Day: 26 September 2021

To the surprise of some, the Regional Express Holdings Ltd (ASX: REX) share price is surging higher on Monday. This is despite the regional airline announcing further extensions to suspensions of services and staff stand-downs.

At the time of writing, shares in the domestic airline are fetching $1.47, up 5% for the day.

Further delays not hitting the Regional Express share price

Regardless of the company’s latest announcement, investors are bidding up the Regional Express share price today.

Certainly, the company is not alone in the optimistic exuberance on display during the session on Monday. Indeed, much of the ASX travel sector is buoyed with growth to kick off the new week.

It appears not even the company’s latest announcement can dampen investor sentiment. According to its release, Regional Express has been left with no other option but to extend its suspension of domestic services and reduction of regional services. As a result, staff stand-downs will also need to be extended.

This marks the company’s second such extension. Originally, the airline expected the measures to be in place until 12 September. However, due to lockdowns across Greater Sydney, on 1 September this was extended to 10 October 2021.

Unfortunately, the lingering of lockdowns across multiple states means the airline has now had to push these suspensions out until at least 31 October 2021. This date aligns with when Regional Express expects all of its customer-facing staff to be fully vaccinated against COVID-19.

Light at the end of the tunnel

In lieu of these setbacks, onlookers might be scratching their heads as to why the Regional Express share price is pushing higher today.

It seems positive reopening commentary from government officials has boosted travel shares. NSW Premier Gladys Berejiklian has released her plans to open up the state after achieving an 80% vaccination level.

NSW recorded 787 new locally acquired cases of #COVID19 in the 24 hours to 8pm last night. pic.twitter.com/8Qkdwzp9qA

— NSW Health (@NSWHealth) September 27, 2021

https://platform.twitter.com/widgets.js

The news has sent numerous ASX-listed travel shares flying higher at the start of the week. These include Flight Centre Travel Group Ltd (ASX: FLT), Qantas Airways Ltd (ASX: QAN), and Corporate Travel Management Ltd (ASX: CTD)

The post Regional Express (ASX:REX) share price takes flight despite extended stand-downs appeared first on The Motley Fool Australia.

More reading

• Regional Express (ASX:REX) extends suspension of services and stand downs
• Regional Express (ASX:REX) share price up on 33% net loss after tax improvement

Motley Fool contributor Mitchell Lawler 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 owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3obpJbq

The Wesfarmers Ltd (ASX: WES) share price is wobbling today amid news a rival bid has been placed for Australian Pharmaceutical Industries Ltd (ASX: API).

The fresh takeover offer comes only weeks after Wesfarmers upped its bid for 100% of API’s shares to $1.55 of cash per share, valuing the company at around $764 million.

This morning, Sigma Healthcare Ltd (ASX: SIG) posted a mostly-scrip bid for 100% of API shares. This offer has an implied value of $1.57 per share – indicating Sigma values API at approximately $773 million.

The Wesfarmers share price has spent most of the morning in the red after the news, but it has since regained ground. At the time of writing, the company’s shares have gained 0.16% to trade at $57.45 apiece.

Let’s take a closer look at the bidding war that’s erupted over the operator of Priceline.

Bidding war for API begins

The Wesfarmers share price has had a turbulent start to the week amid the emergence of a new competitor for API.

Wesfarmers and Sigma are now simultaneously undergoing due diligence to win the pharmaceutical company.

Sigma has put a higher bid to API’s board, albeit a mostly scrip one. Sigma’s proposal would see API’s shareholders walking away with 35 cents of cash and 2.05 Sigma shares per API share they hold at the time of the demerger.

As the Sigma share price finished Friday’s session trading at 59.5 cents, the implied value of Sigma’s merger offer is $1.57 per share.

Additionally, Sigma has found at least $45 million worth of annual synergies that could be realised if it merged with API.

At this stage, API’s board has determined that Sigma’s proposal is superior to Wesfarmers’ $1.55 per share takeover offer.

What’s on the table from Wesfarmers?

Wesfarmers’ bid of approximately $773 million was the retail giant’s second for API. API turned down Wesfarmers’ previous offer of $1.38 per share in July.

The Wesfarmers share price fell 0.2% after that knockback but gained 0.5% on the back of its most recent bid.

Further, Wesfarmers previously secured the vote of API’s major shareholder, Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which holds 19.3% of API’s stock.

Now, Wesfarmers has a head start on due diligence for API. Its due diligence period expires on 16 October.

