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 2009, an individual known only by the pseudonym Satoshi Nakamoto created what has become the world’s largest cryptocurrency: Bitcoin (CRYPTO: BTC). Since that time, Bitcoin prices have skyrocketed and plunged repeatedly in a dizzying display of volatility. But those frenetic price swings are just one of the reasons Bitcoin can be a risky place to invest your money.

If concerns about this digital currency have led you to avoid betting directly on an asset class that has no clear investment thesis (or on a digital currency that’s relatively difficult to spend in the real world), both PayPal Holdings Inc (NASDAQ: PYPL) and Square Inc (NYSE: SQ) are companies that now offer some Bitcoin exposure without the same level of risk.

Here’s what investors should know.

The importance of Bitcoin

In May 2018, Square started allowing Cash App users to buy and sell Bitcoin. PayPal followed suit with its digital wallet in 2020, and it plans to add the feature to Venmo in the summer of 2021. What’s more, a report by Pantera Capital indicates that both fintech companies are aggressively buying the digital currency. New Bitcoins are created according to a fixed formula and the amount of new coins created will eventually stop when it reaches 21 million. According to Pantera Capital, Square and PayPal together are buying more than 100% of newly mined Bitcoins currently out there. In other words, they are purchasing every new token created as well as some already in circulation.

During PayPal’s recent earnings call, CEO Dan Schulman indicated that users responded with overwhelming enthusiasm to the company’s Bitcoin launch. Even more exciting, Schulman reiterated the company’s plan to enable Bitcoin as a payment method at any of PayPal’s 29 million merchants later this quarter.

While PayPal just started offering this service and has yet to provide specific financial details, Bitcoin has become a major contributor to Square’s top line. In fact, Bitcoin sales have risen from $34 million in the first quarter of fiscal 2018 to $1.6 billion in the third quarter of fiscal 2020 — that’s a 4,600% increase in less than three years.

However, Bitcoin revenue comes with incredibly low margins — in the most recent quarter, Square’s gross margin on Bitcoin was just 2%. In other words, despite accounting for the majority of Square’s revenue, Bitcoin’s contribution to the bottom line is negligible. So what’s the point?

For both PayPal and Square, Bitcoin is a way of engaging users. It’s one more feature that enhances their mobile app ecosystems. And as these fintech companies add new users, it becomes more likely that those users will engage in other profit-generating activities.

For example, Square’s Cash App also allows users to send peer-to-peer transfers, instantly transfer funds to bank accounts, receive direct deposits, buy and sell stocks, and make purchases using the Square Cash Card. And users who adopt two or more of those services transact three to four times more frequently and generate three to four times more gross profit than other users. Additionally, in the third quarter of fiscal 2020, 23% of Cash App consumers were daily users compared to 15% in the third quarter of fiscal 2018. In other words, Square’s strategy is working, and PayPal will likely see similar benefits.

The benefits of Square and PayPal

Compared to purchasing Bitcoin outright — which is a risky investment for a number of reasons — Square and PayPal both have thriving businesses outside of cryptocurrency.

These fintech companies have developed highly engaging product ecosystems that empower both sellers and consumers. Whether it’s the ability to accept digital payments, invest in cryptocurrency, or transfer money to friends or family, both PayPal and Square provide truly valuable services. Moreover, both have built sizable networks protected by strong moats, creating a barrier to entry (something Bitcoin lacks). And that has translated into tangible wealth and significant revenue growth.

Metric	2017	TTM	Change
PayPal revenue	$13.1 billion	$21.5 billion	64%
Square revenue	$2.2 billion	$7.7 billion	246%

Data source: PayPal and Square SEC filings. TTM = trailing 12 months.

Finally, digital payments and e-commerce are only becoming more prevalent around the world. And in the years ahead, the tailwinds from those trends should help PayPal and Square continue to create value for all stakeholders, even if Bitcoin’s value evaporates.

