Digital Wine Ventures Ltd (ASX: DW8) shares is wobbling in early trade today after the company announced it will implement a buy now, pay later (BNPL) service. The Digital Wine share price is sitting at 15 cents at the time of writing, the same price as its close on Friday.

The wine distributor advised that its subsidiary, WINEDEPOT, has partnered with ASX listed financial technology company Earlypay Ltd (ASX: EPY). Together, they will create a BNPL service for WINEDEPOT’s business-to-business marketplace.

Let’s take a closer look at the news released this morning.

New BNPL service

Digital Wine’s WINEDEPOT is set to launch LIQUIDITY, its brand new BNPL service, in partnership with Earlypay.

LIQUIDITY will be accessible to businesses buying wine and other alcoholic products from the WINEDEPOT platform.

The company said its BNPL service will mean cost won’t be a barrier to sales, keeping its average order value high.

LIQUIDITY will be backed by Earlypay’s comprehensive credit insurance. The fintech company will also provide back-end technology and operational support for LIQUIDITY.

Digital Wine CEO Dean Taylor said the BNPL service would make WINEDEPOT more appealing to businesses, as many aimed to simplify and stabilise their operating costs after the coronavirus pandemic.

Taylor said the average fine dining restaurant sourced alcoholic products from around 50 to 200 different suppliers, and suppliers often spent several days each month chasing overdue invoices. He described WINEDEPOT and its multitude of payment options as a “game-changer” for businesses and suppliers.

The agreement between WINEDEPOT and Earlypay will be in place for 3 years after LIQUIDITY’s launch.

Earlypay will charge WINEDEPOT an initial implementation fee and monthly fees thereafter. The fees are said to be market-standard and not considered material to Digital Wine Ventures.

Digital Wine Ventures also advised it has scrapped its partnership proposal with Trevipay (formerly known as Multi Service Pty Ltd).

The Trevipay partnership was proposed before WINEDEPOT’s launch. It would have seen WINEDEPOT providing its customers with credit as a service.

Commentary from management

Dean Taylor commented on Digital Wine’s agreement with Earlypay, saying:

What attracted us to Earlypay is that they are an innovative Australian owned and operated company with 20 plus years of experience in supporting Australian businesses…

We know that credit terms are a critical element for success on B2B marketplaces and are excited to be able to partner with Earlypay to offer the Australian wholesale beverage market a much simpler payment solution.

Earlypay CEO Daniel Riley also commented on the agreement, saying:

We’re really excited to support a fast growing and innovative business like WINEDEPOT as they use technology to reinvent the supply chain of Australia’s wine industry. For many Australian businesses, managing cash flow is a challenge so we’re proud to provide additional payment flexibility for marketplace buyers and facilitate early payment for suppliers. 

Digital Wine share price snapshot

The Digital Wine share price is having a roaring performance on the ASX in 2021. Today’s news may just bring it another boost.

Currently, the Digital Wine share price is up 275% year to date. It’s also up a mammoth 1,400% over the last 12 months.

The company has a market capitalisation of around $249 million, with approximately 1.6 billion shares outstanding.  

More reading

• Why is the Digital Wine (ASX:DW8) share price tumbling despite strong results?

Motley Fool contributor Brooke Cooper 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.

The post What’s with the Digital Wine (ASX:DW8) share price today? appeared first on The Motley Fool Australia.

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The Xero Limited (ASX: XRO) share price was on fire once again in April. Shares in the Aussie accounting software group jumped 11.9% higher to close out the month at $141.56 per share. 

That means Xero now boasts a market capitalisation of nearly $21 billion and is 10.4% shy of its 52-week high. Here’s why the Aussie technology share was on the charge last month.

Why the Xero share price charged higher in April

The only major update from the group came on 1 April. Xero announced the completion of its Planday and Tickstar acquisitions to the market. Planday is a UK-based workforce management platform operating in Europe and the UK while Tickstar is a technology-based e-invoicing network business.

