Day: 24 January 2022

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.

FAANG stocks — essentially the top five stocks of the tech sector — as a group, cooled off in 2021. Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) led the group of growth stocks with a 65% return for the year, followed by Apple‘s (NASDAQ: AAPL) near-34% return. The rest of the group — Meta Platforms (NASDAQ: FB), Amazon (NASDAQ: AMZN), and Netflix (NASDAQ: NFLX) — all underperformed the S&P 500 index, which returned nearly 27% for the year. Amazon stock was the biggest underperformer of the year, climbing just 2.4% in 2021.

But investors should always be looking forward, so here’s what they can expect from the FAANG stocks in 2022.

Easier comparables will benefit Amazon and Netflix

2020 was a great year for both Amazon and Netflix. Amazon benefited from a massive shift to e-commerce amid the worst parts of the coronavirus pandemic. Likewise, Netflix saw a rush of subscribers as more consumers stayed home and sought living-room entertainment.

But the hangover hit both of them hard last year. Amazon’s core online retail business grew just 13% and 3% in the second and third quarters of 2021, respectively. Its profits shrunk relative to 2020 levels, too, as it invested in building out its fulfillment network, hired more workers, and paid them more.

Netflix saw subscriber growth fall off starting in the third quarter of 2020 after it managed to add nearly 26 million subscribers in the prior two quarters. It added fewer than 10 million subscribers through the first nine months of 2021.

Yet both companies should see more normalized growth in 2022. Amazon says its capacity constraint issues are mostly behind it and it should continue to outpace the growth of online retail. Also, Netflix is set to release more originals in 2022 than 2021, including several highly anticipated series like the finale of Ozark and season four of Stranger Things. 

Meta Platforms could be an advertising winner

The digital ad industry saw a big change last summer when Apple introduced new privacy features in iOS 14. Users are now prompted to opt into cross-app data tracking, which can make tracking ad conversions very difficult. As a result, social media apps saw a reduction in ad spending across the board, as advertisers could no longer determine whether they were spending wisely or not.

Google was a clear winner from the shift in ad spending. It posted its fastest advertising revenue growth rate in more than a decade — 43% — in the third quarter. Its core search advertising business benefits from easily tracked advertisements on any web browser without the need to share data between multiple apps.

But Meta could recover more quickly than its peers in the all-important social media advertising channel. It’s developing new ad measurement tools and systems while building up services that could allow ads to convert within its walled gardens like Facebook Shops.

Meanwhile, engagement with its apps remains strong, with Instagram recently surpassing 2 billion users. Compared to most other social media platforms, Facebook and Instagram historically offer the ability to target and convert better, commanding a premium price. So, Meta could see its core revenue source grow faster relative to its competitors, leading its stock price higher in 2022.

That said, it’ll be harder for Alphabet to maintain its momentum built in the back half of 2021. The benefits of the privacy changes on the mobile operating systems seem to be baked into the stock price. Nonetheless, it remains a top channel for digital advertising with Google, YouTube, and various other advertising platforms all interconnected, allowing more ad retargeting opportunities (getting users to see ads more than once). Google should at least keep pace with the overall industry, but that could seem disappointing after a stellar 2021.

Can Apple push past $3 trillion?

With a market cap pushing $3 trillion, it’s hard to see Apple’s share price continuing to grow at the same pace it did last year. Doing so would mean an additional $1 trillion flows into Apple stock over the next year. Even so, Apple has a few big positives that could allow its stock to remain a strong investment.

First of all, it could see another record year for iPhone sales in 2022 with greater adoption of 5G and subsiding supply chain constraints. The iPhone accounts for half of Apple’s revenue, so growing unit sales would have a massive impact on its top line.

Second, Apple continues to grow its services business, which produces much higher profit margins than its hardware business. The services business growth is the result of a larger install base and greater revenue per user as it increases adoption of its first-party subscriptions and grows App Store sales per user.

Third, Apple may introduce new hardware in 2022: an AR/VR headset. While a new device may not generate significant revenue right away, it could spur further adoption of headsets and the development of metaverse applications. It could be Apple’s next Apple Watch or AirPods. 