A final word

No investment is without risk, nor is any asset class guaranteed to gain value over time. But Bitcoin’s volatility and questionable long-term utility makes it unusually risky in my opinion, even compared to some of the most volatile stocks.

Alternatively, PayPal and Square allow investors to benefit from the mania surrounding Bitcoin while avoiding actual exposure to the cryptocurrency. Put another way, shareholders of PayPal and Square benefit from the buying and selling of Bitcoin, not the value of a currency prone to wild fluctuations. That’s why I’ll take these two fintech companies over Bitcoin any day of the week.

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

More reading

• Afterpay (ASX:APT) share price higher following PayPal’s BNPL update
• GameStop, AMC trades temporarily blocked on Square’s Cash App
• PayPal stock could surge 23% to $300 on its cryptocurrency move, according to this analyst
• Top fundie Hyperion to launch new growth ETF
• Tyro (ASX:TYR) could face legal action for catastrophic outage

Trevor Jennewine owns shares of PayPal Holdings and Square. Trevor Jennewine has no position in any cryptocurrencies mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends PayPal Holdings and Square and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has no position in any cryptocurrencies mentioned. The Motley Fool Australia has recommended PayPal Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Forget Bitcoin, buy PayPal and Square instead 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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The Althea Group Holdings Ltd (ASX: AGH) share price is tearing higher today. This comes after the company announced the completion of its first shipment of products to Germany.

Shares in the global medicinal cannabis company reached a high of 56 cents this morning, but have since retreated to 54 cents, up 9% at the time of writing.

What’s driving the Althea share price higher?

According to its release, the company has delivered its first shipment of medicinal oil cannabis products to Nimbus Health, a company that imports and distributes medicinal cannabis products in Germany. The vertically integrated pharmaceutical wholesaler ranks among the top 10 distributors in Germany.

The shipment is worth around $1 million and arrived at the Nimbus facility for distribution. It is expected the medicinal oil cannabis products will be sent to an extensive network of existing partnering pharmacies.

Althea said it would receive payment for products supplied to Nimbus, along with 50% of the net profit.

Furthermore, under an earlier agreement with Nimbus, Althea will also generate its own sales via new and existing customers to avoid relying on third-party wholesalers for repeat purchase orders.

Addressable market opportunity

Althea noted that the German market represented a significant opportunity to invest its resources in. With a population of 82.3 million, the medicinal cannabis market is estimated to grow to €7.7 billion (A$12.22 billion) by 2028.

Althea believes that its partnership with Nimbus puts it in a good position to become Germany’s leading medicinal cannabis brand.

CEO commentary

Althea CEO Joshua Fegan welcomed the positive news, saying:

Successfully shipping our first products to Germany is a huge milestone for our European expansion plans and builds on the encouraging results to date from our UK operations.

Germany is a key market for global medicinal cannabis and is currently underserviced in terms of high-quality medicinal cannabis oil products and the education of Healthcare Professionals. Along with exceptional patient care, these are the pillars of our business.

Foolish takeaway

The Althea share price has climbed more than 20% since the beginning of the 2021 calendar year. The company’s shares took a minor dip in late January, hitting a low of 44 cents before surging higher.

At the current share price, Althea has a market capitalisation of around $139 million.

More reading

• CBD to be sold in pharmacies, ASX cannabis shares react
• Up in smoke! Why ASX cannabis shares are having a bleary day
• What does the Biden administration mean for ASX shares? 
• The sector that’ll grow 480% this year, expert says
• Why the Althea (ASX:AGH) share price is flying high this morning

Motley Fool contributor Aaron Teboneras 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 Why the Althea (ASX:AGH) share price has zoomed up 9% today appeared first on The Motley Fool Australia.

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In early afternoon trade the S&P/ASX 200 Index (ASX: XJO) is back on form and pushing higher. At the time of writing, the benchmark index is up 0.5% to 6,856.4 points.