Other than completing the takeovers, which had already been announced, there wasn’t much news from the Xero team in April. However, the Xero share price still managed to charge higher throughout the month.

It certainly helped that the S&P/ASX 200 Index (ASX: XJO) also had a good month. Investors were buoyed by solid economic data throughout April with the benchmark Aussie index gaining 3.5% for the month.

Momentum plays its role in investing, especially with Aussie shares on the charge right now. Strong gains across other technology shares like Afterpay Ltd (ASX: APT) also helped the broader WAAAX group of shares, of which Xero is a part, push higher.

A positive broker note from Goldman Sachs, which retained its ‘Buy’ recommendation on the stock at a revised $153.00 per share valuation, also helped buoy the Xero share price in April. Goldman viewed the Planday and Tickstar acquisitions positively for Xero’s growth.

Foolish takeaway

The Xero share price had another solid month in April. The completion of the group’s two acquisitions was well-received by the market and helped propel the company’s market valuation to nearly $21 billion by the end of the month.

More reading

• 3 stellar ASX growth shares for investors in May
• The Xero (ASX:XRO) share price is smashing the ASX 50 this month
• 2 outstanding ASX growth shares that could be great buy and hold options
• The Tyro Payments (ASX:TYR) share price has gained 30% in 12 months
• 2 outstanding ASX growth shares rated as buys

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. 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.

The post Why the Xero (ASX: XRO) share price charged higher in April appeared first on The Motley Fool Australia.

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The PointsBet Holdings Ltd (ASX: PBH) share price was on form last week.

The sports betting company’s shares rose 5.5% over the five days.

This latest gain means the PointsBet share price is up 15% year to date and 255% over the last 12 months.

Why did the PointsBet share price charge higher last week?

Investors were buying the company’s shares following the release of a strong third quarter update.

For the three months ended 31 March, the company reported a 236% increase in turnover to $905.2 million.

This was driven by strong growth across both the Australian and United States markets.

In Australia, turnover increased 137% jump to $423.2 million, whereas in the United States, it reported a 431% increase in turnover to $482 million.

Positively, its net win grew even quicker. PointsBet reported a net win of $64.9 million, which was up 246% on the prior corresponding period.

Is it too late to invest?

One broker that doesn’t believe it is too late to invest is Goldman Sachs.

This morning the broker retained its buy rating and trimmed its price target ever so slightly to $17.20.

Based on the latest PointsBet share price, this price target implies potential upside of 26% over the next 12 months.

What did Goldman say?

Goldman spoke very positively about the quarter and expects more of the same in the fourth quarter.

It commented: “We view PBH’s 3Q21 update as a strong set of numbers, further validating our positive thesis on the stock, with momentum clearly robust into 4Q and beyond. Overall we walked away from the update incrementally more positive about both the Aus and US operations.”

“In our view, the update was characterized by i) very strong Gross/Net margin result, such that Group Net Win YTD came in at A$148 mn, run-rating well above our prior FY21E forecast, 2) robust growth in total active clients, which were up 90%/127% in 3Q vs. pcp respectively for AUS/US, 3) PBH talked to cost per acquisition (CPAs) of <US$500 in 3Q across the US states it’s operational in, consistent with our view here, 4) iGaming launch in Michigan is imminent, with NJ launch expected in June, which should further boost margins, and 5) PBH expects to be operational in Pennsylvania in 1HCY22, with potential for simultaneous roll-out of Sportsbetting and iGaming, whilst they remain constructive on Canada prospects, with a potential launch in early CY22.”

More reading

• 5 things to watch on the ASX 200 on Monday
• ASX 200 drops 0.8%, Pointsbet jumps, Beach sinks
• ASX 200 down 0.6%: ResMed lower on Q3 update, Beach Energy crashes 23%
• Why Dubber, Mesoblast, PointsBet, & Sezzle shares are storming higher
• PointsBet (ASX:PBH) share price jumps on strong Q3 update

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

The post Leading broker tips PointsBet (ASX:PBH) share price to shoot higher appeared first on The Motley Fool Australia.

