The ALE Property Group (ASX: LEP) share price is rocketing today, up 21% in late morning trade. And this for a company with a market cap north of $1.1 billion.

Below we take a look at the acquisition proposal that appears to be fuelling ASX investor interest.

What is Charter Hall proposing?

ALE Property’s share price is surging after reporting that Charter Hall Long WALE REIT (ASX: CLW) and a Charter Hall managed trust on behalf of Hostplus have entered into a Scheme Implementation Deed (SID) to acquire all of its shares.

The acquisition, via schemes of arrangement, remains subject to certain conditions being met. On completion, Charter Hall and Hostplus – CLW’s existing capital partner in the Long WALE Investment Partnership – would each own 50% of ALE Property’s assets.

The acquisition would see ALE investors receive $5.683 per share. That’s right at the current ALE Property share price of $5.69, up 21% from the opening bell.

Investors would receive $3.673 cash along with 0.408 Charter Hall shares for each ALE Property share they hold.

ALE Property shareholders will still receive the September quarter distribution of 5.5 cents per share without impacting on that offer.

Commenting on the acquisition, Charter Hall’s fund manager Avi Anger, said:

We believe the Transaction is attractive and designed to deliver significant benefits to both LEP and CLW securityholders. The transaction is consistent with CLW’s strategy to invest in high quality real estate assets that are predominantly leased to corporate and government tenants on long term leases.

We are pleased to be able to continue our partnership with Hostplus, a leading Australian Superannuation Fund, in investing in high quality pubs and liquor retail outlets leased to Endeavour Group.

The total value of the acquisition, including transaction costs, is estimated at $1.68 billion.

The ALE Property Board unanimously recommended shareholders vote in favour of the transaction, barring a superior offer emerging.

ALE Property share price snapshot

The ALE Property share price has gained 24% year-to-date and is up 21% today.

By comparison the All Ordinaries Index (ASX: XAO) is up 9% in 2021 and down 1% today.

The Charter Hall share price is slipping today, down just over 1%.

The post Why the ALE Property (ASX:LEP) share price is rocketing 21% today appeared first on The Motley Fool Australia.

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

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The Fortescue Metals Group Ltd (ASX: FMG) is plunging yet again as iron ore prices continue their downward trajectory.

At the time of writing, the mining outfit’s shares are down 6.22% to a new 52-week low of $14.32.

What’s causing iron ore prices to fall?

It’s no secret that a slowdown in Chinese demand amid political pressure has led iron ore prices to fall.

In May, the steel-making ingredient touched a record high of US$229.50 per tonne. This translated to bumper profits for Fortescue over the period, with its shares accelerating as a result.

However, Chinese policymakers introduced rules for its steel producers in an effort to curb reliance on Australian iron ore. Chinese mills were instructed to limit 2021 output to no more than 2020 levels, or face harsh consequences.

The Asian giant wants its steel industry to hold iron ore production at around 1 billion tonnes for 2021. In the past two months, Chinese crude steel production sank 8% in July and 12% in August. Although, current levels are still up 5% year-to-date when compared against 2020, indicating further cuts in the coming months.

Fast-forward to today, the current iron ore price has dropped to US$123 per tonne, a fall of almost 14% in September.

The sharp decrease will no doubt have an impact on Fortescue’s bottom line. However, with industry-leading C1 costs of US$13.93 per wet metric tonne, the miner will still be making a profit.

Despite the latest curb in Chinese production, Fortescue is forecasting to maintain iron ore shipments for FY22. The company revealed guidance of 180 million tonnes to 185 million tonnes of iron ore.

C1 costs are expected to slightly rise to US$15.00 to US$15.50 per wet metric tonne (based on an assumed average exchange rate of AUD: USD 0.75).

About the Fortescue share price

It has been a rollercoaster ride for Fortescue investors, with the company’s shares reaching an all-time high of $26.58 in July. This quickly faded in the months following with investors offloading their shares, seeing the share price hit a 52-week low today.

Over the last 12 months, the company’s share price is down around 11%, with year-to-date down close to 40%.

Fortescue commands a market capitalisation of roughly $45 billion and has approximately 3 billion shares on its books.