Four ASX shares that have failed to follow the market’s lead today are listed below. Here’s why they are under pressure:

CIMIC Group Ltd (ASX: CIM)

The CIMIC share price has crashed 16% lower to $21.88 following the release of its full year results for FY 2020 this morning. While the contractor reported a sizeable jump in profits, this growth was driven entirely by the sale of a 50% stake in the Thiess business. Underlying profit fell 25% year on year. The company’s cash flows were also weak, which appears to have alarmed investors.

Crown Resorts Ltd (ASX: CWN)

The Crown share price has returned from its trading halt and dropped 3.5% to $9.80. Yesterday afternoon the casino and resorts operator was judged to be an unsuitable operator of its new Barangaroo casino in Sydney. Commissioner Bergin noted how Crown has been “facilitating money laundering, exposing staff to the risk of detention in a foreign jurisdiction and pursuing commercial relationships with individuals with connections to Triads and organised crime group.”

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The Domino’s share price is down 1.5% to $96.20. This appears to have been driven by a broker note out of Credit Suisse this morning. According to the note, ahead of its half year results release, the broker has reaffirmed its underperform rating but lifted its price target to $63.58. While Credit Suisse expects a solid first half, it isn’t enough to change its recommendation due to valuation reasons.

Praemium Ltd (ASX: PPS)

The Praemium share price has fallen almost 5% to 80 cents. The catalyst for this was the release of the investment platform provider’s half year results this morning. Although Praemium reported a 69% increase in funds under administration to $34.3 billion, its revenue only increased 20% to $31.7 million and its EBITDA rose just 5% to $7.3 million.

More reading

• ASX 200 up 0.35%: CBA half year update, IAG impresses, Zip shoots higher
• Why the Cimic (ASX:CIM) share price is plunging 16%
• Why the Crown (ASX:CWN) share price is tumbling lower today
• Praemium (ASX:PPS) share price on watch after “transformational” period
• ASX 200 drops 0.9%, Crown not suitable for Sydney casino, Macquarie rises

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 Praemium Limited. The Motley Fool Australia has recommended Crown Resorts Limited, Dominos Pizza Enterprises Limited, and Praemium Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why CIMIC, Crown, Domino’s, & Praemium shares are tumbling lower today appeared first on The Motley Fool Australia.

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At lunch on Wednesday the S&P/ASX 200 Index (ASX: XJO) is bouncing back from yesterday’s decline. The benchmark index is currently up 0.35% to 6,845.3 points.

Here’s what is happening on the market today:

Commonwealth Bank half year result

The Commonwealth Bank of Australia (ASX: CBA) share price is trading lower today following the release of its half year results. For the six months ended 31 December, the banking giant reported a 0.5% decline in operating income to $11,961 million and a 10.8% decline in cash net profit after tax from continuing operations to $3,886 million. Excluding COVID-19 impacts and remediation costs, the bank’s cash profit would have been broadly flat. Commonwealth Bank declared a fully franked interim dividend of $1.50 per share.

IAG result impresses

The Insurance Australia Group Ltd (ASX: IAG) share price is charging higher today following the release of a better than expected half year result. The insurance giant delivered a 3.8% increase in gross written premiums (GWP) to $6,188 million and 33.1% increase in insurance profit to $667 million. The latter was driven largely by lower motor claims due to COVID lockdowns. However, due to a hefty business interruption claims charge, the company posted a statutory loss after tax of $460 million. Nevertheless, the company surprised the market by declaring a 7 cents per share interim dividend.

Crown share price tumbles

The Crown Resorts Ltd (ASX: CWN) share price is tumbling lower after being found unsuitable to operate its Barangaroo casino in Sydney. Commissioner Patricia Bergin explained: “Any applicant for a casino licence with the attributes of Crown’s stark realities of facilitating money laundering, exposing staff to the risk of detention in a foreign jurisdiction and pursuing commercial relationships with individuals with connections to Triads and organised crime groups would not be confident of a positive outcome.” Two directors have resigned this morning following the release of the report.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Wednesday has been the Zip Co Ltd (ASX: Z1P) share price with an 8% gain. This is despite there being no news out of the buy now pay later provider. Going the other way, the worst performer has been the CIMIC Group Ltd (ASX: CIM) share price with a disappointing 17% decline. This follows the release of its full year results for FY 2020 this morning. Weak cash flows appear to have spooked the market.

