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.

Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT) both generated big gains for investors this year. Amazon’s stock soared more than 80% as its e-commerce and cloud businesses shone throughout the COVID-19 crisis, and Microsoft’s stock rallied nearly 50% as its cloud growth offset weaker demand for its enterprise-oriented products.

Can Amazon and Microsoft maintain those big gains? Let’s dig deeper into both tech giants to see which tech giant is the better overall investment.

The key differences between Amazon and Microsoft

Amazon generates most of its revenue from its online marketplaces, but most of its profits come from AWS (Amazon Web Services), the world’s largest cloud infrastructure platform.

Amazon subsidizes the growth of its lower-margin marketplaces, and their respective hardware and software ecosystems, with profits from AWS. That’s why Amazon can consistently sell products at low prices, launch new hardware devices at low margins, and offer more digital content and perks to expand its Prime ecosystem – which surpassed 150 million paid subscribers last year.

Microsoft’s business consists of three main segments: Productivity and Business Processes, which provides productivity software like Office and Dynamics; the Intelligent Cloud, which includes Azure and its server products; and More Personal Computing, which sells Windows licenses, Xbox consoles and games, and Surface devices.

Last year, Microsoft’s “commercial cloud” revenue, which include all its public cloud services, accounted for 40% of its top line. Microsoft’s expansion of that business over the past six years under CEO Satya Nadella pivoted the tech giant away from its legacy software products and unlocked new growth engines in the cloud and mobile markets.

How fast are these tech giants growing?

Amazon’s revenue and earnings rose 20% and 14%, respectively, in 2019. In the first half of 2020, its revenue climbed 34% as its earnings grew 24%.

Amazon’s online marketplaces generated robust revenue growth throughout the first half of the year as COVID-19 closures boosted its online sales, but its North America unit’s operating profit fell year-over-year, and its international unit remained unprofitable. Those units already operated at low margins, but higher COVID-19 expenses exacerbated the pressure.

However, a 48% year-over-year jump in AWS’ operating profits easily offset the lower margins of its e-commerce marketplaces in the first half. It also expects its COVID-19 expenses to decline sequentially in the third quarter.

Amazon didn’t provide any guidance for the full year, but analysts expect its revenue and earnings to grow 31% and 37%, respectively.

Microsoft’s revenue rose 12% in fiscal 2020, which ended on June 30, as its adjusted earnings grew 14%. The pandemic throttled sales of its enterprise-oriented productivity software as companies cut back their spending, but generated tailwinds for its cloud, Windows, and gaming businesses – all of which benefited from remote work and stay-at-home measures.

Microsoft’s commercial cloud revenue rose 36% to over $50 billion in 2020. That growth was led by Azure, which ranks second in the cloud platform market after AWS. Microsoft doesn’t disclose Azure’s exact growth rate, but it grew at an average rate of nearly 60% in constant currency terms over the past four quarters.

Microsoft also didn’t provide any full-year guidance, but analysts expect its revenue and earnings to rise 10% and 12%, respectively.

The tailwinds and headwinds

Amazon and Microsoft will both benefit from the secular growth of the cloud market, which is well-insulated from macro headwinds like the trade war and COVID-19. Amazon will also profit from the ongoing expansion of the e-commerce market, while Microsoft’s gaming growth should accelerate with the launch of the Xbox Series X later this year.

Those tailwinds are strong, but both companies also face unpredictable headwinds. Amazon is growing increasingly dependent on third-party sellers – some of which have been accused of selling fake products – to drive its e-commerce sales. New regulations could sever those relationships and throttle Amazon’s long-term e-commerce growth. Microsoft’s Azure growth also decelerated last quarter, sparking concerns about competition from AWS and other rivals, and the Xbox Series X will likely still face fierce competition from Sony‘s PS5.

The valuations and verdict

Amazon currently trades at over 110 times forward earnings and it doesn’t pay a dividend. Microsoft’s stock trades at 35 times forward earnings and it pays a forward yield of 0.9%. Neither stock is cheap relative to its growth, but investors seem to be flocking toward both tech giants as defensive plays.

Amazon and Microsoft are both solid long-term investments, but Microsoft’s lower valuation, the upcoming launch of the Xbox Series X, and a potential rebound in its enterprise business after the COVID-19 crisis ends all make it a better buy at current prices.

