2024 has been a great year for investors. For example, the tech-heavy Nasdaq-100 market index has seen a year-to-date total return of 26%, as of Nov. 13.

Six stocks in that index have gained more than 70% this year. Here are the top performers on the Nasdaq 100 in 2024:

Data source: Finviz and YCharts on 11/13/2024. Table by author.

These market-beating stocks took very different paths to the top in 2024:

• Nvidia and Arm Holdings benefit from the ongoing frenzy for high-powered artificial intelligence (AI) systems.
• The Trade Desk soars as the online advertising market swings back from a multiyear downturn.
• Netflix and DoorDash are reaping the benefits of revamped service portfolios and refreshed consumer spending habits -- in very different industries.
• Constellation Energy enjoys broad demand for clean energy and a refreshed interest in nuclear power.

Where will these Nasdaq-100 winners go next?

Only time will tell where these soaring stocks might go from here. That being said, Wall Street analysts expect all of them to continue climbing for a while. Every stock on this list has earned an average analyst recommendation of "buy" or better, despite soaring charts and lofty valuation ratios.

Therefore, if the Street projections are correct, this bull market should continue in 2025.

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

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One of the best ways to find success in the stock market is by investing within trends. Long-term megatrends in technology and other sectors have the ability to reshape the economy and create big market winners.

For example, trending sectors like e-commerce, cloud computing, and video streaming led to massive returns in several stocks over the last decade, even with the challenges in the tech sector in the last year. 

While 2023 is potentially shaping up to be a tough year for stocks as most economists expect a recession, that doesn't mean that there won't be any winners.

To find great investments, it's a smart idea to see what's trending right now. Here are two of the biggest megatrends for 2023 and beyond.

1. Platforms vs. point solutions

Behind the scenes, one of the biggest trends in technology is that enterprises are replacing multiple "point solutions" with a single cloud platform.

A point solution is an application that solves a single problem, like accepting payments, authenticating users, or monitoring outages. A platform, on the other hand, gives IT managers a single interface to manage multiple functions, including those provided by individual point solutions.

According to tech research firm Gartner, by 2024, 60% of organizations will have switched from using point solutions to platforms, up from 20% today. As a result, many of the fastest-growing software companies today have positioned themselves as platforms. 

Take GitLab (NASDAQ: GTLB), for example. The company provides a single software platform used to manage DevOps, or the systems through which companies develop and deploy software.

GitLab is growing rapidly, in part because it's grabbing market share from point solutions. Its revenue jumped 74% in the second quarter to $101 million, and it has a large growth opportunity ahead of it from this megatrend, as 85% of its customers are still using two to 10 DevOps point solutions.

Another example is Okta (NASDAQ: OKTA), a leader in cloud identity software. Okta's cloud identity platform integrates with more than 7,000 applications and provides a suite of identity tools including single sign-on and multifactor authentication, so businesses can ensure their customers and employees can log on seamlessly and securely. FedEx is one of many companies that have used Okta's Identity Cloud to replace ad hoc legacy point solutions. In its second quarter, Okta's revenue jumped 43% to $452 million.

Finally, Bill.com (NYSE: BILL) has established itself as an automated end-to-end payments platform for small and medium-sized businesses. It's grown both organically and through acquisitions and helps businesses automate payables, credit card expenses, receivables, and more. Bill.com integrates with accounting software tools and in some cases replaces manual bookkeeping or data entry for its customers. Top-line growth has been strong, with revenue up 94% to $229.9 million.

2. Connected TV

In-home entertainment, the transition from traditional pay TV to video streaming defined the 2010s. This decade, the trend that's shaping up to define it is connected TV, or ad-driven streaming.

With video streaming rapidly replacing linear TV, advertisers are starting to shift ad budgets, and some of the biggest streaming platforms, like Netflix and Disney+, are responding by launching their own ad-based streaming tiers.

Commenting on the decision to launch the ad tier and the audience shift to video streaming, Netflix co-CEO Reed Hastings said on the company's recent earnings call:

What I underappreciated was just the impact on advertisers. They're just being able to reach fewer people. And then the 18-to-49 demographic is even faster than the decline in pay TV. So, this is what is really fueling the cycle is that really collapsed linear TV as an advertising vehicle outside of a few properties like sports.

As eyeballs have shifted to streaming, advertisers naturally want to follow, and that will get easier for them with the Disney+ and Netflix ad tiers. Advertisers also love the connected TV model because it offers both the large-screen, engrossing medium of video with the targeting and tracking of digital channels like social. 

Connected TV is already a fast-growing business for a number of adtech companies, and it could explode next year as Netflix and Disney join the fray.

One such winner of this switch looks to be Roku (NASDAQ: ROKU), the leading streaming platform in the U.S. Though Roku may best be known for its branded dongles that enable streaming, the company makes most of its money through an ad revenue share arrangement with streaming services on its platform. Typically, Roku retains 30% of the ad inventory from its streaming partners and keeps all the revenue it makes from those ads.

Though Roku's revenue growth slowed because of a cyclical decline in ad spending, the growth of the connected TV ecosystem bodes well for it over the long term.

Another company that looks poised to capitalize on the growth of CTV is Magnite (NASDAQ: MGNI), a supply-side adtech platform that rearranged its business to prioritize CTV. In its most recent quarter, CTV revenue rose 29% year over year and now makes up 44% of its revenue, excluding traffic acquisition costs.

The leading demand-side ad tech platform, The Trade Desk (NASDAQ: TTD), also seems well positioned to take advantage of the growth in CTV. Though it doesn't break out CTV revenue, CEO Jeff Green said in the third-quarter results that the CTV market is rapidly growing and is one reason why the company delivered 31% year-over-year revenue growth to $395 million.

