If you’re trying to earn an income in retirement, it has become close to impossible with term deposits.

Why not term deposits?

Due to interest rate cuts, term deposits are now offering some of the lowest rates we’ve ever seen.

For example, Commonwealth Bank of Australia (ASX: CBA) will provide investors with a 0.55% per annum interest rate on term deposits of up to $2 million.

This means that if you invested $2 million into one of the bank’s term deposits, you would be earning interest of just $11,000 each year.

As a comparison, prior to COVID-19, the Australian share market was offering investors an average yield of approximately 4%.

Which means that the same $2 million invested into the share market would have yielded $80,000 in dividends. That’s a difference of $69,000.

In light of this, the share market arguably remains the best place to invest money to generate a passive income while in retirement.

But which shares should you buy?

There are a large number to choose from on the Australian share market, but two shares that could be great options according to Goldman Sachs are Coles Group Ltd (ASX: COL) and Telstra Corporation Ltd (ASX: TLS).

This is due partly to their defensive qualities, generous yields, and attractive valuations.

In respect to Coles, Goldman Sachs is positive on the company and has a buy rating and $20.50 price target on the supermarket operator’s shares.

It is forecasting a fully franked 64 cents per share dividend in FY 2021. Based on the current Coles share price of $18.47, this represents a 3.5% forward yield.

As for Telstra, Goldman Sachs has a buy rating and $3.60 price target on the telco giant’s shares. It is also forecasting a 16 cents per share fully franked dividend in FY 2021 and beyond.

Based on the current Telstra share price of $3.01, this would provide investors with a 5.3% dividend yield.

More reading

• 2 buy-rated ASX dividend shares for income investors to snap up
• Leading fund manager names the ASX dividend shares to buy in 2021
• These ASX dividend shares could be top Christmas gifts for income investors
• 8 issues that will impact investors in 2021: experts
• 3 top ASX dividend shares for a better retirement

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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 BetMakers Technology Group Ltd (ASX: BET) share price is on the move on Tuesday following an acquisition update.

At the time of writing, the betting technology company’s shares are up 5.5% to 75.5 cents.

What did Betmakers announce?

This morning the company announced that UK-based Sportech has received shareholder approval for the divestment of its Racing and Digital assets to BetMakers for a total consideration of 30.9 million pounds.

This was the only condition precedent to completion of the acquisition. In light of this, BetMakers will now make a non-refundable initial payment of 6.2 million pounds, with the balance of 24.7 million pounds payable upon completion of the acquisition.

This will occur following satisfaction of certain customary conditions that only BetMakers can waive at its discretion, including transfer of licences.

This acquisition is being funded by a $50 million placement, which is due to settle on 31 December, and a $10 million share purchase plan.

Why is BetMakers acquiring Sportech’s Racing and Digital assets?

Management notes that the acquisition of Sportech’s Racing and Digital assets enables BetMakers to accelerate its international growth plans.

It also strategically positions the company to capitalise on emerging opportunities in the U.S. market, including fixed odds wagering.

The company has previously revealed that the deal had the potential to be a game-changer financially.

For example, on a pro-forma basis for FY 2020, acquired assets and with BetMakers’ existing operations would have delivered $56.1 million revenue and $7.7 million EBITDA.

As a comparison, BetMakers’ recorded stand-alone revenue of $9.2 million and EBITDA of $0.8 million in FY 2020.

When first announcing the proposed acquisition, BetMakers’ Managing Director, Todd Buckingham, commented: “This Acquisition will supercharge our entry into the U.S. and position the Company for substantial growth on the back of the emerging wagering opportunities in U.S. racing, including Fixed Odds, where we believe we are well placed.”

“The Acquisition would give us a meaningful presence in the U.S., including in 36 of the States and across more than 200 venues, 25 digital outlets and 9,000 betting terminals. It will also greatly expand our global customer base across the UK, Europe and Asia and provides us with an opportunity to expand our product offering at scale in these and other regions,” he concluded.

