Since we are well and truly now in the fabled ‘twelve days of Christmas’, many investors are starting to turn their attention to the year in front of us, and what tidings it might bring. After such a year in 2020, it’s hard to know what 2021 has in store for investors.

Could it bring a market crash? Another flat-ish year? Or a year that sees the S&P/ASX 200 Index (ASX: XJO) break above its most recent highs we saw back in February. Perhaps it could even test 8,000 points for the first time ever?

The answer will of course be obvious in hindsight. But since we don’t yet have the benefit of that, let’s look at what an expert thinks.

According to reporting in the Australian Financial Review (AFR) today, an American fund manager is predicting a bumper year for US shares (which could arguably translate into a bumper year for our own ASX 200).

A 25% upside in 2021 for US shares?

The AFR reports that New York-based Fundstrat Global’s research chief Tom Lee is expecting a 25% surge for the American S&P 500 Index (SP: .INX), saying it could end the year as high as 4,300 points (it closed this morning at 3,722 points).

Mr Lee said the US is on the cusp of a “new economic expansion” which “should lead to profit margin explosion after major cost-cutting efforts this year, a drop in equity risk premia and lower volatility“. The reason to be optimistic on the share market is reportedly “pent-up demand”, as well as “massive relief and celebration with an end to the pandemic“. He says this could lead to “a substantially stronger than expected GDP recovery. This is what the resilience of equities in 2020 seem to suggest”.

Speaking of volatility, Mr Lee notes that the VIX (an index that measures US share market volatility) has “averaged 29.5 this year, the third-highest level in 30 years”. Lee sees the VIX averaging just 12 in 2021, suggesting that we should see far less volatility.

However, this happy prediction comes with a caveat. Mr Lee said investors “need to be prepared for some give and take as history says the S&P 500 will [be] likely to correct by 10 per cent to 3,500 between February and April”. He puts this down to the fact that shares “need to work off overbought conditions before mid-year… I am stating the obvious – but markets cannot rise in a straight line”.

However, Mr Lee also notes that risks still abound, and investors need to be careful of the unexpected. He lists some possible things to watch out for:

COVID-19 could mutate; vaccines do not work; the US dollar crashes; interest rates surge; investors are too bullish; Congress goes after big tech; and, President-elect Joe Biden has health issues.

But if all goes well, Mr Lee sees 2021 as the start of a new bull market, one that he sees possibly running all the way to 2030, with an S&P 500 at 10,000 points. That would certainly make the next decade one not to miss out on.

More reading

• UBS unveils its latest ASX “buy” idea for 2021
• The Costa (ASX:CGC) share price is slipping lower today. Here’s why
• ASX 200 down 0.6%: Mesoblast crashes lower, Qantas & Flight Centre tumble, NAB AGM
• The QBE (ASX:QBE) share price has plummeted 9% today. Here’s why
• Are ASX stocks in for an M&A frenzy in 2021?

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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Tyro Payments Ltd (ASX: TYR) has accepted a 2-year court-enforceable undertaking to remedy breaches of the Spam Act.

An Australian Communications and Media Authority (ACMA) discovered the fintech illegally sent more than 150,000 spam email and text messages in the last 2 years.

The communications breached the law because they didn’t include an unsubscribe function.

ACMA deputy chair Creina Chapman said the entire finance sector is on notice after Tyro’s breach.

“Australians should not receive marketing messages they haven’t consented to, and they must be able to easily withdraw their consent when they choose,” she said.

“The Spam Act has been in place for 17 years and provides important protections to consumers.”

The law covers SMS, email and phone marketing, and is a current priority for ACMA because of “the serious harms that can be involved”. 

The Motley Fool has contacted Tyro for comment.

The saga started after a customer complained about the payment company’s spamming to ACMA earlier this year. A subsequent internal investigation confirmed the breaches, which Tyro admitted to the authority.

What has Tyro agreed to do?

