Tag: Motley Fool

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a modest gain. At the time of writing, the benchmark index is up 0.2% to 6,993.1 points.

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

Atlantic Lithium Ltd (ASX: A11)

The Atlantic Lithium share price is up 33% to 94 cents. Investors have been buying this lithium explorer’s shares following the release of an update on drilling activities at its Ewoyaa Main deposit in Ghana. CEO Lennard Kolff commented: “The latest infill drilling results from within the current Resource at the Ewoyaa Main deposit have returned multiple high-grade pegmatite intervals over 1.5% Li2O and up to 95m long with the hole ending in mineralisation, providing further confidence in future Resource to Reserve conversion.”

Coronado Global Resources Inc (ASX: CRN)

The Coronado Global share price is up 9% to $2.10. This morning the team at Morgans retained its add rating on this coal miner’s shares with an improved price target of $2.40. The broker notes that Coronado Global delivered stronger than expected revenue and earnings during the last quarter. It was also pleased to see a special dividend declared.

Lake Resources N.L. (ASX: LKE)

The Lake Resources share price is up 5.5% to $1.12. The catalyst for this was the release of a positive update on the lithium developer’s demonstration plant at the Kachi project in Argentina. Lake revealed that it is now processing Kachi brines and has delivered an at-spec product in initial test work.

Rio Tinto Limited (ASX: RIO)

The Rio Tinto share price is up 2.5% to $92.79. This morning the mining giant revealed that it made a breakthrough with its quest to acquire the rest of Turquoise Hill. If successful, the company will increase its stake in the massive Oyu Tolgoi copper and gold project in Mongolia to 66%.

The post Why Atlantic Lithium, Coronado Global, Lake Resources, and Rio Tinto are charging higher appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most traded ASX 200 shares on Wednesday
• Top brokers name 3 ASX shares to buy today
• 3 ASX resources shares leaping over 15% today
• Lake Resources share price leaps 10% on ‘excellent early results’
• Why is the Rio Tinto share price pushing higher today?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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The AGL Energy Limited (ASX: AGL) share price is outperforming on Wednesday despite the company’s silence.

Its strong performance also comes despite more bad news for the company’s board as it heads towards its annual general meeting (AGM).

Three key proxy advisors have reportedly sided with major shareholder and billionaire Mike Cannon-Brookes ahead of a shareholder vote on the election of four potential directors.

Right now, the AGL share price is up 1.54% at $7.23. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has lifted 0.26% and the S&P/ASX 200 Utilities Index (ASX: XUJ) has jumped 0.33%.

Let’s take a closer look at the latest on what could amount to a major scuffle at AGL’s AGM.

AGL share price lifts amid more AGM drama

The AGL share price is out in front of the market today amid reports three proxy advisors have recommended the company’s shareholders vote against the AGL board’s recommendations.

The drama kicked off last month when the board advised shareholders to vote against electing three of the four potential directors nominated by Cannon-Brookes.

Going up against the Atlassian Corp (NASDAQ: TEAM) co-founder and co-CEO hasn’t gone well for the company in the past. Who could forget the successful campaign against the company’s split?

The AGL board recommends shareholders support the appointment of former Tesla Inc (NASDAQ: TSLA) director Mark Twidell. However, it recommends they vote against the election of Cannon-Brookes’ other nominations, Dr Kerry Schott, John Pollaers, and Christine Holman.

The billionaire slammed the move as “yet another poor decision” that “ignores the threats and opportunities facing AGL”.

And it appears key proxy advisors are on his side.

Institutional Shareholder Services recommends shareholders vote for the election of all four nominations, while Ownership Matters and CGI Glass Lewis recommend they vote for all except Pollaers, the Australian Financial Review reports.

The firms are said to advise around 30% of all outstanding AGL shares between them. Of course, Cannon-Brookes boasts an 11.28% stake in the company through investment vehicle Grok Ventures.  

No doubt all eyes will be on AGL, and its share price, when the company hosts its AGM on Tuesday, 15 November.

The post What’s going on with the AGL share price today? appeared first on The Motley Fool Australia.

