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The Nuheara Ltd (ASX: NUH) share price is back from the Christmas break with a bang.

In morning trade the Nuheara share price is rocketing 23% higher to 5.4 cents.

What did Nuheara announce?

This morning the smart and affordable hearing solutions provider released two big announcements.

The first announcement revealed that Nuheara has signed an agreement to manufacture HP-branded products for American multinational information technology company HP Inc (NYSE: HPQ).

According to the release, the hardware product purchase agreement has a contracted initial term of three years with automatic renewals for successive one-year periods.

This umbrella agreement is designed to manage the design, manufacture, and supply of multiple products throughout the life of the contract. The first Nuheara manufactured product to be supplied under the agreement is a HP branded True Wireless Earbud with charging case.

Utilising Nuheara-owned and developed intellectual property, this product is designed as a premium, compact audio earbud that will enhance the user’s ability to be productive, provide a personalised experience and can be used comfortably in dynamic and ever-changing physical environments. The product will also carry a Nuheara co-brand.

Management advised that the product is on schedule to commence mass shipment to HP in the third quarter of FY 2021. Nuheara has already manufactured and supplied HP the validation units of the product. There are no minimum or maximum supply volumes.

CEO Justin Miller commented: “We are delighted to extend our partnership with HP to a long-term supply agreement. This agreement is another pillar in Nuheara’s diversification of revenue streams, building on our growing Direct to Consumer sales with OEM partnerships. With an embedded strategic partner the size of HP, it provides the potential of significant upside to our global reach and scale.”

Institutional placement.

In a separate announcement, Nuheara revealed that it has raised $11.5 million before costs through an oversubscribed placement of 287.5 million new shares at an issue price of $0.04 per share.

Net proceeds from the placement will be principally used to fund the acceleration of direct to consumer sales and activities, as well as supporting credit terms for Nuheara’s manufacturing and production costs associated with the HP agreement.

More reading

• Why the DroneShield (ASX:DRO) share price is jumping 6% today
• FAANG stocks make their case to lead the Nasdaq in 2021
• 2 star stocks for your ASX retirement portfolio
• Why the BetMakers (ASX:BET) share price is surging higher
• Why the NEXTDC (ASX:NXT) share price is up 85% in 2020

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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DroneShield Ltd (ASX: DRO) shares are rocketing higher today on news the defence contractor has signed an additional government agency order. At the time of writing, the DroneShield share price has lifted 5.9% to 18 cents.

What’s driving the DroneShield share price?

The DroneShield share price is on the rise today after the company announced it has received a follow up order for its DroneGun Tactical hand-held, counter-unmanned aerial systems (UAS) products. The additional purchase is said to be from a Five Eyes country. The term ‘Five Eyes’ relates to a signals alliance between the United States, Canada, Australia, the United Kingdom, and New Zealand.

DroneGun Tactical is a portable, long range counter measure used against UAS threats. When attacking the target, the high-tech gun safely brings the enemy UAS down to ground with no peripheral damage, protecting the surrounding environment.

The deal, valued at around $400,000, represents ongoing commitments from government agencies, which have sought DroneShield products in the past. This includes a $900,000 purchase of DroneGun counter UAS products that was announced on 1 October. The latest transaction is due to be completed sometime in the first-quarter of the new year, pending usual export approvals.

Words from the CEO

Commenting on the contract award, DroneShield CEO Mr Oleg Vornik reinforced the company’s importance to defence markets. He said:

This order demonstrates adoption of our products at a mature sales cycle level, where ongoing repeat orders of meaningful scale start to occur. There is necessarily a larger upfront effort in developing the technology and achieving the initial adoption by tier 1 customers.

This order shows DroneShield moving to a subsequent phase of ongoing sales without requirement of testing and evaluation prior to each sale, as our products become the standard for counter-UAS technology amongst leading Government agencies globally.

DroneShield share price snapshot

The DroneShield share price has fallen pretty hard over the past 12 months, losing nearly 40% for shareholders. While the company signed off a slew of contracts in 2020, its share price has failed to take off.

Based on the current DroneShield share price, the company has a market capitalisation of $66.3 million.

More reading

• Why the DroneShield (ASX:DRO) share price is leaping higher today

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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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.

Stocks continued to do well as Wall Street began the last week of 2020, with the market pushing further into record territory in mid-afternoon trading Monday, and the Nasdaq Composite (NASDAQ: .IXIC) up by nearly 1% shortly after 2 p.m. EST.