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The Premier Investments Limited (ASX: PMV) share price is on the move on Monday following the release of an announcement.

At the time of writing, the retail conglomerate’s shares are down over 1% to $25.99.

What did Premier Investments announce?

This morning Premier Investments provided an update on the $15.6 million of JobKeeper payments it received during the pandemic.

Given the company’s incredible profit growth, it was heavily criticised for not following the lead of other on-form retailers by returning the funds to the government.

Instead, the company held onto the funds and “quarantined” them with the intention of putting them to use to fund the wages of employees who may be stood down under future State Government mandated COVID-19 lockdowns.

This morning the company advised that since the release of its first half results, there have been short snap lockdowns in Queensland and Western Australia.

During these lockdowns, the company used the JobKeeper funds to pay its full time and part time team members their contracted hours whilst they were stood down and unable to attend work.

However, following the lockdowns and upon reopening, increased trading from the combined States has fully offset the cost of supporting its teams through these lockdowns. Therefore, the JobKeeper funds were ultimately not required.

In light of this, the Premier Board, having regard to these outcomes and the success of the Government’s management of COVID-19, has determined that it is now appropriate to refund the net JobKeeper benefit of $15.6 million to the Australian Tax Office.

What impact will this have?

The good news for shareholders and ultimately the Premier Investments share price, is the returning of these funds is not expected to prevent the company from delivering a strong result in FY 2021.

It explained: “Subject to macro-economic trading conditions remaining stable, and subject to no further significant COVID-19 national or state-wide Government mandated lockdowns, and after accounting for the repayment to the Australian Tax Office of $15.6 million, Premier is confident in its ability to meet current market consensus of Premier Retail’s FY21 EBIT (pre-AASB 16) of $318 million.”

More reading

• ASX 200 Weekly Wrap: Shares have average week but a great month
• Claims of insider trading in JB Hi-Fi (ASX:JBH) shares
• What’s triggered the 7% Kogan (ASX:KGN) share price surge?
• Here’s why the JB Hi-Fi (ASX:JBH) share price is tumbling lower today
• Why JB Hi-Fi, Link, Ramelius, & St Barbara shares are tumbling lower

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Premier Investments (ASX:PMV) share price lower after JobKeeper update appeared first on The Motley Fool Australia.

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At the start of each week I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Webjet Limited (ASX: WEB) is back as the most shorted ASX share after its short interest rose to 9.9%. Concerns over its valuation and a longer than expected recovery in the tourism market appear to be the reason for the poor sentiment.
• Tassal Group Limited (ASX: TGR) isn’t far behind with short interest of 9.8%, which is down slightly week on week. Short sellers have been going after this seafood company due to weak salmon prices and Australia-China trade war concerns.
• Resolute Mining Limited (ASX: RSG) has seen its short interest ease week on week to 9.7%. This gold miner has seen its shares crash lower this year due to weak production, disappointing guidance, and issues at its Bibiani operation in Ghana.
• Flight Centre Travel Group Ltd (ASX: FLT) has short interest of 9.1%, which is down slightly week on week. As with Webjet, this may be driven by concerns over its valuation and the stalling travel market recovery.
• Inghams Group Ltd (ASX: ING) has 8% of its shares held short, which is down week on week. This poultry company has recently lost its CEO and is understood to be negotiating a major contract with Woolworths Group Ltd (ASX: WOW).
• Kogan.com Ltd (ASX: KGN) is a new entry into the top ten with short interest of 7.9%. Inventory issues and its slowing growth could be the reason short sellers are targeting Kogan.
• Temple & Webster Group Ltd (ASX: TPW) has seen its short interest rise to 7.5%. Short sellers have been increasing their positions after the online furniture and homewares retailer announced plans to invest materially in its growth at the expense of margins.
• Metcash Limited (ASX: MTS) has seen its short interest rise slightly to 7.4%. This appears to have been driven by concerns over a potential supermarket price war.
• Zip Co Ltd (ASX: Z1P) has short interest of 7.3%, which is up slightly week on week. Valuation concerns and execution risks relating to its international expansion could be weighing on sentiment.
• Megaport Ltd (ASX: MP1) has short interest of 7.2%, which is up again week on week. Unfortunately for short sellers, the Megaport share price was the best performer on the ASX 200 in April with a 30% gain.