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More reading

• Why did the AGL share price outperform the ASX 200 on Friday?
• Why AGL, Mirvac, PeopleIn, and SkyCity shares are charging higher
• Why the AGL share price can surge 35%: Morgans
• 2 much-maligned ASX shares cheap enough to buy now: experts
• Could chasing high yields mean missing out on potentially top-notch ASX dividend shares?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Atlassian and Tesla. 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 Scott Phillips.

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The A2 Milk Company Ltd (ASX: A2M) share price is up almost 2% in late afternoon trading on Wednesday.

Shares of the baby formula giant are currently at their intraday high of $5.30 a share, a 1.92% gain on yesterday’s closing price.

The company’s shares are defying a minor sell-off in the consumer staples sector on Wednesday, with the S&P/ASX 200 Consumer Staples Index (ASX: XSJ) currently down 0.73%.

Meanwhile, the broader market is almost flat, with the S&P/ASX 200 Index (ASX: XJO) up only 0.16%.

The gain comes amid news that A2 Milk is challenging one of its rivals over an intellectual property dispute, as reported by The Australian. And judging by its share price movement, investors seem to believe it will come out on top.

Let’s investigate the details of the lawsuit.

A2 Milk sues Care A2

A2 Milk has filed a claim in the Federal Court against its rival Care A2, seeking a “permanent injunction restraining the respondents from infringing the A2 Milk registered marks”, according to the report.

The action follows a cease and desist letter to Care A2 as well as Care A2’s countersuit denying any alleged trademark infringement.

The article also said that Care A2 milk’s parent company, Care Corporation, has warned of a fake prospectus circulating. It reportedly contains claims the company seeks to raise $49.5 million to float the company on the ASX and has a valuation of $544.5 million.

Inside the fake prospectus, there are also several unfavourable comparisons between A2 Milk’s products and Care’s. These reportedly include the claim that A2 Milk’s Platinum product “is not produced from grass-fed A2 cows and does not use fresh milk”, the article said.

A2 Milk has historically shown some resilience when it’s found itself in legal trouble. In May, A2 Milk’s shareholders launched a class action against the company for alleged misleading and deceptive conduct.

This could indicate that A2 Milk will maintain its footing despite the legal turmoils ahead.

A2 Milk share price snapshot

The A2 Milk share price is down around 3% year to date. Meanwhile, the S&P/ASX 200 Index is down more than 6% over the same period.

The company’s market capitalisation is around $3.9 billion.

The post A2 Milk share price climbs amid legal stoush appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most traded ASX 200 shares on Wednesday
• What’s boosting the Lynas share price on Wednesday?
• Why did the IAG share price just hit a new 52-week high?
• Why did the AMP share price just crack another new 52-week high?
• 3 ASX 200 shares hitting new heights today

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. 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 S&P/ASX 200 Index (ASX: XJO) is once again climbing during this Wednesday’s session in what is turning out to be a top week thus far for ASX shares. At the time of writing, the ASX 200 has gained a bouncy 0.14%, putting the index just below 6,990 points. That puts the ASX 200 up over 3% this week so far alone.

But let’s delve deeper into these gains today by taking a look at the ASX 200 shares that are presently at the top of the share market’s trading volume charts, according to investing.com.

The 3 most traded ASX 200 shares by volume this Wednesday

Medibank Private Ltd (ASX: MPL)

First up today is the ASX 200 private health insurer Medibank Private, with a notable 14.9 million shares traded thus far. There haven’t been any fresh developments out of the company itself today. However, Medibank has been going through a lot in recent weeks, thanks to a well-publicised cyberattack.

After its shares returned from a trading halt last month, the company was battered. However, investors seem to be in a forgiving mood today, giving Medibank a 1.6% gain to $2.90 a share. It could be this that has lured so many shares to a new home with this healthcare share today.

Pilbara Minerals Ltd (ASX: PLS)

ASX 200 lithium share Pilbara Minerals is next up today. This Wednesday has seen a hefty 17.7 million Pilbara shares bought and sold so far. There’s been no news out of this company today.

However, that hasn’t stopped the Pilbara share price from defying the broader markets and recording a depressing fall. Currently, Pilbara shares are down a nasty 3.4% at $5.13. It’s this steep drop that is probably causing the high volumes we are seeing.