During the past year, there was a changing of the guard among Nasdaq stocks. Smaller companies like Zoom Video Communications Inc (NASDAQ: ZM) and CrowdStrike Holdings Inc (NASDAQ: CRWD) saw their share prices soar. Yet the well-known FAANG stocks held their own, and on Monday afternoon, Apple Inc (NASDAQ: AAPL), Amazon.com Inc (NASDAQ: AMZN), Facebook Inc (NASDAQ: FB), and Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) were all seeing share-price gains of 2% or more. Only Netflix Inc (NASDAQ: NFLX) was lagging, with a rise of less than 1.5%, but that gain came as CrowdStrike and Zoom were seeing substantial declines.

FAANG stocks remain sharp

To be clear, the year-to-date gains for the FAANG stocks are impressive. Apple is leading the way, up by more than 85%, but Amazon and Netflix aren’t too far behind. Even the lagging Facebook and Alphabet have managed to gain more than 30%, though those results fall short of the Nasdaq Composite’s 44% rise year to date.

AAPL data by YCharts.

All five of these stocks still have plenty of growth potential. Apple will have an amazing quarter due to the release of its 5G-enabled iPhone 12, for which millions of Apple fans have been waiting through several previous upgrade cycles. Moreover, news that Apple is looking to get into the electric vehicle business shows that its plans for innovation go well beyond its flagship device.

For Amazon, optionality is the name of the game. There’s hardly any industry beyond the reach of the e-commerce giant, which is currently taking a look at areas like real estate, pharmacy services, and grocery delivery.

Facebook hopes that it can get itself out of congressional committee rooms and find new ways to spur its revenue growth. Even as its namesake social media service matures, Instagram remains popular, and advertising sales could bounce back once the economy recovers further from the coronavirus crisis.

Lastly, Alphabet wants to see improvement after a somewhat sluggish 2020. Ad sales slumped during the worst period of pandemic-related economic shutdowns, but that should give the tech giant room to improve in 2021. Moreover, the breadth of its business provides it with chances to excel that many investors don’t even have on their radar screens yet, especially in the company’s “other bets” area.

The most vulnerable of the bunch?

If there’s a FAANG stock that’s most likely to face big challenges in 2021, it’s Netflix. The company roared to unprecedented growth in the first half of 2020, but it’ll be hard for it to keep up the pace. Even in the third quarter, a big slowdown in subscriber growth made investors nervous about the video streaming company.

Moreover, Netflix faces a lot of competition. New services from rivals have gained traction quickly, and the race to acquire and produce top-notch content will require it to lay out increasing amounts of capital. It’ll be interesting to see how Netflix’s recent subscription price hike will play in an environment in which there are so many alternatives.

Don’t count out the FAANG stocks

The FAANG companies are all so big that they simply won’t be able to match the growth rates of their much smaller counterparts on a percentage basis. Yet in terms of their importance, the FAANG stocks remain vital — and they’ll play a key role in determining the direction of the Nasdaq in 2021 and beyond.

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

More reading

• The top streaming stocks to buy in 2021
• Why Amazon’s stock is so expensive
• Report: authorities rejected Facebook offer to foster competitors’ growth
• Tesla asked Apple to buy it
• Is Apple (NASDAQ:AAPL) about to launch an electric car?

Dan Caplinger owns shares of Alphabet (A shares) and Apple. 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. 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 Alphabet (A shares), Alphabet (C shares), Amazon, Apple, CrowdStrike Holdings, Inc., Facebook, Netflix, and Zoom Video Communications 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 Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, Netflix, and Zoom Video Communications. 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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If you’re trying to earn an income in retirement, it has become close to impossible with term deposits.

Why not term deposits?

Due to interest rate cuts, term deposits are now offering some of the lowest rates we’ve ever seen.

For example, Commonwealth Bank of Australia (ASX: CBA) will provide investors with a 0.55% per annum interest rate on term deposits of up to $2 million.

This means that if you invested $2 million into one of the bank’s term deposits, you would be earning interest of just $11,000 each year.

As a comparison, prior to COVID-19, the Australian share market was offering investors an average yield of approximately 4%.

Which means that the same $2 million invested into the share market would have yielded $80,000 in dividends. That’s a difference of $69,000.

In light of this, the share market arguably remains the best place to invest money to generate a passive income while in retirement.

But which shares should you buy?