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

More reading

• Why Alphabet should split its stock
• Netflix stock hits all-time highs as subscribers plan to stay post-pandemic
• Prospective Bezos replacement to leave Amazon
• If you invested $10,000 in Amazon stock during the coronavirus market crash, this is how much you’d have now
• Zoom Video to soon appear on Amazon, Facebook, and Google smart display devices

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun owns shares of Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon. 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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The coronavirus pandemic has shaken Australia’s major four banks.

The big banks have been forced to assist financially stricken customers and have cut or stopped their usually reliable dividends.

Moreover the second wave of COVID-19 in Victoria has dented the prospect of a swift recovery in the national economy.

And now Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking GrpLtd (ASX: ANZ) have more bad news to deal with.

Analytics firm JD Power this week released its Australia Retail Banking Satisfaction Study results, and it doesn’t bode well for the big boys.

Despite their flexibility in helping Australians in trouble due to the COVID-19 recession, all four big banks ranked low in customer satisfaction.

Banks outside the major four averaged 785 points while CBA (776), NAB (771), ANZ (762) and Westpac (758) all fell below that mark.

Heritage Bank (872) and ING (843) topped the list, while ASX-listed Bendigo and Adelaide Bank Ltd (ASX: BEN) came third with 824 points.

Generally, publicly listed institutions fared worse than banks that were privately or mutually owned.

Bank	Customer satisfaction (out of 1,000)
Heritage Bank	872
ING	843
Bendigo and Adelaide Bank Ltd (ASX: BEN)	824
People’s Choice Credit Union	815
CUA	788
BankSA	782
Commonwealth Bank of Australia (ASX: CBA)	776
ME Bank	775
Bankwest (owned by CBA)	772
National Australia Bank Ltd (ASX: NAB)	771
Bank of Melbourne (owned by Westpac)	770
St George (owned by Westpac)	769
Suncorp Group Ltd (ASX: SUN)	767
Bank of Queensland Limited (ASX: BOQ)	763
Australia and New Zealand Banking GrpLtd (ASX: ANZ)	762
HSBC Holdings plc (LON: HSBA)	760
Citigroup Inc (NYSE: C)	759
Westpac Banking Corp (ASX: WBC)	758
Source: JD Power, table created by author

COVID-19-induced financial anxiety

The pandemic has struck financial anxiety into Australians, with the study finding 46% of bank customers are dissatisfied with their personal circumstances.

A quarter even said the impact of COVID-19 had been “devastating” or “severely hurtful”.

“It is imperative that banks understand how to provide better support remotely with no current end in sight to social restrictions.” said JD Power banking and payments intelligence head Bronwyn Gill.

“Banks must narrow the gap in support between customers with good and bad financial health… Helping struggling customers make better financial decisions and manage their spending has many positive outcomes, including higher satisfaction, lower attrition, increased reuse and improved advocacy.”

The increased time at home has led to online and mobile banking overtaking in-person and phone banking in all age demographics.

But that’s led to customers struggling with having any issues resolved. Only 31% of customers said their problem resolution experience was “outstanding”, which was down 7 percentage points from the prior year.

“The implication for banks is that providing highly functional digital banking is key to maintaining satisfaction and preventing attrition,” JD Power stated.

Younger customers are less likely to put up with an unsatisfactory experience, with 22% of those born after 1995 threatening to switch banks. That compares to just 5% of Australians born before 1964 who are thinking of doing the same.

Australia Retail Banking Satisfaction Study was compiled from a survey of 5,584 bank customers. Only banks with more than 100 satisfaction responses were rated.

More reading

• ASX 200 down 1.7%: Afterpay sinks on PayPal news, QBE sacks its CEO, bank shares lower
• 5 things to watch on the ASX 200 on Tuesday
• Are ASX banks or miners buys for dividends?
• Bank analyst tells investors to ‘stay away’ from ASX bank shares
• ASX 200 edges higher: Fortescue sinks, NAB sells MLC Wealth, Costa jumps

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. 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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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to start the month in a very disappointing fashion. At the time of writing the benchmark index is down a sizeable 2.3% to 5,920.4 points.