Lake Resources NL (ASX: LKE)

Our final share this Wednesday is another ASX 200 lithium stock in Lake Resources. This session has had a sizeable 31.13 million Lake shares exchanged thus far. Despite sharing a common purpose, Lake shares are going the opposite way to those of Pilbara today.

At present, Lake Resources is up a pleasing 5.66% at $1.12 per share. As my Fool colleague Brooke covered earlier, this appears to be a result of the company’s promising update regarding its Kachi Project.

The post Here are the 3 most traded ASX 200 shares on Wednesday appeared first on The Motley Fool Australia.

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More reading

• Why Atlantic Lithium, Coronado Global, Lake Resources, and Rio Tinto are charging higher
• A2 Milk share price climbs amid legal stoush
• Why Amcor, Australian Strategic Materials, Goodman, and Pilbara Minerals are dropping
• What’s boosting the Lynas share price on Wednesday?
• Could the Medibank share price be on the road to recovery?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) is fighting hard to keep its winning streak alive. In late trade, the benchmark index is up 0.2% to 6,989.8 points.

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

Amcor PLC (ASX: AMC)

The Amcor share price is down 4% to $17.37. This morning this packaging company released its quarterly update and revealed a 9% increase in revenue to US$3,712 million and a 15% jump in net income to US$232 million. Investors still sold down Amcor’s shares despite its revenue being US$200 million ahead of estimates and its earnings being in-line.

Australian Strategic Materials (Holdings) Ltd (ASX: ASM)

The Australian Strategic Materials share price is down 9% to $1.80. Investors have been selling this integrated materials company’s shares after it announced firm commitments for a $30 million institutional placement. These funds are being raised at a 12.4% discount of $1.73 per new share. The proceeds will be used to accelerate development of its Korean Metals Plant and Dubbo Project.

Goodman Group (ASX: GMG)

The Goodman share price is down 3% to $17.11. This morning Goodman released its first quarter update and revealed that FY 2023 has started positively. And while the company has reaffirmed its earnings growth guidance of 11%, some investors may have been expecting an upgrade. Goodman famously under-promises and over-delivers.

Pilbara Minerals Ltd (ASX: PLS)

The Pilbara Minerals share price is down 3.5% to $5.12. This is despite there being no news out of the lithium miner today. However, a number of the lithium shares are falling today. This may have been driven by profit taking after some strong gains recently.

The post Why Amcor, Australian Strategic Materials, Goodman, and Pilbara Minerals are dropping appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most traded ASX 200 shares on Wednesday
• Goodman share price drops 3% on Q1 update
• Which ASX 200 mining shares managed to dig up gains in October?
• These were the best ASX lithium shares to buy in October
• Here are the 3 most traded ASX 200 shares on Tuesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Amcor Limited. 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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Novonix Ltd (ASX: NVX) shares are under pressure on Wednesday.

In afternoon trade, the battery materials and technology company’s shares are down 2% to $2.70.

Why is the Novonix share price falling?

The Novonix share price appears to be struggling with general weakness in the battery materials space today.

This has seen the likes of Core Lithium Ltd (ASX: CXO) and Pilbara Minerals Ltd (ASX: PLS) lose 3% of their value this afternoon.

In addition, recent selling by one of its largest shareholders and former director could be weighing on sentiment.

According to a ceasing to be a substantial holder notice, St Baker Energy sold 25 million shares for $68.125 million last week. That sale was made a few days after the massive jump in the Novonix share price after the company was selected to for a US$150 million grant from the United States Department of Energy.

Following the sale, St Baker Energy is no longer classed as a substantial shareholder because its holding has dropped beneath the 5% mark. This is a big reduction from its 18.1% stake back in May.

Should investors be concerned about this sale?

Shareholders may have a right to be concerned with this sale as the owner of St Baker Energy, former director Trevor St Baker AO, spoke glowingly about the company’s future and his investment after retiring from the board in May. At the time he said:

I am really very pleased to have been able to contribute as a Director of NOVONIX in its exciting establishment as such an important player in the decarbonisation transformation of global energy and transport businesses.

I am also excited about the Company’s continuing growth as a significant battery material and energy storage solution provider as these sectors grow to serve these transformations, and my resignation should not reflect any diminution of interest by SBEIF or of the St Baker family in NOVONIX as a serious growth stock in our investment portfolios.