The court-enforceable undertaking directs Tyro to hire an independent consultant to review its customer communications, implement the review recommendations, perform auditing and train staff on the Spam Act.

If this undertaking is breached, the Federal Court can force the company into action and order it to pay a fine equivalent to the financial benefit it derived.

“Although it’s clear that [Tyro’s] practices and systems were not adequate to comply with the spam laws, its actions since receiving our alert are appropriate to address the issues,” said Chapman.

“However, the ACMA will not hesitate to pursue more serious enforcement action, including financial penalties, in appropriate cases.”

The last 12 months has seen companies pay more than $1.7 million in penalties for ACMA-enforced breaches of the spam and telemarketing laws.

The Tyro share price was down 0.95%, trading at $3.14 at the time of writing. It has lost almost 18% this month.

More reading

• The Tyro (ASX:TYR) share price is down 20% in one month. Time to buy?
• Why Emerge Gaming, Flight Centre, Medical Dev International, & Tyro shares are dropping lower
• Why Adairs, Link, Nuix, & Tyro shares are charging higher
• Why Bapcor, Event, Money3, & Tyro shares are dropping lower
• Why the Afterpay (ASX:APT) share price and these ASX stocks could get a boost next week

Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. 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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Integrated Research Limited (ASX: IRI) shares are falling lower today after the company provided the ASX with a market update. At the time of writing the Integrated Research share price is trading 5.66% lower at $3.00.

It has been a somewhat volatile year for the S&P/ASX All Technology Index (ASX: XTX) member. Shares in the company were hard hit by the pandemic but rebounded strongly to a price of $4.92 in August. That is were the good news ended however, with Integrated Research shares falling 39% since then. This means, at its current level, the Integrated Research share price is in the red for the year, down by 9.6%.

What Integrated Research does

Integrated Research is a global business that supports some of the largest companies in the world. It is specifically involved in the design and implementation of technology that optimises business operations, predicts disruptions, and automates business processes.

Thus, in essence, the company assists organisations to reduce the complexity and improve the transparency of their operations. 

Based in Sydney, the Aussie growth company now boasts more than 1,000 customers in over 60 countries.

What happened?

This morning the software provider confirmed that, as a result of deteriorating trading conditions, its revenue for the first quarter of FY21 is below that of the prior corresponding period (pcp). As such, Integrated Research essentially updated the market confirming what was hinted at during its 2020 annual general meeting (AGM).

The company stated that, based on unfavourable exchange rate movements and year-to-date trading, anticipated revenue for the first half of FY21 has been reduced to $41 to $47 million. Revenue for the pcp was $53.2 million. As a result of the decrease in revenue, lower profits of between $5 to $8 million are also predicted, compared with profit in the pcp of $11.8 million. 

Foolish takeaway

In addition to today’s news, Integrated Research has also suffered other setbacks in 2020. As noted at the company’s AGM, ongoing global disruption and uncertainty surrounding COVID-19, including widespread business closures, has seen sales cycles lengthen and some customers defer purchasing decisions.

The Australian Dollar has also performed strongly this year, gaining 12% in just six months. And, according reporting in The Australian Financial Review, there may be more hurt ahead for Integrated Research in this regard, with the AFR saying the Australian dollar could surge as high as 85 US cents.

More reading

• Why the Integrated Research (ASX:IRI) share price is dropping lower

Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Integrated Research 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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Much to the disappointment of some shareholders, there will be no Sydney Airport Holdings Pty Ltd (ASX: SYD) dividend in FY 2020.

This is the first time in its listed history that the airport operator hasn’t rewarded its shareholders with an annual paycheck.

But one leading broker believes the investors that stick with the company will be rewarded handsomely in the future.

Who is bullish on Sydney Airport shares?

According to a note out of Goldman Sachs, its analysts have retained their buy rating and $7.02 price target on its shares.

Based on the current Sydney Airport share price, this price target implies potential upside of just under 9% over the next 12 months excluding dividends.

This stretches to almost 11% if you include the ~13.3 cents per share dividend it expects the company to pay in FY 2021.

