The A2 Milk Company Ltd (ASX: A2M) share price has returned from its trading halt and crashed lower on Friday.

In afternoon trade the infant formula and fresh milk company’s shares dropped a disappointing 26% to $9.82.

Why is the a2 Milk share price crashing lower?

Investors have been selling the company’s shares this afternoon following the release of an update to its guidance for the first half and full year of FY 2021.

According to the release, the company has experienced a more significant and protracted disruption in the daigou channel than expected. Given that this channel represents a very large proportion of its infant nutrition sales in its ANZ business, this has had a negative impact on its sales.

In addition, while the daigou disruption was initially predominantly affecting infant nutrition sales, the company revealed that sales in other nutritionals segments have now also been impacted.

As a result, the recovery in recent weeks has been slower than management had previously expected and will lead to a2 Milk falling short of its guidance in FY 2021.

It commented: “Our internal sales forecasts for both the daigou and the CBEC channels for the remainder of FY21 are now materially lower.”

What about other parts of the business?

One area that continues to perform well its China label business. The company notes that sales have been very strong in the China Mother and Baby Store (MBS) channel and its market share continues to grow.

It expects MBS revenue growth of 40% over the prior corresponding period, with its market share increasing to 2.3% at the end of October.

In addition, its liquid milk businesses in Australia and the USA have performed well through the first half. Both businesses have recorded strong first half growth compared to the same period last year.

FY 2021 guidance.

In respect to the above, a2 Milk now expects to report first half revenue of NZ$670 million with an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 27%. This compares to its previous guidance of NZ$725 million to NZ$775 million.

For the full year, revenue is expected to be in the range of NZ$1.4 billion to NZ$1.55 billion with an EBITDA margin of 26% to 29%. As a comparison, its previous guidance for the full year was revenue in the range of NZ$1.8 billion to NZ$1.9 billion with an EBITDA margin of 31%.

More reading

• 5 things to watch on the ASX 200 on Friday
• ASX 200 up 0.7%: Zip capital raising, A2 Milk trading halt, Sydney Airport dividend update
• Why the a2 Milk Company (ASX:A2M) share price is in a trading halt
• Got cash to invest? Here are 3 ASX growth shares to buy
• Top ASX shares to buy in 2021

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. 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.

In a move that has become all too familiar, Facebook Inc (NASDAQ: FB) has noticed an upstart social media app that is gaining traction and wants to take a bite out of the smaller company’s growth. The dominant social media network has deployed this playbook countless times over the years, oftentimes attempting to acquire a promising new start-up while simultaneously threatening it by competing through copying.

The latest target is Cameo, an app that allows users to pay celebrities to deliver personalised messages.

Coming after Cameo

Bloomberg reports that Facebook is developing a new feature called Super, which very closely resembles what Cameo does. Super will allow content creators or celebrities to host virtual events where the audience can send tips or digital gifts. Viewers will also be able to pay for the privilege of appearing directly in the event’s livestream, according to the report.

Facebook’s New Product Experimentation (NPE) team is said to be behind the app’s development. That division was created over the summer of 2019 with the explicit task of testing out new ideas, and the team is reportedly working on apps that basically compete with everyone. The social networking tech giant has made it clear that NPE is a riskier endeavor and won’t hesitate to shut down apps that fail to gain traction. Several apps have already been shuttered, most recently including Hobbi and Lasso, which were trying to replicate Pinterest and TikTok, respectively.

Founded in 2016, Cameo connects celebrities with fans, who can pay for personalised videos and messages. The celebrity sets the price, with the start-up taking a 25% cut of all transactions. Users can request that the celebrity perform specific actions or say certain things, and clips often go viral  on social media.

The company had raised $50 million last summer in a Series B funding round at a $300 valuation, according to Axios. Cameo’s popularity has surged during the COVID-19 pandemic, as the platform is a way for people to connect virtually while staying at home. As a small private company, Cameo does not regularly disclose many details around its business but has said it facilitates hundreds of thousands of interactions per month.

Why Facebook won’t just buy Cameo

With that type of booming demand, it’s no surprise that Facebook wants to jump into the niche. Considering Facebook’s history, it wouldn’t even been surprising if the juggernaut was interested in acquiring Cameo. However, Facebook’s strategy of acquiring upstarts that could one day grow to become viable competitors is under extreme scrutiny right now — the FTC and state attorneys general have just sued the company, alleging that it has built an illegal monopoly by buying up the competition.