More reading

• Why the Betmakers (ASX:BET) share price is seesawing today
• Why the BetMakers (ASX:BET) share price is surging 12% higher today
• Why BetMakers, Medical Development International, Qantas, & Zip are dropping lower
• Why the BetMakers (ASX:BET) share price is crashing 15% lower today
• Why the BetMakers (ASX:BET) share price is up 12% to a record high

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 Betmakers Technology Group Ltd. 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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One of the best performers on the S&P/ASX 200 Index (ASX: XJO) this year has been the NEXTDC Ltd (ASX: NXT) share price.

Since the start of the year, the data centre services company’s shares have rocketed a massive 85% higher.

Why is the NEXTDC share price rocketing higher this year?

Investors have been fighting to get hold of the company’s shares this year after the COVID-19 pandemic accelerated the structural shift to the cloud.

This shift to the cloud led to a jump in customer numbers and a surge in demand for capacity in NEXTDC’s data centres.

For example, during FY 2020, NEXTDC’s contracted utilisation grew 17.4MW or 33% to 70MW and its customer numbers increased by 180 or 15% to 1,364.

Unsurprisingly, this underpinned further strong revenue and profit growth. Over the 12 months, NEXTDC delivered a 14% increase in revenue to $205.2 million and a 23% jump in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to $104.6 million. The latter was at the top end of its guidance range.

Pleasingly, management is expecting this positive form to continue in FY 2021. It provided underlying EBITDA guidance in the range of $125 million to $130 million. This implies growth of approximately 24.5% at the top end of its range.

What else is driving the NEXTDC share price higher?

Also getting investors excited is its recent announcement of a new senior debt facility of $1.85 billion.

This senior debt facility is being split across three tranches, each with a tenor of five years. This comprises $800 million for a term loan facility, $400 million for a capital expenditure facility, and $650 million for a multi-currency revolving credit facility.

After much speculation, the company revealed that the latter multi-currency revolving credit facility is to support its international expansion. NEXTDC has opened up offices in both Singapore and Tokyo and is working with key customers and talking to respective governments about a potential market entry.

Given the size of these markets, they could provide NEXTDC with a long runway for growth over the next decade.

In light of this, it is no surprise to learn that Goldman Sachs has a buy rating and $13.20 price target on its shares. It has even suggested that its shares could be worth $20.00 based on assumptions that are high, but “not unrealistic considering the current acceleration in demand that is evident across the business.”

More reading

• 2 ASX tech shares to buy and hold until 2030
• 5 fantastic ASX shares to buy in 2021
• 2 outstanding ASX shares to buy and hold for a decade
• These are 10 of the best performing ASX tech shares of 2020 so far
• 10 highly rated ASX shares to buy in 2021

Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. 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 4-way takeover battle for Cardinal Resources Ltd (ASX: CDV) has finally been declared over today, with Chinese miner Shandong Gold being declared the winner.

In a release to the market this morning, Cardinal said Shandong has acquired in excess of 50% of its shares at $1.075 per share, effectively controlling the company.

The Cardinal share price last closed at $1.08 on 24 December, and is expected to trade today at the $1.075 level.

What was announced?

In light of this development regarding Shandong, Cardinal has today said that all other takeover offers are now off the table, and are no longer an option for shareholders.

According to the release, the Russian miner Nordgold, which has so far acquired around 20% of Cardinal shares, has also now accepted the Shandong offer on 24 December. Nordgold’s last offer was at $1.05.

The $1.20 offer from Dongshan Investments will also no longer be considered as the acceptance condition of 50.1% ownership will no longer be possible, given that Shandong has acquired more than 50% of the shares.

Finally, the $1.05 offer from Ghanaian company Engineers & Planners will also be considered void as its acceptance condition of 50.1% can no longer be met.

