This article first appeared on our U.S. website. All amounts are in U.S. dollars.

Netflix (NASDAQ: NFLX) has officially ended its bid to acquire the studio and streaming operations of Warner Bros. Discovery (NASDAQ: WBD). The target company had a week to think about a raised bid from Paramount Skydance (NASDAQ: PSKY), and came back leaning toward a Paramount deal in half that time.

Pending regulatory approval, it’s a done deal. Netflix shares opened Friday’s trading 11.6% higher on the news. Warner Bros. stock fell by roughly 2% and Paramount soared more than 18% higher. Combined, the three stocks added approximately $40 billion of market value today.

Netflix dodges a $40 billion debt bomb

Was this the best outcome for Netflix? Maybe not from an industry domination perspective, but it certainly puts Netflix in a less stressful financial situation.

Netflix had $9 billion of cash and $13.5 billion in long-term debt at the end of 2025. To finance its all-cash buyout bid, the company would have needed more than $40 billion of additional debt. Instead, it walks away with a $2.8 billion deal breakup fee, to be paid by Paramount.

As exciting as a mega-studio combining Warner Bros. and Netflix might have been, a clean balance sheet (with an extra $2.8 billion) could be the ideal outcome for Netflix and its shareholders.

What Netflix will do with all that cash

And the cash is going to work right away. Netflix’s management promised to invest $20 billion in content production this year, up from a prior 2026 production commitment of $11.5 billion. The stock buyback program is also back in action, having been paused to conserve cash for the Warner Bros. deal.

The resumed buybacks strike me as a smartly opportunistic move. Netflix’s stock posted a drawdown of 43% from last summer’s peak, mostly due to concerns about the expensive buyout battle. Canceling shares at a deep discount should be a shareholder-friendly idea and a good use of spare cash.

Netflix stock looks like a deep-discount deal at this point, even after Friday’s jump.

The post Netflix Lost. Netflix Won. Film at 11. appeared first on The Motley Fool Canada.

More reading

• This 10% Yield Looks Tempting — but It Could Be a Dividend Trap 
• 1 High-Yield Dividend Stock You Can Buy and Hold for a Decade of Income
• How to Convert $25,000 in TFSA Savings Into Reliable Cash Flow
• The Stocks I’d Most Want to Own If I Had $1,000 to Put to Work Today
• Manulife vs. Sun Life: 1 Canadian Insurer I’d Buy and Hold

Anders Bylund has positions in Netflix. The Motley Fool recommends Netflix. The Motley Fool has a disclosure policy.

Many cloud computing specialists saw their share prices tank in September, according to data from S&P Global Market Intelligence. E-commerce platform operator Shopify (NYSE: SHOP) fell 19.1%, team communications specialist Slack Technologies (NYSE: WORK) dropped 17.1%, and content delivery expert Fastly (NYSE: FSLY) took a 24.1% hit.

So what

These companies have a few things in common:

• They all run services tailored to business users rather than consumers, focusing mostly on the needs of small to medium-size businesses.
• Their services run online, managed by the service provider rather than the end user. This form of cloud computing is known as software as a service.
• Their revenues are skyrocketing. Fastly’s sales rose 34% year over year in the recently reported second quarter. Slack’s revenue surged 58% in the same quarter. Shopify’s second-quarter sales rose 48%.
• The stocks all trade at lofty price-to-sales ratios ranging from Fastly’s 14 times trailing revenue to Shopify at 27 times. I can’t refer to P/E ratios here because the companies are reporting negative earnings so far. Their sky-high valuations rest on rampant growth trends rather than solid profits.
• Crucially, September was a fairly quiet month for all of these companies — at least in terms of bad news. Slack did report earnings, crushing Wall Street’s expectations across the board. Shopify’s biggest news was a cleanly executed secondary stock offering. For Fastly, I found no market-moving news at all in September.

Now what

High-flying growth stocks often act exactly like this, making big moves for no apparent reason. In this case, investors worried about the ongoing trade struggles between Washington and Beijing, inspiring a few market makers to move some assets out of these growth stocks and into something safer.

There’s nothing wrong with that, just a common wrinkle in the fabric of Wall Street. On the upside, falling share prices only hurt if you’re locking in the low prices by selling in a panic. More-adventurous investors may see these discounts as an opportunity to start or expand their holdings in Shopify, Fastly, and Slack. Many analysts issued rosy reports on these stocks in September, echoing exactly that core idea.