The legal complaints call for Facebook to be broken up, specifically from Instagram and WhatsApp, both of which were acquisitions. Attempting to acquire Cameo would just stoke further criticisms at exactly the worst possible time. In all likelihood, Facebook will simply try to copy Cameo and quietly shut down Super a few months after it launches when it fails to make a dent in Cameo’s growth.

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

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Evan Niu, CFA has no position in any of the stocks mentioned. 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 Facebook and Pinterest. The Motley Fool Australia has recommended Facebook. 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.

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Investing regularly in cheap stocks may not seem like a successful means of making a passive income to some investors. After all, many shares continue to trade at relatively low prices following the stock market crash.

However, over time, they have the potential to deliver sound recoveries. In doing so, they may produce impressive capital returns that contribute to a growing nest egg from which a generous passive income can be drawn in older age.

Buying today’s cheap shares to benefit from a stock market recovery

There are currently a wide range of cheap stocks available to buy that could improve an investor’s passive income prospects in retirement. Some sectors are relatively unpopular among investors due to their uncertain near-term operating outlooks. As such, they could produce impressive returns as the world economy’s performance improves and investors become less risk averse.

Certainly, they may face difficulties in the short run. Risks such as political uncertainty in Europe and the coronavirus pandemic may weigh on their prospects.

However, in many cases, their valuations may account for a period of slower sales growth and weaker profitability. They may even offer wide margins of safety that do not factor in their long-term recovery potential.

Buying cheap stocks has historically been a sound means of generating strong capital returns over the long run.

The economy has always returned to positive growth following its downturns, while investors have continually returned to bullish viewpoints after bear markets.

Therefore, investors who have purchased cheap shares and held them for the long term have often benefitted the most from a stock market recovery. This may mean there is scope for today’s cheap shares to provide market-beating returns in the coming years.

Focusing on high-quality businesses

Of course, some of today’s cheap stocks are priced at low levels because of fundamental flaws that could negatively impact on their prospects. For example, they may have high debt levels that mean they are under pressure when making interest payments from lower levels of operating profit.

Similarly, some cheap shares may have weak competitive positions that are now being exposed by an economic slowdown. This may cause their financial performances to lag sector peers.

Therefore, focusing on high-quality companies that trade at low prices could yield higher returns, as well as lower risks. They may offer greater scope for capital returns in a stock market recovery that increases an investor’s chances of building a large retirement portfolio.

Building a passive income in retirement

Even if an investor’s purchase of cheap stocks provides a market rate of return of around 8%, they could build a worthwhile passive income with a modest regular investment. For example, investing $500 per month at an 8% return would produce a portfolio valued at $750,000. From this, a 3.5% annual withdrawal would provide a passive income in excess of $25,000.

However, through buying undervalued shares today it may be possible to make higher returns to build a larger portfolio. In doing so, an investor could make a greater passive income in older age.

More reading

• Why the IDP Education (ASX:IEL) share price is down almost 20% in a month
• Why the National Storage (ASX:NSR) share price is dropping lower
• Could this be the saving grace for the Zip Co Ltd (ASX:Z1P) share price?
• How wealthy are you compared to the average household?
• 3 AGM highlights lifting the Nufarm (ASX:NUF) share price today

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The IDP Education Ltd (ASX: IEL) share price has quietly lost almost 20% of its value during the past month. The company’s shares were cruising nicely in November, rising by an equivalent 20% after news of successful COVID-19 vaccine advancements broke out.

IDP shares have since gone on a downward spiral following the end of November, without the company making any major announcements to the market.

Here we’ll take a look at possible reasons why the IDP share price has lost so much value in one month.

What’s happening?

IDP Education is an English education company that conducts the International English Language Testing System (IELTS) for students. 

The company’s main revenue source comes from mostly in-person English language testing, which basically relies on international students coming back to Australia.

Recent developments, however, have created obstacles to this taking place and hampered the possibility of a quick return of overseas students to this country. 

For example, the Australian Government has continued to restrict its borders to international visitors indefinitely – and this restriction also applies to international students.