Wesfarmers share price snapshot

Those interested in the Wesfarmers share price will likely be watching the company closely in the coming weeks.

Shares in the company have gained 11% so far this year and are trading 26% higher than this time last year.

The post Wesfarmers (ASX:WES) share price wobbles amid rival bid for API appeared first on The Motley Fool Australia.

More reading

• Why AVZ, Flight Centre, Fortescue, & Sigma shares are storming higher
• Woolworths (ASX:WOW) and Coles (ASX:COL) could face a margin shock
• ASX 200 (ASX:XJO) midday update: Fortescue jumps, Wesfarmers dealt takeover blow
• API (ASX:API) share price heats up as bidding war begins
• What is the outlook for the Wesfarmers (ASX:WES) share price

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

from The Motley Fool Australia https://ift.tt/2WdqogY

The Andromeda Metals Ltd (ASX: ADN) share price is up 1.38% in afternoon trade on Monday to 14.7 cents.

This follows the company releasing a key update on its Great White kaolin deposit in South Australia.

Here’s what we know.

What did Andromeda announce?

Andromeda advised that a bulk sample collection program has commenced at its Great White deposit.

The deposit contains kaolin, a rock from which the clay-type mineral kaolinite is derived. Kaolinite has been used for centuries as the main ingredient in porcelain.

Large samples will be extracted from the “high-purity” area to “provide material for the natural nanotech’s prototype carbon and conversion pilot plant”.

The company’s update also notes that Andromeda’s Streaky Bay kaolin refining plant has been upgraded and “arranged to replicated the proposed Great White wet processing plant”.

A large amount of Andromeda’s “ultrabright, high purity Great White PRM (kaolin) product of over 90% ISO brightness” has already been produced at Streaky Bay, the company says.

Aside from this, two other revenue streams will be added to progress commercialisation of Andromeda’s product.

Firstly, high-grade halloysite-kaolin will be produced and used for the approval testing market for cosmetics labels.

“Tonne amounts” of the company’s Halloysite Rheology Modifier (HRM) concrete additive will also be extracted to build sales. HRM technology improves the handling and behaviour of concrete.

Andromeda has already sent a large amount of regional calcrete for testing to see how it performs in upgrading local roads and mining preparations.

It seems investors are welcoming the news, pushing the Andromeda share price higher on the day.

Andromeda Metals share price snapshot

The Andromeda share price has been swimming in a sea of red these past 12 months, posting a loss of 8%.

Indeed, the company’s shares are 48% in the red this year to date and have slipped a further 10% in the last month alone.

At the time of writing, Andromeda Metals has a market capitalisation of $357 million.

The post The Andromeda (ASX:ADN) share price rises on bulk sample update appeared first on The Motley Fool Australia.

More reading

• Why AVZ, Flight Centre, Fortescue, & Sigma shares are storming higher
• Invest with Buffett? 3 ways to buy Berkshire Hathaway on the ASX
• Which ASX 300 shares are leading the way on Monday?
• Fund manager sees multibagger potential in Redbubble (ASX:RBL) share price
• Fortescue (ASX:FMG) share price rallies 5% as iron ore climbs

The author Zach Bristow has no positions 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 Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3kIH4X0

The S&P/ASX 200 Index (ASX: XJO) has started the week on a positive note. In afternoon trade, the benchmark index is up 0.75% to 7,398.5 points.

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

AVZ Minerals Ltd (ASX: AVZ)

The AVZ share price has jumped 11.5% to 35.7 cents. This morning the lithium developer announced a transaction implementation agreement with Suzhou CATH Energy Technologies (CATH). The agreement will see CATH pay US$240 million in cash for a 24% equity interest in a multi-faceted joint venture to develop the Manono Lithium and Tin Project. CATH will also contribute its pro rata portion of funding for the development of the project.

Flight Centre Travel Group Ltd (ASX: FLT)

The Flight Centre share price is up 7% to $21.22. Investors have been buying Flight Centre and other travel shares today. This appears to have been driven by a positive reaction to New South Wales’ roadmap out of lockdown. These plans could be a boost to travel markets.

Fortescue Metals Group Limited (ASX: FMG)

The Fortescue share price has risen 4% to $15.98. The catalyst for this was a rebound in the iron ore price on Friday night. According to Metal Bulletin, the spot benchmark iron ore price rose 2.4% to US$111.33 a tonne. Investors appear optimistic that this could mean the worst is over for the iron ore price.