The post Many Cloud Computing Stocks Look Affordable After Crashing in September appeared first on The Motley Fool Canada.

More reading

• This 10% Yield Looks Tempting — but It Could Be a Dividend Trap 
• 1 High-Yield Dividend Stock You Can Buy and Hold for a Decade of Income
• How to Convert $25,000 in TFSA Savings Into Reliable Cash Flow
• The Stocks I’d Most Want to Own If I Had $1,000 to Put to Work Today
• Manulife vs. Sun Life: 1 Canadian Insurer I’d Buy and Hold

Shares of in-flight broadband service provider Gogo (NASDAQ: GOGO) jumped 50% higher in September, according to data from S&P Global Market Intelligence. The company drove this surge with a one-two punch of meaty press releases. At this point, Gogo’s stock has gained 80% year to date.

So what

First, Gogo’s shares rose 11% in a single day on the announcement of 1,500 completed system installations. That’s still a very small slice of a global market with roughly 17,000 airliners aloft at any given time. But it’s also a headline-ready round number that shows steady progress from less than 1,300 installations in January.

The next week, Gogo enjoyed another buzz thanks to public comments by an executive from Delta Air Lines (NYSE: DAL). Share prices surged another 10% on the revelation that Delta wants to set itself apart from the competition by offering free Wi-Fi on every flight.

Now what

Gogo is already a supplier to Delta, but it never hurts to see a major client preparing to use your products and services as a consumer-facing selling point. Investors should keep an eye on Gogo’s backlog, which stood at 850 unfilled orders in early September. The combination of filled and unfilled orders has held relatively steady so far in 2019, and it would be good for the company’s future revenue flows to see the backlog take another jump. The Delta deal should push Gogo in that direction as the airline’s high-level ambitions turn into bankable order sheets and invoices.

The post Why Gogo’s Shares Surged 50% in September appeared first on The Motley Fool Canada.

More reading

• This 10% Yield Looks Tempting — but It Could Be a Dividend Trap 
• 1 High-Yield Dividend Stock You Can Buy and Hold for a Decade of Income
• How to Convert $25,000 in TFSA Savings Into Reliable Cash Flow
• The Stocks I’d Most Want to Own If I Had $1,000 to Put to Work Today
• Manulife vs. Sun Life: 1 Canadian Insurer I’d Buy and Hold

Shares of Roku (NASDAQ: ROKU) fell 33% in September 2019, according to data from S&P Global Market Intelligence. The maker of streaming media devices and related services took several ice baths last month

So what

Roku started last month in high spirits, setting fresh all-time highs on the back of positive analyst reports. That changed in a hurry when Apple announced a video streaming service with a miserly subscription fee of $5 per month. Roku’s stock took an 18% haircut in two days.

The market hit rewind to play that story again a week later. Roku shares fell as much as 14% when Comcast introduced another streaming service that will provide free set-top boxes to its subscribers.

And we’re not done yet. Two days later, analyst firm Pivotal Research Group said that Roku’s stock was wildly overvalued and should be trading closer to $60 than $130 per share. That analyst note, tied to a firm “sell” rating, caused the stock to close 19% lower.

So Roku started the month on an uptrend, only to crash amid concerns about fresh competition and unsustainable stock prices. The closing price on Sept. 30 landed a staggering 42% below the all-time highs that were set on the morning of the 9th.

Now what

As fellow Fool Daniel Sparks noted when the Pivotal analyst note made the rounds, Roku doesn’t really compete against streaming video services. Instead, it provides a hardware and software platform on which those services can shine. Apple’s new streaming platform, for example, will be compatible with Roku devices from day one.

“More affordable pricing for Apple TV+ will lead to more subscribers — and ultimately more engagement — on the Roku platform,” Dan wrote. I couldn’t have said it better myself. Bearish analysts and nervous investors are misreading how the evolving streaming video industry will affect Roku’s business prospects.

Yes, the stock was expensive in early September and arguably remains costly even after the drastic correction that followed. But sometimes you get what you pay for. This might actually be a great time to pick up some Roku shares for the long run.

The post Here’s How Roku Shares Dropped 33% Last Month appeared first on The Motley Fool Canada.