More reading

• Why is the Zip (ASX:Z1P) share price falling on hard times?
• ASX 200 Weekly Wrap: Shares have average week but a great month
• 2 ASX growth shares to buy in May 2021
• Top brokers name 3 ASX shares to buy next week
• These were the best performing ASX 200 shares in April

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd, Temple & Webster Group Ltd, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited, Kogan.com ltd, MEGAPORT FPO, and Temple & Webster Group 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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The ResMed Inc (ASX: RMD) share price was out of form last week.

The sleep treatment-focused medical device company’s shares lost 3.5% of their value over the five days.

Why did the ResMed share price tumble lower?

Investors were selling ResMed’s shares last week following the release of its third quarter update, which fell a touch short of expectations.

For the three months ended 31 March, ResMed reported revenue of US$768.8 million and an operating profit of US$223.4 million. This represents a 0.1% decline and 3% increase, respectively, over the same period last year.

While this growth is slower than the market is used to, it is worth noting that the prior corresponding period benefited greatly from strong COVID-19-related ventilator sales.

In fact, if you exclude COVID-19 benefits from a year ago, its revenue would have grown year on year.

Is this a buying opportunity?

According to a note out of Goldman Sachs, its analysts don’t see enough value in its shares yet to make a buy recommendation. Goldman has retained its neutral rating and trimmed its price target slightly to $28.40.

However, based on the latest ResMed share price of $26.17, this price target still implies decent upside of 8.5% over the next 12 months.

Goldman commented: “The shortfall in mask growth in 3Q21 may now also be symptomatic of the cumulative deficit in diagnoses through the last 12m (GSe: 20% of masks from new starts) and, if so, it may be several quarters yet before mask growth returns towards the 3-year quarterly average of +14% that the market had become increasingly accustomed to. Furthermore, costs growing ahead of revenue is an unusual dynamic for RMD and one that may persist through to 4Q22E, depending on the shape of the recovery from here.”

Though, it is worth pointing out that Goldman remains very positive on RedMed’s long term future.

It explained: “We believe it is the clear leader in an attractive market with long-term, realizable penetration upside. The pricing outlook is the best in years, and whilst the AHRQ report adds risk to the regulatory environment, at this stage we do not expect a material impact.”

What did other brokers say?

Two brokers that appears more positive on the near term opportunity are Credit Suisse and Morgans.

This morning Credit Suisse put an outperform rating and $29.00 price target on its shares. Whereas Morgans has put an add rating and $29.14 price target on its shares.

These price targets imply potential upside of 10.8% to 11.3% over the next 12 months.

More reading

• ASX 200 drops 0.8%, Pointsbet jumps, Beach sinks
• Why Beach Energy, Bigtincan, Pointerra, & ResMed are sinking today
• ASX 200 down 0.6%: ResMed lower on Q3 update, Beach Energy crashes 23%
• ResMed (ASX:RMD) share price on watch following Q3 results
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.

The post Is the ResMed (ASX:RMD) share price good value after its Q3 update? appeared first on The Motley Fool Australia.

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The A2 Milk Company Ltd (ASX: A2M) share price continued to decline in April. From close of trade on 31 March to close of trade on Friday, shares in the New Zealand dairy company fell 7.8% to end the month at $7.22. Over the same time, the S&P/ASX 200 Index increased by 3.4%.

The company has struggled since Australia’s borders were closed down at the onset of the COVID-19 pandemic. A2 Milk shares have fallen 60.4% over the last 12 months, with the dairy producer heavily reliant on sales of its infant formula via the daigou market. 