There are a large number to choose from on the Australian share market, but two shares that could be great options according to Goldman Sachs are Coles Group Ltd (ASX: COL) and Telstra Corporation Ltd (ASX: TLS).

This is due partly to their defensive qualities, generous yields, and attractive valuations.

In respect to Coles, Goldman Sachs is positive on the company and has a buy rating and $20.50 price target on the supermarket operator’s shares.

It is forecasting a fully franked 64 cents per share dividend in FY 2021. Based on the current Coles share price of $18.47, this represents a 3.5% forward yield.

As for Telstra, Goldman Sachs has a buy rating and $3.60 price target on the telco giant’s shares. It is also forecasting a 16 cents per share fully franked dividend in FY 2021 and beyond.

Based on the current Telstra share price of $3.01, this would provide investors with a 5.3% dividend yield.

More reading

• 2 buy-rated ASX dividend shares for income investors to snap up
• Leading fund manager names the ASX dividend shares to buy in 2021
• These ASX dividend shares could be top Christmas gifts for income investors
• 8 issues that will impact investors in 2021: experts
• 3 top ASX dividend shares for a better retirement

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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 BetMakers Technology Group Ltd (ASX: BET) share price is on the move on Tuesday following an acquisition update.

At the time of writing, the betting technology company’s shares are up 5.5% to 75.5 cents.

What did Betmakers announce?

This morning the company announced that UK-based Sportech has received shareholder approval for the divestment of its Racing and Digital assets to BetMakers for a total consideration of 30.9 million pounds.

This was the only condition precedent to completion of the acquisition. In light of this, BetMakers will now make a non-refundable initial payment of 6.2 million pounds, with the balance of 24.7 million pounds payable upon completion of the acquisition.

This will occur following satisfaction of certain customary conditions that only BetMakers can waive at its discretion, including transfer of licences.

This acquisition is being funded by a $50 million placement, which is due to settle on 31 December, and a $10 million share purchase plan.

Why is BetMakers acquiring Sportech’s Racing and Digital assets?

Management notes that the acquisition of Sportech’s Racing and Digital assets enables BetMakers to accelerate its international growth plans.

It also strategically positions the company to capitalise on emerging opportunities in the U.S. market, including fixed odds wagering.

The company has previously revealed that the deal had the potential to be a game-changer financially.

For example, on a pro-forma basis for FY 2020, acquired assets and with BetMakers’ existing operations would have delivered $56.1 million revenue and $7.7 million EBITDA.

As a comparison, BetMakers’ recorded stand-alone revenue of $9.2 million and EBITDA of $0.8 million in FY 2020.

When first announcing the proposed acquisition, BetMakers’ Managing Director, Todd Buckingham, commented: “This Acquisition will supercharge our entry into the U.S. and position the Company for substantial growth on the back of the emerging wagering opportunities in U.S. racing, including Fixed Odds, where we believe we are well placed.”

“The Acquisition would give us a meaningful presence in the U.S., including in 36 of the States and across more than 200 venues, 25 digital outlets and 9,000 betting terminals. It will also greatly expand our global customer base across the UK, Europe and Asia and provides us with an opportunity to expand our product offering at scale in these and other regions,” he concluded.

More reading

• Why the Betmakers (ASX:BET) share price is seesawing today
• Why the BetMakers (ASX:BET) share price is surging 12% higher today
• Why BetMakers, Medical Development International, Qantas, & Zip are dropping lower
• Why the BetMakers (ASX:BET) share price is crashing 15% lower today
• Why the BetMakers (ASX:BET) share price is up 12% to a record high

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 Betmakers Technology Group Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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One of the best performers on the S&P/ASX 200 Index (ASX: XJO) this year has been the NEXTDC Ltd (ASX: NXT) share price.

Since the start of the year, the data centre services company’s shares have rocketed a massive 85% higher.

Why is the NEXTDC share price rocketing higher this year?

Investors have been fighting to get hold of the company’s shares this year after the COVID-19 pandemic accelerated the structural shift to the cloud.

This shift to the cloud led to a jump in customer numbers and a surge in demand for capacity in NEXTDC’s data centres.

For example, during FY 2020, NEXTDC’s contracted utilisation grew 17.4MW or 33% to 70MW and its customer numbers increased by 180 or 15% to 1,364.

Unsurprisingly, this underpinned further strong revenue and profit growth. Over the 12 months, NEXTDC delivered a 14% increase in revenue to $205.2 million and a 23% jump in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to $104.6 million. The latter was at the top end of its guidance range.