Megatrends are worth keeping an eye on

With the rise of these megatrends, there are plenty of ways to profit, and both the transition from point solutions to platforms and the evolution of connected TV look poised to transform their respective industries over the coming years. Companies riding these trends, such as the companies mentioned, are worth keeping an eye on, as they look well-positioned to outperform the market.

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

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What happened

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), the world leader in online advertising, released its third-quarter financial report after the market closed Tuesday, and the results were disappointing. Furthermore, these results were seen as a harbinger of what's to come for the rest of the digital advertising industry.

As a result, many adtech and digital advertising stocks fell in sympathy on Wednesday, as investors considered what was to come. Shares of The Trade Desk (NASDAQ: TTD) and Meta Platforms (NASDAQ: META) slumped as much as 8.1% and 5.5%, respectively, while Amazon (NASDAQ: AMZN) and Roku (NASDAQ: ROKU) had fallen as much as 4.8% and 3.9% respectively. As of 1:59 p.m. ET, the quartet was down 3.9%, 5.1%, 3.9%, and 2.9%, respectively.

This sell-off was broad based, taking down a wide variety of companies that rely on digital advertising for their livelihood. Earlier this year, Google's ad revenue seemed largely immune to the recessionary fears that gripped much of Wall Street. It's well documented that advertising is among the first items in corporate budgets to be slashed in times of economic uncertainty, and it seems that reality has finally caught up with the digital advertising kingpin.

So what

In the third quarter, Alphabet reported revenue of $69.1 billion, which grew just 6% year over year. Foreign currency headwinds played a part, as revenue would have been up 11% in constant currency. For context, revenue in the prior-year quarter grew by 41%.

The pressure on the top line also dented profits, as earnings per share (EPS) of $1.06 declined 24%. Analysts' consensus estimates had called for revenue of $71 billion and EPS of $1.26, so Alphabet failed to clear either bar.      

However, commentary by the company sent investors running for the exits, as management detailed several factors that will weigh on results for the coming quarter. Alphabet cited tough comps, worsening foreign exchange headwinds, and lower ad spending as companies shore up their financial positions in the face of growing economic uncertainty.

As a result of the disappointing results, analysts issued a flurry of price target reductions, with no fewer than 14 of Wall Street's finest cutting their expectations. JMP Securities analyst Andrew Boone seemed to capture the prevailing mood, saying the results were a warning sign that digital advertising this quarter will likely be weaker than originally imagined. 

Bernstein analyst Mark Shmulik echoed those sentiments, writing, "Google is an ad business first, and digital ads [are] no longer a safe place to hide."  

Now what

Alphabet's results seemed to suggest the writing is on the wall for the rest of the digital advertising and adtech space. That said, investors shouldn't be too quick to jump ship but rather assess the potential for each of these companies on their own merit.

Meta Platforms leads the social media space and is widely regarded as the other company in the Google/Facebook duopoly that dominates much of the digital advertising space. Given the similarities in their business models and Meta's reliance on digital advertising for more than 97% of its revenue and all of its profits, the comparison is an appropriate one. After that, however, the contrasts become more pronounced.

Amazon derives the lion's share of its revenue from e-commerce and cloud computing, though in recent years, digital advertising has been one of the company's fastest-growing businesses. Amazon's advertising services revenue grew 20% so far this year but still represents just 7% of the company's total revenue, so the sell-off in this case is likely related to the state of the broader economy and the potential to slow growth in its e-commerce and cloud segments.

Roku is an interesting one. Investors inexorably link the company with its namesake streaming devices, but many are unaware that Roku derives the majority of its revenue from the digital advertising that appears on its streaming video platform. Alphabet said that digital ads on YouTube, the company's streaming platform, declined 2% year over year, the first such decline since Alphabet began reporting the platform's results in 2019. This could spell trouble for Roku in the coming quarters.  

Finally, there's The Trade Desk. The company's adtech platform places digital ads across a wide spectrum of online locations, acting as a go-between for some of the world's largest ad agencies.

When The Trade Desk released its second-quarter report in early August, the results were surprisingly robust. Revenue grew 35% year over year, while adjusted EPS climbed 11%. At the time, CEO Jeff Green made a startling pronouncement, saying (emphasis mine), "This trend also gives us confidence that we will continue to gain market share in any market environment."  

The Trade Desk is seen as a striking alternative to advertising in the walled gardens offered by Google, Facebook, and Amazon. It also has one of the highest valuations, a function of its consistently strong results and entrenched position in the industry. While the stock may yet feel the impact of the economic downturn, The Trade Desk is still my top pick among these digital advertising and adtech stocks. 

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

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After a stellar 2020, Cathie Wood's ARK Invest hasn't done so hot. Shares of the staple ARK Innovation ETF (NYSEMKT: ARKK) are down almost 77% from their all-time highs.

While the firm's results might be changing, its investment strategy isn't. ARK Invest continues to buy innovative growth stocks, and it has become increasingly optimistic about Roku (NASDAQ: ROKU). The streaming platform is ARK's third-largest position across all its ETFs as of this writing.

Why, you might ask? Cathie Wood and ARK Invest have a very optimistic price target on the company of $605 by 2026, which implies a 1,050% return from the stock's current price of roughly $52.60. But is this price target within reach for Roku?

Wood might be overly optimistic...

Many growth investors investing in riskier companies are trying to beat the performance of the S&P 500 Index (SP: .INX), which has returned roughly 11.9% annually since 1957. However, when investors try to "beat the market", many of them anticipate earning only a few more percentage points annually. Therefore, Wood's price target of $605 on Roku might be too outlandish.

This price target reflects more than 1,000% price appreciation over only four years, implying a compound annual growth rate topping 84%. In other words, Wood hopes Roku's share price will jump 84% every year (on average) for the next four years.