4-way deadlock

Cardinal Resources has been pursued as a takeover target by four different companies.

In June, Cardinal received a takeover bid from Hong Kong-based Shandong Gold at an offer price of 60 cents per share, valuing the company at around $300 million.

The Chinese company, which is the second-largest gold producer in China, then increased its offer price for Cardinal to $1.00 per share in September, later increasing it again to $1.05 in November.

That higher offer was meant to outbid another interested party, Nordgold, a Russian gold miner which had previously increased its own offer from 60 cents to 90 cents a share. Nord Gold also increased its offer price to $1.05 on 11 December.

Cardinal was then approached by another suitor in November, in the form of a Ghana-based company, Engineers & Planners Company Limited. That offer also stood at $1.05 per share.

And just before Christmas, Cardinal received an offer from an Emirati-Russian investment house, Dongshan Investments, at $1.20 per share.

Cardinal is a West African gold‐focused exploration and mining company that holds the prized Namdini Gold Project in Ghana.

More reading

• Cardinal Resources (ASX:CDV) share price drops as takeover deadline looms
• Cardinal Resources (ASX:CDV) share price rises on 3-way takeover deadlock

Motley Fool contributor Eddy Sunarto 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 CSL Limited (ASX: CSL) share price will be on watch on Tuesday following news that another COVID-19 vaccine is expected to be given approval in the United Kingdom this week.

What was announced?

According to CNBC, the COVID-19 vaccine being developed by AstraZeneca and the University of Oxford, AZD1222, is expected to be approved for use in the United Kingdom later this week.

This follows reports in the Financial Times which claim that government officials have confirmed that the Medicines and Healthcare products Regulatory Agency would imminently approve the vaccine, potentially as soon as Tuesday.

This comes a day after the United Kingdom reported approximately 30,500 daily infections and 316 deaths after a more transmissible COVID strain spreads across the country.

Why does this matter for CSL?

The potential approval of AZD1222 in the United Kingdom could be good news for CSL and Australia because the biotech giant has already commenced manufacturing of the vaccine candidate at its advanced manufacturing facility in Broadmeadows, Victoria.

This followed the receipt of separate contracts with AstraZeneca and the Australian Government to manufacture approximately 30 million doses of the AZD1222 vaccine candidate, with the first doses planned for release in 2021, pending the outcome of clinical trials and regulatory approval.

Is this vaccine the one?

The editor-in-chief of The Lancet medical journal, Dr. Richard Horton, believes this vaccine could be used around the globe more effectively than others.

He told CNBC: “The Oxford/AstraZeneca vaccine is the vaccine right now that is going to be able to immunize the planet more effectively, more rapidly than any other vaccine we have,” adding that it was important to think about vaccine immunisation on a global scale “because even if we immunize one country, the threat then is you reintroduce the virus from another country that is not protected.”

AstraZeneca’s CEO, Pascal Soriot, expects the vaccine to be highly effective. He told the Times newspaper this weekend that he is convinced that subsequent data will show that this vaccine achieved an efficacy rate equal to the others, at above 90%.

More reading

• 2 ASX healthcare shares to buy next week
• 3 unstoppable ASX shares to buy
• 5 fantastic ASX shares to buy in 2021
• 2 of the best ASX healthcare shares to buy in 2021
• 7 top ASX biomedical shares in 2020

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 CSL Ltd. 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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Making an attractive passive income over the long run does not necessarily require large sums of capital. Nor does it need an investor to constantly buy and sell stocks depending on which sectors are outperforming the wider stock market.

Rather, a simple buy-and-hold strategy that focuses on purchasing high-quality companies at low prices can produce a large portfolio. From this, a generous income can be drawn that provides financial freedom in the long run.

A buy-and-hold strategy to make a passive income

It is tempting to buy and sell stocks over a short time period when aiming to make a worthwhile passive income over the long run. After all, events such as the recent stock market rally can lead to sizeable profits for investors. This may lead them to lock-in profits and seek to repeat their success elsewhere.

