good news is Apple's services segment -- where it offers such things as iCloud, Apple TV+, Apple One, Apple Music, etc. -- is becoming increasingly important for the company and offers much higher margins. Last fiscal year, Apple's products segment reported gross margins of 35.3%, compared to nearly double that for the services segment of 69.7%.

Given the powerful brand name it has built as a leading tech company, Apple will continue generating solid sales from its hardware products, at least for the foreseeable future. But the company's services unit will likely grow in importance thanks to the ecosystem it has built. That should allow Apple to find even more ways to monetize its users and work wonders for its bottom line. That's why even after crushing the market historically, Apple remains an excellent buy-and-hold stock. 

2. Berkshire Hathaway

Warren Buffett clearly loves purchasing shares of the corporation he leads. In the past couple of years, Berkshire Hathaway bought back 9% of its shares that were outstanding as of the end of 2019 -- for a total of $51.7 billion. Investors who want to survive downturns and beat the market should consider following Buffett's lead and load up on shares of Berkshire Hathaway.

This conglomerate wholly owns many notable subsidiaries, including Geico, Fruit of the Loom, Duracell, and more. Berkshire Hathaway boasts an insurance division and a manufacturing unit, and it also owns several energy and utility companies. That is more diversity than investors can typically get by investing in just one stock. And don't think it'll stop there.

Buffett and his team have often deployed their huge cash pile to acquire even more excellent businesses. That last point underscores what is perhaps the best reason to purchase shares of Berkshire Hathaway: Doing so allows investors to have both Buffett and the company's vice chairman Charlie Munger in their corner.

Both are widely considered among the best investing minds ever. And with these two at the helm, Berkshire Hathaway has historically crushed the market while surviving many economic recessions and market downturns.

Having proven they know how to lead a highly successful business, Buffett and Munger -- both in their 90s -- have reportedly already chosen who will lead the company next. The chosen one's name is Gregory Abel, vice chairman of Berkshire Hathaway's non-insurance operations. Munger himself has emphasized that Abel will keep the culture of the company.

That's all the insurance that investors need to know -- that Berkshire Hathaway should continue performing well for many years to come. If the company's shares plunge in a market crash this year, initiating a position looks like it would be a great move. 

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

The post 2 Warren Buffett stocks to buy and hold if the market crashes appeared first on The Motley Fool Australia.

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

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Apple and Berkshire Hathaway (B shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple and Berkshire Hathaway (B shares). 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.

In 2020, business was booming for e-commerce companies because of the pandemic and related government-imposed lockdown orders. It's with this momentum that Amazon (NASDAQ: AMZN), one of the largest players in the industry, started 2021. However, the tech giant lagged the market last year, and several factors likely contributed to Amazon's underperformance in 2021. 

First, investors largely shifted away from the so-called "pandemic stocks," and many of these companies had a terrible year as a result. Second, Amazon's iconic founder, Jeff Bezos, stepped down from his role as the CEO of the company in the third quarter, leaving his deputy Andy Jassy in charge. Will these factors continue to weigh on Amazon's stock performance, or can the company get back to its market-beating ways?

Amazon's shares currently trade at $3,251.08 apiece. Let's see whether the company's stock can rise roughly 23% this year to hit the $4,000 mark.

AMZN data by YCharts

Near-term headwinds

While the pandemic brought forth increased adoption of e-commerce, from which Amazon benefited, the outbreak also came with several issues for the company's consumer business. As it reported in its latest quarterly update, the tech giant is currently facing "labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs."

The company also doubled the size of its fulfillment network since the pandemic started to deal with capacity constraint issues. Amazon largely insulated its customers from these higher costs, which means it is taking them on itself. The company said it would incur "several billion in additional costs" due to the issues it is facing, which may harm the bottom line, at least in the short run. 

Long-term opportunities

Amazon has always been laser-focused on pleasing its customers, and it is showing this commitment once again. The money Amazon is spending to deal with its current issues will help keep its retail business efficient. Getting items to customers promptly is what matters in the long run. But then there's also the company's cloud computing unit, Amazon Web Services (AWS), to consider.

AWS continues to contribute substantially to Amazon's overall business performance. The company recorded net sales of $110.8 billion in the third quarter, 15% higher than the year-ago period. Meanwhile, operating income and net income both dropped for the company. Amazon's operating income decreased by 21.7% to $4.9 billion, while net income declined to $3.2 billion, 50.2% lower than the year-ago period.

How did AWS perform? Net sales from the segment soared by 38.9% to $16.1 billion -- a much higher growth rate than Amazon's overall business. Furthermore, AWS' operating income increased by 38.1% to $4.9 billion while Amazon's international segment reported an operating loss. The North America division only saw a comparatively modest operating profit of $880 million.