Four shares that have fallen more than most today are listed below. Here’s why they are tumbling lower:

The Afterpay Ltd (ASX: APT) share price is down 6% to $86.02. Investors have been selling the payments company’s shares (and those of its rivals) after PayPal announced a buy now pay later offering. The US payments giant will launch Pay in 4 in the United States in the fourth quarter of 2020. It will allow consumers to buy things and spread the payment out over four interest-free instalments.

The Flight Centre Travel Group Ltd (ASX: FLT) share price is down over 4% to $12.68. Investors appear to be taking profit after some strong gains over the last few weeks. Prior to today, the Flight Centre share price was up 34% in the space of a month.

The Helloworld Travel Ltd (ASX: HLO) share price is down 4.5% to $1.86 following the release of its full year results. The travel company posted a statutory loss after one-off costs and non-cash impairments of $70 million. Positively, the company has a strong balance sheet and appears well-placed to ride out the storm. Helloworld finished the period with a cash balance of $131.9 million. Though, this has increased to $174.8 million since then following a recent capital raising. 

The QBE Insurance Group Ltd (ASX: QBE) share price has dropped 5% to $10.06 after announcing the shock departure of its chief executive officer. This morning the insurance giant revealed that Pat Regan was given the boot following an external investigation concerning workplace communications. The outcome of this investigation found these communications did not meet the standards set out in the company’s code of ethics and conduct, leading to the board taking decisive action.

More reading

• Zip share price drops lower despite completing QuadPay acquisition
• Afterpay and Zip shares sink lower after PayPal announces Pay in 4 BNPL product
• 4 ASX growth shares I’d buy in September
• QBE share price tumbles lower after shock CEO sacking
• 2 financial services for the fiscal cliff

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Helloworld Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. 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 Aerometrex Ltd (ASX: AMX) share price is 5.71% lower in early morning trade compared with the All Ordinaries Index (ASX: XAO) which is down 1.92% to 6,125.20 points. At the time to writing, the Aerometrex share price is trading at $1.32 following the company’s release of its full-year results for the financial year ended 30 June (FY20). 

What’s moving the Aerometrex share price?

The Aerometrex share price is this morning being sold down despite the company reporting strong growth across the overall business in its FY20 report. This was driven predominately by the company’s LiDAR and 3D segments. Total revenue for the aerial mapping specialist came in at $20.09 million, an increase of 24.7% on FY19’s revenue of $16.1 million.

Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) fell 8.7% to $4.6 million. This was due to the company’s investment in sensor and aircraft assets to support future growth.

Aerometrex recorded a positive cashflow from operations of $8.1 million, up 60% and a strong cash position of $22.2 million.

COVID-19 impact

The business advised that there was no material impact in FY20 from COVID-19, however it expects some logistical challenges due to border closures in the near future. Furthermore, crews have remained in the field longer which has had added some costs to the company.

Aerometrex has $4.5 million of undrawn debt facilities should the need arise to see the company through the pandemic.

What did management say?

Aerometrex Managing Director, Mark Deuter, said:

The Company is continuing to grow strongly in our subscription service MetroMap, in LiDAR and in 3D modelling. We are continuing to execute the growth plans put forward in our Prospectus of December 2019. The Company’s earnings have to a large degree offset cash expenditure on growth and it is pleasing to see a robust normalised EBITDA figure. We are excited at the new capabilities and developments arising from our increased R&D expenditure and we look forward to a successful FY21.

Outlook

Aerometrex did not provide any guidance going into FY21 as it will focus on its near-term strategic priorities. The continued growth of MetroMap has been building in the initial weeks of FY21 with annual recurring revenue (ARR) jumping from $1.66 million at the end of the financial year to $2.87 million at the end of August.

The aerial mapping specialist also expects to see opportunities from its acquisition of Spookfish Australia which will bump up revenue in the coming year.

In the business’ overseas operations, the company has established a base in the United States to capitalise on the significant 3D growth prospects. Aerometrex is currently in ongoing discussions with multinational technology and gaming companies.

About the Aerometrex share price

The Aerometrex share price has regained 89% since its March low of 70 cents. However, since the beginning of the calendar year, the Aerometrex share price is trading 34% lower.