The post Fortescue (ASX:FMG) share price slides 6% as iron ore woes continue appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Magellan Financial Group Ltd (ASX: MFG) share price has been left bruised and battered over the past year. It began deteriorating in November and December of 2020. Unfortunately, after a momentary bounceback, shareholders have witnessed another steep fall since July this year.

On Wednesday, shares in the Aussie financial group posted a new 52-week low of $37.43. However, the Magellan share price recovered before the weekend to finish at $39.51.

What’s weighing on Magellan shares?

The recent cascade in the Magellan share price comes as concerns mount over the financial group’s underperformance while retaining relatively high fees.

For example, the Magellan Global Fund (ASX: MGF) has returned 12.77% since its inception (in November 2020). However, the fund’s MSCI World benchmark index delivered a 23.58% windfall over the same period. As a result, the global investment strategy led by billionaire fund manager Hamish Douglass has underperformed by 10.81%.

This underperformance is largely due to the heavier weighting towards China-based companies in the Magellan fund. According to the fund, Alibaba Group Holding Ltd (NYSE: BABA) and Tencent Holdings Ltd (HKG: 0700) made up 4.8% and 4.5% of the Global fund’s holdings at the end of June.

Both companies have slumped more than 25% in the past 6 months as China’s government cracks down on various industries with regulatory changes.

To make matters worse for the Magellan share price, the investment manager’s growth in total funds under management slowed month over month in August. Compared to previous months, with posted increases of around 3.5%, August experienced a marginal gain of 0.8% to $117.96 billion.

What do analysts think?

Three analysts have shared less than optimistic perspectives on the Magellan share price recently. Firstly, analysts at UBS cut its price target to $35 per share with a “sell” rating, down from a neutral. This would suggest at least a further 10% downside to the current Magellan share price.

Secondly, the team at Jarden has downgraded its outlook on Magellan shares to “underweight”. Finally, leading broker Morgan Stanley has held an “underweight” rating on Magellan since August.

The post What’s going wrong for the Magellan (ASX:MFG) share price lately? appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler 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 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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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.

Consumer product and technology company Apple (NASDAQ: AAPL) is one of the largest and most dominant businesses globally, since building a base of more than 1 billion iPhone users worldwide.

Apple just had its annual iPhone reveal event and again showcased incremental product updates rather than something bolder. While it’s still a great company, here are three reasons why Apple stock’s best returns might be behind it.

1. Apple and the “Innovator’s Dilemma”

The “Innovator’s Dilemma” concept comes from Harvard professor Clayton Christensen, who wrote a book about it in 1997. The Innovator’s Dilemma is the idea that a successful business can get caught between sustaining what it knows already works versus striving to continue pushing the envelope, embracing new ideas.

A classic example of this is Blockbuster, which went from a multi-billion-dollar industry giant in entertainment to out of business in just over a decade because it failed to adapt its business model to new and emerging ideas, which in this case was the digital distribution of content, a la Netflix.

When we talk about Apple, it’s essential to be clear in saying that I do not think Apple is in danger of being “Blockbustered.” But it is important to recognize patterns and be forward-looking.

Apple just had its annual iPhone reveal, and the majority of the highlights centered around new iterations of its iPhone, Apple Watch, and iPad products. The freshest product among these three is the Watch, which debuted in 2015. Apple has added the occasional feature over the past six years but has mostly stuck with memory, processor, and camera upgrades.

Why would Apple shake things up? The iPhone continues to sell, and Apple has grown revenue by 15% per year over the past decade. But in 2010, more than one-third of Americans used Blackberry devices; did anyone see the iPhone coming then?

2. The “law of large numbers”

Apple has grown into the largest public company globally, with a market cap currently at $2.4 trillion. The total Gross Domestic Product (GDP), which is the total monetary value of all the goods and services in the United States economy, is $22.72 trillion, meaning Apple is worth more than 10% of the wealthiest economy in the world!

I know we’re comparing apples and oranges here since market caps measure the total market value of a company while the GDP looks at monetary production in a single year. Nevertheless, it’s still impressive to see Apple’s market value in the same ballpark as this metric of the national economy.

The stock’s market cap has grown from roughly $400 billion to $2.4 trillion over the past decade, a six-fold increase. Because Apple is such a massive company, it will be much harder for the market cap to double, let alone grow six-fold again anytime soon.

