The Mesoblast limited (ASX: MSB) share price is trading flat on Wednesday despite the release of a positive announcement.

In morning trade the allogeneic cellular medicines company’s shares are changing hands for $5.24.

What did Mesoblast announce?

This morning Mesoblast announced that it has received ethics approval to include Australian hospitals in the Phase 3 randomised controlled trial of remestemcel-L in ventilator-dependent COVID-19 patients with acute respiratory distress syndrome (ARDS).

According to the release, participating hospitals in Melbourne and Sydney have been granted approval by the Human Research Ethics Committee of Monash Health and will join more than 17 leading US medical centres that are already part of the Phase 3 trial.

This study is being conducted by the US National Institutes of Health–funded Cardiothoracic Surgical Trials Network, and cleared by the US Food and Drug Administration (FDA).

Mesoblast’s Chief Executive, Dr Silviu Itescu, appeared to be pleased with the news.

He stated: “As an Australian company developing a potential treatment for COVID-19 ARDS, the primary cause of death in patients infected with COVID-19, we have a responsibility to evaluate remestemcel-L in Australian patients as the country continues to grapple with COVID-19.”

What does the trial consist of?

Mesoblast’s phase 3 trial is enrolling ventilator-dependent patients in intensive care units with moderate to severe COVID-19 ARDS. They are randomised (1:1) to receive either two intravenous infusions of remestemcel-L three to five days apart or a placebo on top of maximal care.

The primary endpoint is all-cause mortality within 30 days of randomisation, with the key secondary endpoint being the number of days off mechanical ventilator support.

The trial’s independent Data Safety Monitoring Board plans to complete an interim analysis this month in the trial’s first 90 patients randomised in the United States after they have completed 30 days of follow up.

After the review of the safety and efficacy data, the Data Safety Monitoring Board will provide a recommendation to Mesoblast on whether the trial should proceed as planned or stop early.

That data should be released later this month and will be worth watching out for.

More reading

• These were the best performing ASX 200 shares in August
• Up 38% in August, is the Mesoblast share price a buy?
• Bulls versus bears – two experts face off on where share prices are going
• Mesoblast share price on the rise after delivering promising FY20 results
• Hydrix and Zip were among the most traded shares on the ASX last week

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. 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 2020 stock market crash may have caused some investors to turn to other assets that are less risky than shares. However, buying stocks today could prove to be a sound long-term move that delivers relatively high returns.

Of course, an uncertain economic outlook means that avoiding companies with weak balance sheets, high valuations and business models that may not easily adapt to change could be a shrewd move. It may reduce your risks and help to improve your return prospects.

High valuations after the market crash

Even though the stock market crash occurred only a handful of months ago, some shares now appear to be trading on excessive valuations. Certainly, they could move higher in the short run if investor sentiment continues to improve as per recent trends. However, buying any asset for more than it is worth could prove to be a means of generating poor returns over the long run.

Therefore, it may be prudent to focus your capital on stocks that have more attractive valuations based on their financial position and outlooks. The prospects for the world economy continue to be very uncertain, with risks such as coronavirus and Brexit having the potential to cause a second downturn for stock prices in the near term. By investing in undervalued, rather than overvalued, stocks you can limit your potential losses in the short run and benefit from greater capital return prospects in the long term.

Weak balance sheets

The uncertain economic outlook following the market crash means that companies with weak balance sheets may struggle to survive. For example, they may have high debt levels or lack access to liquidity. Should their sales come under pressure, they may struggle to remain afloat compared to sector peers that have modest debt levels and stronger cash flow.

Therefore, it could be a good idea to hold companies with sound financial positions. Investors can determine the financial strength of a business through looking at its annual report and recent market updates. This information is available freely online, and could help you to avoid weak businesses that ultimately prove to be disappointing investment opportunities in the current challenging economic climate.

An inability to evolve

Following the market crash, some sectors may need to evolve rapidly to respond to changing consumer tastes. The coronavirus pandemic may have fundamentally changed sectors such as energy, banking and retail forever. Businesses that can adapt their operations to accommodate different consumer tastes may therefore have a competitive advantage over their peers.