However, a buy-and-hold strategy may be more effective in building a portfolio in the long run. Not only does it mean less commission costs and potentially less effort than a plan to trade stocks regularly, it also allows holdings within a portfolio to deliver on their potential. This is especially relevant at the present time, since a number of solid businesses may take many months, or even years, to recover from their present-day challenges.

Furthermore, a buy-and-hold strategy can lead to a larger passive income in the long run. It allows compounding to have a positive effect on a portfolio’s value. Over time, this can turn even modest monthly investments into sizeable sums of capital.

Buying high-quality stocks at cheap prices

As well as using a buy-and-hold strategy, purchasing high-quality companies at low prices can have a positive impact on an investor’s passive income prospects. The past performance of the stock market has shown that recoveries from its declines have always taken place. Therefore, using market cycles to buy undervalued shares can be a means of outperforming the wider index.

Certainly, some stocks are priced at low levels because they have weak finances, lack a competitive advantage or face major challenges that may not be overcome. However, other stocks currently have low valuations based on weak near-term operating outlooks that are likely to reverse as the world economy’s prospects improve.

Investing money to make an income return

Even if an investor matches the high single-digit annual returns of the stock market, they could make an attractive passive income in retirement with a modest monthly investment. For example, investing $250 per month at an annual return of 8% would produce a portfolio valued at $375,000 within 30 years. From this, a 4% annual withdrawal equates to an income of $15,000.

By purchasing strong businesses at low prices and holding them for the long run, it is possible to beat the stock market’s returns. This may lead to an even more appealing income in the coming years.

More reading

• The top streaming stocks to buy in 2021
• These are the 10 most shorted shares on the ASX
• 3 exciting small cap ASX shares to buy
• What Goldman likes about the Jumbo Interactive (ASX:JIN) share price
• 2 quality ASX dividend shares to buy

Motley Fool contributor Peter Stephens 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.

The pandemic lit a fire under the streaming media sector as people stayed home and streamed more TV shows, movies, and songs. Many of those stocks have already generated big gains for investors this year, but they could surge even higher in 2021 and beyond.

The global video streaming market could grow at a compound annual growth rate (CAGR) of 18.3% between 2019 and 2026, according to Valuates Reports. The global music streaming market could also expand at a CAGR of 17.8% from 2020 to 2027, according to Grand View Research.

Therefore, forward-thinking investors should hold a few promising streaming stocks as that market expands. Here are three solid plays on that secular trend that are still worth buying in 2021: Roku Inc (NASDAQ: ROKU), Netflix Inc (NASDAQ: NFLX), and Spotify Technology (NYSE: SPOT).

1. Roku

Roku is the market leader in connected TV (CTV) devices. It’s expected to capture 46.9% of the U.S. CTV market this year, according to eMarketer, thanks to brisk sales of its stand-alone streaming devices and smart TVs. The firm expects Roku’s share to surpass 50% by 2022, putting it comfortably ahead of rivals like Amazon.com Inc‘s Fire TV.

Roku’s revenue rose 57% year-over-year in the first nine months of 2020. Sales of its lower-margin players, which generated about 29% of its revenue, grew 40%. Sales from its higher-margin software platform, which generated 71% of its revenue from ads and content distribution partnerships, surged 66%.

During the third quarter, Roku’s hardware shipments rose at their fastest rate in over seven years. Its number of active accounts rose 43% year-over-year to 46 million and its average revenue per user (ARPU) grew 20%, but its gross margin contracted as the pandemic throttled its sales of higher-margin ads. 

Roku is unprofitable, and its net loss widened year-over-year in the first nine months. Analysts don’t expect it to generate a profit anytime soon, but they expect its revenue to rise 54% this year and another 39% next year.