It’s just what happens when a company reaches a large enough size. A smaller company will grow from $5 billion to $50 billion more easily than a $100 billion company will grow to $1 trillion. Apple can continue to grow and increase in value, but investors are unlikely to see the returns over the next decade that just occurred over the last 10 years.

3. A valuation going in the wrong direction

To drive this point home, let’s look at Apple’s valuation over that time. From 2012 to late 2019, the stock consistently traded at a price-to-sales (P/S) ratio between 2 and 4. But since then, the P/S ratio has expanded to what is now more than 7.

Can Apple justify this increased valuation as its massive size makes it increasingly harder to maintain its growth? It has been working to grow a variety of subscription services in recent years, such as:

• Apple Music
• Apple TV+
• Apple Arcade
• iCloud
• Apple Fitness+

These services carry higher gross margins than the hardware Apple sells. In third-quarter 2021, service margins were 70% versus 36% on hardware. However, services make up just 18% of total revenue, so the company’s overall profit margins might be tough to improve dramatically because hardware influences the total financials so much.

So what can investors expect from Apple?

The business itself remains healthy, and investors should not interpret this as a negative slant on the company. Apple continues to grow; its revenue grew 36% year over year in the 2021 third quarter, hitting an all-time high.

Apple may need to continue performing at a high level to justify its increased P/S ratio; if sales momentum slows from something like a soft iPhone sales cycle, investors may choose to push the stock back toward the valuation it’s traded at for much of the past decade.

With how large the company has grown, investors are most at risk of Apple becoming merely a “good” investment moving forward instead of the “great,” life-changing investment it has been for the past two decades.

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

The post Apple and the innovator’s dilemma appeared first on The Motley Fool Australia.

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Apple and Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended BlackBerry and has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple, BlackBerry, and Netflix. 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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The REA Group Limited (ASX: REA) share price is falling today despite the company’s CEO, Owen Wilson, declaring that financial year 2021 (FY21) was a “defining period” for the company.

Wilson’s comments were released with the company’s annual report this morning.

Within the report, Wilson noted the changes the company’s realestate.com.au platform made to support Australians in lockdown, which saw it sport its highest ever customer sentiment rating. Additionally, he named the company’s FY21 results “exceptional”, despite the “extraordinary disruption” caused by COVID-19.

Right now, the REA share price is $155.33, 1.27% lower than its previous close.

Let’s take a closer look at how the company’s leaders viewed its performance over the 12-months ended 30 June 2021.

REA’s “outstanding” FY21

The REA share price is in the red this morning despite the release of the company’s latest annual report.

Within the report, REA’s CEO celebrated a strong yearly performance, as did its chair, Hamish McLennan.

McLennan commented the digital advertising company specialising in property had an “outstanding” FY21 despite “ongoing disruptions and volatility” from the pandemic.

REA’s realestate.com.au saw more than 3 times more visits than its nearest competitor in FY21. REA also launched a number of new services with its Australian offerings and extended the company’s international footprint.

REA also increased its shareholding in India’s Elara to 54.3%, while Elara’s flagship site Housing.com saw 92% more site visits than it did in the previous financial year.

Additionally, REA transferred its Malaysia and Thailand operations to PropertyGuru in exchange for an 18% interest in PropertyGuru.

Back home, REA acquired Mortgage Choice, bringing it together with the company’s Smartline broker business. McLennan stated the acquisition will accelerate REA’s financial services strategy and potentially see it become Australia’s leading mortgage broking business.

However, none of the acquisition news posed by REA in FY21 resulted in its share price increasing.

Though, its business’ growth wasn’t all the company achieved last financial year.

REA officially became carbon neutral in FY21, completing the Australian Government’s Climate Active certification process.

The company’s MSCI ESG rating also increased from ‘BBB’ to ‘A’. For those not familiar with MSCI’s ESG ratings, they measure a company’s ability to weather long-term environmental, social and governance (ESG) risks. A rating of ‘A’ puts a company at the high end of average, with ‘AA’ and ‘AAA’ indicating a leading ESG company.

Further, REA ended FY21 with a gender-balanced leadership team and equal gender representation within its Australian employees.

REA share price snapshot

The REA share price has been struggling on the ASX in 2021.

It has only gained 0.7% this year so far.

However, it is 44.1% higher than it was this time last year.

The post REA Group (ASX:REA) share price slumps amid CEO naming FY21 a “defining period” appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper 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 REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Vulcan Energy Resources Ltd (ASX: VUL) share price is out of form on Monday.