As such, avoiding companies that lack the right strategy to evolve their business models could be a sound move. Clearly, assessing this factor is highly subjective. However, by considering the strategies of a company compared to its sector peers, it may be possible to purchase those stocks with the financial capacity to make necessary changes to their business models so they can return to strong growth in the long run.

More reading

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• Xero share price higher after chairman buys $400k worth of shares
• Nufarm share price charges higher on FY 2020 guidance
• 3 reasons why people with disposable income should be investing monthly
• This is the one investment Warren Buffett says almost everyone should make

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 Brainchip Holdings Ltd (ASX: BRN) share price has been on fire again on Wednesday morning.

At the time of writing the artificial intelligence technology company’s shares are up 30% to a 52-week high of 40.5 cents.

Why is the Brainchip share price rocketing higher?

Investors have been scrambling to buy Brainchip’s shares this morning after it announced a collaboration with VORAGO Technologies.

VORAGO Technologies is a privately held, high technology company based in Texas with over 15 years of experience in providing radiation-hardened and extreme-temperature solutions for the Hi-reliability marketplace.

According to the release, it is recognised as one of Inc 5000’s Fastest Growing Private Companies in America.

VORAGO’s patented HARDSIL technology uses cost-effective high-volume manufacturing to harden any commercially designed semiconductor component for extreme environment operation. It has created a number of solutions throughout Aerospace, Defense, and Industrial applications.

What is the collaboration?

Management advised that the collaboration is intended to support a Phase I NASA program for a neuromorphic processor that meets spaceflight requirements.

The agreement includes payments that are intended to offset the its expenses to support partner needs.

BrainChip’s CEO, Louis DiNardo, commented: “We are both excited and proud to participate in this Phase I program with VORAGO Technologies and support NASA’s desire to leverage neuromorphic computing in spaceflight applications. The combination of benefits from the Akida neuromorphic processor and a radiation-hardened process brings significant new capabilities to spaceflight and aerospace applications.”

The company notes that its Akida neuromorphic processor is uniquely suited for spaceflight and aerospace applications. The device is a complete neural processor and does not require an external CPU, memory or Deep Learning Accelerator.

This is important as reducing component count, size, and power consumption are paramount concerns in spaceflight and aerospace applications.

Bernd Lienhard, VORAGO CEO, commented: “We are thrilled and honored to partner with BrainChip to harness the radiation hardening capabilities of our patented HARDSIL technology for the Phase I program with NASA. Our ongoing mission of creating components with increased availability and unmatched solutions in aerospace and defense applications paired with the Akida neuromorphic processor will create unprecedented standards moving forward in the industry.”

More reading

• Zip and Brainchip were among the most traded shares on the ASX last week
• 3 under the radar ASX growth shares to buy today
• 3 ASX growth shares that could help you retire rich
• Brainchip share price up 1000% in 5 months. Is it the next big thing?
• Brainchip share price rockets 30% in a week

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. 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 Xero Limited (ASX: XRO) share price is pushing higher on Wednesday morning.

At the time of writing the cloud-based business and accounting software company’s shares are up slightly to $100.00.

Why is the Xero share price pushing higher?

Xero’s shares were given a lift this morning from some insider buying news.

According to a change of director’s interests notice, the company’s chairman, David Thodey AO, has been buying shares this week.

The notice reveals that Mr Thodey picked up 4,000 Xero shares through an on-market trade on Monday. The chairman paid an average of $101.34 per share, which equates to a total consideration of $405,357.41.

This purchase lifted Mr Thodey’s holding in the company to a total of 8,461 shares.

Should you invest?

Just as insider selling is a bearish indicator, insider buying is often seen as a bullish indicator. After all, who knows a company better than its own directors.

I already felt that Xero was a buy, but this significant insider buying gives me extra confidence in this view.

Overall, I believe Xero is one of the best buy and hold options on the Australian share market.