Daigou is a term that refers to a market of customers who buy products overseas (such as in Australia) and then sell and ship them to end-users in China. These entrepreneurs are usually, but not always, from the People’s Republic. Popular daigou products in Australia include Blackmores Limited (ASX: BKL) vitamins and the aforementioned infant formula.

Here are a few of the major stories that had an impact on the A2 Milk share price last month.

What hit the A2 Milk share price in April?

Broader border uncertainty

Australia’s international border situation remained as clear as mud during the month of April. While Prime Minister Scott Morrison hinted the government is actively considering the border situation, there’s been no actual changes to border policy announced. Any hope of international students being able to return was dashed last month because of the delayed vaccine rollout.

A large portion of foreign students in Australia (212,000) come from the People’s Republic. They are a key component of the daigou market. Their arrival had the potential to reactivate that key market for A2 Milk, but those hopes were put to bed in April. Without this key source of revenue returning any time soon, the A2 Milk share price has continued its decline.

Declining birth rates

Also in April, Motley Fool reported on forecasts of declining birth rates. Credit Suisse says that by 2025, compared to 2018 numbers, children of infant formula age are expected to be 30% fewer.

The broker made a note of saying it expects the trend to affect the infant formula market in China. It also said it expects FY25 net profits for A2 Milk to “approach but not surpass” its FY20 peak. It placed a target on the A2 Milk share price of $7.15 – 7 cents below Friday’s close.

The Chinese market may not be the same

Separate notes out of Morgans and Citi last month were pessimistic about the Chinese infant formula market when normalcy returns.

According to Morgans, dairy prices in mainland China are not improving and there may be an excess of inventory in the country. It believes these factors could be a bigger problem than previously anticipated. In further disappointing news, Citi says Chinese consumers have grown accustomed to domestic brands in a range of products – including infant formula. This could mean, therefore, that demand for A2 formula in China may never return to the levels it was pre-pandemic.

A2 Milk share price snapshot

Despite the effects of the pandemic on the border and the economy, the A2 Milk share price was initially resilient at the beginning of the pandemic. The dairy company’s shares hit a record high of $20.05 in the midst of 2020’s chaos. Pessimism soon set in, however, with the company’s value falling during the second half of the year and continuing its decline in 2021.

More reading

• Will 2021 go down as the year A2 and other milk share prices turned sour?
• Why a2 Milk, Atlas Arteria, Audio Pixels, & Nickel Mines shares are sinking
• The A2 Milk (ASX: A2M) share price is at a 3-year low
• Why these ASX shares just hit 52-week lows or worse
• Bubs (ASX:BUB) share price hits multi-year low but could keep sinking

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk and Blackmores Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post A2 Milk (ASX:A2M) share price continues to stink in April appeared first on The Motley Fool Australia.

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ASX mining shares could be under pressure this morning even though price premiums paid for commodities have risen to the highest since 2007.

The BHP Group Ltd (ASX: BHP) share price and Rio Tinto Limited (ASX: RIO) will be watched closely as their US and UK-listed shares lost ground on the weekend.

If these shares underperform the S&P/ASX 200 Index (Index:^AXJO), they could drag on the Fortescue Metals Group Limited (ASX: FMG) share price or other ASX miners.

Commodity price premiums hit a high

The sombre Monday morning outlook for the sector stands in contrast to the commodities futures market.

Contract prices for immediate delivery of many commodities are commanding higher prices than contracts for future deliveries.

This situation is called backwardation and Bloomberg reported that a range of commodities are in the deepest backwardation in over 14-years.

What is backwardation?

It isn’t considered “normal” (if there’s such a thing) for the market to be in backwardation. Prices for immediate or near-term delivery are usually lower and get more expensive the further the delivery is scheduled for.

The higher prices are to compensate for holding and others costs and the uncertainty of future operating conditions.

When near term prices exceed longer-term ones, it means consumers are willing to cough up extra to take the commodity now.