Looking further ahead, Goldman expects this dividend to more than double to ~29.2 cents per share in FY 2022 when trading conditions return to normal

What did Goldman say?

Goldman Sachs has been pleased with Sydney Airport’s recovery from the pandemic and notes that its recent update is in line with its forecasts.

It explained: “SYD’s November pax volumes align with our expectations of an improvement in domestic pax with the softening of state boarders in NSW. We expect to see a continued increase in December data with holiday travel and the reopening of the NSW and Victoria border on 23 November.”

It also notes that Qantas Airways Limited (ASX: QAN) is planning to increase its flights into the airport, which should help its recovery.

“QAN has indicated that it has scheduled 15 flights/day (well below the 45 pre-Covid-19), but that there is significant pent-up demand for the route and that on the day of the reopening of ticket sales it sold over 100k SYD-MEL tickets,” the broker said.

All in all, the broker feels it is worth sticking with the company, especially with its shares still trading materially lower than their pre-COVID highs.

More reading

• Why Blackmores, Service Stream, Sydney Airport, & Webjet shares are dropping lower
• ASX 200 up 0.7%: Zip capital raising, A2 Milk trading halt, Sydney Airport dividend update
• Sydney Airport (ASX:SYD) share price lower on dividend and traffic update
• ASX 200 rises on Monday
• Why I’m sticking with my Afterpay shares: fundie

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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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.

E-commerce company Chewy (NYSE: CHWY) is focused solely on the pet food and pet care category, while for Amazon (NASDAQ: AMZN), that’s just one of countless categories and business lines. But within that niche, the two are battling aggressively for sales and dominance.

So which one is the better buy for investors today?

The everything store

Amazon barely needs an introduction – it’s the global leader in e-commerce and cloud computing by a wide margin. And those two markets are beyond massive.

For example, the global retail market is estimated to be worth $25 trillion. The worldwide public cloud computing market is expected to top $330 billion this year. And Andy Jassey, the CEO of Amazon Web Services (AWS), also aims to push AWS into the $3.7 trillion enterprise IT market. Given Amazon’s $348 billion of net sales over the last 12 months, it’s clear it has much more room to grow.

And as we all know, the COVID-19 pandemic has accelerated the growth of e-commerce. Now that more people have become accustomed to shopping online, including for categories like groceries that they previously were more apt to buy in person, it is likely to remain a habit for many of them.

But the beautiful wild card of Amazon’s business is its relentless culture of invention. The company is constantly investing in building new businesses that could potentially become huge – which is precisely how it grew from an online bookstore into a giant that competes in far too many markets to list here.

The pet specialist

While Amazon is an incredible business, Chewy is certainly no slouch. This is a company that was only founded nine years ago, and it’s already poised to generate more than $7 billion of net sales this year. And it’s still growing net sales at a rate of over 40%. This rapid success is all the more impressive considering Amazon’s presence in the pet category.

And Chewy has plenty of room to keep growing. Pet spending in the US was $95.7 billion in 2019 and is forecast to reach $99.0 billion this year, according to the American Pet Products Association.

In addition, the portion of pet category spending that has migrated online is still relatively low, but it’s expected to increase sharply. Six years ago, the online component of the category was about 2%. Last year, it reached around 15%. And it is now projected to surpass 35% by 2024.

Chewy is also expanding into new segments of the pet market such as pet telehealth and compounding pharmacy services. Management has also suggested it will eventually roll out a suite of online services, which could include things like a marketplace for groomers, dog walkers, and other service providers. That could be a lucrative new business for Chewy because it has a huge number of regular customers who could utilize those services. 

The better buy

Both Amazon and Chewy are fantastic at what they do, but Amazon is the better buy.

Clearly, Amazon is the much larger business – but that alone doesn’t make its stock the better investment. Nor is the key point that it has vastly bigger addressable markets with far more white space available for it to exploit.