Finally, Apple has become a safe harbour for many investors. With bonds offering very low returns, Apple’s ironclad balance sheet and strong cash flow make it attractive in the low-yield environment. Not to mention, it still offers a 0.5% dividend yield, which will likely see another increase this year.

Although Apple may not provide market-trouncing returns again in 2022, it’s still a solid investment option for most.

Ranking the FAANGs

I think all five of the FAANG stocks could make a good investment in 2022, and I continue to hold positions in all of the stocks. But if I were to add to those positions, here’s how I would prioritize them based on today’s prices and the outlook for 2022.

1. Amazon. Its retail business should see a reacceleration in growth while its cloud-computing and advertising businesses drive the bottom line higher.
2. Netflix. After underperforming on subscriber additions since late 2020, it should see a return to normalized growth and content releases in 2022.
3. Meta. The impact of mobile OS privacy changes is priced in, and it’s best positioned to overcome those challenges.
4. Alphabet. A simple play on the secular growth of digital advertising.
5. Apple. If history has taught me anything, it’s to never bet against Apple.

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

The post FAANG Stocks: 2022 Winners and Losers appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Levy owns Alphabet (C shares), Amazon, Apple, Meta Platforms, Inc., and Netflix. The Motley Fool owns and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Meta Platforms, Inc., and Netflix. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Alphabet (A shares) and Meta Platforms, Inc. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Meta Platforms, Inc., and Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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Key points

• Fortescue to acquire Williams Advanced Engineering for approximately AU$310 million
• Fortescue Future Industries (FFI) to manage the integrated company
• Collaborative effort to create battery electric solutions to decarbonise mining operations

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The Fortescue Metals Group Limited (ASX: FMG) share price is down 1.43% in morning trade.

Following another day of heavy selling in US markets on Friday, the S&P/ASX 200 Index (ASX: XJO) is also selling off, down 0.47%. 

Below we take a look at the ASX 200 miner’s acquisition announcement.

What acquisition was reported?

The Fortescue share price is edging lower after the company reported it’s entered into a share sale and purchase agreement to acquire 100% of Williams Advanced Engineering Limited (WAE).

WAE is currently held by EMK Capital and Williams Grand Prix Engineering Limited. The acquisition cost was reported at £164 million (approximately AU$310 million).

WAE, a technology and engineering services business, works with Tier 1 customers in advanced engineering in the premium automotive and motorsports sectors. Calendar year 2021 revenue for the business came in at approximately US$84 million.

Fortescue said that WAE’s technology and expertise in high-performance battery systems and electrification will aid its efforts to decarbonise its mining operations alongside launching a new business growth opportunity.

Upon completion of the acquisition, the company will be managed by Fortescue Future Industries (FFI). The combined team will work to develop battery electric solutions for Fortescue’s rail, mobile haul fleet and other heavy mining equipment. Fortescue expects to announce details on the first major collaborative project, a battery electric train concept, within the next few months.

Commenting on the acquisition, Fortescue’s founder, Andrew Forrest said:

FFI and WAE will work together to decarbonise Fortescue – and in turn the global heavy industry and hard to abate sectors – for the good of our planet, and the benefit of our shareholders.

Today’s announcement builds on our commitment to remove fossil fuel powered machinery from our operations and to replace it with zero carbon emission technology, powered by FFI green electricity, green hydrogen and green ammonia.

Fortescue’s CEO, Elizabeth Gaines added:

The potential global market for WAE is significant and will extend beyond the decarbonisation of Fortescue, further demonstrating our commitment to the diversification of Fortescue to a renewable energy and resources company.

The transaction is expected to be complete by the end of March 2022, subject to meeting customary conditions precedent, which in this case includes meeting the UK’s foreign investment approval.

Fortescue will fund acquisition from its existing liquidity sources.

Fortescue share price snapshot

The Fortescue share price is up 7% so far in the new year. That compares to a year-to-date loss of 4% posted by the ASX 200.

Over the past 12 months, Fortescue shares are down 15%. 

The post Fortescue (ASX:FMG) share price slides on $310 million acquisition appeared first on The Motley Fool Australia.

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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.

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Key points

• The crypto market is down $1.4 trillion from its peak
• Bitcoin and Ethereum are trading like risk assets
• Higher interest rate prospects have investors seeking havens

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Crypto investors aren’t having the best start to the New Year.