Roku remains a risky stock, but it isn’t terribly expensive at 19 times next year’s sales — especially when tech companies that are generating slower growth are trading at much higher price-to-sales ratios.

2. Netflix

Netflix is the world’s largest streaming video platform by paid subscribers. Its total number of paid subscribers grew 23% year-over-year to 195.15 million at the end of the third quarter, as its revenue and earnings rose 25% and 73%, respectively, in the first nine months of 2020. 

Netflix attributes some of that growth to stay-at-home trends throughout the pandemic, but it still expects its revenue and subscribers to both rise another 20% year-over-year in the fourth quarter.

Analysts expect Netflix’s revenue and earnings to rise 24% and 52%, respectively, for the full year. Next year, they expect its revenue and earnings to grow another 18% and 44%, respectively — which are robust growth rates for a stock that trades at 58 times forward earnings. 

Netflix could face tougher competition next year as rivals like Walt Disney Co and AT&T Inc ramp up their streaming efforts. However, Disney and AT&T’s streaming platforms aren’t profitable like Netflix yet, and Netflix’s strong lineup of original content could keep it ahead of the competition.

Moreover, Netflix’s latest price hikes (an extra $1 for standard plans and an additional $2 for premium plans in the U.S.) indicate it still enjoys plenty of pricing power against Disney, AT&T, and other challengers. Those strengths all make Netflix a great all-around play on the streaming market.

3. Spotify

Spotify is the world’s largest streaming music platform by paid listeners. Its monthly active users (MAUs) grew 29% year-over-year to 320 million last quarter. Its number of paid subscribers rose 27% to 144 million, while its number of ad-supported MAUs grew 31% to 185 million.

Spotify’s revenue rose 16% year-over-year in the first nine months of 2020, but high content costs and sluggish ad sales throughout the pandemic throttled its margins and resulted in a net loss.

For the fourth quarter, Spotify expects its revenue to rise 8%-19% year-over-year, its MAUs to increase 11%-27%, and for its gross margin to hold steady. Analysts expect its revenue to rise 41% this year and 22% next year, and for its net loss to narrow next year. 

Spotify’s stock more than doubled in 2020, but the stock still looks cheap at five times next year’s sales — likely due to concerns about its lack of profits and competition from tech giants like Apple Inc. 

However, Spotify’s stable growth in MAUs and paid listeners indicate there’s still plenty of room for multiple streaming music platforms to grow. Its gross margins should expand after the pandemic ends and advertisers ramp up their spending again, while new strategies — including its recent takeover of the podcast tech company Megaphone and its upcoming expansion into South Korea — could generate fresh growth. Therefore, Spotify should remain the top “pure play” on the streaming music market for the foreseeable future.

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

More reading

• How to invest in US shares in 2021
• Amazon has a new strategy to capture India’s e-commerce market
• Disney+ to hit $4 billion in revenue by 2022