More reading

• Why Afterpay, Flight Centre, Helloworld, & QBE shares are tumbling lower
• Zip share price drops lower despite completing QuadPay acquisition
• Tesla stock splits: Here’s what investors should know
• Apple’s stock split Monday. Here’s what you need to know.
• Afterpay and Zip shares sink lower after PayPal announces Pay in 4 BNPL product

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. 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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News that PayPal is launching a buy now pay later offering in the fourth quarter of 2020 has overshadowed a positive announcement and is weighing on the Zip Co Ltd (ASX: Z1P) share price on Tuesday.

In morning trade the Zip share price is down 6% to $8.59.

What did Zip announce?

This morning Zip announced that shareholders voted overwhelmingly in favour of its acquisition of QuadPay at an extraordinary general meeting on Monday.

As a result, the acquisition has completed successfully along with the issuance of $200 million in convertible notes and warrants to CVI Investments.

Under the terms of the acquisition, the company has issued 118,776,189 fully paid ordinary shares to the QuadPay stockholders and granted 10,480,369 options to subscribe for new fully paid ordinary shares in the future.

What is QuadPay?

QuadPay is a growing US-based buy now pay later provider disrupting the credit card industry with a strong focus on innovation and customer centricity.

As with rival Afterpay Ltd (ASX: APT), it enables customers to pay in four interest-free instalments over 6 weeks for purchases made both online and instore in the $5 trillion dollar US market.

Zip’s CEO and Co-Founder, Larry Diamond, was very pleased to complete the acquisition.

He said: “We are thrilled to welcome QuadPay to the Zip Family. The US is a critical part of our global strategy as merchants increasingly demand global payment solutions. The QuadPay business has continued to deliver strong results, driven by the flight to online and a move away from the outdated and unfair credit card.”

“We are already working closely with the QuadPay team and expect to drive significant synergies as we come together to capitalise on the global opportunity. We are also delighted to welcome Susquehanna Investment Group onto the register and thank them for their support as we turbocharge our growth into new products and geographies,” he concluded.

More reading

• Why Afterpay, Flight Centre, Helloworld, & QBE shares are tumbling lower
• Afterpay and Zip shares sink lower after PayPal announces Pay in 4 BNPL product
• 4 ASX growth shares I’d buy in September
• Why the Zip Co share price rocketed 54% higher in August
• 2 financial services for the fiscal cliff

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.

Shares of Tesla (NASDAQ: TSLA) finally began trading on a split-adjusted basis Monday morning, completing a stock split that was announced on Aug. 11. The lower price represents a forward stock split in which shares split 5-for-1. Tesla stock opened the day trading at about $445 — one-fifth of what the stock was trading at before the split.

If the electric-car maker’s stock split has grabbed your attention and you’re now taking a closer look at the growth stock, here’s a quick overview of important factors investors should keep in mind.

A stock split doesn’t make Tesla stock a better buy

First and foremost, investors should note that while Tesla shares are more affordable after the split, the split does not make the stock a more attractive investment than it was at its much higher pre-split price of $2,225.

Why is this the case? Simply because both price and ownership in the company on a per-share basis were divided by five. Put another way, each Tesla share is now assigned only one-fifth of the ownership in the company that was allotted previously.

On the flip side, of course, a stock split doesn’t make Tesla stock any worse of an investment either. A stock split is simply a nonfactor when it comes to making investment decisions and should have no impact on an investment thesis.

Several key catalysts for Tesla stock

Nevertheless, some investors may be more interested in Tesla stock now simply because shares have become more affordable. Some retail investors could have been in a position in which it was more difficult to spend $2,225 on a single share. Or perhaps there are other investors who have coincidently become more interested in Tesla stock recently.

For those investors, let’s take a quick look at the automaker and the catalysts that could help the stock over the long haul.

First, there’s Tesla’s recent launch of its Model Y. Debuting in March, the Model Y is Tesla’s second-most affordable vehicle yet. With a starting price of about $50,000, the new vehicle gives the automaker a smaller SUV that is much more affordable than its larger Model X SUV. Model X pricing comparatively starts at $80,000. The automaker has big expectations for the Model Y, with management saying that it believes deliveries could eventually surpass those of the Model 3, which is Tesla’s best-selling car by far. Specifically, Tesla CEO Elon Musk has said he believes annual Model Y deliveries could eventually grow to 1.25 million. With total Tesla vehicle deliveries estimated to come in at about 500,000 this year, the Model Y has the potential to be a huge catalyst for Tesla.