Sigma Healthcare Ltd (ASX: SIG)

The Sigma share price is up 3% to 61 cents. Investors have been buying Sigma’s shares after it tabled a takeover offer for rival pharmacy chain operator and distributor Australian Pharmaceutical Industries Ltd (ASX: API). Sigma has offered $1.57 per share in cash and shares. This compares to a $1.55 per share offer from Wesfarmers Ltd (ASX: WES). The API board has granted Sigma due diligence to facilitate a binding offer. It believes the offer is more favourable to shareholders.

The post Why AVZ, Flight Centre, Fortescue, & Sigma shares are storming higher appeared first on The Motley Fool Australia.

More reading

• Which ASX 300 shares are leading the way on Monday?
• Fortescue (ASX:FMG) share price rallies 5% as iron ore climbs
• Why these ASX 200 travel shares are flying this Monday
• ASX 200 (ASX:XJO) midday update: Fortescue jumps, Wesfarmers dealt takeover blow
• How has the Flight Centre (ASX:FLT) share price been performing since reporting results?

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 owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3m4pPPl

Most ASX investors know that Warren Buffett is one of the greatest investors of all time, and someone most of us would have no problem with managing their money. But the company Mr Buffett heads as chair and CEO – Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B) – is not listed on the ASX. Berkshire is an American business through and through and, as such, you can find it at home on the New York Stock Exchange.

That makes it tricky for us ASX investors to invest alongside Uncle Warren. But not impossible. Let’s get the first mental hurdle out of the way. Berkshire Hathaway is famous for its sky-high share price, the result of Buffett never initiating a stock split in its long history. Indeed, the price of one Berkshire Hathaway Class A share currently stands at US$418,101 each (no typos). That’s probably out of the reach of most ASX investors.

However, Berkshire also has a Class B share. These are trading at the far more accessible price of US$277.87. Class B shares do have slightly less voting power compared to their Class A counterparts, but this shouldn’t be an issue for most ASX investors.

So here are 3 ways any ASX investor can invest in Berkshire Hathaway shares.

3 ways to invest in Buffett’s Berkshire Hathaway on the ASX

Find a broker offering US share trading

Most ASX brokers offer US shares as well these days. That means that most investors who already own ASX shares won’t have too much difficulty buying Berkshire shares directly through their existing broker. 

CommSec and NABtrade both offer this service, as do other brokers like Stake and Superhero. So if you don’t mind owning US shares yourself, this is an arguably easy option to explore.

Buy indirectly using ETFs

Exchange-traded funds (ETFs) are another path to ownership of Berkshire Hathaway for ASX investors. There are now a plethora of ETFs available on the ASX, and some of these cover the US markets. Since Berkshire Hathaway is one of the largest US companies out there, it will usually have a large weighting in any US-based index ETF.

That includes the popular iShares S&P 500 ETF (ASX: IVV), as well as broader US funds like the Vanguard US Total Market Shares Index ETF (ASX: VTS). Thus, if you’ve invested in an ETF of this nature, you will find yourself with a small, indirect exposure to Buffett’s company.

Find a fund manager who invests like Buffett

There are a few actively managed ETFs, managed funds and other investment vehicles on the ASX, whose managers aim to invest like Warren Buffett. Magellan Financial Group’s CEO Hamish Douglass has discussed how he likes to invest in a Buffett-esque style before. Indeed, one of Magellan’s flagship funds, the Magellan Global Fund (ASX: MGF), has owned Berkshire Hathaway shares in the past.

The VanEck Morningstar Wide Moat ETF (ASX: MOAT) also aims to follow a Buffett-inspired investing strategy. In fact, MOAT currently boasts Berkshire shares within its current portfolio. Going down this path may suit an investor who is looking for a more concentrated exposure to Berkshire (or Berkshire-like investments) than what index funds offer.

The post Invest with Buffett? 3 ways to buy Berkshire Hathaway on the ASX appeared first on The Motley Fool Australia.

More reading

• Which ASX 300 shares are leading the way on Monday?
• Fund manager sees multibagger potential in Redbubble (ASX:RBL) share price
• Fortescue (ASX:FMG) share price rallies 5% as iron ore climbs
• Why the Santos (ASX:STO) share price is up 10% in a week
• Woolworths (ASX:WOW) and Coles (ASX:COL) could face a margin shock

Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited and VanEck Vectors Morningstar Wide Moat ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Berkshire Hathaway (B shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares), VanEck Vectors Morningstar Wide Moat ETF, and iShares Trust – iShares Core S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3zKy2wU

The S&P/ASX 300 Index (ASX: XKO) is off to a positive start today, rebounding from Friday’s loss.