While beating the market has been done before, that price target projects some extremely rare price appreciation. For comparison, Apple (NASDAQ: AAPL) has seen returns of roughly 518% over the past decade. While that has handily beaten the market, that's only half of what Wood expects for Roku (over an even shorter period).

This isn't to mention the headwinds facing Roku over the coming year or two. With the challenging economy in the United States right now, Roku has two issues on its hands.

First, consumers are less likely to spend on discretionary goods like televisions right now. Second, the challenging macro environment is causing businesses to pull back ad spending, where Roku makes a lot of its money. Because of this, Roku softened its Q3 revenue guidance, and it now foresees just a 3% year-over-year revenue expansion for the quarter.

Not only that, but Roku's profits fell drastically over the past few quarters. At the beginning of 2022, Roku's trailing-12-month free cash flow was almost $200 million, which has since fallen to a burn of $5 million. The same goes for trailing-12-month net income.

But she might be on to something

While Cathie's price target might be overshooting, there are still reasons to be optimistic about Roku over the long haul. Streaming is picking up drastically, recently overtaking cable TV in terms of usage. According to The Trade Desk (NASDAQ: TTD), connected TV streaming reached 109 million households in the U.S. in 2021, far higher than the 68.5 million cable subscriptions in the U.S. over the same period.

Streaming might be on the rise, but advertisers haven't made the shift yet. Advertisers are predicted to spend just 22% of U.S. TV ad budgets on streaming in 2022, while U.S. consumers ages 18 to 49 spent 50% of TV time streaming in the second quarter of 2022. These figures will likely converge over the long haul as advertisers realize the benefits of advertising on streaming platforms. 

Considering Roku is the leading streaming platform in the U.S., Canada, and Mexico, with over 63 million active accounts, the company looks best positioned to capitalize on this massive opportunity. 

Does the reward equal the risk?

Roku might not be considered a safe stock, but the potential reward for owning the company for the long haul seems to outweigh the risks. Yes, the short term could be painful for Roku as advertisers pull back ad spending and consumers purchase fewer TVs. However, the future is moving toward streaming. As long as Roku remains the leader in this space as streaming picks up, Roku could reap significant benefits over the long haul. 

Additionally, if you're willing to own this stock in a diversified portfolio, you can buy shares now at historically cheap prices. At 2.4 times sales, Roku has not traded around this valuation since coming public in 2017.

With an attractive long-term opportunity ahead and the brand name and scale to benefit, Roku could be a winner, although maybe not as big a winner as Cathie Wood projects. 

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

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Amazon (NASDAQ: AMZN) is no stranger to antitrust lawsuits. Just the other day, California filed a suit against Amazon alleging anticompetitive pricing policies. This filing isn't the first time these allegations have come up, and it likely won't be the last.

Because of the current environment, it's not a far-fetched idea that Amazon could be split up voluntarily or by the government. It's a worthwhile exercise to value each business segment of the company separately for two reasons. First, it could prepare investors for a split. Second, it also serves as a method to value the company and determine if it's worth an investment today.

Let's see how each segment is valued and if Amazon is worth your investment dollars.

A large business with multiple segments

Amazon's business can be split into two main segments: commerce and cloud computing. Commerce is much broader than the website you order items from. It also includes advertising, third-party seller services, and subscription products. Cloud computing, better known as Amazon Web Services (AWS), provides the infrastructure to process workloads through the cloud.

The commerce segment also generates the bulk of Amazon's revenue. Over the past 12 months, the company brought in $485.9 billion in sales overall, and 85% of that came from commerce. However, that segment hasn't made any money over the past year. It lost $7.1 billion; whereas, AWS made $22.4 billion in operating income.

Those figures group all of the many commerce segments together. Amazon doesn't break out its expenses for each segment, but it does break out its sales.

Source: Amazon. YOY = year over year.

This table provides valuable insights. First, its online-store segment didn't grow its sales but is still the largest. Second, AWS is the fastest-growing segment (the "other" segment is volatile, so growth likely isn't sustainable) and the second largest. Lastly, advertising services still grew 21% year over year during a difficult ad environment.

Overall, Amazon's quarter was strong; it was just dragged down by its largest segment having difficult comparisons, because 2021's second quarter was still during the height of COVID-19. But should the company need to be split, it's challenging to determine which segments would go where.

AWS would likely need to be its own entity because it is unrelated to commerce. Advertising could be seen as a conflict of interest, as it should theoretically be a neutral marketplace. One seller could pay Amazon to place its product above other similar ones, even if it is lower rated or more expensive. The rest of the divisions -- online stores, physical stores, third-party services, and subscriptions -- could remain a separate company.

That leaves three separate businesses: cloud computing, advertising, and commerce. Now it's time to determine what each business is worth.

Valuation by parts

To determine what each entity is worth, I'll apply a valuation comparable to companies that perform services similar to the newly formed Amazon businesses. While this approach has flaws, it's a good way to estimate a valuation for each business.

First, investors could compare the commerce business to retail giants like Target Corporation (NYSE: TGT) or Wal-mart Stores, Inc.(NYSE: WMT). These two trade for 0.7 and 0.6 times sales, respectively. While these two companies have a more expensive physical footprint, Amazon has to pay for delivery. However, unlike Amazon's commerce business, Walmart and Target are consistently profitable. Because of this, I will apply a valuation of 0.5 times sales to Amazon's commerce business.

For advertising, The Trade Desk (NASDAQ: TTD) is a similar business. Its ad-tech platform connects buyers to sellers to ensure advertisers get the best results. Amazon's platform has similar capabilities but also deals directly with ads, unlike The Trade Desk. Because of this, I'm going to discount this business significantly. The Trade Desk is valued at 22 times sales, but I'm going to cut that in half for Amazon's ad business to 11 times sales.