In morning trade, the clean lithium company’s shares are down 4% to $14.52.

This is despite the company releasing an update on some key new appointments today.

Why is the Vulcan share price tumbling lower?

Today’s decline by the Vulcan share price appears to have been driven by broad weakness in the lithium sector.

This may be due to profit taking after some strong sector gains in recent weeks.

For example, the Vulcan share price isn’t the only one sinking today. The Orocobre Limited (ASX: ORE) share price is down 5% and the Pilbara Minerals Ltd (ASX: PLS) share price is down 6% at the time of writing.

What about the announcement?

Failing to give the Vulcan share price a lift today was the announcement of some key new appointments in its communications team.

In Germany, Vulcan has appointed Beate Holzwarth as its Chief Communications Officer, effective from 1 October.

The release notes that Mrs Holzwarth has over 20 years’ experience in various communication and marketing roles within Mercedes-Benz Cars and Daimler Trucks.

Whereas in Australia, Vulcan has appointed Jessica Bukowski as its Public and Investor Relations Manager. Ms. Bukowski was previously Senior Media and Corporate Affairs Specialist at Fortescue Metals Group Limited (ASX: FMG). She was also an adviser to former Prime Minister Kevin Rudd AC.

Vulcan’s Managing Director, Dr Francis Wedin, commented: “With Beate and Jess joining us, we welcome two highly qualified and capable communications experts into our executive team. Beate’s experience in the German automotive industry with Daimler-Mercedes and her in-depth knowledge of the Upper Rhine Valley region, combined with Jess’ experience with the transformation of Fortescue towards becoming an integrated resources-renewable energy company, will be invaluable to our stakeholder communication as part of the development of the Zero Carbon Lithium Project.”

The post Vulcan (ASX:VUL) share price tumbles despite key appointments appeared first on The Motley Fool Australia.

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

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The Paladin Energy Ltd (ASX: PDN) share price has been booming double digits almost every other day since late August thanks to skyrocketing uranium prices.

However, its shares are unwinding on Monday, down 13.59% to 89 cents at the time of writing.

What’s driving the Paladin Energy share price?

Broader market selloff

Wall Street was red across the board last Friday, with the Dow Jones Industrial Average, Nasdaq and S&P 500 down between 0.48% and 0.91%.

The S&P/ASX 200 Index (ASX: XJO) has followed suit, down 1.2% to a 2-month low of 7,314.90.

Headlining today’s selloff is the resources sector, with heavyweights BHP Group Ltd (ASX: BHP), Fortescue Metals Group Ltd (ASX: FMG) and Rio Tinto Limited (ASX: RIO) opening lower.

The S&P/ASX Materials (INDEXASX: XMJ) is currently down 2.78%, which doesn’t spell good news for the Paladin Energy share price.

Uranium cools off

The uranium sector has been running hot since late August after spot prices jumped from US$30/lb to 9-year highs of around US$50/lb.

Even after today’s selloff, the Paladin Energy share price is up more than 100% since 20 August.

Coinciding with the market’s broader weakness on Friday night, the Global X Uranium ETF (NYSE: URA) tumbled 7.83%.

The uranium ETF provides a good reflection of how the sector is performing, given its broad exposure to uranium mining and nuclear components.

Are uranium prices still booming?

Uranium prices managed to close around US$50/lb on Friday.

The recent jump in uranium has largely been driven by Sprott Inc’s Physical Uranium Trust. The fund has been aggressively buying physical uranium off the spot market, tightening the market and driving prices higher.

The fund continued snapping up uranium last Friday, according to its Twitter account.

What a month for the Sprott Physical Uranium Trust!

Over 10 million pounds of physical #uranium added since August 17!

Now over 28 million lbs held #SPUT $U.UN $U.U $SRUUF #Nuclear #lowcarbon

For more information and disclosures, please visit https://t.co/PcaG53VfN5 pic.twitter.com/NeV2qQPxXE

— Sprott Asset Management (@Sprott) September 17, 2021

https://platform.twitter.com/widgets.js

Overall, it looks like uranium prices have held steady which spells good news for the broader uranium sector.

However, it looks like the crumbling ASX 200 and resources sector might have other plans for the Paladin Energy share price.