During early afternoon trade, the ASX 300 is up 0.83% to 7,407 points. Currently, the index is around 3% off its all-time high of 7,625 points reached on 13 August.

Let’s take a look at which ASX companies are the biggest movers today.

Flight Centre Travel Group Ltd (ASX: FLT)

The Flight Centre share price is soaring 9.50% to $21.67, despite no market-sensitive news out of the company today.

The travel agent has taken off since reporting its full-year results to the market last month, highlighting the worst has passed.

Australia’s accelerated vaccination program is on track, with selected international travel set to resume in December. It appears investors are optimistic on Flight Centre shares, preparing for a strong comeback as a more agile business.

IOOF Holdings Limited (ASX: IFL)

The IOOF share price is storming higher with a 5.62% gain to $4.51.

The Australian financial service provider also hasn’t released anything new to the ASX of late. However, the company reported a transformation year for FY21 following the MLC acquisition in May.

As a result, IOOF expects to deliver synergy benefits during FY22 and beyond.

Webjet Limited (ASX: WEB)

Another strong mover for the start of the week is the Webjet share price, up 5.38% to $6.47.

The online travel company announced improved trading performance in its WebBeds business.

Adding to this, the United States is set to lift travel restrictions for fully-vaccinated passengers from 33 countries in November. No doubt, this will positively impact Webjet’s earnings with demand expected to ramp up.

And which ASX 300 companies are heading the other way?

Sandfire Resources Ltd (ASX: SFR)

The biggest loser today is the Sandfire share price, down 11.90% to a 5-month low of $5.48.

The copper-focused mineral exploration and development company advised it completed its institutional placement offer.

Sandfire successfully raised $926 million at an issue price of $5.40 apiece. Along with the planned retail component of $322 million, the combined total equity raise is expected to be $1.248 billion.

The proceeds of the capital raise are being used to acquire the Matsa mining complex in Spain.

Paladin Energy Ltd (ASX: PDN)

Also being weighed down by investors is the Paladin share price, down 6.02% to 78 cents.

Investors are offloading the company’s shares after the spot price of uranium cooled off.

Paladin shares have fallen almost 25% in a week but are still up 490% over the past 12 months. In 2021, its shares have risen close to 220%.

The post Which ASX 300 shares are leading the way on Monday? appeared first on The Motley Fool Australia.

More reading

• Why these ASX 200 travel shares are flying this Monday
• ASX 200 (ASX:XJO) midday update: Fortescue jumps, Wesfarmers dealt takeover blow
• Leading brokers name 3 ASX shares to buy today
• The Sandfire (ASX:SFR) share price drops 13% on entitlement offer completion
• How has the Flight Centre (ASX:FLT) share price been performing since reporting results?

Motley Fool contributor Aaron Teboneras 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 owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3kH17VN

It was a volatile month in August for the Redbubble Ltd (ASX: RBL) share price. However, that wasn’t enough to deter one private investment company from remaining bullish on the ASX-listed online marketplace.

For EGP Capital, the medium-term prospects look favourable for Redbubble shareholders. This might explain why the e-commerce company appears as the fund’s fourth-largest holding in its EGP Concentrated Value Fund (as of 31 August 2021).

Let’s take a look at what’s behind the fund’s optimism towards Redbubble.

Potential upside for the Redbubble share price

Coming off a disappointing month in July, the EGP Concentrated Value Fund delivered a return of 6.7% during August. This exceeded the 2.5% derived from the S&P/ASX 200 Index (ASX: XJO) over the same period.

A significant contributor to the impressive monthly performance was Redbubble. In fact, the global online marketplace for print-on-demand products experienced a 32.8% jump in its value over the month. As a result, the Redbubble share price finished the month at $4.33.

Although, before shareholders could enjoy the jump, they had to endure the fall. Ahead of the company’s full-year results for FY21, the Redbubble share price fell nearly 14%.

Despite these fluctuations, EGP’s fund remains positive on the potential that Redbubble offers its investors. Speaking to this, EGP Capital chief investment officer Tony Hansen wrote:

I remain very positive about the medium-term prospects of RBL, now that the marketplace has reached scale, the key decisions are around how to deploy cashflows in search of business optimisation. Each new time I hear CEO Mike Ilczynski discuss his strategy, I am more convinced he has a very clear vision for how best to position the business.