No reason was given for this latest sale, leaving shareholders to figure out what has changed since then.

Should you invest?

The team at Morgans sees value in the Novonix share price. Though, they warn that it would be a high risk investment.

The broker currently has a speculative buy rating and $3.11 price target on its shares. This implies almost 15% upside for Novonix shares from current levels.

The post A major shareholder sold off most of its Novonix shares last week. What’s happening? appeared first on The Motley Fool Australia.

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More reading

• Novonix shares go for a swim after burning through $25 million
• Why $6.5b Argo Investments is backing these ASX 200 lithium shares
• Down 65% in 2022, chair says Novonix ‘share price will respond appropriately’
• Here are the top 10 ASX 200 shares today
• Why Life360, Novonix, Pilbara Minerals, and Vulcan shares are storming higher today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 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.

Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) are having a brutal year on the market thanks to weak personal computer (PC) sales that have hurt the demand for graphics cards and processors. Both stocks have lost over 50% of their values so far in 2022, but an emerging opportunity could help them recover from the current slump.

While the demand for traditional gaming hardware and software may remain muted in the near term because of inflation, there’s one niche within this market that’s growing at a terrific pace — cloud gaming. The cloud gaming market reportedly generated just $1.7 billion in revenue last year, but it could generate over $40 billion in revenue by 2029, growing at an average of more than 43% per year over the forecast period.

This rapid rise in the adoption of cloud gaming isn’t surprising, as it provides a cheaper alternative for gamers to play their favorite titles. In cloud gaming, games are run on remote servers and are delivered to smartphones, tablets, televisions, or PCs with a high-speed internet connection. Users simply need to buy a subscription to a cloud gaming service such as Nvidia’s GeForce Now and have a fast internet connection to start playing.

As a result, gamers don’t need to invest in expensive gaming hardware, nor do they need to spend money on buying titles. The cost-effective nature of cloud gaming is the reason why this market is expected to take off big time in the future. Nvidia and AMD are two companies that could make the most of this opportunity, but which one is the better bet? Let’s find out.

Nvidia is already a major player in cloud gaming

Nvidia’s GeForce Now is the most popular cloud gaming service, with more than 20 million subscribers, as reported by the company on its August earnings conference call. That’s a big jump over February 2020, when the service was made generally available to the public with a 1-million-strong subscriber base.

The rapid growth of Nvidia’s GeForce Now cloud gaming service can be attributed to the company’s efforts of aggressively expanding its library, as well as making the service available in more regions across the globe. The service boasts an extensive library of titles. It had more than 1,000 titles available for streaming in July last year, and the continuous expansion of its library means that gamers now have more choices.

Also, Nvidia has two paid subscription tiers for the service, priced at $9.99 a month and $19.99 a month, giving gamers access to games in high resolution and features such as ray tracing. The combination of a solid content library and affordable costs is the reason why Nvidia is the No. 1 player in the cloud gaming market.

Newzoo estimates that the cloud gaming market could have 31.7 million paying users by the end of 2022, indicating that Nvidia already conquered a sizable portion of the market. What’s more, the company generated an estimated $1 billion in revenue from this market in fiscal 2022, indicating that it already cornered a commanding portion of the revenue opportunity available in this space.

All this indicates that Nvidia is in a solid position to tap the $40 billion long-term revenue opportunity in cloud gaming. This could allow the chipmaker to inject life into its gaming business, which is currently in a state of decline thanks to the dependence on sales of hardware such as graphics cards. As such, don’t be surprised to see Nvidia’s gaming revenue take off substantially in the future as new catalysts, such as cloud gaming, gain critical mass and supercharge the company’s growth.

AMD is focusing on the hardware side, but that may not be enough

While AMD doesn’t have a cloud gaming service of its own like Nvidia, it does provide hardware to others for powering their cloud gaming initiatives. For instance, AMD was selected by Alphabet to power the Google Stadia cloud gaming service, providing the latter with data center GPUs (graphics processing units) as well as software development tools.

So, AMD plunged into the cloud gaming space before Nvidia formally made GeForce Now generally available to customers. Sadly, Alphabet is winding down the Stadia streaming service, indicating that Nvidia’s solid position in this market has left little space for even bigger rivals to flex their muscles.