More reading

• This 10% Yield Looks Tempting — but It Could Be a Dividend Trap 
• 1 High-Yield Dividend Stock You Can Buy and Hold for a Decade of Income
• How to Convert $25,000 in TFSA Savings Into Reliable Cash Flow
• The Stocks I’d Most Want to Own If I Had $1,000 to Put to Work Today
• Manulife vs. Sun Life: 1 Canadian Insurer I’d Buy and Hold

Shares of MongoDB (NASDAQ: MDB) fell 20.9% in September 2019, according to data from S&P Global Market Intelligence. The database software developer’s slide started with a merely solid earnings report that failed to excite investors.

So what

MongoDB saw second-quarter sales rising 67% year over year, landing at $99.4 million. On the bottom line, net losses were reduced from $0.34 to $0.26 per diluted share. Your average Wall Street analyst would have settled for a net loss of $0.28 per share on revenues in the neighborhood of $91.7 million.

But the company’s third-quarter earnings guidance was only in line with the analyst views at the time despite a slightly more optimistic revenue prognosis. For high-octane growth stocks like MongoDB, that’s not always enough to preserve the stock’s seat in Wall Street’s nosebleed section. The stock plunged 17% over the next three days.

Now what

Several analysts followed up on MongoDB’s results with rosy reports on their own, often raising their price targets on the stock to at least $180 per share. Barclays analyst Raimo Lenschow expected these results to trigger a short squeeze and drive the stock much higher at the drop of a hat.

That didn’t happen. At this point, MongoDB’s stock has nearly doubled over the past 52 weeks despite a 16% decline in the past three months. You can call it a discount if you like, though it’s always hard to call MongoDB a value stock when both earnings and free cash flows are negative.

That’s life in the fast lane — MongoDB’s $7.4 billion market cap is built on investor expectations of continued hypergrowth for the foreseeable future.

The post Why MongoDB Shares Fell 21% Last Month appeared first on The Motley Fool Canada.

More reading

• This 10% Yield Looks Tempting — but It Could Be a Dividend Trap 
• 1 High-Yield Dividend Stock You Can Buy and Hold for a Decade of Income
• How to Convert $25,000 in TFSA Savings Into Reliable Cash Flow
• The Stocks I’d Most Want to Own If I Had $1,000 to Put to Work Today
• Manulife vs. Sun Life: 1 Canadian Insurer I’d Buy and Hold

But volatile penny stocks are usually found in Wall Street’s bargain bin for a reason. They could be unproven upstarts, still looking for a first big break. Some are fallen giants, struggling to adapt to ever-changing market conditions. Either way, penny stocks often stoke dreams of big returns only to drop all the way to zero in the end.

Experienced investors will prefer a more substantial company over penny stocks, 999 times out of 1,000. On that note, here are three higher-priced stocks that look so tempting right now that I actually bought some of each last week.

The not-really-struggling e-commerce giant

You can’t get much further away from penny stock territory than e-commerce giant Amazon.com (NASDAQ: AMZN). At $853 billion, Amazon’s market cap stands among the three largest on the stock market today. Moreover, the company hasn’t executed a single stock split in this millennium, and has risen 2,800% since the last split in 1999. Explosive share price growth plus that aversion to stock splits equal a current stock price of $1,737 per share — one of the five highest per-share prices available.

Amazon’s massive long-term gains include a sharp lull in recent months. The stock has traded largely sideways over the last year and a half, posting a negative 11% return in the last 52 weeks. Unless something is very wrong with Amazon’s business, this would be a great time to pick up some shares.

I understand why Amazon’s stock is sputtering at the moment. Investors worry about the ongoing trade war between China and America, which boosts nearly every retailer’s operating costs. But that’s a short-term downside to a generally thriving business model. Most of Amazon’s operating income stems from cloud computing services rather than e-commerce sales nowadays. The company is also becoming a logistics powerhouse, handling more and more of its enormous shipping volumes through in-house services. And when that Chinese-American trade tension lifts, Amazon will enjoy lower costs amid a spike in order volumes.

I’ve seen my existing Amazon shares more than double in value since 2017, and I expect big long-term returns from the shares I added last week. Amazon was never a penny stock or even a small-cap ticker, but the company is still staring down a high-growth runway typically associated with hungry little start-ups.

That’s a no-brainer buy right now.