More reading

• Why the Cimic (ASX:CIM) share price is plunging 16%
• Why Computershare, IAG, Northern Star, & PointsBet shares are pushing higher
• Why the Crown (ASX:CWN) share price is tumbling lower today
• Why the Insurance Australia Group (ASX:IAG) share price is charging higher
• Commonwealth Bank (ASX:CBA) share price in focus after $3.9 billion half year cash profit

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 has recommended Crown Resorts Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post ASX 200 up 0.35%: CBA half year update, IAG impresses, Zip shoots higher appeared first on The Motley Fool Australia.

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The Cimic Group Ltd (ASX: CIM) share price fell hard after the opening bell, down 14% at the time of writing.

This comes after the company released its financial results for the full year ending 31 December.

What full year financial results did Cimic report?

In this morning’s announcement, Cimic Group reported statutory net profit after tax (NPAT) of $620 million for the full 2020 financial year. That compares to a loss of $1.4 billion for the 2019 financial year.

Underlying NPAT came in at $601 million, down from $800 million in FY 2019. This was adjusted for the company’s sale of Thiess, Gorgon, and other one-offs.

The $372 million in proforma underlying NPAT fell from $597 million the previous financial year. This reflects the underlying adjustment for Thiess as a 50% joint venture.

Cimic reported revenue of $11.4 billion, down from $14.7 billion in 2019. The company said that COVID-19 had caused delays in gaining new projects, resulting in lower revenues across both its domestic and international activities.

The construction, mining, services, and engineering company ended 2020 with liquidity of $4.2 billion and a net cash position of $190 million. It reported that it had work on hand of $30.1 billion, or the equivalent to approximately 2 years of revenue.

Comments from the CEO

Addressing the results, Cimic Group CEO, Juan Santamaria said:

While the pandemic had a bearing on revenues and the award of new projects during 2020, we have a strong level of work in hand of $30.1 billion, providing approximately two years’ worth of work and a positive outlook for the future.

The Thiess transaction has delivered additional capital to pursue future growth opportunities and enables us to retain a strategic 50% interest in the mining business, whilst also strengthening our balance sheet and reducing debt.

Santamaria said the company’s strong liquidity and net cash position, supported by the Thiess transaction, enabled it to declare a final dividend of 60 cents per share. That works out to a payout ration of 62% of Cimic’s 2H 2020 NPAT.

Looking ahead, Cimic is targeting healthy profit growth for the 2021 financial year. It offered FY21 NPAT guidance in the range of $400–430 million. Those figures are up 8–16% from the 2020 results.

Cimic Group share price snapshot

The Cimic share price, like many ASX shares, was hammered during the COVID market panic last year. Shares plunged 63% from 22 January through to their 19 March lows. Since that low, the Cimic share price has rebounded 78%.

With today’s intraday loss taken into account, the Cimic share price is down 7% so far in 2021. By comparison the S&P/ASX 200 Index (ASX: XJO) is up 2.5%.

More reading

• Goldman Sachs says sell Premier Investments (ASX:PMV) shares into today’s big rally
• Ex-COO of ASX giant arrested in Sydney

Motley Fool contributor Bernd Struben 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 Why the Cimic Group (ASX:CIM) share price is plunging appeared first on The Motley Fool Australia.

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The Northern Star Resources Ltd (ASX: NST) share price opened more than 4% higher this morning following release of the company’s half-year results. At the time of writing, the Northern Star share price is trading up $3.95% at $12.37.

Northern Star Resources is a gold production and exploration company with a resource base located in Australia and North America’s gold regions.

Record profits and interim dividend boost Northern Star share price

The company reported that it achieved record profits, cash flow, and interim dividend in the 6 months leading to 31 December 2020.