No, the real differentiator here is Amazon’s culture of invention. A decade from now, Amazon will likely have multiple additional huge business lines that it’s only getting started with today. We can’t know for sure which ones they’ll be, but we can anticipate that at least one of the areas where the company is investing will pay off in a big way.

It could be the global logistics business that it is investing aggressively in. It could be Amazon Pharmacy, which it just recently debuted. It could be physical retail stores, including supermarkets, that utilize its Amazon GO “just walk out” technology. It could be a self-driving robotaxi fleet, made possible by its recent acquisition of start-up autonomous technology company Zoox.

Or Amazon’s biggest new business of tomorrow could be one we don’t even know about yet. The beauty of all this is that Amazon’s shares don’t appear to have the value of these potential big new revenue drivers baked into the stock price yet, because these businesses barely even exist. That’s why Amazon shares could actually remain consistently undervalued while also appreciating nicely in the years to come. Investors should buy this stock and hang on for a decade or longer.

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

More reading

• Amazon has a new strategy to capture India’s e-commerce market
• World’s 10 biggest companies are now worth 12% of Earth’s GDP
• Amazon stock: Buy, sell, or hold going into 2021?
• This is Jeff Bezos’s most important investing lesson
• Amazon’s driverless electric vehicle is coming

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Andrew Tseng owns shares of Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Chewy, Inc 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.

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The Costa Group Holdings Ltd (ASX: CGC) share price is slightly down today on news the company has signed a lease implementation deed with Macquarie Infrastructure and Real Assets (MIRA).

At the time of writing, the Costa share price is marginally lower at $4.01, down 0.99%. In comparison, the S&P/ASX 200 Index (ASX: XJO) is also trending lower, trading at 6,695 points, down 0.9% at the time of writing.

Quick take on Costa

Costa is an Australian horticultural company that grows, packs and markets fresh fruit & vegetables. The business operates in three main categories: Produce, Costa Farms and Logistics, and International.

Costa manages more than 4,700 planted hectares of farmland, 30ha of glasshouse facilities and three mushroom growing facilities. In addition, the company has international joint ventures covering six blueberry farms in Morocco and four berry farms in China.

What did Costa announce?

In today’s release, Costa advised that the farms which it leases from Vitalharvest could change ownership to MIRA. The implementation deed will come into effect if MIRA’s takeover bid of Vitalharvest is successful.

This can happen either by MIRA acquiring 100% of the issued units in Vitalharvest via a trust scheme; or acquiring all of the assets from Vitalharvest should the trust scheme not be approved.

Currently, Costa leases 7 farms from Vitalharvest. These include 3 citrus farms in South Australia, and 2 berry farms in each of New South Wales and Tasmania.

The signed lease implementation deed states a fixed rent lease agreement for each of the farms for 20 years. There’s an additional 10-year option should both parties be satisfised with the arrangement during the lease period.

Costa said the rental yields were in line with current market conditions for operating large-scale horticulture assets. Furthermore, the company’s existing contracts with MIRA were relatively on the same terms.

Costa pointed out that the new leases would provide long-term rental certainty for its citrus and berry assets. The current agreement would have seen its fixed and variable rental components up for review in 2026.

About the Costa share price

The Costa share price has been trending higher since the beginning of the year, up 62%. However, when looking at its shares over a 2-year timeframe, the Costa share price is down around 40%.

Costa has a market capitalisation of $1.6 billion.

More reading

• ASX 200 down 0.6%: Mesoblast crashes lower, Qantas & Flight Centre tumble, NAB AGM
• The QBE (ASX:QBE) share price has plummeted 9% today. Here’s why
• Are ASX stocks in for an M&A frenzy in 2021?
• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises on Thursday

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. 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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Australia’s top brokers have been busy adjusting their estimates and recommendations again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

According to a note out of Morgans, its analysts have retained their add rating and increased their price target on this banking giant’s shares to $26.00. The broker notes that APRA has removed dividend restrictions on the banks from 2021. It expects this to result in ANZ lifting its dividend payout ratio to upwards of 70% in the coming years. In light of this, Morgans is forecasting a $1.27 per share dividend in FY 2021 and a $1.50 per share dividend in FY 2022. Based on the current ANZ share price of $23.39, this represents 5.4% and 6.4% dividend yields, respectively.