This is due to its high quality platform, which was recently strengthened with the acquisition of Waddle, favourable industry tailwinds, and its massive global market opportunity.

In respect to the latter, I believe the company has a significant opportunity in the North American market. At the end of FY 2020, Xero had just 241,000 subscribers in this lucrative market. This compares to a sizeable 914,000 subscribers in a materially smaller ANZ market.

If it can make a success of its expansion in North America, which I believe it will, then it should underpin very strong subscriber and recurring revenue growth over the next decade and beyond.

More reading

• Why it makes sense to invest in ASX tech shares
• Top ASX Stock Picks for September 2020
• 5 ASX shares better than banks
• 3 of the best ASX tech shares to buy in September
• Why I’d buy Afterpay and other ASX tech shares at record highs

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 Xero. 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 Nufarm Limited (ASX: NUF) share price is charging higher in morning trade.

At the time of writing the agricultural chemical company’s shares are up 4% to $4.07.

What did Nufarm announce?

This morning Nufarm announced a non-cash asset impairment and revealed its unaudited FY 2020 earnings estimate.

According to the release, the company expects to recognise non-cash, impairment charges in relation to its European assets of approximately $215 million in FY 2020.

This comprises a pre-tax impairment of intangible assets of approximately $190 million and a derecognition of tax assets of approximately $25 million.

Management advised that the assessment of the carrying value takes into account recent operating performance and a moderated outlook of future earnings. The latter is based on an expectation of continuing margin pressure in its base product portfolio due to higher manufacturing costs and increased competition.

And while there are early indications that raw material costs for products in the portfolios Nufarm acquired in 2018 are easing, it notes that input costs for a small number of products are expected to remain elevated in the medium term. This has also been reflected in the carrying value assessment.

While this is disappointing, Nufarm’s CEO, Greg Hunt, appears confident it is onwards and upwards from here for the European business.

He commented: “We believe the European business has reached an earnings trough in FY20, however it is appropriate to take this step to revise the carrying value of the assets. We have a comprehensive improvement program underway in Europe to grow revenues, reduce our cost to serve and lift margins.”

“We expect this program, combined with an anticipated easing in raw material costs and improved weather conditions would be the major drivers of improved profitability in the European business in FY21,” he concluded.

FY 2020 earnings estimates.

Based on its preliminary and unaudited accounts, Nufarm expects underlying group earnings before interest, tax, depreciation and amortisation (EBITDA) to be in the range of $290 million to $300 million in FY 2020.

Though, following the sale of the South American businesses, underlying EBITDA from continuing operations is expected to be in the range of $230 million to $240 million. This compares to EBITDA of $420 million in FY 2019.

Mr Hunt commented: “We have delivered positive momentum across most regions in the second half of the financial year, however earnings for the full year will be down on last year, primarily due to the divestment of the South American businesses, lower earnings in the first half and reduced earnings in Europe.”

More reading

• Market crash 2020: 3 stock warning signs to watch out for
• Brainchip share price rockets 30% higher on NASA program collaboration
• Xero share price higher after chairman buys $400k worth of shares
• 3 reasons why people with disposable income should be investing monthly
• This is the one investment Warren Buffett says almost everyone should make

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

Nationwide shutdowns because of COVID-19, coupled with a slower-than-expected reopening of the economy, have left many people spending more time at home. This global pandemic has hurt so many people financially, but a number of fortunate workers have had no changes to their income.

If you are one of the latter, you may have seen a decrease in your monthly expenses and an increase in your bank balance. Here are three reasons why you should invest that extra monthly money. 

The markets are volatile

Volatility in the stock market has created a unique investment opportunity to use a dollar-cost averaging strategy. With dollar-cost averaging, you budget a certain amount of money each week or month, then use that money to buy shares of stocks or funds. From one month to the next, you get different prices for the securities you buy – some lower, some higher. 

If you’re left frozen by indecision, or waiting until the stock market bottoms out to take action, this method can really help you. No one really knows when a bottom will happen, and trying to time the market can prove difficult and costly.