Lastly, AWS is likely the most valuable. It's growing quickly and is highly profitable. Its two main competitors, Microsoft's (NASDAQ: MSFT)Azure and Alphabet's (NASDAQ: GOOGL)(NASDAQ: GOOG)Google Cloud, aren't stand-alone companies, so a valuation can't be deduced from them.

There aren't many businesses like it, but Adobe Inc.(NASDAQ: ADBE) comes close. The product isn't close to AWS, but its subscription revenue stream and high operating margins (35%) are similar to AWS. Adobe trades at 8.5 times sales, which is influenced by recent acquisition news. Before then, it traded at 11 times sales. I'll apply a valuation of 13 times sales to AWS to adjust for this drop and account for AWS' faster sales growth.

Now, let's see the value of all three businesses.

Source: Amazon. P/S = price to sales. TTM = trailing 12 months.

Now, let's add up those three segments. Using this method, Amazon's entire business is worth $1.5 trillion. However, its current market cap is $1.26 trillion. That means, according to my valuation method, the company's stock is currently undervalued by 19%. 

So, if Amazon gets broken up by regulators or through its own decision, investors will likely make a quick profit through a split. But that action might not happen.

One thing that is certain is that investors can purchase Amazon's stock today. With its recent price movement, it looks undervalued, and investors should consider establishing a position and holding it for an extended period, even if it gets broken up.

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

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The Nasdaq Composite Index (NASDAQ: .IXIC) is cranking on August 10, 2022, up 2.4% at 12:53 p.m. Today's big gains come as earnings season continues and following the release of the latest inflation data from the U.S. Department of Labor this morning. According to the data, the Consumer Price Index, or CPI, rose 8.5% in July. For context, that's still near the highest levels of the past four decades, but it's trending very much in the right direction after June's 9.1% set a 41-year high.

Today, investors are betting that slowing inflation is a good signal that a sharp recession is less likely. Energy and food prices are moderating, and many companies are still reporting upbeat quarterly results and expectations. Upstart (NASDAQ: UPST) and Affirm Holdings (NASDAQ: AFRM) are at the leading edge of that consumer risk, and their highly volatile stocks are up big today on the optimistic reading of the inflation data.

Today's noteworthy postearnings gainers include The Trade Desk (NASDAQ: TTD), with shares up more than 36% at one point. Investors are also betting on better prospects for renewable and low-carbon energy companies. Shoals Technologies (NASDAQ: SHLS) and Plug Power (NASDAQ: PLUG) are two of those up big today.

When near-record inflation is a "good" thing

While the CPI is still very high, today's interpretation of the data was generally positive. We have seen energy and food prices begin to come down, and some areas of the global supply chain crisis are improving, too. Semiconductor companies, in particular, are reporting that the cycle in that industry is turning from too much demand to too much supply in certain product categories. While that's not a positive for shareholders in the short term, it's positive for the broader economy that the supply shortfall that's kept many products off the shelves and prices very high might be starting to ease.

Investors see this as very positive for Upstart, the AI-driven consumer lending platform, and for buy now, pay later specialist Affirm Holdings, with their shares up 16% and 13%, respectively, at this writing. Both companies live at the leading edge of consumer credit risk. By and large, the bulk of their lending products are unsecured consumer debt (though Upstart is diversifying into auto lending), which is the first kind of credit to see increased rates of default in weak economic periods. However, today's gains could prove temporary, as both saw their stocks fall sharply earlier this week on earnings and economic speculation.

The Trade Desk's second quarter was, by almost every measure, exceedingly strong. It reported 35% revenue growth, continued to retain more than 95% of its customers, and more than doubled its operating cash flows. If there's one not-great number, it's stock-based compensation, which almost tripled year over year and was the primary factor in The Trade Desk reporting a GAAP loss.

What happens next? Plenty of volatility as investors try to telegraph what happens in the near term. Investors in both companies should be prepared for that and acknowledge that their risks will be amplified if consumers continue to get squeezed. The companies' long-term prospects, however, are tied to their ability to keep disrupting the traditional credit card and consumer lending industries.

The Trade Desk shakes off earnings woes for adtech

The Trade Desk's results were a breath of fresh air for the adtech industry. In recent weeks, many of the companies that are deeply involved in the growing digital ad industry have reported somewhat mixed results. The mature giants like Facebook parent Meta Platforms (NASDAQ: META) have reported strong ad volume but falling ad rates, as marketers have cut ad spending.

Investors seem happy to trade a portion of equity to co-founder and CEO Jeff Green, however, as part of his compensation. Shares are up a massive 36% at this writing.

Cleantech stocks cleaning up today -- can they keep it up?

The stocks of a number of clean energy companies are up big today. Shares of Shoals Technologies, which makes electrical wiring for utility-scale solar plants, are up 14% today, joining hydrogen companies Plug Power and Bloom Energy (NYSE: BE). The latter's shares are up more than 15% after Bloom reported expectations-beating earnings and said it expects to be cash flow positive for the full year.

Plug Power reported on August 9. Unlike Bloom, its results came up short of expectations. However, analysts continued to have bullish outlooks, raising their price targets on the company, partly due to the expected tailwinds of the recently passed landmark federal climate legislation.

Looking beyond near-term price targets and potential tailwinds from the new climate law, investors should focus on the financials. Plug Power has a very long record of cash burn (it has never had a positive-cash-flow year in its multidecade history), while Shoals and Bloom have demonstrated positive cash flows in the past and are trending in positive directions.

Optimistic thinking is nice, but as investors, we mustn't forget that long-term wealth comes from a healthy -- growing -- bottom line.

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

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Netflix (NASDAQ: NFLX) surprised investors when management shared its plans to start offering an ad-supported tier of the streaming service in the near future. The company has long eschewed the idea of advertisements on its platform, but it's gotten to work quickly as it looks to stem subscriber losses.

