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.

Enterprises are increasingly relying on data to drive business decisions. One of the most critical components of data synthesis and aggregation is cloud computing, a form of server virtualization to deliver infrastructure-as-a-service (IaaS). Instead of investing heavily into capital expenditures in the form of physical servers, cloud providers allow customers more scalability because enterprises are essentially outsourcing active management of data aggregation and server maintenance. According to Gartner, the public cloud market is dominated by Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), and Amazon is emerging as the leader. Does that positioning merit an investment in the web giant right now?

AWS has proven tough to beat

Through the first nine months of 2021, Amazon’s cloud segment, Amazon Web Services (AWS), generated $44.4 billion of revenue while operating at a 30% margin. For one point of comparison, Google Cloud contributed $13.7 billion of revenue for the first nine months of 2021 and is unprofitable, as it reported a loss of $2.2 billion.

What’s even more staggering is the pace of AWS’s growth. During Q3 2021, AWS generated $16.1 billion of revenue, which represented 39% year-over-year growth. Investors can see that the quarterly operating income of $4.9 billion for the AWS segment was more than Amazon’s entire business combined. Amazon Web Services is arguably becoming the most important pillar of the company’s ecosystem.

Despite the impressive growth of AWS and the operating leverage it’s providing Amazon’s business, investors may find it curious that Amazon stock has remained relatively flat over the last 12 months. Competing cloud providers Microsoft and Google witnessed 42% and 52% stock price increases over the last 12 months, compared to Amazon’s 0.10%.

Ambitions beyond the cloud

Amazon has been able to reinvest the profits from its cloud business into other segments, as the company works to differentiate itself from other technology behemoths. One area that is quickly becoming an important crux of Amazon’s business is digital advertising.

According to eMarketer, Amazon is expected to comprise 10.7% of the U.S. digital ad market in 2021 and grow to 12.8% by 2023. Although the uptick has been bolstered by increasing consumer reliance on digital shopping during the pandemic, one could argue that this theme will stick because Amazon’s platform makes it more time-efficient and cost-effective for consumers to make purchases online versus going to a physical retail location.

The boom on the digital ad side of its business could serve as another lucrative catalyst for the company as it gains market share from Google and Meta Platforms. On the contrary, eMarketer predicts that Google’s digital ad business in the U.S. is expected to decrease from 28.9% in 2020 to 26.6% in 2023. 

Amazon is well-positioned to benefit from enterprise investment in digital transformation. As the company gains market share over its competition, AWS’s capital efficient margin profile will continue fueling additional growth drivers as the company looks to enter new industries.

When in doubt, zoom out

Investors and Wall Street analysts kept a close eye on Amazon during 2021 as the company significantly increased its operating expenses to combat pandemic-driven supply chain speed bumps. The effects of these increased expenses were most apparent in the company’s Q3 2021 financials. For the quarter ended Sept. 30, 2021, Amazon reported operating margins of 1.3% and –3% for its North American and International e-commerce segments, respectively.

During times of economic uncertainty, it is important for investors to zoom out and look at the larger picture. Microsoft, Google, and Amazon all appear to be compelling investments, especially given many growth and technology stocks witnessed significant sell-offs during the final months of 2021 due to lingering concerns over inflation. Although Amazon’s overall profitability profile has taken a hit due to challenges on the e-commerce side of the business, it could be argued that this is primarily a function of short-term headwinds related to wage inflation and supply chain. The growth in AWS has allowed the company to combat these near-term challenges given the strong operating profits it produces. Moreover, Amazon is able to reinvest some of these profits into other areas such as digital market, entertainment, and consumer electronics.

Amazon’s business appears far more prolific than its competitors who are heavily reliant on singular products, namely hardware devices and advertising, which are also markets that Amazon competes in. As the company trades for three times trailing 12-month sales compared to Microsoft’s 15 times and Alphabet’s eight times, now may be a unique time for investors to consider Amazon before its next bull run. 

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

The post The cloud wars are heating up, and Amazon is primed to thrive appeared first on The Motley Fool Australia.

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Adam Spatacco owns Amazon, Microsoft, Alphabet, and Facebook. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft 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. 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 has recommended Alphabet (A shares), Alphabet (C shares), Meta Platforms, Inc., and Microsoft and Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Gartner and recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Meta Platforms, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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Have you got room for a blue chip or two in your portfolio? If you have, then take a look at the excellent ASX 200 blue chip shares listed below.

Here’s why they are highly rated:

CSL Limited (ASX: CSL)

The first blue chip ASX 200 share for investors to look at is CSL. It is one of the world’s leading biotechnology companies, comprising the CSL Behring and Seqirus businesses. Both are leaders in their respective fields – plasma therapies and vaccines.

And while COVID headwinds have been weighing on plasma collections over the last two years, CSL appears well-placed for growth once conditions ease. Particularly given strong demand for its immunoglobulins and vaccines, and its lucrative R&D pipeline. The latter is full of potential therapies that could boost sales materially in the future. CSL has also recently announced the proposed acquisition of Vifor Pharma, which will boost its offering in other lucrative markets.

Citi is a fan of CSL. It recently upgraded the company’s shares to a buy rating with a $340.00 price target. This compares favourably to the most recent CSL share price of $262.57

ResMed Inc. (ASX: RMD)

Another blue chip ASX 200 share to look at is ResMed. It is a medical device company with a focus on the growing sleep treatment market.

Management estimates that there are over 1 billion people globally that suffer from sleep apnoea. However, the vast majority of these people are yet to be diagnosed. This gives ResMed a significant market opportunity to grow into as awareness grows and more and more sufferers are diagnosed.