If you invested $10,000 in an S&P 500 index fund at the beginning of 1980 and stayed completely invested throughout the end of 2018, you would have almost $660,000. If you tried to time the markets, failed, and missed out on the top 10 days of market gains, you would only have $318,000. Assuming that you’re already saving money, investing it monthly will help you to avoid this pitfall, taking the guesswork out of trying to time the bottom of the stock market. It will also ensure that your money is always invested, preventing you from missing out on potential gains. 

It doesn’t take a ton of money

In my work as a financial advisor, I met many clients who didn’t invest because they never felt as if they had enough money to start. Instead of investing small amounts when they could, they attempted to save lump sums of money – leading to them to miss out on months of market gains, or give up on their investing goals completely.

Contrary to this belief, you don’t have to be rich or have a ton of money to invest. How long you invest for can be just as important as how much you invest. Consider the following two scenarios:

Age When You Start Investing	How Much You Invest Annually	Number of Years	Annual Return Earned	Final Amount
25	$1,200	35	10%	$357,752.17
35	$2,500	25	10%	$270,454.41

If you invest less than half as much annually, but start 10 years sooner, you’ll earn roughly 32% more by the time you reach age 60. 

There’s no time like the present. Using the money you’re saving each month will allow you to get an early start to investing if you’re new to it. If you’re currently investing, this strategy will enable you to save and invest more money than you were before – getting you closer to meeting your financial goals. 

You’ll get better at planning to invest

Saving and investing money monthly is extremely important, but finding the extra money to do so isn’t always easy. If you’re currently spending less on leisure activities, now is a perfect time to adjust your priorities and reallocate that money toward investments.

Start by making a plan. According to a 2019 Modern Wealth Survey by Charles Schwab, having a plan leads to more regular saving. Of the people surveyed, 74% who have a financial plan invest money automatically, compared with just 25% of those who don’t.

To create a plan, make a list of your monthly expenses before and after the impact of COVID-19. You can shift some of the money that you’re currently saving on leisure activities like dining out or travel toward monthly investments instead. Once the pandemic ends and life as normal resumes, you can continue to enjoy these activities – you’ll just be doing so within your new budget. 

Once you have a plan in place, it’s a straightforward and easy process. The same way that you can set up a bill to be paid each and every month, you can have money directed monthly to your investment accounts. After the money arrives, you can set up automatic orders to buy your favorite stocks, ETFs, or mutual funds. 

Once you create these habits, you’ll improve them over time. When you receive pay raises, you can put a portion of them toward investing, rather than entirely increasing your expenses that are within your control. You can also continue to reduce discretionary expenses so that you can save and invest more.

Uncertainty and turmoil in the world has upended our lives and made everything more difficult, but as Albert Einstein said, “In the middle of difficulty lies opportunity.” Finding and benefiting from these opportunities will help you reach your long-term goals. And taking these few steps now with your disposable income while you have the ability to do so will create long-lasting saving and investing habits that will stay with you long after this pandemic is done. 

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

More reading

• Market crash 2020: 3 stock warning signs to watch out for
• Brainchip share price rockets 30% higher on NASA program collaboration
• Xero share price higher after chairman buys $400k worth of shares
• Nufarm share price charges higher on FY 2020 guidance
• This is the one investment Warren Buffett says almost everyone should make

The Motley Fool has a disclosure policy.

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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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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.

It’s not surprising that many investors watch eagerly for news of Warren Buffett’s stock trades. The Oracle of Omaha has made a successful career (and lots of money) picking stocks. 

But while there’s a lot you can learn from Buffett, investing like him may not be the best move. His investing goals, his portfolio, and the size of his pocketbook are likely quite different from yours. Instead of emulating his trades, you may be better off listening to his advice — and in particular, the guidance about which investment he believes most people should own. 

What investment does Buffett recommend for most investors?

Buffett’s advice for the average investor is simple and easy to follow: Invest in an S&P 500 index fund. 