Second, there’s Tesla’s fast-growing energy business, which includes sales of energy storage and solar panels. While revenue from the segment only accounts for about 6% of total revenue today, Musk believes Tesla Energy will eventually rival its automotive business. 

Finally, Tesla hopes its vehicle software will eventually bring in far more revenue for the company. Management has indicated two ways it plans to improve monetization of the software. First, it will continue raising the price for its driver-assist technology as it improves (the company believes the software will eventually get to the point where Tesla can release an over-the-air update that makes its vehicles self-driving, helping it command a much higher price tag). Second, Tesla plans to eventually launch a ride-sharing network that will operate with self-driving Tesla vehicles.

One key reason to avoid Tesla stock

Despite these exciting potential catalysts for Tesla stock, investors should keep in mind the automaker’s pricey valuation. Today, Tesla has a market capitalization of $426 billion even though trailing-12-month sales and net income are just $25.7 billion and $368 million. This means that investors have already priced in a wildly optimistic growth story for the company over the next decade.

It’s always possible, of course, that Tesla executes so well that even the rosy outlook priced into the stock today proves to be an underestimate of the company’s potential. But investors should bear in mind the risks of the underperformance the stock could endure if investor expectations prove too optimistic.

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

More reading

• Why Alphabet should split its stock
• 2 Advantages of Stock Splits for Apple and Tesla Investors
• Tesla stock split: Should you buy now or wait?
• The 1 Warren Buffett quote that tells us how to invest right now
• Analyst says Tesla best-case scenario could see share price spike 70% to $3,500

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. 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.

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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.

Shares of Apple‘s (NASDAQ: AAPL) stock are suddenly a whole lot more affordable.

The tech titan’s shares began trading at their new split-adjusted price Monday. Following its 4-for-1 stock split, Apple’s shares are now trading for roughly 75% less than they were before.

But does that mean the stock is a buy?

First of all, investors need to understand that a stock split does not change the fundamental value of a business. Stock splits simply divide up a company into more pieces, with the value of each piece reduced in kind. In Apple’s case, investors received three new shares for each share they owned. Those four shares are now worth one-quarter of the original share’s price. So, if you owned one share of Apple worth roughly $500 on Friday, today you own four shares worth approximately $125.

Here’s another way to think about it: A 4-for-1 stock split is like exchanging a $1 bill for four quarters. You still have the same amount of money, it’s just divided into more portions.

But if a stock split doesn’t change the value of a company, why has Apple’s stock price run up so much ahead of its split and continues to rise after the split?

It’s a fair question, and one with multiple answers. One reason is that less-experienced investors might not understand exactly how stock splits work and are simply excited about the chance to own more shares of Apple. Another reason is that investors who could not afford to buy a share at $500 may now be able to buy one at $125. (Though this is less of a factor today, now that many brokers allow their customers to buy fractional shares.)

Perhaps the best explanation is that professional traders know that many people do get excited about splits, and so they buy the stock ahead of what they expect will be a herd of individual investors rushing in to buy shares after the split is announced.

However, none of this alters Apple’s long-term value, and so the effects can be fleeting. Said differently, it’s possible that Apple’s stock could surrender some of its recent gains now that the split has occurred.

So, is Apple’s stock a buy today?

To answer this question, investors should shift their focus from the stock split to the true drivers of Apple’s long-term value. And nothing is more important for Apple in this regard than the iPhone.

Fortunately, the company appears to be gearing up for a 5G-driven sales bonanza for the newest version of its prized product. The fifth-generation wireless technology could help to spur hundreds of millions of device sales in the coming year, driving Apple’s sales and profits sharply higher. 

Profits are what ultimately determines a company’s – and, by extension, a stock’s – true value. And in this regard, Apple’s future is bright. Its stock, in turn, remains a buy post-split.

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

More reading

• Why Alphabet should split its stock
• Apple shares will surge 20% after its stock split, according to this analyst. Is he right?
• 2 Advantages of Stock Splits for Apple and Tesla Investors
• Is Apple’s market cap headed to $3 trillion? One analyst thinks so
• Apple shareholders are either correcting a mistake… or making one

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia has recommended 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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Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) shares were on fire in August, with the two buy now pay later providers smashing the market with gains of 33.4% and 54%, respectively.