Northern Star’s net profit after tax shot up 46% compared to the previous corresponding period (pcp) hitting $184.5 million.

The interim dividend soared 27% to 9.5 cents a share, fully franked.

The gold miner’s group earnings before interest, tax, depreciation and amortisation (EBITDA) also posted record gains to reach $472.2 million. That’s a 47% leap compared to the previous corresponding period.

Commenting on Northern Star’s EBITDA, executive chair Bill Beament said:

The record EBITDA of A$472m demonstrates that our growth plan is delivering superior results.

This result came despite investing A$108m in exploration and expansionary capital and directing 39 per cent of our gold sales into hedges, which meant revenue was over A$100m lower than at spot prices.

The company further posted an underlying free cash flow in the first half of FY21 of $226 million, a significant increase from the pcp, which was $116 million.

Northern Star merger with Saracen positioned to boost production

On 12 February 2021, the Northern Star merger with Saracen Mineral Holdings Limited (ASX: SAR) will be implemented. 

Regarding its first-half results, Northern Star reported that sales stemmed from 480,431oz of gold production.

The company is expecting a stronger second half following the merger with Saracen. Production guidance for the full year is 940,000oz to 1.06 million oz.

Northern Star believes that the Saracen merger positions the company on a “clear pathway to an annual production rate of 2 million oz”.

The Northern Star share price has dropped more than 10% over the past 12-month period.

More reading

• Why Computershare, IAG, Northern Star, & PointsBet shares are pushing higher
• 5 things to watch on the ASX 200 on Tuesday
• Here are the 10 most shorted shares on the ASX
• ASX 200 Weekly Wrap: RBA unleashes ASX’s inner animal
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Gretchen Kennedy 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 Here’s why the Northern Star (ASX:NST) share price is climbing today appeared first on The Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) is on course to bounce back from yesterday’s decline. In late morning trade, the benchmark index is up 0.25% to 6,839.5 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are pushing higher:

Computershare Ltd (ASX: CPU)

The Computershare price is 2% higher at $14.62. This follows the release of its first half results after the market close on Tuesday. The administration services company reported a 3.2% decline in management revenue to $1.1 billion and a 25% decline in net profit after tax to $117.8 million. This was ahead of expectations and led to Computershare upgrading its guidance for the full year.

Insurance Australia Group Ltd (ASX: IAG)

The Insurance Australia Group share price is up 4.5% to $5.28. Investors have been buying the insurance giant’s shares following the release of a better than expected half year result. It reported a 3.8% increase in gross written premiums (GWP) to $6,188 million for the first half. And thanks to lower motor claims, the company delivered a sizeable 33.1% increase in insurance profit to $667 million. And while it posted a statutory loss after tax of $460 million, this didn’t stop the board from declaring a 7 cents per share interim dividend.

Northern Star Resources Ltd (ASX: NST)

The Northern Star share price is up 3% to $12.26 following the release of its half year results. For the six months ended 31 December, the gold miner delivered a record underlying half year net profit after tax of $194.4 million. This was up 63% from the prior corresponding period. This was driven by gold sales coming in at the upper end of its guidance range at 480,431 ounces.

PointsBet Holdings Ltd (ASX: PBH)

The PointsBet share price is up 4.5% to $16.64. Investors have been buying the sports betting company’s shares after it announced a multi-year strategic partnership with the NHL. The agreement will see the ice hockey league name PointsBet as an “Official Sports Betting Partner.” As part of the partnership, PointsBet receives rights to use NHL marks and logos, as well as a variety of NHL sponsorship and promotional opportunities for its brand across various linear, digital, and social media assets.

More reading

• Here’s why the Northern Star (ASX:NST) share price is climbing today
• Here’s why the PointsBet (ASX:PBH) share price is surging 6% higher
• Why the Insurance Australia Group (ASX:IAG) share price is charging higher
• Computershare (ASX:CPU) share price on watch after better than expected half year result
• 5 things to watch on the ASX 200 on Wednesday

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 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.