Index funds track the performance of market benchmarks. The S&P 500 index Buffett recommends specifically attempts to mimic the performance of 500 large-cap U.S. stocks that, together, account for 80% of all U.S. market capitalization. 

To be included in the S&P 500, companies must meet certain criteria, including having positive reported earnings for a certain number of quarters and having a reasonable price per share. The index is also weighted by market capitalization, which means each company’s representation is proportional to the total value of all of its outstanding shares. 

When you invest in the S&P 500, you’re making a bet on large American companies that have a proven track record. In fact, when you buy an S&P 500 index fund, you’ll take a tiny ownership stake in companies you’re almost assuredly familiar with, including Amazon.com Inc (NASDAQ: AMZN), Apple Inc (NASDAQ: AAPL), Clorox, Coca-Cola Co (NYSE: KO), Johnson & Johnson (NYSE: JNJ), JPMorgan Chase, and Ralph Lauren. 

Why does Buffett recommend investors buy the S&P 500 index fund?

As you may be able to guess from the list above, the S&P 500 gives you exposure to businesses across different industries, including tech companies, retailers, and those selling consumer goods. And that’s great news, because when you buy into an S&P index fund, you’re pretty much instantly diversified. 

Diversification isn’t the only benefit, though. Your returns will parallel the performance of the index, which — between 1926 and 2018 — provided average annual returns of around 10%. It’s very difficult for the typical investor to consistently beat that performance over a sustained period. 

Investors trying to time the market can also get themselves into trouble, but putting your money into an S&P 500 fund all but eliminates the risk of buying high and selling low (at least for those who leave their money alone for the long term). In fact, anyone who has ever put their money into an S&P 500 index fund and left it alone for at least 20 years would’ve ended up profiting even if they bought in when stocks were at their most expensive. And S&P 500 index funds don’t require active management since they simply include the stocks that make up the index, so they come with few fees that eat away at investment returns. 

In sum, you don’t have to time the market, you don’t have to consistently pick winning stocks, and you don’t have to worry about paying high fees if you buy an S&P 500 index fund. It’s a simple, easy way to bet big on America and maximize the chance of earning a generous return while minimizing risk, so it’s no wonder Buffett thinks it’s the best bet for most people who don’t spend their entire careers evaluating investments. 

And while Buffett and other disciplined investors can definitely do better picking individual stocks than investing in an S&P index fund, you need to really be willing to put in the work to do that. Unless you’re committed to developing a sound investment strategy and becoming an expert in the industries you invest in, taking Buffett’s advice and putting your money into this safe, simple investment for the long run may be the best financial move you’ll make. 

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

More reading

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• Apple just split its stock: Here’s why this tech stock might be next
• Better buy: Amazon.com vs Microsoft
• Apple’s stock split Monday. Here’s what you need to know.

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 Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Johnson & Johnson and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon and Apple. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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It doesn’t happen often, but the A2 Milk Company Ltd (ASX: A2M) share price was out of form in August.

The infant formula and fresh milk company’s shares fell 12% during the month.

Why did the a2 Milk Company share price tumble lower in August?

There were a couple of catalysts for a2 Milk’s poor form in August. The first was the company’s full year results release.

For the 12 months ended 30 June 2020, a2 Milk Company delivered a 32.8% increase in revenue to NZ$1,730 million. This compares to its revenue guidance range of NZ$1,700 million to NZ$1,750 million.

And due to its earnings before interest, tax, depreciation and amortisation (EBITDA) margin coming in at 31.7%, in line with its guidance range of 31% to 32%, a2 Milk reported a 32.9% increase in EBITDA to NZ$549.7 million in FY 2020.

While this result was undoubtedly strong, it wasn’t quite as strong as some investors were hoping. A2 Milk had been tipped as a company that could smash its guidance in FY 2020 thanks to strong demand for its infant formula during the pandemic.

Thus, a result that was in the middle of its guidance range simply wasn’t enough for investors and sent some to the exits.