To say the least.

Since the height of the crypto market in November last year, when both Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) hit new all-time highs, more than US$1 trillion (AU$1.38 trillion) has been wiped from the global cryptocurrency market cap. That currently stands at around US$2 trillion.

And 2022 has been a shocker.

According to data from CoinMarketCap, 98 of the top 100 cryptos are down for the calendar year. The 2 that are flashing green are both US dollar-linked stable coins. And their fractional gains (both up some 0.05%) are hardly anything to write home about.

While Bitcoin has edged up 1.4% over the past 24 hours to US$35,467, the world’s original crypto remains down 48% from its 10 November record high of US$ 68,790. And it’s down 26% so far in 2022.

What’s happening with the crypto crash?

Crypto investors are being caught up in the wider selloff of risk assets.

The selloff is largely being driven by increased certainty that major central banks around the world will be raising interest rates sooner, and more aggressively, than most analysts had forecast last year.

Crypto assets are also facing new headwinds from looming government regulations in the United States and a potential ban in Russia.

Commenting on the risk asset nature of cryptos, Starkiller Capital’s Leigh Drogen said (as quoted by Bloomberg):

It’s even more of a risk asset now that most of the crypto market cap is Ethereum, Solana and all sorts of other stuff that is just basically technology where we’re pulling forward massive assumptions of global growth into the present.

Stephane Ouellette, CEO of crypto-platform FRNT Financial, points to the strong correlation between Bitcoin and altcoin prices and risk assets being hammered across the world:

Crypto is reacting to the same kind of dynamics that are weighing on risk assets globally. Unfortunately for some of the mature projects like BTC, there is so much cross-correlation within the crypto asset class it’s almost a certainty that it falls, at least temporarily in a broader alt-coin valuation contraction.

Hayden Hughes, CEO at Alpha Impact, explained why crypto is facing additional pressure in the current market selloff:

Margin positions being liquidated caused a wave of additional sell pressure, as assets that had been held as collateral were forcibly sold to pay for margin loans. I would expect it to take some time for a bottom to form and for confidence to return, before expecting any sort of bullishness.

The outlook for Bitcoin

The future price moves for the crypto market remain uncertain. As we looked at above, Bitcoin, Ethereum and most altcoins’ prices are closely tied to those of global risk assets, which in turn are closely tied to central bank interest rates and the cost of money.

As for Bitcoin, Antoni Trenchev, managing partner at Nexo, said (quoted by Bloomberg), “Fear and unease among investors is palpable. If we see a bigger selloff in equities, expect the Fed to verbally intervene to calm nerves and that’s when Bitcoin and other cryptos will bounce.”

Looking at the technicals, Trenchev added:

For now, Bitcoin is up against the wall after falling below $40,000 [US dollars]. A swift bounce above that key technical and psychological level can’t be ruled out. Failing a quick reversal, I’m not excluding Bitcoin re-tests $30,000 before the Fed changes tack, but that ought to be the bottom, at least in the mid-term. And from there, I think we can have a nice leg up.

There you have it. If you’re investing in crypto, you’ll want to keep an eye on the US Fed.

The post $1.4 trillion evaporates. What’s happening with the crypto crash? appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Bitcoin and Ethereum. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• The Flight Centre share price is down in early trade
• The company’s CEO Graham ‘Skroo’ Turner is planning a meeting today on possible legal action over the extended WA border closure
• The European Union removed Australia from a safe travel list last week

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The Flight Centre Travel Group Ltd (ASX: FLT) share price is sinking today amid reports the company’s CEO is reconsidering a legal challenge on the closed Western Australia border.

The company’s shares are currently trading at $16.54, down 1.58% after plunging to a low of $16.30 just after market open. For comparison, the  S&P/ASX 200 Index (ASX: XJO) is 0.42% lower at the time of writing.

Let’s take a look at what might be impacting the travel company’s shares today?

Will Flight Centre launch a legal challenge on borders?

Flight Centre is holding a meeting with lawyers on Monday to consider a legal challenge against the Western Australian government on its extended border closure, the Sydney Morning Herald reported.

As Motley Fool Australia reported on Friday, Western Australian Premier Mark McGowan has delayed the reopening of the state border indefinitely in an announcement Thursday night.