Unfortunately, September hasn’t started as positively and both shares are tumbling notably lower this morning.

At the time of writing the Afterpay share price is down 6% to $86.17 and the Zip share price is down 7.5% to $8.46.

Why are Afterpay and Zip Co shares sinking lower today?

Investors have been hitting the sell button this morning in response to an announcement out of payments giant PayPal overnight.

That announcement reveals that PayPal will be launching “Pay in 4” to customers in the United States in the fourth quarter of 2020.

As its name implies, Pay in 4 is a short-term payment solution that allows consumers to make a purchase and pay over four interest-free instalments.

PayPal commented: “Pay in 4 can help merchants drive conversion, revenue and customer loyalty without taking on additional risk or paying any additional fees, while enabling consumers to make a purchase and pay over four, interest-free instalments.”

It is part of the company’s growing suite of Pay Later solutions, enabling merchants and partners to get paid upfront while enabling customers to pay for purchases between $30 and $600 over a six-week period.

Pay in 4 is automatically included in the merchant’s existing PayPal pricing, so merchants won’t have to pay any additional fees to enable it for their customers.

PayPal’s SVP of Global Credit, Doug Bland, said: “In today’s challenging retail and economic environment, merchants are looking for trusted ways to help drive average order values and conversion, without taking on additional costs. At the same time, consumers are looking for more flexible and responsible ways to pay, especially online.”

“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,” he added.

Foolish Takeaway.

Competition certainly is heating up in the lucrative market. However, given Afterpay’s strong market position in the United States, I’m not overly concerned by this news. 

Though, given the smaller market share Zip Co’s QuadPay business has, it might have a fight on its hands in 2021.

More reading

• 4 ASX growth shares I’d buy in September
• Why the Zip Co share price rocketed 54% higher in August
• 2 financial services for the fiscal cliff
• The Afterpay share price jumped 33% in August: Is it too late to invest?
• These market veterans believe a share market pullback is coming. Here’s their surprising advice…

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 and recommends PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PayPal Holdings. 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 could mean that buying the best stocks becomes even more profitable over the long run. While a decade of economic growth may have caused investors to overlook the risks posed by weak business models, companies with poor operating outlooks may now struggle to deliver rising share prices during what could be a more difficult period for the world economy.

As such, by following Warren Buffett’s strategy of buying the best businesses in a specific industry, you could gain exposure to the most appealing investment opportunities available.

A quality focus after the stock market crash

Focusing on quality stocks may become even more important after the market crash. The uncertain economic outlook could mean that only those companies with sound finances and a dominant market position are able to survive the short run, and prosper in the long run. Therefore, it could be a good idea to focus your portfolio on those businesses that can extend their market share amidst difficult operating conditions.

Warren Buffett has always sought to purchase the most attractive businesses in a specific industry. For example, he has focused on buying those companies with the widest economic moats. This essentially means that they have a competitive advantage over their peers that enables them to deliver more impressive financial performance. An economic moat is subjective, but can consist of factors such as a unique product, brand loyalty or a lower cost base that, over time, produce strong profit growth.

Paying a premium for quality

Of course, the best stocks may not necessarily be the cheapest stocks – even after the recent market crash. Investors may currently be seeking to lower their overall risks, and could therefore reposition their portfolios towards the strongest companies around. This may lead to many of the best stocks trading at high prices relative to their weaker peers.

While this may dissuade some investors from buying them, it could be worth paying a premium price for stronger businesses. They may offer superior risk/reward opportunities to their sector peers, and could deliver higher returns in the long run. Therefore, in terms of value for money, more expensive stocks that are better quality may be more appealing.

Diversification

Even if you purchase the best stocks around after the market crash, it is still imperative to diversify. This not only reduces your risks through limiting exposure to a small number of holdings, it may also enable your portfolio to benefit from a wider spectrum of growth opportunities.

Since the outlook for the world economy continues to be uncertain, investors with diverse portfolios may generate smoother, and more impressive, returns in the long run. As such, now could be the right time to build a diverse portfolio of high-quality stocks.

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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.

The post I’d follow Warren Buffett and buy the best stocks after the market crash appeared first on 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.