Pleasingly, management is expecting this positive form to continue in FY 2021. It provided underlying EBITDA guidance in the range of $125 million to $130 million. This implies growth of approximately 24.5% at the top end of its range.

What else is driving the NEXTDC share price higher?

Also getting investors excited is its recent announcement of a new senior debt facility of $1.85 billion.

This senior debt facility is being split across three tranches, each with a tenor of five years. This comprises $800 million for a term loan facility, $400 million for a capital expenditure facility, and $650 million for a multi-currency revolving credit facility.

After much speculation, the company revealed that the latter multi-currency revolving credit facility is to support its international expansion. NEXTDC has opened up offices in both Singapore and Tokyo and is working with key customers and talking to respective governments about a potential market entry.

Given the size of these markets, they could provide NEXTDC with a long runway for growth over the next decade.

In light of this, it is no surprise to learn that Goldman Sachs has a buy rating and $13.20 price target on its shares. It has even suggested that its shares could be worth $20.00 based on assumptions that are high, but “not unrealistic considering the current acceleration in demand that is evident across the business.”

More reading

• 2 ASX tech shares to buy and hold until 2030
• 5 fantastic ASX shares to buy in 2021
• 2 outstanding ASX shares to buy and hold for a decade
• These are 10 of the best performing ASX tech shares of 2020 so far
• 10 highly rated ASX shares to buy in 2021

Motley Fool contributor James Mickleboro owns shares of NEXTDC 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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The 4-way takeover battle for Cardinal Resources Ltd (ASX: CDV) has finally been declared over today, with Chinese miner Shandong Gold being declared the winner.

In a release to the market this morning, Cardinal said Shandong has acquired in excess of 50% of its shares at $1.075 per share, effectively controlling the company.

The Cardinal share price last closed at $1.08 on 24 December, and is expected to trade today at the $1.075 level.

What was announced?

In light of this development regarding Shandong, Cardinal has today said that all other takeover offers are now off the table, and are no longer an option for shareholders.

According to the release, the Russian miner Nordgold, which has so far acquired around 20% of Cardinal shares, has also now accepted the Shandong offer on 24 December. Nordgold’s last offer was at $1.05.

The $1.20 offer from Dongshan Investments will also no longer be considered as the acceptance condition of 50.1% ownership will no longer be possible, given that Shandong has acquired more than 50% of the shares.

Finally, the $1.05 offer from Ghanaian company Engineers & Planners will also be considered void as its acceptance condition of 50.1% can no longer be met.

4-way deadlock

Cardinal Resources has been pursued as a takeover target by four different companies.

In June, Cardinal received a takeover bid from Hong Kong-based Shandong Gold at an offer price of 60 cents per share, valuing the company at around $300 million.

The Chinese company, which is the second-largest gold producer in China, then increased its offer price for Cardinal to $1.00 per share in September, later increasing it again to $1.05 in November.

That higher offer was meant to outbid another interested party, Nordgold, a Russian gold miner which had previously increased its own offer from 60 cents to 90 cents a share. Nord Gold also increased its offer price to $1.05 on 11 December.

Cardinal was then approached by another suitor in November, in the form of a Ghana-based company, Engineers & Planners Company Limited. That offer also stood at $1.05 per share.

And just before Christmas, Cardinal received an offer from an Emirati-Russian investment house, Dongshan Investments, at $1.20 per share.

Cardinal is a West African gold‐focused exploration and mining company that holds the prized Namdini Gold Project in Ghana.

More reading

• Cardinal Resources (ASX:CDV) share price drops as takeover deadline looms
• Cardinal Resources (ASX:CDV) share price rises on 3-way takeover deadlock

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The CSL Limited (ASX: CSL) share price will be on watch on Tuesday following news that another COVID-19 vaccine is expected to be given approval in the United Kingdom this week.

What was announced?

According to CNBC, the COVID-19 vaccine being developed by AstraZeneca and the University of Oxford, AZD1222, is expected to be approved for use in the United Kingdom later this week.

This follows reports in the Financial Times which claim that government officials have confirmed that the Medicines and Healthcare products Regulatory Agency would imminently approve the vaccine, potentially as soon as Tuesday.

This comes a day after the United Kingdom reported approximately 30,500 daily infections and 316 deaths after a more transmissible COVID strain spreads across the country.

Why does this matter for CSL?