The beaten-down innovator

Next up, I added a few shares to my stake in Tesla (NASDAQ: TSLA). The electric-car company isn’t quite as massive as Amazon but still carries a very substantial $$41.5 billion market cap and a $238 price per share.

Just like Amazon, Tesla’s rampant growth has hit the brakes in recent months. The stock has dropped 22% in 52 weeks and trades 37% below its yearly highs. Here, investors are worried about vehicle deliveries below analyst forecasts. That nitpicky concern ignores Tesla’s huge production and delivery growth. Skyrocketing revenue growth meets sinking capital expenses, leading up to $1.4 billion in trailing free cash flows. For those keeping score at home, the company hasn’t reported positive free cash flows at any point in its publicly traded history.

So, Tesla’s business is doing just fine, despite competitive pressure from a rising range of electric vehicle rivals. In the very long run, that’s not even what Tesla wants to be — we’re actually looking at a future energy giant in the making, built around a combination of green energy generation and cutting-edge battery technologies.

I think Tesla is among the most misunderstood companies on the planet these days. That’s why I’m downright happy to invest in this stock right now, even if many investors are running in the opposite direction.

A small but strong internet service specialist

Finally, it was time to dip a toe into Tucows (NASDAQ: TCX) — a company I have been following closely for years but never got around to adding to my portfolio.

This is a smaller company but still far from a penny stock. The Canada-based provider of various internet services trades at $51 per share today, yielding a market cap of $558 million.

The foundation of Tucows’ business has been domain name registration for many years. Thanks to a series of client portfolio buyouts, the company now boasts the second-largest account catalog in the domain name industry with 29 million domains under management. Now, that’s no hypergrowth business but domain name deals do provide a stable and substantial cash generation platform from which Tucows can launch into more exciting ideas.

At this time, Tucows is leaning into the internet service provider market through two different operations under the Ting brand. Ting Mobile is a full-service cellphone network where Tucows resells access to T-Mobile services at a lower cost and with Ting’s high-quality customer service. The network provider will shift to Verizon starting with new subscribers in early 2020, but the core idea remains the same.

Moreover, Ting Internet is a fiber-optic broadband service that offers gigabit service at a reasonable price in a handful of small, handpicked markets. Currently available in six small towns such as Charlottesville (Virginia) and Sandpoint (Idaho), Tucows is opening three more Ting Internet markets soon and planning to take the concept further over the years.

Ting Internet expanded its customer list by 54% in the second quarter of 2019, compared to the year-ago period. This is the high-growth operation that should deliver strong returns for Tucows owners in the long run. And the company is built on a risk-mitigating foundation of slower-growth services that most penny stocks just can’t match.

The post Don’t Waste Your Money on Penny Stocks: These 3 Stocks Are Better Buys appeared first on The Motley Fool Canada.

More reading

• Billionaires Are Dropping Tesla Stock and Buying This TSX Stock in Bulk

Shares of Universal Display (NASDAQ: OLED) fell 18.3% in September, according to data from S&P Global Market Intelligence. In keeping with the display technology researcher’s recent history, the stock made a big move in connection with news from smartphone giant Apple (NASDAQ: AAPL).

So what

Before Apple introduced the 2019 lineup of new iPhones, some investors had been speculating that every model would come with an organic light-emitting diode (OLED) screen. That would be good news for Universal Display, which collects royalties based on the screen size of such displays reaching consumers. But the OLED technology remained limited to the higher-end models, just like last year, leaving Universal Display’s Apple business unchanged. The stock closed 9.8% lower that day.

Now what

Other factors also weighed on Universal Display on Sept. 10, such as the CEO having sold a significant batch of shares and the tech sector having a bad day as a whole. But Apple has a tendency to move Universal Display’s share price at the mere suggestion of OLED-related developments in the iPhone or iPad lines. In this case, the mere lack of OLED-centric iPhone news was enough to put pressure on the OLED expert’s stock.

Long-term investors are better off watching Universal Display’s progress in the big-screen TV market and the upcoming push into OLED lighting fixtures. Those opportunities will eventually dwarf the smartphone segment’s impact on this company’s top and bottom lines. For that reason, big share-price cuts based on smartphone news — like September’s plunge — should be treated as a wide-open buy-in window.