Everyone is wondering which company will win the race to produce a coronavirus vaccine. With 31 candidates in clinical development and six of those in phase 3 studies, competition is high.

That’s if we expect only one winner. But the fact is, one winner likely won’t be sufficient, a fact that becomes clear when we consider the number of people who need the vaccine and the manufacturing capacity of any single company. Let’s take a look at some of the numbers and what all of this means for those in the vaccine race, as well as investors.

To stop the coronavirus from spreading, the goal is to reach herd immunity. That’s when most of the population is immune to an illness, halting the spread. Experts have said 70% of the population must be immune to the coronavirus to reach that point. With the world’s population totalling 7.7 billion, about 5.4 billion people will need vaccination.

Now, let’s see where leaders in the race stand in terms of supplying a possible vaccine. The following are all involved in phase 3 or phase 2/3 trials. Moderna (NASDAQ: MRNA) is set to deliver 500 million doses annually, with the possibility of increasing that to 1 billion as of next year. AstraZeneca (NYSE: AZN) says its manufacturing capacity is 3 billion doses. Pfizer (NYSE: PFE) and its partner BioNTech (NASDAQ: BNTX) aim to produce more than 1.3 billion doses by the end of 2021.

Does supply meet demand?

Before calculating whether supply meets demand, keep in mind that certain vaccines involve two doses. That’s the case for Moderna’s program and the Pfizer/BioNTech team. Though AstraZeneca tested its vaccine in both one- and two-dose treatments, researchers said the strongest immune response was seen in the two-dose group. So, when regulators approve any vaccine, its number of doses will affect how much supply is needed for a population.

And even if all three vaccine candidates mentioned above gain approval, supply will still fall short of demand, regardless of a one- or two-dose schedule — at least considering today’s manufacturing capacity. That’s probably one reason why countries have been scrambling to pre-order vaccines from more than one company.

For example, the U.S. has pre-ordered doses of potential vaccine candidates under development by Moderna, AstraZeneca, Pfizer/BioNTech, and others. Through a $1.5 billion investment this month, the U.S. ordered 100 million doses from Moderna; it has offered $1.2 billion to AstraZeneca for 300 million doses; and for a $1.95 billion investment in Pfizer/BioNTech’s program, the U.S. will own 100 million doses. Europe and the U.K. have also signed supply agreements with vaccine developers.

Making extra sure they’re ready

All this willingness to order vaccines from several producers might also be a case of countries hedging their bets. If one company’s program fails, at least there’s a chance of obtaining a vaccine elsewhere. But knowing the supply problem that lies ahead — even if a few vaccine candidates are approved — it’s likely governments will have to seek doses from several vaccine makers well into the future, and they know that.

Pricing is another concern, and prices so far have varied. For instance, the U.S. is paying $10 a dose for 100 million doses of Johnson & Johnson‘s (NYSE: JNJ) investigational vaccine. And Moderna has recorded some small volume orders in the range of $32 to $37 a dose. It’s too early to say whether lower-priced vaccines will have an edge. Supply and product quality will determine that further down the road.

Crossing the finish line

So, to answer our question: Yes, there is room for more than one winner in this vaccine race. But these winners may not all cross the finish line at the same time. The one that does, though, is likely to see its shares climb. Companies that are ahead from a timeline perspective — such as Moderna, AstraZeneca, and Pfizer/BioNTech — stand a good chance if the data cooperate.

And then there may be a later winner (or winners): a biotech or pharmaceutical company whose vaccine candidate is in phase 1 or 2 studies today. If that player’s potential vaccine eventually performs well, revenue and share gains will be on the horizon.

The key point to keep in mind here, regarding the companies close to the finish line and those further behind, is this: Clinical trial results will be the first benchmark to determine the winners of this race. So, if you’re looking to get an edge on who will dominate the market, be on the lookout for clinical trial reports this fall.

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

More reading

• Johnson & Johnson to launch late-stage coronavirus vaccine trials in September
• This could be the ace in the hole for Johnson & Johnson’s COVID-19 vaccine
• How Moderna went from coronavirus sequence to a phase-1-ready vaccine candidate in 42 Days
• Everything you need to know about the coronavirus vaccine race

Adria Cimino 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.

The post In the race for a coronavirus vaccine, can there be multiple winners? appeared first on Motley Fool Australia.

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

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