Importantly, the company is looking to partner with other companies in order to streamline the operation. "We can be a straight publisher and have other people do all of the fancy ad-matching," co-CEO Reed Hastings said during Netflix's first-quarter earnings call. With the massive popularity of Netflix, those "other people" could have a big opportunity ahead.

Here are four companies that could benefit from Netflix's advertising plans.

1. Alphabet

Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google is an absolute beast when it comes to digital advertising. That said, its premium video advertising experience is limited. While YouTube generated $29 billion in ad revenue for the company last year, Netflix might want more premium advertisements than the standard ad seen next to user-uploaded videos on YouTube. Something more akin to television commercials. 

Google has been pushing into that market. It operates YouTube TV, where it's tasked with filling a couple of minutes of advertising for every hour of programming. It's also worked with Disney since late 2018, serving ads across video, desktop, and mobile.

The real value Google brings to the table is that it has a global user base, just like Netflix. In fact, YouTube is the only streaming service more widely used than Netflix. If the streaming service company wants a simple one-stop shop, Google is it.

2. Comcast

Comcast's (NASDAQ: CMCSA) media subsidiary NBCUniversal is a massive ad seller and a leader in ad technology for television. Its Freewheel ad technology could be the backbone for streaming ads on Netflix, as it already is on its own Peacock platform and several other streaming services. 

Moreover, NBCUniversal already has an ad sales team set up in the U.S. and Europe that could source premium ads for all the inventory coming to Netflix. As such, Netflix might be able to generate the highest revenue per ad impression in those regions by partnering with NBCUniversal.

Despite NBCUniversal's competitive position against Netflix, its ad-tech platform is widely used throughout the media industry. Disney used Freewheel before it switched to Google, for example. So despite the conflict of interest, it's capable of supporting other media companies.

For Netflix to work with NBCUniversal, it may need to find an additional partner or hire some staff in-house for ad sales and integration outside of Europe and the U.S. It's not clear if that's something it's looking to do, but outsourcing could be difficult as The Wall Street Journal reports NBCUniversal is looking for an exclusive contract.

3. Roku

Rumors began swirling that Netflix was interested in buying Roku (NASDAQ: ROKU) earlier this month. That might not be the best investment Netflix could make, and partnering with the connected-TV platform could be a much more reasonable choice. 

Roku could benefit from an ad-supported tier by using it as an opportunity to renegotiate its distribution agreement with Netflix. Roku may look to take a share of the advertising on Netflix, participating in the upside potential of the product instead of taking a flat commission on customers who sign up for the service through its platform. It could also push Netflix to buy ads on its home screen, something it's managed to get Netflix's competitors to do in its negotiations. Disney, for example, often does home-screen takeovers for new Disney+ releases on Roku's platform.

4. The Trade Desk

The Trade Desk (NASDAQ: TTD) offers a demand-side platform that connects media ad buyers with premium connected-TV ad inventory. Netflix could offer excess inventory that it or its partners haven't sold directly through The Trade Desk, enabling it to maintain high-quality ads while keeping a lean advertising sales team. 

The Trade Desk generates revenue by charging ad buyers a percentage of gross spend on its platform. If it has more premium ad inventory to fill via a partnership with Netflix, it ought to be able to increase revenue. Estimates put the amount of annual advertising spend on Netflix in the U.S. and Canada alone at around $2.5 billion. Granted, that likely wouldn't all go through The Trade Desk, depending on Netflix's other ad-tech partners, but a significant chunk could end up coming from its buyers.

Netflix could be a pivotal partner

As Netflix moves toward launching its ad-supported tier, investors will want to pay close attention to which company it partners with, as they could provide a significant boost to revenue over time. While it might take some time for advertising to become a significant part of Netflix's business, the impact could be seen much more quickly for any of the above companies. 

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

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The recent bear market has left many investors scared and reluctant to invest. Many one-time high-flyers in technology, both inside and outside the Nasdaq Composite, now trade at a fraction of their highs. The Composite itself is down about 31% year to date. 

However, that bear market means that $1,000 buys a lot more stock than it did a year ago. To that end, the market has priced Amazon (NASDAQ: AMZN) and The Trade Desk (NASDAQ: TTD) well within the range of such investors.

Amazon stock is trading at a substantial discount

Until recently, Amazon shareholders with only $1,000 to invest would have had to settle for a partial share. But now that Amazon just split its stock 20-for-1, small-scale investors have an easier time buying whole shares of this e-commerce and cloud giant.

Even with an extensive online retail footprint, consumers have bought less online, which has hurt Amazon stock. Investors have sold off as its North America and International divisions reported negative operating income.

Still, Amazon Web Services, which pioneered the cloud computing industry, continues to fire on all cylinders. It made up only 16% of Amazon's revenue in the first quarter of 2022, but that revenue grew by 36% year over year.

This far exceeded the 7% revenue growth for the company over the same period in Q1. That revenue, which amounted to over $116 billion, still led to an overall net loss of $3.8 billion, down from an $8.1 billion profit in the year-ago quarter. This slower revenue growth has likely contributed to a 45% drop in Amazon's stock price from its 52-week high. 

Nonetheless, analysts believe it can recover to 12% revenue growth for 2022. Moreover, the lower stock price has taken the price-to-earnings ratio to 50, a substantial discount for a stock that has often sold for over 100 times earnings in recent years. Given cloud resilience and a likely retail recovery, such a price point could make today a good time to start adding Amazon positions. 

The Trade Desk's stock sells at a 60% discount at the moment

Investors who don't know this company may assume it has something to do with trading stock. While it most certainly operates a market, this particular trade desk buys available advertising inventories.