Leo Sun owns shares of Amazon, Apple, AT&T, and Walt Disney. 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 recommends Amazon, Apple, Netflix, Roku, Spotify Technology, and Walt Disney and recommends the following options: short January 2021 $135 calls on Walt Disney, long January 2022 $1920 calls on Amazon, long January 2021 $60 calls on Walt Disney, and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon, Apple, Netflix, 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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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) continues to be the most shorted share on the ASX after its short interest rose to 15.3%. Concerns that the recovery of travel markets may take longer than hoped appears to be weighing on its shares.
• Tassal Group Limited (ASX: TGR) has seen its short interest jump to 11.4%. This salmon producer has come under pressure amid concerns that China could put tariffs on Australian salmon exports.
• Mesoblast limited (ASX: MSB) has seen its short interest surge to 9.6%. This biotech company’s shares crashed lower this month after a series of disappointing updates. One of which calls into question a potentially lucrative deal with pharma giant Novartis.
• Speedcast International Ltd (ASX: SDA) still has short interest of 9.3%. The communications satellite technology provider’s shares have been suspended for almost the entire year as it undertakes a recapitalisation.
• Inghams Group Ltd (ASX: ING) has 8.4% of its shares held short, which is up week on week. It appears as though short sellers aren’t convinced the worst is over for the poultry producer after a disappointing performance in FY 2020.
• InvoCare Limited (ASX: IVC) has short interest of 8.3%, which is down week on week. Short sellers have been targeting this funeral company amid concerns that it is losing market share to rivals.
• Myer Holdings Ltd (ASX: MYR) has seen its short interest fall to 8.3%. This department store operator’s shares have been hammered this year after the pandemic disrupted its recovery plans.
• Flight Centre Travel Group Ltd (ASX: FLT) has seen its short interest reduce to 8%. A recent COVID outbreak in New South Wales and a particularly virulent strain in the UK have been weighing on this travel company’s shares recently.
• Western Areas Ltd (ASX: WSA) has seen its short interest reduce to 7.8%. Short sellers appear to be closing positions after the nickel producer’s shares rebounded following a guidance downgrade-related crash.
• Zip Co Ltd (ASX: Z1P) has entered the top ten with short interest of 7.7%. This may be due to concerns that the company’s US buy now pay later business will be impacted negatively by increasing competition from the likes of Shopify and PayPal.

More reading

• Invest like Warren Buffett and buy and hold these ASX shares in 2021
• Why Mesoblast, Monash IVF, Netwealth, & Reece shares are dropping lower
• Why a2 Milk, Air New Zealand, Mesoblast, & Recce shares are storming higher
• Here’s why the Zip (ASX:Z1P) share price is in focus today
• 7 top ASX biomedical shares in 2020

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 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 and InvoCare 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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There are some small cap ASX shares that investors may think are exciting and worth a closer look.

Businesses that are earlier on in their growth journey may have a longer growth runway than companies that are already very large.

Here are three businesses that are quite small but are growing:

Sezzle Inc (ASX: SZL)

According to the ASX, Sezzle has a market capitalisation of $1.26 billion.

Sezzle is a buy now, pay later business that’s headquartered and focused in the US.

In its latest update, which was for the month of November 2020, Sezzle said that its active consumers had grown by 151.5% year on year to 2.07 million and active merchants went up by 164.5% to 24,846.

November was an important month for retail-related businesses because it included the four big retail days of Black Friday to Cyber Monday (BFCM) weekend.

The month saw underlying merchant sales (UMS) grow 188.5% to AU$153.9 million with annualised UMS also growing by 188.5% to AU$1.85 billion.

At the time of that update, Sezzle CEO and executive Chair Charlie Youakin said: “In addition to our record setting performance in November and over the BFCM weekend, we are extremely excited about the direction of our business, as we recently partnered with GameStop and eCommerce platform Wix.

“Sezzle is now offered at Gamestop’s network of more than 3,300 US retail stores, its online store, and in the GameStop mobile app. Our integration on Wix is available to all Wix merchants in the United States, Canada, India and in the future will be available in other regions as Sezzle expands internationally.”

City Chic Collective Ltd (ASX: CCX)

According to the ASX, City Chic has a market capitalisation of $911 million.

City Chic is a global omni-channel retailer that specialises in plus-size women’s apparel, footwear and accessories. It has a number of brands including City Chic, Avenue, CCX, Hips & Curves and Fox & Royal. It has a network of 96 stores across Australia and New Zealand, websites operating in Australia, New Zealand and the US, marketplace and wholesale partnerships with major US retailers such as Macys and Nordstrom, and a wholesale business with European and UK partners such as ASOS and Zalando.

FY20 was a disrupted year for the small cap ASX share with plenty of stores being closed during the COVID-19 lockdown period. Even so, it grew total revenue by 31% and online sales went up 113.5%. Online sales made up 65% of total sales in FY20.