In addition to this, the company reported a large increase in its inventory at the end of the period. Its total inventories lifted 36% to NZ$147.3 million. Given that there are concerns that the panic buying from the pandemic may have brought forward sales from future periods, investors appear worried that the company will have excess stock on its hands.

What else weighed on its shares?

In addition to the above, heavy insider selling at the end of August weighed on its shares.

The company’s chairman, chief executive, Asia Pacific chief executive, chief growth and brand officer, and chief operations officer all offloaded large amounts of shares.

For example, the Asia Pacific chief executive, Peter Nathan, sold almost NZ$15.1 million worth of shares.

Given how insider selling is often seen as a bearish indicator (who sells shares if they are confident they are going higher?), I’m not surprised that investor sentiment is low right now.

Is this a buying opportunity?

I remain a fan of a2 Milk Company but I am a touch more cautious on things following the insider selling.

In light of this, I would class its shares as a buy, but suggest investors buy half of a desired holding now and wait until its AGM in November for the other half.

More reading

• 2 ASX dividend shares with yields over 10%
• This ASX-listed company makes $5.7 million per employee
• A2 Milk share price lower after Chairman, CEO, COO, and other execs sell millions of shares
• Why a2 Milk, Appen, Huon, & Newcrest shares are tumbling lower
• These ASX ETFs will give you exposure to China’s growing middle class

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

Even in the wake of record-setting growth, it appears the best may be yet to come for Netflix (NASDAQ: NFLX). As the result of widespread stay-at-home orders, the company has attracted 25.86 million new paying customers during the first six months of this year. This brought the company’s total subscribers to 193 million, but that number could be dwarfed by what’s yet to come.

Shares of the streaming giant got a boost today as the result of a bullish analyst note that posited that Netflix’s subscriber numbers could more than double over the coming decade, climbing to between 475 million and 525 million by 2030. 

RBC Capital analyst Mark Mahaney updated his price target on Netflix to $610 per share, while reaffirming his outperform (buy) rating. The analyst estimates that Netflix is a staple in 66% of U.S. households, but its international penetration rate sits at just 29%. Mahaney expects that to change over the next 10 years, with the streaming service eventually making its way into 57% of global fixed broadband households, nearly double the current rate.

Mahaney believes that Netflix “has achieved a level of sustainable scale, growth, and profitability that isn’t currently reflected in its stock price,” he wrote. “We also view Netflix as one of the best derivatives off the strong growth in online video viewing and in internet-connected devices.”

That’s not all. Mahaney also estimates that Netflix’s pricing power will enable the company to generate average revenue per user (ARPU) of between $16 and $22, as much as double the current amount of $10.80. 

The analyst became increasingly bullish in the wake of user surveys conducted in several countries. Customer satisfaction hit record highs in the U.K. and India, at 81% and 92% of users, respectively, who said they were “extremely” or “very satisfied” with Netflix.

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

More reading

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• Better Buy: Netflix vs. Amazon

Danny Vena owns shares of Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Netflix. The Motley Fool Australia has recommended Netflix. 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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Paypal Holdings Inc (NASDAQ: PYPL) yesterday announced its expansion into the buy now, pay later (BNPL) sector, sending investors scurrying in all directions. The payments giant entered the $5 trillion United States retail market with its new offering ‘Pay in 4’. The service is an expansion on PayPal’s existing pay later solutions, which include PayPal Credit’s revolving credit line and Easy Payments.

Doug Bland, SVP of Global Credit at PayPal spruiked the company’s offering saying “With Pay in 4, we’re building on our history as the originator in the buy now, pay later space, coupled with PayPal’s trust and ubiquity, to enable a responsible and flexible way for consumers to shop while providing merchants with a tool that helps drive sales, loyalty and customer choice.”

The competitive difference here is that merchants will not have to pay any additional fees. The service will be included as part of PayPal’s current pricing. In addition, it won’t be promoting other merchants to its customers, unlike the other BNPL companies. Nonetheless, the question remains; will Paypal just scoop up the lion’s share of the market, or are the ASX BNPL shares well placed to compete?