The 2024 targets the CEO has laid out would be very close to the “Near Perfect Execution” trajectory of our original piece, and if they can get anywhere near that target, the share price would be multiples of the current price, implying enormous market scepticism about the likelihood of achieving these goals.

Stacking up against peers

The fund’s monthly report drew comparisons between Redbubble and US-based marketplace Etsy Inc (NASDAQ: ETSY).

For instance, as pointed out by EGP Capital, Redbubble trades on a trailing enterprise value (EV) to earnings before interest, tax, depreciation, and amortisation (EBITDA) multiple of 20 times. In comparison, Etsy fetches a richer 55 times multiple.

Additionally, Hansen anticipates Redbubble will outpace Etsy’s organic growth in revenue and earnings over the next few years.

Similarly, Redbubble trades at less than 5 times EV to gross profit. Meanwhile, Etsy commands roughly a 16 times multiple.

The fund points out that Etsy could pay twice Redbubble’s valuation to acquire it, and it would still be worthwhile. As a consequence, EGP Capital considers potential acquisition being the biggest risk to the multibagger potential of the Redbubble share price.

The post Fund manager sees multibagger potential in Redbubble (ASX:RBL) share price appeared first on The Motley Fool Australia.

More reading

• These are the 10 most shorted ASX shares
• Got cash to invest? Here are 2 ASX shares that could be buys
• These are the 10 most shorted ASX shares
• These are the 10 most shorted ASX shares
• What experts are saying about the Redbubble (ASX:RBL) share price

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Etsy. 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.

from The Motley Fool Australia https://ift.tt/3zKi6eb

The Fortescue Metals Group Limited (ASX: FMG) share price is surging today, up 5.6% to $16.20.

After bouncing 13.7% off last week’s lows of $14.15, investors will no doubt be hoping the Fortescue share price has finally turned the corner.

Let’s take a look.

Fortescue share price rallies on higher iron ore prices

Fastmarkets reported an uptick in iron ore prices last Friday, adding US$2.66 a tonne or 2.5% to US$111.33 a tonne.

Sources told Fastmarkets that iron ore prices increased amid “more speculative buying activity for low and mid-grade iron ore fines”.

That said, iron ore prices started the month of September around US$143 a tonne. In comparison, they were fetching record highs of US$230 a tonne in May.

Despite today’s slight improvements, there’s still a long way to go for both the Fortescue share price and iron ore.

What’s the outlook for iron ore?

Analysts at the Bank of America view further declines for the key steel-making metal, forecasting a 35% drop to US$70 per tonne.

The bank analysts said that China’s policy to “force” steel production -10% during the period August-December “puts the iron ore market into surplus”.

Barring a change in this policy stance, we don’t see any reason why iron ore shouldn’t trade down to marginal cost (c. $80/t), particularly as ‘blue sky’ policies loom in early 2022 for China’s winter Olympics.

They added that $US70 a tonne was also possible as iron ore shipments rose and the price of feedstock potentially faced headwinds that could “cut well into the cost curve”.

Linked to that, our China steel team anticipates another weak year for steel production in 2022. Of course, embedded in that … is the possibility of a rebound in steel production post-Olympics, but until then iron ore prices remain under pressure.

The last time iron ore traded around US$70 a tonne was in December 2018. Back then, the Fortescue share price was fetching just $4 a share!

The post Fortescue (ASX:FMG) share price rallies 5% as iron ore climbs appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Fortescue jumps, Wesfarmers dealt takeover blow
• Here’s why the Fortescue (ASX:FMG) share price is down 11% in a week
• 5 things to watch on the ASX 200 on Monday
• Is this ASX 200 miner one of the best value shares to buy today
• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor Kerry Sun 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 Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3kJdoZT

The Santos Ltd (ASX: STO) share price is pushing higher again on Monday.

In afternoon trade, the energy producer’s shares are up 2.5% to $6.77.

This latest gain means the Santos share price is now up over 10% since this time last week.

Why is the Santos share price rising?

Investors have been bidding the Santos share price higher over the last few trading sessions for a couple of reasons.

Chief among them is rising oil prices. According to Bloomberg, on Friday the WTI crude oil price rose 0.7% to US$73.98 a barrel and the Brent crude oil price climbed 1.1% to US$78.05 a barrel. This means that oil prices rose over 3% during the week.