The post Why the Paladin Energy (ASX:PDN) share price is down 15% on Monday appeared first on The Motley Fool Australia.

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Motley Fool contributor Kerry Sun 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Nickel Mines Ltd (ASX: NIC) share price has started the week deep in the red.

In morning trade, the nickel producer’s shares have fallen 6% to $1.01.

Why is the Nickel Mines share price sinking?

The Nickel Mines share price has come under pressure today amid concerns that the company could be negatively impacted by tax changes in Indonesia.

An announcement notes that on Friday, the Indonesian Investment Minister was reported as suggesting that Indonesia is exploring the possibility of levying an export tax on nickel products with less than 70% nickel content.

However, it also highlights that the reported comments were made without prior consultation with other Indonesian Government Ministries. This includes the ministry which would be responsible for the introduction of such a tax, the Ministry of Energy and Natural Resources (MEMR).

Furthermore, it points out that any contemplated export tax must be submitted in draft to the Cabinet Secretary for review and eventual Presidential approval before it can be finalised and issued by the relevant Minister.

As a result, the proposal would be required to follow this process, and only after a lengthy period of discussion and industry consultation.

Though, based on the Nickel Mines share price, it seems that some investors believe the changes could happen and weigh on its margins.

Management commentary

Nickel Mines’ Managing Director Justin Werner doesn’t appear overly concerned with the speculation.

Particularly given the company’s strong domestic sales and its ability to create product with nickel content greater than 70%.

He said: “Whilst we do not currently believe the rumoured export tax to be the planned policy of the Government, it is worth noting that at present, approximately 50% of the Company’s NPI production is sold within the IMIP (in-country).”

“The Company also has an MoU for two of its RKEF lines to undergo conversion to allow the production of nickel matte which can be processed within the IMIP to a grade of greater than 75%. The Company expects to enjoy an exceptionally strong 2H2021 on the back of record NPI prices and strengthening EBITDA margins,” he added.

The post Why the Nickel Mines (ASX:NIC) share price is sinking 6% today appeared first on The Motley Fool Australia.

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

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The Dubber Corp Ltd (ASX: DUB) share price is off to a strong start, up 3% in early morning trade.

Below, we take a look at the cloud platform service provider’s acquisition announcement that looks to be driving this morning’s action.

What acquisition did Dubber announce?

Dubber’s share price is rising after the company reported it has acquired technology group Notiv.

Notiv, based in Brisbane, develops “cloud-native AI-based products” able to do transcripts of meetings, as well as provide summaries, signals and actions.

Dubber acquired Notiv from United States company Pinch Labs Inc for a total price of $6.6 million. The company will pay $5.15 million in cash once the deal is complete. The remaining $1.15 million will be paid via the issue of 386,277 Dubber shares at an issue price of $3.75.

According to the announcement, Notiv’s key management and employees will stay on following the transaction. This includes the company’s 2 co-founders, Chris Raethke and Iain McCowan.

Commenting on the acquisition, Dubber’s CEO Steve McGovern said:

One of our fundamental beliefs is that artificial intelligence has a part to play as a standard feature of every call and conversation… With Notiv, Dubber will now have the ability to automatically take notes and create action items on every call. We are confident that our telecommunications carrier and service provider partners will see enormous potential for revenue-generating value-added services for their customers at scale…

The integration of the Notiv business is accretive for both parties in that Dubber can expose the fantastic capability of the Notiv offering to a global customer base and the Notiv team can develop a continuous stream of revenue-generating services for Dubber’s addressable market.

Dubber share price snapshot

The Dubber share price has been a standout performer in 2021, up 150% year-to-date. That compares to a gain of 10% posted by the All Ordinaries Index (ASX: XAO).

Over the past month, Dubber shares have gained 16%.

The post Why the Dubber (ASX:DUB) share price is leaping higher today appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Dubber Corporation. The Motley Fool Australia owns shares of and has recommended Dubber Corporation. 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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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.

At first glance, it doesn’t even seem to be a contest. Shares of e-commerce giant Amazon (NASDAQ: AMZN) have not only outperformed those of brick-and-mortar rival Walmart (NYSE: WMT) in recent years, but as of last month — according to numbers crunched by The New York Times — people now spend more at Amazon than at the more traditional retailer. The pandemic’s clearly been a boon for the online “everything store.”