Global shortage of vital commodities

This is probably driven by two distinct tailwinds. First is growing demand due to the rebound in the global economy from COVID-19.

The other is worry about supply keeping pace as supply lines try to catch up after being severely impacted by the pandemic.

It isn’t only hard commodities like iron ore and copper that are surging. About half of the major commodity markets tracked by the Bloomberg Commodity Index are in backwardation. These include oil, natural gas, copper and soybeans.

This explains why ASX agri shares, like the Graincorp Ltd (ASX: GNC) share price, have also performed well.

Foolish takeaway

Pimco pointed out that the current commodities rally reflects shortages in vital materials.

Coincidentally, the world is currently experiencing a shortage in computer chips that are used in everyday products from cars to consumer electronics.

How long commodities remain supercharged is an open debate. But the good news is that the outlook remains robust and many bigger ASX miners do not need prices to stay near record highs to make big profits and pay generous dividends.

More reading

• ASX 200 Weekly Wrap: Shares have average week but a great month
• 5 things to watch on the ASX 200 on Monday
• These were the worst performing ASX 200 shares in April
• These were the best performing ASX 200 shares in April
• 2 quality ASX dividend shares with generous yields

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto Ltd. Connect with me on Twitter @brenlau.

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.

The post ASX miners set for tough start even as commodity premiums hit a 14-year high appeared first on The Motley Fool Australia.

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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.

Gone are the days when Amazon (NASDAQ: AMZN) was just a company operating at breakeven, surrounded by doubts over whether it would ever be profitable.

Today, the company is an absolute profit-generating machine. Amazon finished 2020 with $21.3 billion in net income, making it one of the most profitable companies in the world, and in the first quarter of this year, the company posted a bottom-line result of $8.1 billion, setting a new quarterly record. At a net margin of 7.5%, the quarter also represented its highest profit margin in more than a decade.

Those results are no accident. They’re the outcome of the years of investment, a reputation for great customer satisfaction, and the build-out of a series of competitive advantages that has unlocked high-growth, high-margin businesses.

While there’s no doubting Amazon’s profit potential now, its margin is still going to keep expanding. Here are three reasons why.

1. Its third-party marketplace keeps growing

Amazon started out as a direct e-commerce seller. That business is still its biggest source of revenue, but it’s a low-profit one. Costs are high in direct e-commerce, and the company competes against a wide range of both brick-and-mortar retailers and e-commerce companies.

Its third-party marketplace is the real profit driver for its marketplace. Amazon provides services like fulfillment for vendors who want to sell on its platform and charges a commission for each sale. Since its launch in 1999, that business has become larger than its first-party sales, and in the first quarter, 55% of units sold on Amazon were from third-party sellers.

It’s not clear how much profit Amazon makes on its third-party sales, but the margins are significantly better as the marketplace leverages the company’s competitive advantages, including Amazon’s huge customer base, high traffic, and logistics network. It also has no real direct competitor as a marketplace. While Etsy has made itself a home for artisans, and Walmart is building out its own e-commerce platform, Amazon is by far the leading option and the first place most online sellers go. Amazon has also spent $45.4 billion on capital expenditures in the past year, much of it going to logistics to improve capacity and shipping speeds. That will only make the platform more appealing to third-party sellers.

Thanks to those advantages, the marketplace should only gain more share of the overall e-commerce business, generating more profits.

2. Advertising is a juggernaut

Amazon launched its advertising business in 2008 and didn’t ramp it up until recent years. It’s now the third-biggest digital advertising business behind Alphabet and Facebook, and advertising complements the marketplace in many ways as it helps sellers boost sales.  

In the first quarter, sales from Amazon’s “other” category, which is primarily made up of advertising, jumped 77% to $6.9 billion. This is high-margin revenue for the company as the infrastructure to sell ads is already there. It’s just leveraging the traffic already coming to its website and the sellers who are already doing business on its platform.