The post Why Universal Display Shares Dropped 18% Last Month appeared first on The Motley Fool Canada.

More reading

• This 10% Yield Looks Tempting — but It Could Be a Dividend Trap 
• 1 High-Yield Dividend Stock You Can Buy and Hold for a Decade of Income
• How to Convert $25,000 in TFSA Savings Into Reliable Cash Flow
• The Stocks I’d Most Want to Own If I Had $1,000 to Put to Work Today
• Manulife vs. Sun Life: 1 Canadian Insurer I’d Buy and Hold

Shares of cloud-based communications specialists had a tough month in September. According to data from S&P Global Market Intelligence, RingCentral ‘s (NYSE: RNG) shares fell 11% while 8×8 (NYSE: EGHT) took a 14.5% haircut and Vonage (NYSE: VG) saw a 14.8% drop. All of these drops were tied to sector peer Twilio (NYSE: TWLO), as that provider of platforms around which programmers can build custom a cloud-based communications systems took a 15.7% dip.

So what

Twilio’s pain, which was mirrored by the other cloud communications, hinged on a sharp drop on Monday, Sept. 9. The company didn’t do anything to deserve that sudden sell-off, other than trading at rich valuation multiples in the cloud computing sector. Many stocks meeting that description followed Twilio more than 10% lower that day, all on extraordinarily high trading volumes but no particularly scary news.

Nearly 12 million Twilio shares changed hands on Sept. 9, compared with an average daily trading volume of 4 million over the past three months. That’s in line with the heavy volume reported for most of the plunging cloud computing stocks on this ill-fated day. I’m tagging Vonage, 8×8, and RingCentral as victims of Twilio’s suffering because none of these tickers joined the high-volume trading trends of this single-day bloodbath. Moreover, Twilio’s big drop happened very quickly while the other industry stocks took a few days to follow suit — always on moderate trading volumes or less.

Now what

Even the cloud computing sell-off came with little warning and no solid reasons for the panic. I am still convinced that what we saw that day was a handful of very large shareholders moving away from the cloud computing industry and into safer industries where stocks trade at more reasonable valuations. All of the stocks mentioned range from mildly overvalued to nosebleed-inducing, as measured against traditional value metrics such as price to earnings, cash flows, or sales.

None of that changes the growth-based value other investors see in these tickers. Fellow Fool Nick Rossolillo, for example, used the big one-day drop in early September to pick up shares of several cloud computing stocks at a sudden discount — including a few Twilio stubs. That’s a good idea in my eyes.

You should also know that RingCentral has jumped 35% higher in early October thanks to a new partnership with office communications giant Avaya. The other cloud communications specialists did not follow suit and are still available at the lower prices that were introduced in September.

The post Why Shares of Several Cloud Communications Experts Crashed Last Month appeared first on The Motley Fool Canada.

More reading

• This 10% Yield Looks Tempting — but It Could Be a Dividend Trap 
• 1 High-Yield Dividend Stock You Can Buy and Hold for a Decade of Income
• How to Convert $25,000 in TFSA Savings Into Reliable Cash Flow
• The Stocks I’d Most Want to Own If I Had $1,000 to Put to Work Today
• Manulife vs. Sun Life: 1 Canadian Insurer I’d Buy and Hold

Sprint‘ s (NYSE: S) merger with fellow wireless telecom T-Mobile US (NASDAQ: TMUS), a year and a half in the making, is still up in the air. Buying Sprint shares today is a firm bet that the deal will be approved and consummated in its current form. Anything short of that would be downright bad news for Sprint shareholders.

You really don’t want to own Sprint in the long run

Let’s be clear: Sprint is probably dead meat if the T-Mobile merger falls apart.

This is clearly the weakest of the four major American wireless networks, more likely to lose subscribers than gain them in any given quarter. Dissatisfied with Sprint’s particular combination of service quality and plan prices, subscribers leave Sprint more often than they do from any of the other majors, forcing the company to rely on expensive promotions to keep their subscriber counts reasonably stable.

T-Mobile isn’t trying to buy a strong competitor with a large and high-quality customer roll. Adding Sprint’s 54 million subscribers to T-Mobile’s 83 million customer won’t hurt, of course, but this deal is really all about Sprint’s valuable collection of radio spectrum licenses. Cancel the merger and watch Sprint’s long slide into oblivion continue.

What’s at stake?