The northern hemisphere made up 42% of global sales and this is about to rise after the announced acquisition of Evans in the UK from Arcadia after going into administration. The plus-sized clothing business made £26 million (A$46 million) of revenue from its e-commerce and wholesale business in the 12 months to August 2020. City Chic won’t be buying the physical store network.

At the current City Chic share price, it’s priced at 24x FY23’s estimated earnings.

Volpara Health Technologies Ltd (ASX: VHT)

According to the ASX, Volpara has a market capitalisation of $346 million.

Volpara is a digital health company focused on early detection of breast cancer by improving the quality of screening using artificial intelligence (AI).

The small cap ASX share said that its gross profit margin is now 92%. In the FY21 half-year result it showed that its annual recurring revenue went up by around 27% to NZ$19.9 million with subscription revenue growing 71% to NZ$8.8 million.

The number of women in the US that had one of Volpara’s products applied on their images and data grew from 25.8% in the first half of FY20 to approximately 27% in the first half of FY21.

Volpara has several goals including: maintaining a high retention rate, increasing average revenue per user, win new customers, upsell with existing customers and it may make acquisitions.

More reading

• Top brokers name 3 ASX shares to buy next week
• 3 top small cap ASX shares to buy
• Top brokers name 3 ASX shares to buy today
• 2 small cap ASX healthcare shares to watch
• ASX 200 drops over 1%

Tristan Harrison 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 VOLPARA FPO NZ. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia has recommended Sezzle Inc and VOLPARA FPO NZ. 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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It has been a topsy-turvy few years for long-term shareholders of digital lottery business Jumbo Interactive Ltd (ASX: JIN). After surging from below $10 to almost $30 by October 2019, the Jumbo share price dropped off a cliff. The fall was precipitated by panic-selling as the spread of COVID-19 wreaked havoc across global share markets, and by March Jumbo shares had dropped back below $10 again.

Since March, the Jumbo Interactive share price has recovered slightly and is trading at $13.87 as at the time of writing. However, this is well short of the lofty highs of around $27 the company’s shares had hit back in October 2019.

But major broker Goldman Sachs Group still feels bullish about the prospects for Jumbo Interactive shares. The broker believes that most of the worst market conditions are behind Jumbo, and that it actually has some unique business opportunities over the next 12 to 24 months.

What Goldman likes about the Jumbo share price

One of the key items highlighted by Goldman was the recent deal struck between Jumbo and Western Australian Government-owned Lotterywest. Under the deal, which was announced back in November, Jumbo will provide its online software platform to Lotterywest, and will receive a 9.5% service fee for each transaction processed. The deal is for up to 10 years but can be reviewed in years 3 and 6 by Lotterywest.

According to Goldman, the successful integration of Lotterywest could provide Jumbo with significant tailwinds, and even lead to further domestic and offshore contract wins. Without providing specifics, Jumbo has flagged the potential for software-as-a-service (Saas) business opportunities across the United States eastern seaboard. The company was also recently granted a licence to supply its software platform to lottery operators in Great Britain.

While long-term shareholders will be pleased that Jumbo now has Goldman’s recommendation, they may be a little disappointed with the 12-month price target of just $14.50 the broker has put on Jumbo shares. This means that it could be a long time before the Jumbo share price is back within touching distance of $30.

Goldman does identify a number of key risks associated with an investment in Jumbo. Changes in gambling regulations are always a threat to the industry and could potentially disrupt Jumbo’s business model or even lead to increased competition by making it easier for new entrants in the lottery sector.

The other, potentially more obvious, risk is the possibility of Jumbo’s SaaS business falling short of expectations. A fair amount of the bullish outlook on the Jumbo share price is focused on the company’s SaaS runway, both at home and abroad. If the company can capitalise on the momentum generated by its Lotterywest contract, this will go a long way towards unlocking the value Goldman sees in Jumbo shares.

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Rhys Brock owns shares of Jumbo Interactive Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive 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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