On the earnings call, CFO Brian Olsavsky said traffic has been strong, but he also credited the advertising team for rolling out new products and increasing relevancy and conversions.

Digital advertising more broadly is experiencing a boom as strong earnings reports from Alphabet and Facebook this quarter have illustrated. Screen time has surged during the pandemic, and businesses are hungry to capitalize on the economic reopening — that should lead to strong advertising demand at least through the rest of the year.

3. AWS is still a beast

Amazon helped pioneer cloud infrastructure services with Amazon Web Services, which has been a key driver of the company’s profits for close to a decade. While more attention has been given to the e-commerce side of the business recently, AWS continues to grow and churn out increasing profits, showing no signs of slowing down.

In the first quarter, the cloud computing division saw revenue grow 32% year over year to $13.5 billion, and its operating income rose 35% to $4.2 billion. 

Olsavsky highlighted momentum at AWS and said it was seeing growth accelerate across a broad range of customers, including new commitments with sports leagues like the National Hockey League and the PGA Tour, Walt Disney to help power Disney+, automakers like Torc robotics, and telecoms like DISH Network.

While Amazon has more competition in cloud infrastructure than it once did, the industry is growing briskly and generates high margins, so it will continue to be a long-term profit driver for the company.

Amazon is likely to face some headwinds later this year as the economic reopening will be a challenge for e-commerce, but its momentum across a number of businesses keeps snowballing. For the second quarter, the company is calling for 27% revenue growth at the midpoint of its $110 billion to $116 billion range, and operating income should land between $4.5 billion and $8.0 billion. Based on its recent performance and momentum, the tech giant could fly past that forecast once again.

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

More reading

• ASX 200 Weekly Wrap: Shares have average week but a great month
• Retail just changed. Forever…
• Disney says it’s using Amazon’s infrastructure for its worldwide Disney+ expansion
• Amazon on track to beat Walmart as biggest U.S. retailer by 2025
• Amazon to roll out Prime in-garage grocery delivery nationwide

Jeremy Bowman owns shares of Amazon, Facebook, and Walt Disney. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (C shares), Amazon, Facebook, and Walt Disney and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Alphabet (C shares), Amazon, Facebook, and Walt Disney. 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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ELMO Software Ltd (ASX: ELO) shares will be in focus today after the company announced it has launched another new product. At Friday’s close, the ELMO share price finished the week at $5.70.

Let’s take a closer look at what the cloud-based human resources and software solution provider announced. 

New module launch

ELMO shares could be on the move today as investors digest the company’s latest new release.

In a statement to the ASX, ELMO advised it has launched its ‘Predictive People Analytics’ module.

Developed in collaboration with the University of Technology Sydney, the module uses artificial intelligence to predict employee behaviour. This includes identifying such things as a high-performing employee who might represent a ‘flight risk’.

In addition, the platform also provides visualisation tools and insights to aid management in decision making. ELMO explained that the module allows a company to achieve the best outcomes by driving employee engagement, insights, and retention.

ELMO noted that the launch will bolster its competitive offering in the marketplace and provide new revenue streams.

What did management say?

ELMO CEO and co-founder Danny Lessem further explained the new module, saying:

Predictive People Analytics provides organisations with powerful insights into employee behaviour. These insights give HR teams and management opportunities to identify, and act on, situations that require action, as well as providing valuable insights across the entire workforce.

Mr Lessem also touched on the applications for its newest product, adding:

The introduction of this new module further broadens and strengthens ELMO’s competitive offering and will have relevance for both new customers as well as ELMO’s existing customer base.

About the ELMO share price

The ELMO share price has lost almost 20% over the past year and is down more than 10% year to date. The company’s shares hit a 52-week high of $8.06 last May, before going on a rollercoaster ride.

On valuation metrics, ELMO presides a market capitalisation of about $508 million, with approximately 89.2 million shares on issue.

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

The post Why the ELMO (ASX:ELO) share price will be on watch this morning appeared first on The Motley Fool Australia.

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