The potential approval of AZD1222 in the United Kingdom could be good news for CSL and Australia because the biotech giant has already commenced manufacturing of the vaccine candidate at its advanced manufacturing facility in Broadmeadows, Victoria.

This followed the receipt of separate contracts with AstraZeneca and the Australian Government to manufacture approximately 30 million doses of the AZD1222 vaccine candidate, with the first doses planned for release in 2021, pending the outcome of clinical trials and regulatory approval.

Is this vaccine the one?

The editor-in-chief of The Lancet medical journal, Dr. Richard Horton, believes this vaccine could be used around the globe more effectively than others.

He told CNBC: “The Oxford/AstraZeneca vaccine is the vaccine right now that is going to be able to immunize the planet more effectively, more rapidly than any other vaccine we have,” adding that it was important to think about vaccine immunisation on a global scale “because even if we immunize one country, the threat then is you reintroduce the virus from another country that is not protected.”

AstraZeneca’s CEO, Pascal Soriot, expects the vaccine to be highly effective. He told the Times newspaper this weekend that he is convinced that subsequent data will show that this vaccine achieved an efficacy rate equal to the others, at above 90%.

More reading

• 2 ASX healthcare shares to buy next week
• 3 unstoppable ASX shares to buy
• 5 fantastic ASX shares to buy in 2021
• 2 of the best ASX healthcare shares to buy in 2021
• 7 top ASX biomedical shares in 2020

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 CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Making an attractive passive income over the long run does not necessarily require large sums of capital. Nor does it need an investor to constantly buy and sell stocks depending on which sectors are outperforming the wider stock market.

Rather, a simple buy-and-hold strategy that focuses on purchasing high-quality companies at low prices can produce a large portfolio. From this, a generous income can be drawn that provides financial freedom in the long run.

A buy-and-hold strategy to make a passive income

It is tempting to buy and sell stocks over a short time period when aiming to make a worthwhile passive income over the long run. After all, events such as the recent stock market rally can lead to sizeable profits for investors. This may lead them to lock-in profits and seek to repeat their success elsewhere.

However, a buy-and-hold strategy may be more effective in building a portfolio in the long run. Not only does it mean less commission costs and potentially less effort than a plan to trade stocks regularly, it also allows holdings within a portfolio to deliver on their potential. This is especially relevant at the present time, since a number of solid businesses may take many months, or even years, to recover from their present-day challenges.

Furthermore, a buy-and-hold strategy can lead to a larger passive income in the long run. It allows compounding to have a positive effect on a portfolio’s value. Over time, this can turn even modest monthly investments into sizeable sums of capital.

Buying high-quality stocks at cheap prices

As well as using a buy-and-hold strategy, purchasing high-quality companies at low prices can have a positive impact on an investor’s passive income prospects. The past performance of the stock market has shown that recoveries from its declines have always taken place. Therefore, using market cycles to buy undervalued shares can be a means of outperforming the wider index.

Certainly, some stocks are priced at low levels because they have weak finances, lack a competitive advantage or face major challenges that may not be overcome. However, other stocks currently have low valuations based on weak near-term operating outlooks that are likely to reverse as the world economy’s prospects improve.

Investing money to make an income return

Even if an investor matches the high single-digit annual returns of the stock market, they could make an attractive passive income in retirement with a modest monthly investment. For example, investing $250 per month at an annual return of 8% would produce a portfolio valued at $375,000 within 30 years. From this, a 4% annual withdrawal equates to an income of $15,000.

By purchasing strong businesses at low prices and holding them for the long run, it is possible to beat the stock market’s returns. This may lead to an even more appealing income in the coming years.

More reading

• The top streaming stocks to buy in 2021
• These are the 10 most shorted shares on the ASX
• 3 exciting small cap ASX shares to buy
• What Goldman likes about the Jumbo Interactive (ASX:JIN) share price
• 2 quality ASX dividend shares to buy

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. 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.

The pandemic lit a fire under the streaming media sector as people stayed home and streamed more TV shows, movies, and songs. Many of those stocks have already generated big gains for investors this year, but they could surge even higher in 2021 and beyond.

The global video streaming market could grow at a compound annual growth rate (CAGR) of 18.3% between 2019 and 2026, according to Valuates Reports. The global music streaming market could also expand at a CAGR of 17.8% from 2020 to 2027, according to Grand View Research.