These gains were driven by solid demand and tighter supplies. The latter is being caused largely by a slower than expected restart to production in the Gulf of Mexico following Hurricane Ida.

What else is boosting the company’s shares?

Also giving the Santos share price a lift was a broker note out of UBS last week.

According to the note, the broker has retained its buy rating and lifted its price target on the company’s shares to $8.65.

Based on the current Santos share price, this implies potential upside of 28% over the next 12 months.

UBS made the move after lifting its crude oil forecasts for 2021 and 2022, which resulted in an increase to its earnings expectations for Santos.

The broker is now forecasting Brent crude to average US$67.50 a barrel in 2021 and US$68.50 a barrel in 2022. The latter is up 10% on previous forecasts. “The higher oil price reflects the market’s appetite to price in the recovery rather than a changed view of the physical market,” UBS said.

All in all, Santos remains the broker’s top pick at present. This is thanks largely to its attractive valuation and solid growth opportunities.

The post Why the Santos (ASX:STO) share price is up 10% in a week appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• ASX 200 (ASX:XJO) midday update: Telstra buys Vita stores, Cochlear sinks
• Why ASX 200 energy shares are trouncing the index today
• 5 things to watch on the ASX 200 on Friday
• Why the Santos (ASX:STO) share price is charging higher on Thursday

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 Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3CLZQmI

The Woolworths Group Ltd (ASX: WOW) share price and Coles Group Ltd (ASX: COL) share price could be in for a bumpy ride.

These COVID-19 ASX darlings could suffer a margin squeeze that’s a lot worse than the market expects.

That’s the prediction of analysts at Macquarie Group Ltd (ASX: MQG). The broker is warning that census forecasts are set too high!

Popular ASX shares

The Woolworths share price and Coles share price have benefitted from panic buying of household goods during the pandemic.

While their shares have retreated from their highs recently, they are still widely held by many investors.

But COVID isn’t the only reason why some investors have stocked up on these ASX supermarket shares.

Tailwinds for the Woolworths share price and Coles share price

Their expansion into online shopping and ambitious warehouse automation projects to cut costs have added a spring in their step.

The market’s optimism in the industry’s strong earnings before interest and tax (EBIT) margin may be misplaced.

Consensus downgrades ahead?

“We note that consensus is counting on both COL and WOW to continue to deliver operating leverage in outer years with incremental margins ranging from 7-9%, well ahead of food EBIT margins ~5-5.5%, which we believe is overly ambitious,” said Macquarie.

“Our supermarket EBIT margins are below the street as we believe automation margin gains are likely to be competed away quickly.”

If the broker’s dour predictions come to pass, the Coles share price and Woolworths share price could soon be hit by consensus downgrades.

Macquarie picks Coles share price over Woolworths share price

But it’s Woolies that could be worst for wear. Macquarie favours the Coles share price over Woolworths and Metcash Limited (ASX: MTS) share price.

This is because the Coles share price is trading at around a 7-point valuation gap to the Woolworths share price. Macquarie reckons that the discount is unwarranted.

The broker has an “outperform” recommendation on Coles with a 12-month price target of $19.80.

In contrast, Macquarie rates the Woolworths share price and Metcash share price as “neutral”. Its 12-month target price on the shares are $41.50 and $4.10, respectively.

Margin pressure leaking to other retailers

However, it isn’t only the supermarkets that are facing margin pressure. Several ASX retail shares are also likely to report a squeeze in the coming months due in part to a five-fold increase in container shipping costs.

But the impact may not be as severe. Unlike ASX supermarket shares, the market is already pricing in skinnier margins for a range of ASX discretionary retailers.

These include the Wesfarmers Ltd (ASX: WES) share price, Harvey Norman Holdings Limited (ASX: HVN) share price and JB Hi-Fi Limited (ASX: JBH) share price.

The post Woolworths (ASX:WOW) and Coles (ASX:COL) could face a margin shock appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Fortescue jumps, Wesfarmers dealt takeover blow
• How do you value the Woolworths (ASX:WOW) share price?
• These experts believe the future is bright for the Bank of Queensland (ASX:BOQ) share price
• 2 growing ASX dividend shares named as buys
• What is the outlook for the Wesfarmers (ASX:WES) share price

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET, Harvey Norman Holdings Ltd., Macquarie Group Limited, and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3miIebF