The IDP share price seems to be sensitive to any news that might restrict travel. For example, the company’s shares have retreated today, as have other ASX travel-related shares, after a spike of COVID-19 cases in New South Wales prompted fears of possible new state border restrictions. 

Arguably, the IDP share price is also negatively impacted by any deterioration in Australia-China relations, as Chinese students make up a good portion of its student base.

For example, the IDP share price has fallen since China announced tariffs on Australian wines in late November – with its share price falling again when news came out about the Chinese ban on Australian coal this week. 

About the IDP Education share price

Having said all that, the IDP Education share price has actually done well for the year, up around 13%, after the company made a quick pivot to online offerings.

The company first floated on the ASX in 2015 at an initial public offering (IPO) price of $2.65. It was trading below $10 per share for most of the period prior to 2019.

At the current price, the company commands a market capitalisation of $5.6 billion. 

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Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Idp Education Pty 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.

The post Why the IDP Education (ASX:IEL) share price is down almost 20% in a month appeared first on The Motley Fool Australia.

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The National Storage REIT (ASX: NSR) share price is dropping lower on Friday despite the release of a positive update.

In early afternoon trade the self-storage operator’s shares are down almost 2% to $1.95.

How is National Storage performing?

According to the release, National Storage has been busy with its growth through acquisition strategy and has surpassed 200 self-storage centres.

The company now has 206 centres across Australia and New Zealand following the acquisition of 17 centres and the development of two more so far in FY 2021.

This includes a major portfolio of nine centres in greater Melbourne with over 38,000m2 net leasable area (NLA) and significant opportunities for future expansion. These acquisitions and developments came at a cost of $263 million.

But it doesn’t end there. Management advised that five expansion and development projects are recently completed or nearing completion. They will add 31,000m2 NLA to its current portfolio.

Record occupancy growth.

National Storage revealed that it achieved record occupancy growth of 78,000m2 during the period 1 July to 30 November. This represents 8% of its total NLA.

This took its combined Australian and New Zealand same centre occupancy to 85.7%, up from 78.9% at the end of June.

Pleasingly, the company is also seeing further improvements in its same centre revenue per available square metre (REVPAM) metric. At the end of November, its REVPAM was up 6.2% since the end of June to $207.

The company’s Managing Director, Andrew Catsoulis, commented: “Despite the significant challenges faced during 2020, including M&A activity and the COVID-19 pandemic, NSR has delivered a very strong half year performance with record occupancy growth of 78,000m2 for the 5 months to 30 November 2020, combined with a 6.2% improvement in same centre REVPAM and an improving rate per square metre. Given NSR’s relatively fixed cost base, the majority of this additional revenue should fall to underlying earnings.”

FY 2021 Guidance.

Looking ahead, management expects its earnings per share to be at the upper end of the guidance range of 7.7 cents per share to 8.3 cents per share.

It is also expecting an FY 2021 distribution of 90% to 100% of its underlying earning.

Judging by the National Storage share price performance today, some investors may have been expecting stronger guidance.

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Motley Fool contributor James Mickleboro 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 Zip Co Ltd (ASX: Z1P) share price has given back all of its post-QuadPay acquisition gains in recent months and almost halved since its record all-time high of $10.64 back in August.

Its shares jumped as much as 6% on Thursday following a successful $120 million capital raising. However, the discount price and broader weakness in the market is likely to blame for its 3.7% slump today, at the time of writing.

With its plans to accelerate its growth and explore opportunities for international exposure, could this be the saving grace for the Zip share price moving into 2021? 

Equity raising for growth 

On Wednesday, Zip announced a capital raise of up to $150 million to bolster its US growth and UK expansion, explore new markets and ramp up its product expansion. The capital raising will have an offer price of A$5.34 which represents a 4.1% discount to its last traded price of $5.57 on 16 December, 2020. 

The next day, it announced the successful completion of the placement, raising $120 million of growth capital. Following the completion of the placement, eligible shareholders will be given the opportunity to subscribe for new shares under a share purchase plan for a raise of up to $30 million. 

Capital to accelerate growth and enter new markets

The proceeds from the capital raising will be used to accelerate the company’s growth on all fronts. This is the breakdown of its allocation of funds. 