Therefore, forward-thinking investors should hold a few promising streaming stocks as that market expands. Here are three solid plays on that secular trend that are still worth buying in 2021: Roku Inc (NASDAQ: ROKU), Netflix Inc (NASDAQ: NFLX), and Spotify Technology (NYSE: SPOT).

1. Roku

Roku is the market leader in connected TV (CTV) devices. It’s expected to capture 46.9% of the U.S. CTV market this year, according to eMarketer, thanks to brisk sales of its stand-alone streaming devices and smart TVs. The firm expects Roku’s share to surpass 50% by 2022, putting it comfortably ahead of rivals like Amazon.com Inc‘s Fire TV.

Roku’s revenue rose 57% year-over-year in the first nine months of 2020. Sales of its lower-margin players, which generated about 29% of its revenue, grew 40%. Sales from its higher-margin software platform, which generated 71% of its revenue from ads and content distribution partnerships, surged 66%.

During the third quarter, Roku’s hardware shipments rose at their fastest rate in over seven years. Its number of active accounts rose 43% year-over-year to 46 million and its average revenue per user (ARPU) grew 20%, but its gross margin contracted as the pandemic throttled its sales of higher-margin ads. 

Roku is unprofitable, and its net loss widened year-over-year in the first nine months. Analysts don’t expect it to generate a profit anytime soon, but they expect its revenue to rise 54% this year and another 39% next year.

Roku remains a risky stock, but it isn’t terribly expensive at 19 times next year’s sales — especially when tech companies that are generating slower growth are trading at much higher price-to-sales ratios.

2. Netflix

Netflix is the world’s largest streaming video platform by paid subscribers. Its total number of paid subscribers grew 23% year-over-year to 195.15 million at the end of the third quarter, as its revenue and earnings rose 25% and 73%, respectively, in the first nine months of 2020. 

Netflix attributes some of that growth to stay-at-home trends throughout the pandemic, but it still expects its revenue and subscribers to both rise another 20% year-over-year in the fourth quarter.

Analysts expect Netflix’s revenue and earnings to rise 24% and 52%, respectively, for the full year. Next year, they expect its revenue and earnings to grow another 18% and 44%, respectively — which are robust growth rates for a stock that trades at 58 times forward earnings. 

Netflix could face tougher competition next year as rivals like Walt Disney Co and AT&T Inc ramp up their streaming efforts. However, Disney and AT&T’s streaming platforms aren’t profitable like Netflix yet, and Netflix’s strong lineup of original content could keep it ahead of the competition.

Moreover, Netflix’s latest price hikes (an extra $1 for standard plans and an additional $2 for premium plans in the U.S.) indicate it still enjoys plenty of pricing power against Disney, AT&T, and other challengers. Those strengths all make Netflix a great all-around play on the streaming market.

3. Spotify

Spotify is the world’s largest streaming music platform by paid listeners. Its monthly active users (MAUs) grew 29% year-over-year to 320 million last quarter. Its number of paid subscribers rose 27% to 144 million, while its number of ad-supported MAUs grew 31% to 185 million.

Spotify’s revenue rose 16% year-over-year in the first nine months of 2020, but high content costs and sluggish ad sales throughout the pandemic throttled its margins and resulted in a net loss.

For the fourth quarter, Spotify expects its revenue to rise 8%-19% year-over-year, its MAUs to increase 11%-27%, and for its gross margin to hold steady. Analysts expect its revenue to rise 41% this year and 22% next year, and for its net loss to narrow next year. 

Spotify’s stock more than doubled in 2020, but the stock still looks cheap at five times next year’s sales — likely due to concerns about its lack of profits and competition from tech giants like Apple Inc. 

However, Spotify’s stable growth in MAUs and paid listeners indicate there’s still plenty of room for multiple streaming music platforms to grow. Its gross margins should expand after the pandemic ends and advertisers ramp up their spending again, while new strategies — including its recent takeover of the podcast tech company Megaphone and its upcoming expansion into South Korea — could generate fresh growth. Therefore, Spotify should remain the top “pure play” on the streaming music market for the foreseeable future.

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

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Leo Sun owns shares of Amazon, Apple, AT&T, and Walt Disney. 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, Apple, Netflix, Roku, Spotify Technology, and Walt Disney and recommends the following options: short January 2021 $135 calls on Walt Disney, long January 2022 $1920 calls on Amazon, long January 2021 $60 calls on Walt Disney, and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon, Apple, Netflix, and Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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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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