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The Vulcan Energy Resources Ltd (ASX: VUL) share price is pushing higher again on Wednesday.

In morning trade the clean-lithium company’s shares were up as much as 6.5% to $9.00.

At the time of writing, the Vulcan share price has eased back a touch but is still up 2.5% to $8.66.

Why is the Vulcan share price pushing higher?

Investors have been buying Vulcan shares today after it announced a bolt-on acquisition.

According to the release, the company has signed a binding agreement to acquire 100% of geothermal subsurface consultancy company GeoThermal Engineering.

The release explains that GeoThermal Engineering has a highly credentialed, world-leading scientific team with over a century of combined expertise in sub-surface development of geothermal projects. This includes from exploration to production drilling.

Management explained that the acquisition is part of its plans to accelerate its Zero Carbon Lithium project in Germany.

This project will use the company’s Zero Carbon Lithium process to produce both renewable geothermal energy, and lithium hydroxide, from Europe’s largest lithium resource.

What will it cost?

The acquisition will cost Vulcan a single euro. The company notes that the sole shareholder of GeoThermal Engineering is Dr. Horst Kreuter, who is the Executive Director of Vulcan.

Geothermal Engineering owes a debt of approximately 140,000 euros to Dr Kreuter plus a nominal amount of interest. It also has further debt of 135,000 euros owed to external parties.

Completion of the acquisition is subject to the completion of due diligence to Vulcan’s sole discretion and satisfaction.

Vulcan’s Managing Director, Dr. Francis Wedin, commented: “By acquiring GeoT, we are welcoming decades of experience of German deep geothermal sub-surface project development into the Vulcan team.”

“GeoT has exceptional expertise in the geology and geochemistry of the Upper Rhine Valley geothermal brine. Our motivations are fully aligned: to decarbonise heat and power in Europe with geothermal development in the Upper Rhine Valley, and in doing so to co-produce Zero Carbon Lithium for the European electric vehicle market. We expect our larger, bolstered development team to accelerate the development of our globally unique project,” he concluded.

Following today’s gain, the Vulcan share price is now up 212% since the start of 2021.

More reading

• ASX 200 falls 0.9%, Nick Scali reports, Vulcan jumps
• Why Alliance Aviation, REA Group, SEEK, & Vulcan shares are charging higher
• Here’s why the Vulcan Energy (ASX:VUL) share price is storming 14% higher
• Why the Vulcan Energy (ASX:VUL) share price is in a trading halt
• Why the Vulcan Energy (ASX:VUL) share price stormed 186% higher in January

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.

The post Why the Vulcan (ASX:VUL) share price is storming higher today 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.

To put it plainly, the coronavirus pandemic boosted most of Amazon‘s (NASDAQ: AMZN) operations. Social distancing orders placed added value on the services it provided and to the company’s credit it capitalized on the situation quite effectively.

The pandemic will not be permanent, and life will at some point slowly return to a more normal reality. Where will Amazon’s business be when this happens? Here we will explore Amazon’s prospects one year from today.

Thriving financially

Amazon fully took advantage of the environment we found ourselves in last year — and it shows in the company’s financial success. In its most recent quarter (ended Dec. 31, 2020) the company eclipsed $100 billion in sales for the first time, with revenue coming in at $125.6 billion — up 44% year over year on a truly massive base.

Its trailing-12-month operating cash flow soared 72% year over year to $66.1 billion with free cash flow over the same period rising 20.1% despite heavy investments in logistics and a historic hiring spree.

The outperformance does make some sense considering the year our world has just endured. Government mandates forced many brick-and-mortar retail rivals to temporarily close or restrict capacity, which boosted Amazon’s gigantic e-commerce presence by limiting consumer selection.

Furthermore, the pandemic accelerated society’s digital transformation. Considering this, one could have expected its Amazon Web Services (AWS) segment to enjoy strong demand just like its commerce business did. After all, Microsoft‘s Azure — its closest competitor — realized a slight ramping in growth quarter over quarter during the same period. It posted 48% growth for Azure versus the prior-year’s period.