58% of the raise or $85 million will be allocated to the US market where the company seeks to continue to capitalise on its QuadPay acquisition. Here, Zip will seek to accelerate its growth including customer acquisition, increase app usage and merchant partnerships. The US growth story so far has been accelerating, with November transactions more than tripling November 2019. With an addressable retail market of more than $5 trillion, Zip is eager to continue to capture market share. 

10% or $15 million will be used for the UK market where it hopes to establish greater scale, partnerships and rollout additional product innovations. The UK has a $600 billion addressable retail market and largest ecommerce market in Europe. This represents an exciting opportunity for BNPL, which is in its early days in the UK. 

24% or $35 million will be allocated to its new division, “new markets” to execute across product, engineering, regulatory and growth functions. A key element of its new markets division is undertaking strategic investments in high-performing, culturally aligned existing players to quickly gain access to new geographies and acquire new customers. 

There has been a lack of further international expansion for ASX BNPL players across the board, besides the likes of Afterpay Ltd (ASX: APT). But with this announcement, Zip has made two new investments including Spotii, a leading BNPL player headquartered in the United Arab Emirates and focused on the Gulf Cooperation Council region, and a non-binding agreement with Twisto, a leading payments platform operational in Czechia and Poland with the ability to passport licensing across the EU.

Finally, 8% of $12 million will be used to find the continued growth of the ANZ region with new investment in product expansion. 

More reading

• Here’s how ASX buy now, pay later (BNPL) shares have performed in 2020
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• Why Codan, Pro Medicus, Uniti, & Zip shares are storming higher
• ASX 200 up 0.7%: Zip capital raising, A2 Milk trading halt, Sydney Airport dividend update
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Lina Lim 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 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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Many Australians tend to view our country as blissfully egalitarian. Aussies are inclined to believe, as a nation, we are largely unencumbered by the massive wealth disparities of the United States, for example, home to nine of the ten richest people on the planet, according to Bloomberg.

We also don’t participate in the classic class divides that our friends over in the United Kingdom do, with their lordships, dukedoms and such. But we are still a country of wealth disparity, as is inevitable in a capitalist economy.

But how wide is this disparity? Well, reporting from The Sydney Morning Herald (SMH) today sheds some light on that question. The report was compiled using data from the Australian Bureau of Statistics and was originally prepared by the Australian Council of Social Services (ACOSS) together with the University of New South Wales.

How wealthy is the average household?

According to the SMH, the richest tenth of households today owns almost half of Australia’s private wealth. Egalitarian indeed.

There is a “comfortable middle” 30% of Australian households that control roughly 38% of the country’s household wealth, which leaves the lowest 60% of Aussie households with just 16% of the pie.

According to the report, the average net worth of a household in that upper echelon reached $4.75 million in FY2018, representing 46% of the total private wealth in the country. This was vastly assisted by growth in property prices, as well as “a disproportionate share of stocks and business investments”.

That “comfortable middle” came in with an average net household worth of $1.3 million. Whereas the bottom 60% averaged a net worth of just $277,000.

These figures include the net value of the family home, as well as superannuation balances. You can see a more detailed breakdown of the SMH’s data here:

Household Income	Share of Total Wealth	Average Wealth	Average Value of Wealth Components
Highest wealth	46%	$4.75 million	Own home (less mortgage): $1.41m Other non-financial assets: $211,000 Superannuation: $897,000 Other real estate (less expenses): $802,000 Shares, business and financial: $1.44m Other debt: -$10,000
‘Comfortable middle’	38%	$1.28 million	Own home (less mortgage): $615,000 Other non-financial assets: $126,000 Superannuation: $297,000 Other real estate (less expenses): $104,000 Shares, business and financial: $164,000 Other debt: -$8,000
Lower wealth	16%	$277,000	Own home (less mortgage): $120,000 Other non-financial assets: $56,000 Superannuation: $69,000 Other real estate (less expenses): $13,000 Shares, business and financial: $28,000 Other debt: -$56,000

Data: SMH and ACOSS/NSW, Table: Author’s Own

What about income?

The report also finds that income disparity is not as divergent compared to household wealth. It indicates that the highest-earning 20% of households had an average pre-tax income of just under $300,000 per annum, with the middle 20% coming in at $116,000 and the bottom 20% at $41,000.