Additionally, to foster a competitive advantage, it helps clients tailor media campaigns and set spending parameters to ensure they buy ad spaces that would enhance the marketing goals of clients. And it utilizes further advantages through software. Thanks to a new platform called Solimar, it can work around privacy updates from Apple and Alphabet. Also, with its Unified ID 2.0 solution, clients no longer need access to third-party cookies, a concern that has hurt some media stocks in recent months.

In the first three months of 2022, its revenue of $315 million surged by 43% year over year. This means revenue growth had remained consistent with 2021, when revenue also grew by 43%. Though the company reported a $15 million GAAP loss, non-GAAP income rose 50% to $105 million when excluding stock-based compensation and an income tax adjustment.

Still, The Trade Desk also predicts modest slowing as it forecast $364 million in second-quarter revenue, which would mean a 30% surge year over year if that figure holds.

Investors have turned on the company amid the more modest increases, and it sells at a nearly 60% discount to the 52-week high. However, the price-to-sales ratio of 18 is a two-year low and has fallen from 50 in November. This discount and its growth potential could make it a great time for a starter investment. 

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

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The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Shaw and Partners portfolio manager James Gerrish tips a couple of quality businesses that have been oversold and will roar back.

Hottest ASX shares

The Motley Fool: What are the 2 best stock buys right now?

James Gerrish: Goodman Group (ASX: GMG) and Hub24 Ltd (ASX: HUB). 

It's all about buying quality that's been sold off. So if you think the year that we're likely to have is going to be dictated by big change, change is entrenched from a sector point of view, but [dictated by] quality companies coming in and out of vogue. 

Goodman's down 16% from its highs. That's a really high quality company that's growing really strongly. They've got caught up in the sell-off of high valuation stocks. 

And Hub24 is similar. It's fallen 30%. They just came out with their best quarterly trading update in a long time. The growth there is accelerating. 

But I think the important thing is they're real businesses. There's a lot of high-value type stocks that are promising a lot, but are yet to deliver. These are stocks that have delivered, and the trend of delivery is there and ingrained. I think this year you want to be in things that have got some defensive qualities, but also, you want to be high quality. 

This is why this year could be such a good year. You will get opportunities in those high quality companies.

The market has ultimately become too bearish bonds — bullish bond yields — and if we're correct here, these high quality growth-oriented stocks will recover strongly in the near term. Importantly, however, that is not a long term view. It's a more short to medium term stance in response to the question of what to buy right here.

Looking back

MF: Is there a move that you regret from the past? For example, a missed opportunity or buying a stock at the wrong timing or price.

JG: There are always lots of regrets in the market, I should have done this, I should have done that. It's important to frame these as learnings — and over the years you tend to have fewer of these pop up if you learn from each one. 

The most recent 'learning' has been around how quickly and aggressively hot money can come out of technology. While we were correct on the macro side in 2021 and into the start of 2022 around interest rates, we should have been more aggressive in culling our exposure as a consequence of that view. In our International Equities Portfolio, our position in Trade Desk Inc (NASDAQ: TTD) springs to mind here.

We called the macro pretty reasonably well, around interest rates and to remain underweight technology in that environment. I regret not being more aggressive in reducing some of our holdings in that space… Where we've still got painful holdings there, we could have done better in terms of exiting them based on our macro view.

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The world of digital advertising is once again on the verge of a sea change, the result of the latest privacy move by Apple Inc (NASDAQ: AAPL). With an upcoming update to iOS 14, iPhone users will be required to explicitly consent to allow app publishers to track them across the apps and websites they visit. This has the digital-advertising industry up in arms.

Facebook Inc (NASDAQ: FB) is sounding the alarm, saying its business will be "severely impacted" by Apple's decision. The company has even gone so far as to take out a full-page ad in The Wall Street Journal decrying the move and claiming it will be harmful to small businesses, though its claims are tenuous, at best. 

It's important to note, however, that not all digital advertisers are created equal. Take The Trade Desk Inc (NASDAQ: TTD), for example. It said it doesn't expect the change to create a material impact on its business. What's an investor to think?

IDFA: A primer

To understand what all the fuss is about, it's important to know what's actually happening. The identifier for advertisers (IDFA) is a unique ID assigned to each iOS device, which currently allows app publishers to track the activity on a specific device as it moves between apps and websites, in order to provide more individualized and targeted advertising.

In previous versions of iOS, users could opt-out by choosing the "limit ad tracking" option in their device settings. This resulted in roughly 30% of users opting out in 2020. Apple announced that it will roll out an update to iOS 14, now scheduled for early 2021, that will notify iPhone users of the tracking and specifically require users to opt-in for each app, in order to continue being tracked. It's estimated that after the update, the number of users sharing their data will drop to between 10% and 15%, plummeting from roughly 70% today. 

With an installed base of more than 1.5 billion devices worldwide and an estimated 900 million iPhones, Apple could have a significant impact on the ability of marketers to provide relevant advertising to iOS device users. 

A tale of two advertisers

Facebook has been justifiably concerned about the development, as its ability to deliver targeted ads to iPhone users will be severely limited. The company has conducted internal testing and seen "more than a 50% drop" in the revenue generated by its Audience Network advertising platform when it removed the ability to offer up these highly targeted, personalized ads. Facebook even said it's considering shuttering the platform for iOS 14. 

The Trade Desk is not expecting the same kind of hit. In the latter company's third-quarter conference call, CEO Jeff Green went to great pains to lay out why Apple's move isn't expected to impact its business very much. Green said that only about 10% of the advertising spend conducted on its platform is reliant on IDFA, a figure that has been consistent for quite some time, saying it "doesn't have a material impact to our business." The Trade Desk serves more than 12 million ads every second, with only about 1 million of those related to IDFA. 

Green also points out that limiting IDFA across all apps will have a negative impact on the customer experience, specifically citing cases like Netflix or Dropbox. After a time, he theorizes that companies will go back to consumers, inviting them to "upgrade" their experience by opting back in, which he believes will ultimately be successful.