Especially given its industry-leading products, wide distribution network, and investment in research and development. The latter has led to the development of its new CPAP device, AirSense 11. This device appears to have cemented its leadership position, particularly given how one of its biggest rivals is currently dealing with a significant product recall of 5.2 million CPAP devices.

Credit Suisse is very positive on the company and recent retained its outperform rating and $43.00 price target. This is notably higher than the latest ResMed share price of $32.73.

The post 2 excellent blue chip ASX 200 shares to buy this month appeared first on The Motley Fool Australia.

More reading

• Analysts name 2 excellent ASX 200 shares to buy
• Has the CSL (ASX:CSL) share price dropped back into the buy zone?
• 2 killer ASX shares to buy for a volatile 2022
• How is the CSL (ASX: CSL) share price performing in the age of Omicron?
• Leading fund manager says these blue-chip ASX shares are buys right now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. The Motley Fool Australia has recommended ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you’re looking to take advantage of recent market volatility by making some new additions to your portfolio, then you may want to look at the shares listed below.

Here’s why these ASX shares have been rated as buys:

Breville Group Ltd (ASX: BRG)

The first ASX share to look at is Breville. It is a leading appliance manufacturer responsible for a number of popular brands. These include Kambrook, Sage and the eponymous Breville brand. Thanks to its global expansion, burgeoning product pipeline, and favourable consumer trends, it has been tipped to grow strongly over the long term. Morgans is positive on the company and has an add rating and $34.00 price target on its shares.

Lovisa Holdings Limited (ASX: LOV)

Another ASX share to look at is Lovisa. It is a fast-fashion jewellery retailer with a growing global store network. While the company surprised the market with the announcement of the exit of its long-serving CEO last year, its replacement has gone down very well with investors. Lovisa has appointed Victor Herrero as its new CEO. He was previously the Head of Asia Pacific and Managing Director Greater China for Inditex (Zara, Pull & Bear and Massimo Dutti), the CEO of Guess, and the CEO of Clarks. The team at Macquarie was pleased, especially given that Mr Herrero has experience in China and India. These will be a key focus for Lovisa’s expansion in the future. In light of this, Macquarie has put an outperform rating and $25.00 price target on its shares.

South32 Ltd (ASX: S32)

Finally, another ASX share to consider is South32. It is a diversified mining and metals company producing bauxite, alumina, aluminium, copper (soon), energy and metallurgical coal, manganese, nickel, silver, lead, and zinc. Thanks largely to its exposure to a number of in-demand commodities such as aluminium, it has been tipped to generate significant free cash flow in the coming years. It is for this reason that Goldman Sachs has a conviction buy rating and $4.60 price target on its shares. The broker is also expecting double digit dividend yields for a number of years.

The post 3 top ASX shares to buy in 2022 appeared first on The Motley Fool Australia.

More reading

• Here are the 3 most heavily traded ASX 200 shares this Monday
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Lovisa Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• AGL, Origin Energy shares closed lower today
• Beach Energy, Woodside Petroleum, and Santos also finished in the red
• Natural gas prices have fallen 19% since 12 January

ASX energy shares, including AGL Energy Ltd (ASX: AGL) and Origin Energy Ltd (ASX: ORG), have had a tough day on the market.

The AGL share price fell 2.74% to $7.10. Meanwhile, the Origin Energy share price closed 1.58% lower at $5.60. For perspective, the S&P/ASX 200 Index (ASX: XJO) ended the day down 0.51%.

Let’s take a look at what may be impacting energy shares.

Tough day for ASX energy shares

AGL and Origin finished in the red today, but they were not alone. The broader S&P/ASX 200 Energy (ASX: XEJ) also closed 0.53% lower.

Investors could be reacting to the declining price of natural gas. The commodity has fallen 1.68% in the past day to $US3.932 per MMBtu.

Since 12 January, the natural gas price has plummeted by a whopping 19% from US$4.8570 to US$3.932 per MMBtu.

Despite the fall in price, AGL and Origin are reportedly planning to pass increased natural gas costs to consumers, the Herald Sun newspaper reported yesterday.

Origin executive general manager Jon Briskin told the publication:

The increase in natural gas prices for variable rate plans is primarily due to a significant increase in what it costs us to purchase and supply this gas to our customers.

Increasing prices is not a decision we take lightly, which is why we absorbed some increases in network costs in Victoria over the past few years to keep gas prices flat for our customers throughout 2019 and 2020

Meanwhile, in other energy stocks today, the Beach Energy Limited (ASX: BTP) share price fell 1.05%, Woodside Petroleum Ltd (ASX: WPL) dropped 0.24%, and Santos Limited (ASX: STO) dipped 0.14% today.

As my Motley Fool colleague James reported this morning, oil prices dropped on Friday, with the WTI crude oil price falling 0.5% and Brent crude oil prices dropping 0.55%.

Share price recap

AGL shares have dived around 40% in the past year, while Origin Energy shares have climbed 9.6%.

In comparison, the benchmark ASX 200 index has returned about 5% in the past year.

The post Why AGL (ASX:AGL), Origin (ASX:ORG) shares tumbled today? appeared first on The Motley Fool Australia.

More reading

• Why UBS says the Woodside (ASX:WPL) share price is a buy
• 5 things to watch on the ASX 200 on Monday
• Own AGL (ASX:AGL) shares? JP Morgan is overweight, tips 23% upside in 2022
• 2 cheap ASX 200 shares rated as top buys
• 5 things to watch on the ASX 200 on Friday

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

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