However, it also notes that investment income is “highly concentrated at the top end”, with around two-thirds going to the wealthiest 20% of households, compared to 44% of wage/salary income. That’s an average of $1,000 a week from investment income. This disparity is something we Fools think should change! Hence our mission to bring the joys of investing to as many people as possible.

So now you know where you and your household stands compared to your fellow Australians. Hopefully, this report provides some insight and perspective into how wealth and income are sloshed around in our ‘lucky country’.

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Motley Fool contributor Sebastian Bowen 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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Agrochemicals company Nufarm Limited (ASX: NUF) has reported its revenues for October and November were up 47% on the comparative period last year. This follows a 23% revenue growth in September, the company said in a bullish trading update at its annual general meeting (AGM) this morning. 

The Nufarm share price has reacted positively to the news, trading up more than 2% to $4.23 at the time of writing.

3 AGM highlights driving the Nufarm share price today

Firtly, the revenue growth numbers just mentioned. Nufarm says that this growth was driven primarily by stronger demand in Australia and Europe. In particular, its European Nuseed business. With continuing better pricing from suppliers, the company expects to deliver even better earnings from the region as the year progresses.

The second major highlight was the “significant milestone” the company achieved in selling its South American crop protection business to Sumitomo Chemical Company earlier this year. That sale has allowed the company to refocus its resources into regions and businesses through which it can generate better long-term growth, such as Europe.

Thirdly, Nufarm is working to reduce its cost base to improve margins and provide a buffer against unforeseen headwinds. The company is targeting $20 million to $25 million of cost savings by the end of financial year 2022. Around $10 million to $15 million of the savings are to come from the European business.

What does Nufarm do?

With origins dating back more than 100 years, Nufarm is a global manufacturer of crop protection solutions and seeds. 

Nufarm’s products are designed to protect commercial crops from a variety of pests, weeds, and diseases, thereby maximising crop yields.  It first listed on the ASX in 1988. 

Nufarm share price performance this year

The Nufarm share price has lost almost 30% in 2020. The company recorded a statutory net loss after tax of $456 million for the full year FY20. This was attributed to weak seasonal conditions faced in the first 6 months and the effects of COVID-19.

The company has continued to suspend all dividends until further notice, with the board saying it would revisit this decision in future based on the prevailing market conditions.

Nufarm commands a market cap of $1.5 billion.

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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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At lunch on Friday the S&P/ASX 200 Index (ASX: XJO) is on course to end the week with a day in the red. The benchmark index is currently down 0.6% to 6,716.6 points.

Here’s what has been happening on the market today:

Travel shares tumble.

Travel shares such as Flight Centre Travel Group Ltd (ASX: FLT) and Qantas Airways Limited (ASX: QAN) are tumbling lower today. This appears to have been driven by news that the COVID-19 outbreak in New South Wales has continued to grow. This resulted in Western Australia closing its border to the state on Thursday night. There are now concerns that other states will soon follow suit, which could delay the domestic travel market recovery.

Mesoblast shares crash lower.

The Mesoblast limited (ASX: MSB) share price is crashing lower on Friday after the release of a disappointing update in relation to its COVID-19 trial. The release reveals that the biotech company’s trial is unlikely to meet its 30-day mortality reduction endpoint. As a result, the US Data Safety Monitoring Board has effectively told the company to end the trial early and recruit no further patients. Management suggested that changes in the treatment regimens for COVID-19 patients are to blame.

NAB annual general meeting.

The National Australia Bank Ltd (ASX: NAB) share price is dropping lower on the day of its annual general meeting. This appears to be down to broad market weakness rather than anything that went on at the event. In fact, NAB spoke positively about the future at its meeting. CEO, Ross McEwan, said: “While revenue headwinds from low credit growth and ultra-low interest rates remain, we see opportunities for growth in our core banking businesses; NAB, BNZ and UBank. As we lift performance, we expect to have the opportunity to return more profit to you, our shareholders.”

Best and worst ASX 200 performers.

The Blackmores Limited (ASX: BKL) share price is the best performer on Friday with a 4% gain. The health supplements company’s shares have rebounded after a sizeable decline on Thursday. The worst performer has been the Mesoblast share price with a 35% decline. This follows its COVID-19 trial update.

More reading

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• Qantas (ASX:QAN) dobbed in to ACCC by rival
• The QBE (ASX:QBE) share price has plummeted 9% today. Here’s why
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia has recommended Flight Centre Travel 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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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.