Nvidia is relying on its own GPUs — such as the RTX 3080 — to power GeForce Now. Additionally, the company is successfully building a subscription service and a predictable stream of revenue using the same.

Of course, the cloud gaming market is in its nascent stages right now and is yet to gain critical mass, so there is time for AMD to take a chunk out of this emerging video gaming niche. But Nvidia looks like the better bet for investors who are looking to take advantage of this space. 

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

The post 2 beaten-down Nasdaq stocks that could win from a $40 billion market appeared first on The Motley Fool Australia.

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• Why Microsoft stock is down 29% this year
• Tech sell-off: These Nasdaq stocks could drop further, but one looks like a screaming buy
• 3 of the top-growing stocks on Earth
• 3 high-growth US stocks that could be worth $1 trillion in 10 years – or sooner

Harsh Chauhan has no position in any of the stocks mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Alphabet (A shares), Alphabet (C shares), and Nvidia. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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The Medibank Private Ltd (ASX: MPL) share price is decidedly in the green today, up 2.63% to $2.93.

Medibank shares hit a new 52-week low of $2.76 last Friday as the fallout continued from its cyberattack.

The Medibank share price has lost 14% of its value since news of the cyberattack broke two weeks ago.

Is the Medibank share price on its way back up?

That’s a very hard call to make. Sure, the Medibank share price is up today. But this cyberattack story isn’t over. There is likely going to be more news to come and the share price will react each time.

As my Fool colleague James reported yesterday, Medibank has already put a number on the damage. Medibank estimates that its half-year earnings will be impacted by $25 million to $35 million pre-tax.

This doesn’t include potential remediation costs or regulatory and litigation costs. Nor the brand damage and potential customer churn.

According to the annual EFTM Mobile Phone Survey published on Friday, 10.32% of Optus customers have already switched to another provider following the company’s cyberattack.

A further 56% say they are considering changing providers. That’s one heck of a potential customer churn.

What do the experts think?

James reports that Citi has dropped its 12-month share price target for Medibank by 25% to $3.

Remarkably, that means there is potential upside for any ASX investor daring enough to buy a company in a PR crisis.

Citi said:

Key considerations from here will be the precise nature of the impact and the reaction of consumers to it, which is hard to gauge.

This could see the share price move in either direction, but the extent of the current uncertainty moves us to neutral, lowering our target price to $3.

The post Could the Medibank share price be on the road to recovery? appeared first on The Motley Fool Australia.

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More reading

• Why did the IAG share price just hit a new 52-week high?
• These were the worst-performing ASX 200 shares in October
• Could the Medibank share price be in for way more pain?
• 5 big ASX announcements making news this week
• Citi downgrades Medibank share price and slashes target by 25%

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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The Insurance Australia Group Ltd (ASX: IAG) share price marked a new 12-month high today, hitting $5.09 in late morning trade.

Shares of the general insurance giant have since settled at $5.05 each, up 1.31% on yesterday’s closing price at the time of writing.

IAG is outperforming the S&P/ASX 200 Financials Index (ASX: XFJ) which is currently just 0.14% higher.

Meanwhile, the broader market is also up, with the S&P/ASX 200 Index (ASX: XJO) gaining 0.4% so far today.

So why are IAG’s shares delivering such a cracker performance on Wednesday? Let’s investigate.

What’s going on with the IAG share price?

There’s no news from the company today to make sense of the surge in its share price.

But near the end of October, the company received some positive coverage which could have added conviction to the idea that it’s worth buying.

Watermark Fund Management principal Justin Braitling believes that general insurers such as IAG could be worth a look, thanks to the benefit of rising interest rates and the depressed valuations of companies in the industry.

Wilsons’ analysts also singled out IAG as being a quality pick for income investors due to its strong dividend yield, earnings quality, long-term growth outlook, and other factors.

Fellow insurer Medibank Private Ltd (ASX: MPL) is up today too. It’s made a 2.46% gain despite suffering a significant cyber attack that rocked its valuation towards the end of October.

IAG share price snapshot

The IAG share price is up 18.66% year to date. Meanwhile, the S&P/ASX 200 Index is down around 6% over the same period.