What happened to BNPL shares yesterday?

Yesterday marked one of the largest falls in the short history of the BNPL sector. The Sezzle Inc (ASX: SZL) share price fell the most, ending the day down by 14.7%. Furthermore, Zip Co Ltd (ASX: Z1P) fell by 12.77%, OpenPay Group Ltd (ASX: OPY) by 7.18%, Splitit Ltd (ASX: SPT) by 7.26%, and market leader Afterpay Ltd (ASX: APT) was down by 8.04%.

Yesterday’s falls underline the bubble-like nature of the sector, and the almost gambling approach of many buy now, pay later investors. The rapid growth of Afterpay competitors also underlines just how low the barriers to entry in this sector are. What’s more, there are no reasons for shoppers to favour any one of these services. At the end of the day, they are just payment instalment services. In addition, private companies like Limepay are already working to help organisations offer instalment services without the BNPL providers. Finally, it underscores the stratospheric and unsustainable market valuation of Afterpay.

Is PayPal really a threat?

In my opinion, PayPal is definitely a threat. It is the largest payment method for the United States and the United Kingdom. In fact, the company boasts an 82% better conversion rate using PayPal, and it already has 237 million shoppers globally.

PayPal won’t be the last shark in the waters. In fact, it isn’t even the first. Commonwealth Bank of Australia (ASX: CBA) has already entered the BNPL market locally. In January, the bank announced it would be premiering its new partnership with Swedish private bank, Klarna. CommBank has a 5% stake in Klarna, and 50% ownership in the Australian and New Zealand business. 

This is no idle threat, CommBank is far and away the nation’s largest digital payments processor. However, for those who thought the bank would just sweep in and take most of the market; it hasn’t happened. Moreover, the US market is gigantic. It remains to be seen whether PayPal can easily take out the majority of the US market.

The counter narrative

Personally, I favour the counter narrative. All of the big players have been caught flat footed by the rapid onset of the BNPL market and they are desperately trying to play catch up. Sure, PayPal is a threat. But this sector is already filled with threats. Moreover, PayPal has pre-existing pay later mechanisms which don’t seem to have set the world on fire.

The strongest argument for me, is that most of the serious players already have deals with large digital payment points. For example, Afterpay has a deal with Apple Inc (NASDAQ: AAPL)’s Apple Pay and Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG)’s Google Pay. Zip Co is on Amazon.com Inc (NASDAQ: AMZN) and has a new deal for business lines of credit with eBay. Lastly, Splitit has deals with Visa and MasterCard, enabling its point of sale service with merchants globally. 

Another competitive advantage that the BNPL shares have are their portals. Each of the ASX BNPL companies offers a digital shopping mall with dozens of online stores to explore. Not only are they helpful for customers, they actually drive business to merchants. The fee is for more than just processing payments and increasing over the counter sales.

Foolish takeaway

I believe the sell off in BNPL shares on Tuesday was preemptive. The ASX BNPL shares have positioned themselves well through partnerships, differentiated service offerings, and the digital ecosystem each one has built. Not only that, but the global market is very large, with companies like Sezzle already deeply embedded in the US.

In the final analysis, I think the market is large enough to support several BNPL companies. I also think several of the local companies are well placed to establish a defensible beach head. Yesterday’s sell off has created several buying opportunities. In my view, both Sezzle and Zip Co are very interesting at their current prices.

More reading

• ASX 200 falls 1.8%, Afterpay drops 8%
• Zip and Brainchip were among the most traded shares on the ASX last week
• These ASX stocks at earnings risks as the Aussie is forecast to hit US80 cents
• ASX 200 down 1.7%: Afterpay sinks on PayPal news, QBE sacks its CEO, bank shares lower
• Why Afterpay, Flight Centre, Helloworld, & QBE shares are tumbling lower

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Daryl Mather owns shares of Sezzle Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc and recommends the following options: short January 2022 $1940 calls on Amazon, long January 2022 $1920 calls on Amazon, and long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, PayPal Holdings, and Sezzle Inc. 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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