The merger deal calls for each Sprint share to be converted into 0.10256 T-Mobile stubs. Since T-Mobile is trading at roughly $78 per share today, that works out to a final deal-powered value of $8 per share.

But this ain’t no sure thing. Sprint’s stock is fetching just $6.11 per stub right now, some 24% below the promised buyout value.

On the upside, this discount gives you a chance to buy Sprint stock today and watch it rise in value if and when the merger takes effect — assuming, of course, that T-Mobile’s share prices hold steady.

On the other hand, this sharp discount serves notice that investors are worried about the regulatory outcome here. The Trump administration has long been sending mixed signals about its willingness to approve this deal. Recent moves have generally pointed in a positive direction, but you just never know what Trump or FCC Chairman Ajit Pai might say or do next. So, investors are taking a big risk here, weighing the promise of a 25% value boost against the far darker conclusion of owning a stand-alone Sprint on its own merits.

Here’s a better idea

I’m an investor, not a gambler. Therefore, I wouldn’t recommend owning Sprint shares today.

If you want to take advantage of a positive merger outcome, I would point you toward T-Mobile’s stock instead. That ticker would also see an impressive jump when the final John Hancock is placed on the merger documents. It’s also a far more solid long-term investment than Sprint if the deal is stopped at the goal line.

Comparable rewards, much less risk — what’s not to love? T-Mobile is a better investment than Sprint right now.

The post Is Sprint a Buy? appeared first on The Motley Fool Canada.

More reading

• This 10% Yield Looks Tempting — but It Could Be a Dividend Trap 
• 1 High-Yield Dividend Stock You Can Buy and Hold for a Decade of Income
• How to Convert $25,000 in TFSA Savings Into Reliable Cash Flow
• The Stocks I’d Most Want to Own If I Had $1,000 to Put to Work Today
• Manulife vs. Sun Life: 1 Canadian Insurer I’d Buy and Hold

Let’s talk about that.

What’s the big idea behind this company?

The proposed blockbuster merger with Qualcomm (NASDAQ: QCOM) was called off at the last minute, hamstrung by simmering trade tensions of the highest order. The reason Qualcomm wanted to invest $44 billion in this company remains unchanged.

NXP is the gold standard for automotive computing, leading that high-growth sector in several sub-categories. From traffic sensors and radar systems to self-driving controller packages and infotainment systems, NXP is the player to beat. Autonomous driving keeps moving deeper into the mainstream and even perfectly normal cars are growing their computer-controlled systems. This was the standards-setting position that Qualcomm wanted to acquire above all else.

Furthermore, NXP is firing on all cylinders at the moment. Operating margins are running at a multi-year high of 28%, carrying over to a 23% bottom-line profit margin. Inventories sit at a lean 5.4% of NXP’s total assets, the company is paying down its debt balances, and there’s even room for a modest dividend with a 1% yield in the current financial plan.

What’s not to love?

What about the valuation?

This stock might have been expensive after this year’s huge gains, but that’s not how things worked out at all.

NXP shares are currently trading at 16 times trailing earnings, 12 times forward estimates, and 10 times its free cash flows. Those valuation ratios range from bargain-bin discounts to modest middle-of-the-road readings. I can’t find a single metric that would indicate and overbought, overvalued market darling. This is actually one of the best bargains to be found among large semiconductor stocks today. For example, NXP is far more affordable than erstwhile suitor Qualcomm, which trades at 28 times trailing earnings and 19 times forward estimates.

NXP trades nearly 20% below Qualcomm’s proposed buyout price, and for no good reason.

Yep, that’s a buy

NXP gives you a vibrant company at the very heart of one of the most explosive growth industries on the market today, married to deeply discounted share prices. It’s a no-brainer buy today because this exciting market leader clearly deserves a richer valuation.

The post Is NXP Semiconductors a Buy? appeared first on The Motley Fool Canada.

More reading

• This 10% Yield Looks Tempting — but It Could Be a Dividend Trap 
• 1 High-Yield Dividend Stock You Can Buy and Hold for a Decade of Income
• How to Convert $25,000 in TFSA Savings Into Reliable Cash Flow
• The Stocks I’d Most Want to Own If I Had $1,000 to Put to Work Today
• Manulife vs. Sun Life: 1 Canadian Insurer I’d Buy and Hold