A final note

By limiting its exposure to IDFA, The Trade Desk has insulated itself against the issues now faced by Facebook. It remains one of the undisputed leaders in programmatic advertising but is still just getting started. The Trade Desk generated revenue of $661 million last year, which pales in comparison to the roughly $29 billion that was spent on programmatic advertising in 2019. 

Fears regarding the impact of Apple's move were partially responsible for a decline in The Trade Desk's stock price in recent weeks, as shares have dipped nearly 16%. That gives astute investors the opportunity to buy this high-flyer at a significant discount.

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

The post Apple's latest privacy move is a blow for Facebook, but not The Trade Desk. Here's why appeared first on The Motley Fool Australia.

Although the ASX 200 slipped yesterday, and is down 0.5% in late morning trading today, that positive outlook certainly remains true.

However, while there are plenty of great performing shares on the ASX you should have in your portfolio, today I want to stress the importance of looking beyond the local markets. Specifically, to US markets.

Why you shouldn't limit yourself to ASX shares

Let's look at the relative performance of the Aussie and US markets first.

Over the past 12 months the ASX 200 is down 3.4%. Over 5 years it's up 27.2%.

Over the past 12 months the S&P 500 Index (INDEXSP: .INX) is up 15.1%. Over 5 years it's up 73.7%.

The tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) has performed even better. Over the past 12 months the Nasdaq is up 38.9%. Over 5 years it's up 135.9%.

Have another look at those returns. A picture may paint a thousand words, but these figures speak for themselves.

Tremendous benefits

Scott Phillips, the Motley Fool's chief investment officer in Australia, has had great success investing in ASX shares. But he's also a strong proponent of investing internationally, particularly in US share markets.

Here's an excerpt from an article he wrote for his investment service, Share Advisor, in April 2019:

Investing internationally delivers tremendous portfolio diversification benefits and brings a world of opportunities to your investment doorstep…

The fact of the matter is — some of the very best companies on planet Earth aren't listed on the ASX. The Australian share market is a minnow on the global stage. Our share market represents a tiny 2% of global stock markets. If you exclude our two big miners and four large banks, that falls to almost 1%…

By investing part of your funds internationally you not only increase the opportunity to find the big winners of tomorrow, but you also reduce the risks that are specific to Australia. Risks that could seriously damage your portfolio.

Most online brokers these days offer you relatively inexpensive (and sometimes free) access to trading US shares.

You should be aware of the additional risks, though, chiefly currency fluctuations. If you invest in US shares and the Aussie dollar appreciates against the greenback, this will negatively impact your returns. Of course, if the Aussie dollar falls in value against the US dollar, it will boost those returns.

Why Bank of America and Blackrock are bullish on US shares

As the Australian Financial Review reports, Bank of America Corp (NYSE: BAC) is bullish for the outlook of US shares.

Noting that risks remain around the delivery of COVID vaccines and the potential for lengthier global lockdowns, the bank forecasts that a 5% increase in the S&P 500 from its Wednesday close is a conservative estimate:

[A] few themes support stocks: the S&P 500 dividend yield is three times the 10-year yield, and S&P 500 dividends are set to increase in 2021. And unlike bond yields, earnings are nominal and participate in inflationary upside – where inflation risks may be running higher, given rampant money-printing and a potential post-vaccine spike in demand…

Technology and Health Care offer neglect and growth at a reasonable price. We are underweight Staples, Real Estate and Comm. Services which represent past leadership, in our view, of bond-proxies and secular growth. We prefer small to large amid expectations for a strong US economic recovery.

BlackRock Investment Institute is also optimistic on the outlook for US shares, saying investors should look beyond the current volatility.

According to Mike Pyle, global chief investment strategist at BlackRock (quoted by Bloomberg):

We upgrade U.S. equities to overweight, expecting this market to benefit from both structural growth trends and a potential cyclical upswing during 2021. Positive vaccine news reinforces our outlook for an accelerated restart during 2021, reducing risks of permanent economic scarring.

BlackRock stated that apart from the mega-cap tech stocks, there are also semiconductor and software companies with strong growth trends that face few regulatory risks.

2 outperforming US shares with a 'buy' rating

We leave off today with a look at 2 outperforming shares Scott Phillips has previously recommended to the members of Share Advisor. Though they've posted strong gains since his recommendations, Scott maintains a 'buy' rating on both.

First up is Trade Desk Inc (NASDAQ: TTD). The company helps advertisers place programmatic ads across the web, on mobile, and in other places.

Scott recommended Trade Desk on 19 July 2019. His reasons to buy included the company's innovative business model's success at winning and keeping customers, its treasure trove of data to help clients, and its fast growing and scalable business.

Since Scott recommended it, the Trade Desk share price has rocketed 266.4% higher.

Today's second outperforming US share is Match Group Inc (NASDAQ: MTCH). The company owns more than 40 separate online dating platforms including Tinder.

Scott recommended Match Group on 18 June 2020. His reasons to buy included the company's impressive history of growth, the fact that Tinder continues to lead the way among dating apps, and that Match Group had plenty of room to grow profitability.

The Match Group share price is up 60.6% since 18 June.

At risk of being repetitive, when it comes to looking beyond ASX shares, these figures speak for themselves.

The post Why investors should look beyond ASX shares for outsized gains appeared first on The Motley Fool Australia.

Here are a few things you can do to manage your ASX 200 portfolio, prepare for tax time and ensure you only pay the tax you are required to pay.

Rebalance your ASX 200 portfolio allocations

The financial year end provides a great opportunity for you to review your portfolio and investment strategy. This can be particularly relevant for growth investors, or investors who are not contributing more capital to their investment portfolio. 