According to Statista, Amazon held a 32% slice of the cloud computing market in the third quarter; its closest peer came in at 21%. And while increased competition in this field is a potential headwind to keep in mind, Amazon generates loads of cash, and we can expect the company to continue investing heavily in this business. Amazon ended the third quarter with $30.2 billion in cash and cash equivalents, which remained more or less flat compared to the year-ago period.

According to some estimates, the cloud computing market will expand at a compound annual growth rate of 17.9% through 2028. That's good news for Amazon -- and its shareholders. Expect the tech giant to continue to benefit from this tailwind.

How will the market react? 

Despite the near-term challenges, Amazon is still ideally positioned for long-term growth. That's what matters most: After all, the market is supposed to be forward-looking. That's why, after it was a laggard last year, I expect the company to beat the broader market in 2022. Analysts see Amazon growing its revenue by 17.7% this year.

Furthermore, the company's analyst consensus price target stands at $4,104.88, or 26.3% above its current price (as of this writing). I see Amazon exceeding this price target within the next 12 months. But even if it doesn't, investors should remain focused on the company's excellent long-term prospects. 

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

The post Will Amazon shares hit $4,000 in 2022? appeared first on The Motley Fool Australia.

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

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Prosper Junior Bakiny owns Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and recommends Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

The market doesn't always react predictably to news and headlines.

Case in point: Facebook (NASDAQ: FB) recently released its fourth-quarter and full-year earnings report, and although the tech company's performance was strong, Facebook's shares are down by about 9% since its earnings release. The sell-off was attributed to Facebook's decelerating growth rate, but that's something management had predicted would happen.

During Facebook's third-quarter 2019 earnings conference call, CFO Dave Wehner said the following: "We continue to expect a more pronounced deceleration of our revenue growth rate in Q4. We expect our Q4 reported revenue growth rate will decelerate by mid to high single-digit percentage compared to our Q3 rate." 

Looking at the big picture, Facebook's latest slump is an opportunity for long-term investors to purchase shares of the tech giant.

Growth opportunities

Facebook now boasts 2.5 billion monthly active users (MAUs) on its namesake website and app, whereas the company has 2.89 billion MAUs across its family of apps, which includes Instagram and WhatsApp. 

Few companies in the world have managed to garner a stronger community of users. For that reason, Facebook will continue to be a prime target for advertisers looking to reach their target market. However, beyond Facebook's bread and butter advertising business, the company has been looking for other ways to monetise its community of users. 

Take, for instance, Facebook's e-commerce ambitions. Last year, the tech giant introduced Instagram Checkout to allow users on Instagram to purchase items directly from the app. In addition to the increased advertising revenue this could bring to Instagram (as retailers increasingly look to reach customers on the platform), the company charges sellers processing fees with each transaction. Facebook then introduced Facebook Pay, a platform that allows users to set up payment information to use automatically across its family of apps. 

After its initial launch, Facebook Pay was only available with a select number of businesses, but the company said it would add more participating businesses over time. This could help Facebook offer a more convenient shopping experience for its users, which could lead to increased traffic on its family of apps as businesses look to connect with customers.

As Facebook COO Sheryl Sandberg said during the company's fourth quarter earnings conference call:

We launched Checkout on Instagram with a small closed beta in Q1 2019. We slowly have been building the experience, and now hundreds of businesses in the US are experimenting with Checkout. We're taking the time to get this right and growing slowly so people and advertisers can benefit over the long-term.

Facebook has other avenues for growth as well. For instance, the company is looking to make a dent in the virtual reality (VR) market. Back in 2014, Facebook acquired VR leader Oculus for $3 billion. The company has also been spending a lot of money lately to acquire more VR assets. This business is still years away from making a serious impact on Facebook's top line, but it is one of the growth opportunities available to the company. 

Facebook is still a buy

Facebook is currently trading at 19 times future earnings, while its price to earnings growth (PEG) ratio is 1.19. These valuation metrics hardly make Facebook cheap, but that isn't at all surprising given the company's stature and reasonably attractive prospects.

That being said, there's one thing that could disrupt Facebook's ambitions, namely government regulation. Some politicians have flirted with the idea of breaking up Facebook into two or more smaller companies. Facebook is also one of the tech companies at the heart of the ongoing big tech antitrust investigation.

However, not much has come of this investigation yet, and Facebook continues to thrive despite increased scrutiny from government regulators.

Investors should definitely keep an eye on how things develop, but given Facebook's strong core business -- as well as its potentially lucrative growth opportunities -- it remains of the top tech stocks out there, and after its most recent slump, now is a good time to jump on board. 

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

The post Facebook's post-earnings sell-off is an opportunity for investors appeared first on The Motley Fool Australia.

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

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

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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. Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook. The Motley Fool Australia has recommended Facebook. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.