The company’s market capitalisation is around $12 billion.

The post Why did the IAG share price just hit a new 52-week high? appeared first on The Motley Fool Australia.

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Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Insurance Australia Group Limited. 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.

It’s becoming more evident that Amazon (NASDAQ: AMZN) is a tale of two businesses: e-commerce and cloud computing. And their performance couldn’t be more different either. Amazon Web Services (AWS) is crushing it, while e-commerce is struggling to turn a profit.

Is a company that is having mixed results worth owning? Let’s find out.

Strong revenue, weak earnings

The sales-growth headline number for Amazon’s third quarter was impressive: 15% year-over-year (YOY) revenue growth to $127.1 billion. However, the real issue was Amazon’s net income, which fell to $2.9 billion from $3.2 billion last year.

But as alluded to above, the headline numbers don’t tell the whole story.

Only when Amazon’s three primary segments are dissected can investors get the complete picture.

Segment	YOY Revenue Growth	Operating Margin
North American Sales	20%	(0.5%)
International Sales	(5%)	(8.9%)
AWS	27%	26.3%

Source: Amazon.

While the commerce side of the business struggled on the profitability front, it’s reassuring that North American sales are growing at such a healthy pace after only growing at 10% and 8% in the second quarter and first quarter, respectively.

Amazon is also well prepared for the holiday season with strong inventory levels. However, CFO Brian Olsavsky said in Amazon’s conference call: “[W]e’re realistic that there’s various factors weighing on people’s wallets, and we’re not quite sure how strong holiday spending will be versus last year.” Amazon is cautiously optimistic about Q4, which is probably the correct mindset with the general economic uncertainty.

Its advertising services are buried within Amazon’s commerce segments, which should have struggled in Q3 if you just looked at other advertising businesses like Alphabet or Meta Platforms. Instead, it grew 25% YOY to $9.5 billion. Additionally, third-party seller services had its best quarter over the past year, with revenue rising 18% YOY to $28.7 billion.

While we don’t know if these segments are profitable, their growth and revenue share are significant compared to Amazon’s online store, which posted 7% YOY growth to $53.5 billion.

Amazon is a master at developing new segments, and these two are ones to keep an eye on.

AWS excels again

Without AWS, Amazon would be unprofitable. It has also been a large part of Amazon’s growth recently, with Q3’s 27% growth the lowest it has experienced in many years. One reason for the slower growth is cost optimization, as customers look to streamline their spending to save money where possible.

However, AWS isn’t slowing its expansion, as Amazon’s capital expenditures have been about the same in 2022 as in 2021 but with $10 billion more spent on its AWS infrastructure. Investors will need to keep an eye on AWS in future quarters to ensure the growth stays in the mid-20% range, but the segment is performing well, and investors shouldn’t nitpick it too much.

While both segments had pretty good Q3s, the stock dropped about 7% after the report, primarily due to Amazon’s guidance.

In Q4, Amazon’s sales are expected to rise between 2% and 8%, with operating income between $0 and $4 billion. That’s a pretty wide range, and it will obviously be affected by how strong the consumer is during the holiday period.

Still, the stock is attractively priced. With $502.2 billion in sales over the past 12 months and a market cap of $1.05 trillion, Amazon’s stock trades at 2.09 times sales. To find a time when Amazon was this cheap, you have to backtrack all the way to 2015.

There’s a lot of fear baked into Amazon’s stock with how the economy is doing, which is a fair argument. However, long-term investors should know that a recession won’t last forever. Once the economy recovers, Amazon will likely experience pent-up demand, affecting both its commerce and cloud-computing segments.

Investors may experience some more stock-price drops in the short run. However, Amazon’s long-term prospects still look bright with a booming AWS business, strong advertisement growth, and a third-party seller service that is starting to challenge Amazon’s own commerce store.

I’m a buyer of Amazon’s stock, but I’m willing to hold the stock for five years to see market-beating returns. 

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

The post Is Amazon stock a buy now? appeared first on The Motley Fool Australia.

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Keithen Drury has positions in Alphabet (C shares) and Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, 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 Meta Platforms CEO Mark Zuckerberg, 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Meta Platforms, Inc. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Meta Platforms, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.    

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

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