However, AWS did not realize a demand boost. Its year-over-year growth of 29% was the same as the previous quarter despite favorable macro tailwinds; this potentially points to the segment continuing to mature and reach its potential. With AWS boasting far better profit margins than its e-commerce business, this is concerning and there is little guarantee it will be able to turn around.

The ebbing of COVID-19

While we don’t know exactly when the pandemic will finally come to end, help is certainly arriving. Over the last several weeks, millions of Americans have received their COVID-19 vaccines, and cases continue to precipitously drop in correlation with this trend. To help supply chains even more, Johnson & Johnson just submitted an Emergency Use Authorization application for its COVID-19 inoculation.

What would this all mean for Amazon?

The return of brick-and-mortar competition should allow stores to more effectively compete with Amazon. This is not to say Amazon’s growth will halt here — far from it. The company has been delivering expansion and shareholder returns for decades and that will not likely change as e-commerce as a whole continues to quickly grow. Still, it does likely mean growth will revert to pre-pandemic levels.

From an AWS perspective, fading social distancing orders could theoretically lead to the return of in-person meeting and collaboration which could be a small headwind there. With AWS’ growth already slowing during the heat of the pandemic, a return to normalcy would be great for the world as a whole but perhaps not as great for Amazon. The company’s somewhat lofty price to earnings (P/E) ratio of 80.2 makes slowing growth in its two primary areas of business troubling.

Proceed with caution 

For years (decades really) Amazon has reliably delivered for investors. While its 2020 was undeniably admirable, a return to normalcy would remove some of the need for Amazon’s products. Investors certainly will not be burned by owning this iconic behemoth, but I do think there are better places to invest your funds.

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

More reading

• Amazon unveils its largest-ever renewable energy project
• Amazon’s CEO quits. Time to sell?
• Amazon introduces new electric delivery trucks in Los Angeles
• 4 most trusted ASX companies (and the 4 least trusted)
• GameStop (NYSE:GME) appoints 3 new Vice Presidents from Amazon and Chewy

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 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 Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Where will Amazon (NASDAQ:AMZN) be in a year? 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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Brambles Limited (ASX: BXB) shares are edging higher this morning following the company’s latest ASX announcement. At the time of writing, the Brambles share price has climbed 0.75% higher to $10.76.

Why is the Brambles share price climbing today?

The Brambles share price is on the move in early trade after the company announced a merger of its Kegstar business with MicroStar. Kegstar is Brambles’ keg rental business while MicroStar is a leading United States beer keg solutions provider.

Brambles’ business is a participant in the global beer keg rental sector operating across Australia, New Zealand, the United Kingdom, Ireland, the Netherlands and the US. MicroStar will look to capitalise on synergies in the similar ‘pay per fill’ business models used by both companies.

Brambles will hold an approximate 15% stake in the merged entity with the remaining 85% retained by MicroStar’s existing shareholders. These include Freeman Spogli, a growth-focused private equity firm based out of Los Angeles, USA.

MicroStar is set to purchase Kegstar at an enterprise value of US$52.2 million and issue shares in MicroStar to Brambles. The proposed merger remains subject to foreign investment approval in Australia and New Zealand with expectations this will be finalised by June 2021.

The coronavirus pandemic “significantly impacted” the Kegstar business as reported by Brambles last year. The group’s FY2020 results noted a “slow recovery” in the Kegstar business due to widespread lockdowns and operational inefficiencies.

Whilst the Brambles share price is edging higher in early trade following the news, shares in the logistics group remain down around 16% over the last 12 months while the S&P/ASX 200 Index (ASX: XJO) is down 2.7% over the same period. 

Foolish takeaway

The Brambles share price is climbing higher this morning following the company’s merger announcement. The merger of the Kegstar and MicroStar businesses will create an even larger global keg rental operation.

Brambles will retain a 15% stake in the combined entity’s operations and recognise that as an investment on its books.

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Motley Fool contributor Ken Hall 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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