Northern Star Resources Ltd (ASX: NST)

Analysts at Citi have upgraded this gold miner’s shares to a buy rating but lowered the price target on them to $13.90. The broker is expecting the gold price to peak in 2021 before softening from 2022 as COVID-19 passes and global economic growth resumes. And while this will impact Northern Star’s earnings in the future, it believes recent share price weakness has dragged it down to an attractive level. The Northern Star share price is fetching $12.90 this afternoon.

Pro Medicus Limited (ASX: PME)

Another note out of Morgans reveals that its analysts have retained their add rating and lifted the price target on this health imaging company’s shares to $35.02. The broker notes that the company has just won another major contract in the United States. It also points out that this is the first time it has signed a major cloud-only deal. Which could be a sign of things to come. The Pro Medicus share price is changing hands for $32.88 on Friday.

More reading

• 2 ASX growth shares to buy that keep delivering wins
• ASX 200 rises on Thursday
• Leading broker just upgraded these ASX gold stocks to “buy”
• Why Codan, Pro Medicus, Uniti, & Zip shares are storming higher
• Here’s why the Pro Medicus (ASX:PME) share price is storming 5% higher

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus 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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An investor lobby group has told AGL Energy Limited (ASX: AGL) to “wake up” and permanently close its Liddell coal-fired power station after a worker was injured this week.

On Thursday, a staffer was seriously injured from an incident with a transformer at the site’s unit 3 generator. The generator was immediately shut.

The company announced to the market on Friday morning that the unit could be down for up to 2.5 months. This would skip over the entire summer, when power demand peaks from air conditioning usage.

The exact outage period is yet to be confirmed as investigations are currently taking place.

The almost half-century-old Liddell site in NSW is due to be closed in 2022 or 2023.

The Australasian Centre for Corporate Responsibility (ACCR) urged the company to bring forward the closure.

“Today’s closure shows that AGL is operating in a high risk environment to its workers, its shareholders and also the reliability of the NSW grid,” said ACCR director Dan Gocher.

“These types of incidents will become commonplace and investors must demand that AGL get serious about de-risking its portfolio.”

AGL has indicated it would inform the ASX by Wednesday about the impact of the closure to its bottom line.

The AGL share price was up 0.92% as of 2.00pm AEDT, trading at $13.23.

It’s expensive to keep coal power plants running

Maintenance costs for ageing coal power plants grew from 25% of AGL’s total capital spend in 2013 to 74% in the 2020 financial year, according to Gocher.

“Investors must question whether this expenditure is in the long-term interests of shareholders,” he said.

“AGL intends to operate Bayswater beyond 50 years, and Loy Yang A beyond 64 years. It’s ridiculous and completely out of step with Australia’s climate goals and it will continue to risk the safety of its workers.”

The Australian Financial Review reported that the closure of the Liddell unit on Thursday caused the wholesale electricity price in NSW to hit the maximum $15,000 per megawatt-hour.

The  Australian Energy Market Operator was then forced to call upon its emergency reserve to prevent a blackout in NSW on Thursday afternoon.

More reading

• Leading brokers name 3 ASX shares to sell today
• Is AGL (ASX:AGL) really offering a 7% dividend yield today?
• Could these ASX renewable energy shares benefit from the Biden win?

Motley Fool contributor Tony Yoo 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 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.

More reading

• World’s 10 biggest companies are now worth 12% of Earth’s GDP
• Is it time for Facebook to do the unthinkable?
• ACCC hauls Facebook to court for ‘deceptive’ conduct
• Zip (ASX:Z1P) share price pushes higher on Facebook deal
• Facebook allegedly crossed a line in buying up the competition

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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