Growth investors will often have an oversized portion of their portfolio concentrated in a few shares that have done particularly well. Each individual investor will have their own comfort level when it comes to concentration of risk. I was in this position with Altium Limited (ASX: ALU) and The Trade Desk Inc (NASDAQ: TTD) last year. This was because they had both grown much faster than the rest of my portfolio. Personally, I prefer to let my winners run and am continuing to add funds to my investment portfolio. Therefore, these winners are a part of my portfolio I'm comfortable with.         

Pay the piper, later   

Your individual circumstances, including whether your shares are in a gain or loss position, will dictate the best time or times to rebalance your portfolio. For example, if you already have a capital gain in FY20, selling shares at a loss before 30 June will mean you can reduce your gain. If the shares you want to sell down as part of the rebalance are in a gain position, waiting until 1 July could provide you an additional year before the tax is due. This is because the gain will be included in your FY21 tax return.

Organise your shoebox

Whether you give your accountant a shoebox or send them a link to a cloud drive, getting your documents in order prior to year end will give you a better idea of your tax position. This means you can also better plan your cash flows and invest accordingly. 

A further benefit is that if you have all of your Cochlear Limited (ASX: COH) retail entitlement documentation or Telstra Corporation Ltd (ASX: TLS) dividend reinvestment plan purchases organised, your accountant should be able to work more efficiently and you might save on their fees.

Foolish takeaway

Tax shouldn't be what drives your investment decisions, but it should be a consideration. ASX investors should target outperforming the ASX 200 index's return, after fees and taxes. Furthermore, legally lowering your average lifetime tax rate can significantly increase your annualised growth rate and wealth over time.

The post Tax planning for ASX 200 investors appeared first on The Motley Fool Australia.

Play with your portfolio

In my previous article on reviewing your finances, I mentioned that preparing your taxes is a great way to potentially boost your cash flow in tough times. One step before this, you should review your ASX share portfolio.

At any point in time, you should be able to look at your portfolio and feel comfortable holding each stock for the long-term. This comes in two parts:

Rebalancing

Firstly, are you happy having a share or two represent an outsized portion of your stock portfolio? In general, your long-term winners will grow as a percentage of your investment portfolio.

For me, that's Altium Limited (ASX: ALU) and Trade Desk Inc (NASDAQ: TTD). They may be great businesses which you want to hold onto going forward, but your diversification is reduced if 20% of your portfolio is in one stock.

Work out what percentage will let you sleep at night and sell down a position as required.

Alignment with your needs, goals and objectives

Additionally, when reviewing your portfolio overall, it should reflect your personal circumstances and goals. A few questions to ask yourself are:

• Do I need any of this money in the next few years?
• Do I have the right balance of growth, dividend and value shares?
• Am I diversified enough by industry, market capitalisation and geographically?

Tax loss selling

Once you have asked yourself these questions, it may be worth considering tax loss selling. As part of your tax planning and portfolio review, you'll likely identify some companies that you don't want to hold going forward which are in a capital loss position. These capital losses can be offset against capital gains in the year they are incurred, or carried forward.

Another benefit of this is that your remaining portfolio reflects your highest conviction investments going forward.

As always, discuss this with your accountant based on your personal circumstances.

Buy recession-resistant and discounted shares

As we've seen in the past, the stock market doesn't perform well in recessions. However, this can provide the opportunity to buy quality businesses at lower valuations.

Some ASX shares currently selling for a discount to recent highs include REA Group Limited (ASX: REA) and Cochlear Limited (ASX: COH).

Not all businesses or industries are built the same. Industries like consumer staples or utilities are necessities in both good times and bad. Just look at Coles Group Ltd (ASX: COL) which has handily beaten the market recently.

Subscription-based businesses can also do quite well in recessions. A perfect example of this is Netflix Inc (NASDAQ: NFLX).

The post My final tip to help you prepare for a recession in 2020 appeared first on The Motley Fool Australia.

Why methodically? Because picking the bottom of a bear market is a (lower-case 'f') fool's errand.

The lower oil price and economic impacts of the COVID-19 pandemic will be felt by the broader economy, but some companies will be affected positively while others will be hurt.

1. Add to your winners

As famed investor Peter Lynch would say, "the best stock to buy is the one you already own". To quote another great investor and The Motley Fool co-founder David Gardner, "Winners win".

Hopefully you hold a well diversified portfolio of at least 15 shares. Over time, you will likely see a few of these companies deliver outsized performance and drive most of your portfolio's returns. Adding to these long-term winners can help to supercharge your investment returns. Companies that are growing quickly tend to continue to do so because of a comparative advantage. They may have the strongest brand, high barriers to entry, or best product or leadership.

For my portfolio, these companies are Altium Limited (ASX: ALU) and Trade Desk Inc (NASDAQ: TTD). Together, they represent over 12% of my wealth, but I'd be happy to add to these positions. They are stellar businesses and in the case of the Trade Desk, could actually benefit from the changing behaviour associated with COVID-19.

Whatever these stocks are for you, because they have performed well, they may represent a significant portion of your overall wealth. If this is more than 10% of your portfolio, make sure that you are comfortable having so much invested in one company.

If you are just starting out investing and looking to build a portfolio, there are plenty of high quality long-term winners to choose from. Examples include CSL Limited (ASX: CSL) and Xero Limited (ASX: XRO).

2. Buy dividend paying ASX shares

Dividend paying shares tend to be some of the best listed businesses. This is because they have a strong history of earning positive free cash flow, showing that their business can make money over time. Dividend payers also generally have strong balance sheets, which provides security and opportunity during times of uncertainty.

Dividend yield is important, especially if you need the income, but dividend payers can and should also be able to grow over time. Some great examples of this are Altium and Aristocrat Leisure Limited (ASX: ALL).

The post 2 tips for buying shares in an ASX bear market appeared first on The Motley Fool Australia.