India’s over-the-top (OTT) video streaming market is about to take off in the coming years, according to a report by PricewaterhouseCoopers, clocking a compound annual growth rate of 28.6% through 2024, when it is expected to be worth $2.9 billion.

Not surprisingly, there are several contenders looking for a piece of India’s video streaming space, as it is currently the fastest-growing OTT market in the world. The likes of Walt Disney Co (NYSE: DIS) and Netflix Inc (NASDAQ: NFLX) have been making aggressive moves in the country, but e-commerce giant Amazon.com Inc (NASDAQ: AMZN) is looking to stay on top in this space.

Let’s take a closer look at what Amazon is doing with its Prime Video service in India and why it could be a big deal for the company in the long run.

Amazon makes a smart move to reach more streaming customers

According to third-party estimates, Amazon’s Prime Video service is already in a solid position in India’s OTT market, with a 20% share. That’s equal to Netflix’s share and slightly higher than the 17% held by Disney+/Hotstar.

Amazon, however, looks capable of pulling ahead of its close rivals thanks to the addition of live cricket coverage in India. The company recently landed the streaming rights to stream cricketing action involving the New Zealand national team in India for a period of five years, until 2026. What’s more, Amazon is open to acquiring more cricket streaming rights, which is not surprising given how popular the game is in India.

The Broadcast Audience Research Council says that cricket attracts 93% of sports viewers in the country. This year, the Indian Premier League (a domestic tournament) saw a 24% jump in viewership, to a cumulative 383 billion minutes. As such, it won’t be surprising to see Amazon go after the more lucrative prize — the Indian Premier League — when the current streaming rights held by Disney expire in 2023.

It is estimated that Disney’s ownership of the Indian Premier League streaming rights could help it exit 2020 with 28 million subscribers, eclipsing Amazon Prime Video’s 17 million subscribers and Netflix’s 5 million subscribers. This is why it is important for Amazon to bring live sports action — especially cricket — to consumers in India.

More importantly, Amazon has the financial firepower to land the big prize, as the Indian Premier League rights were sold for $2.6 billion in 2017. Amazon has already invested $6.5 billion in India so far and has announced a couple of big investments in 2020 to the tune of nearly $4 billion. So, Amazon can be expected to fight for more lucrative cricket tournament rights in India in the coming years.

The bigger play

India’s video streaming market may not be enough to move the revenue needle in a significant way for Amazon, given that the company has generated close to $350 billion in revenue over the past year. But it could give consumers another reason to get into Amazon’s ecosystem by purchasing a Prime membership, and boost the company’s e-commerce business.

Amazon reportedly has around 10 million Prime members in India. The number of Prime memberships could go up rapidly once Amazon doubles down on cricket streaming in India, because of the game’s popularity. This could also give the company’s e-commerce business a shot in the arm, as the Amazon Prime membership not only includes access to video content, but also gives users access to other services such as faster deliveries for free, music, and gaming, among others.

The bottom line is that Amazon could bring more users into its ecosystem in India with the help of cricket streaming, and that could eventually turn out to be a big number. The number of OTT video users in India is expected to hit 452 million in 2025, indicating that Amazon has a big opportunity ahead of it to boost Prime memberships and e-commerce revenue. That’s because Amazon’s Prime members reportedly spend more money on the company’s e-commerce platform when compared to non-Prime members.

According to a third-party survey carried out in the U.S., Prime members have been found to spend $1,400 on average annually on Amazon as compared to $600 for non-Prime members. As a result, the addition of new Prime members in the coming years thanks to the addition of popular content such as cricket streaming could unlock e-commerce riches for Amazon in India.

Amazon holds around 30% of India’s e-commerce market, which is expected to top $100 billion in revenue by 2024. The addition of popular sports such as cricket to Amazon’s Prime Video programming could help the company bump up its market share in India and also drive additional spending from customers. So, don’t be surprised to see Amazon’s move into cricket streaming reap rich dividends for the company’s e-commerce business in India in the long run by adding billions to its revenue, both directly and indirectly.

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

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Harsh Chauhan 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 recommends Amazon, Netflix, 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, 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.

The post Amazon has a new strategy to capture India’s e-commerce market appeared first on The Motley Fool Australia.

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

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