However, if you think it’s just another clear sign that nothing can stand in the way of the Amazon juggernaut, you may be a bit premature in making that conclusion. Walmart has made a small dent in Amazon Prime’s reach by showing respectable growth of its own comparable subscription-based program, Walmart+.

The service may be steering some of Amazon’s current and prospective customers toward the store-centered company. And more of the same could be coming.

32 million and counting

Take the following reported number with at least a small grain of salt, as Walmart has neither confirmed nor denied it. But Deutsche Bank‘s recent estimate that there are 32 million U.S. households subscribed to Walmart+ is probably in the right ballpark. For perspective, Amazon Prime boasts more than 200 million Prime subscribers, although that’s a worldwide figure.

It’s a solid start for Walmart’s subscription service that only launched a year ago, and it doesn’t even include access to a large library of digital entertainment content as Amazon Prime does. Rather, the key selling feature of Walmart+ is unlimited free deliveries of online orders fulfilled by nearby stores — sometimes the very same day — at a Prime-like price of $12.95 per month or $98 per year. It seems to be enough for some consumers, particularly with the offer sweetened by fuel discounts.

The appeal of Walmart+ in a market where Amazon Prime is also available is obvious: speed and convenience, with greater access to perishable foods. Amazon is able to make same-day deliveries in certain markets. But it can’t offer same-day or next-day deliveries of as many high-demand goods that Walmart can thanks to Walmart’s network of more than 5,000 U.S. stores as a means of fulfilling online orders.

A study commissioned by ACI Worldwide and PYMNTS.com quantifies the idea, indicating that ease and convenience are the top concerns for 76% of online grocery shoppers right now, topping risks related to COVID-19. COVID-19 was only a concern for 59% of the 2,342 adults surveyed. Notably, 94% of respondents said they will shop in-store at least some of the time. That’s a detail that gives Walmart a serious leg up on Amazon, which is not a major retailer of groceries or other consumer goods.

Tiptoeing onto Amazon’s turf

There are a couple of additional details buried deeper in Deutsche Bank’s survey results that cast a doubt on just how well Amazon will be able to attract and retain Prime subscribers, who are known to spend at least twice as much on the site as non-Prime consumers do.

One of these nuances is, 86% of Walmart+ subscribers say they’re also Prime members.

That makes sense on the surface. Serious online shoppers likely find paying for both similar services still ultimately pays for itself. Both retailers offer a lot of items, but neither offers everything a consumer may need. If money gets tight, though, consumers may narrow such services down to one. Given the swell of cheap on-demand/streaming services now available, Prime’s content library has never been easier or more affordable to give up.

The other noteworthy nuance of the survey’s results is the type of customers Walmart+ is attracting. These consumers tend to be at the upper end of the income range. Deutsche Bank says 33% of current Walmart+ members live in households earning in excess of $100,000 per year. Only 28% of Prime’s subscribers can say the same.

Simply put, Walmart is making inroads with a crowd that to date has almost exclusively been Amazon’s. Another nicety like access to on-demand content could accelerate this penetration.

Location, location, location

Last month The Wall Street Journal reported that Amazon is mulling the development of its own full-sized store network capable of selling goods like clothing, household goods, and consumer electronics. The company itself has neither confirmed nor denied the Journal‘s suggestion, which was based on comments from unnamed “people familiar with the matter.” But given the early apparent success of Walmart+, a larger store network that looks a bit like Walmart’s might be more of a must-do for Amazon than a want-to.

As it stands now, Amazon manages a few dozen convenience-type and grocery stores, several conventional bookstores, and even more so-called “4-star” stores that feature some of the website’s best-selling items. Don’t forget that Amazon is also now parent to Whole Foods Market, which is a chain of more than 500 North American conventional grocery stores.

That’s still nowhere near Walmart’s geographic reach, however. The big brick-and-mortar retailer’s got more than 5,000 stores doubling as mini-warehouses that it’s leveraging to meet consumers’ desire for a combination of speed, convenience, and local in-store shopping.

Moral of the story: Walmart won’t destroy Amazon, but it could certainly create a brisk headwind for the company.

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

The post Here’s why Amazon needs retail stores right now appeared first on The Motley Fool Australia.

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James Brumley has no position in any of the stocks mentioned. 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 shares of and has recommended Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended 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 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.

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