Chief executive Graham ‘Skroo’ Turner told the SMH:

I’m just fine-tuning this with lawyers … we think there’ll be a lot of pressure on (McGowan) to announce a date.

If he announces the borders will open in March or April, we won’t get the case heard before it’s already open. But if he announces July or December or something like that, we’ll have a much greater chance of success of getting into court before borders open.

The Flight Centre share price has been up and down in the past month as Omicron fears and border decisions, both interstate and internationally, have impacted investor sentiment.

Last week, the European Union removed Australia, Canada and Argentina from its safe travel list. However, each member state within Europe is free to make its own decision on these guidelines.

Mr Turner also considered a legal challenge on the WA borders in November but he put this plan on hold.

Mr Turner told the Australian Financial Review:

A constitutional challenge is a three to four month process. The earliest we could get a hearing was March so when they set February 5 we paused.

Looking at Flight Centre’s ASX 200 travel share peers, the Qantas Airways Limited (ASX: QAN) share price is down 1.23% at the time of writing and Webjet Limited (ASX: WEB) is 1.96% lower. Meanwhile, Helloworld Travel Ltd (ASX: HLO) is down 2.86% while Corporate Travel Management Ltd (ASX: CTD) is having a better day so far, up 2.73%.

Share price recap

The Flight Centre share price has gained around 6% in the past year. In the past month, it has also sunk around 6% and is down around 4% in the past week.

Meanwhile, the broader ASX 200 Index has returned around 5% over the past 12 months.

The company has a market capitalisation of about $3.3 billion based on its current share price.

The post Flight Centre (ASX:FLT) share price falls amid potential legal action on borders appeared first on The Motley Fool Australia.

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

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Key points

• Westpac thinks the RBA could life rates sooner than expected
• Has brought forward its forecasts
• The cash rate could be at 1.75% by March 2024

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Interest rates are a hot topic right now with the outlook for increases seemingly improving by the week.

In its latest weekly economic report, the team at Westpac Banking Corp (ASX: WBC) has weighed in on when it thinks the Reserve Bank of Australia will start to lift rates at long last.

What did Westpac say?

Westpac notes that the December quarter inflation report will be released next week. It expects underlying inflation to print 0.7% for the quarter and 2.4% for the annual rate.

This, combined with a December unemployment rate of 4.2%, means the Reserve Bank could start to take action. Westpac supports this view by highlighting that the central bank has previously stated: “If better than expected progress towards the Board’s goals was made then the case to cease bond purchases in February would be stronger.”

But what about the cash rate?

But it isn’t just bond purchases that could end sooner than originally expected. Westpac has brought forward its rate hike forecast from early 2023 to mid 2022.

According to the note, Australia’s oldest bank believes the Reserve Bank will begin raising rates at the August meeting.

Westpac’s Chief Economist, Bill Evans, said: “While we expect the omicron variant to lower Australia’s growth rate in 2022 from 6.4% to 5.5% in 2022 inflation; wage growth and unemployment forecasts are largely unchanged.”

“Our forecasts are significantly different to the RBA’s forecasts and expect that if our forecasts prove correct the case for the first rate hike in the next tightening cycle by the August Board meeting in 2022 is strong.”

“We now expect one hike of 15 basis points in August to be followed by a further hike of 25 basis points in October,” Evans added.

This will mean a cash rate of 25 basis points in August and then 50 basis points in October. After which, the bank is forecasting a number of rate hikes through to March 2024, at which point it estimates that the cash rate will stand at 1.75%.

Time will tell how accurate these forecasts are.

The post Here’s when Westpac (ASX:WBC) expects the RBA to raise the cash rate appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro owns Westpac Banking Corporation. 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 Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Highlights:

• Expensive shares like the Pro Medicus share price have crashed in 2022 due to interest rate fears
• But Morgans believes the >20% crash in Pro Medicus is a buying opportunity ahead of its results
• The broker upgraded its shares to “add” from “hold” with a price target of $54.49 a share

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The beaten-down Pro Medicus Limited (ASX: PME) share price could finally be catching a break with Morgans upgrading the company’s shares.

The spectre of rising interest rates has taken its toll on the medical management software company. But the broker believes there is too much bad news priced into the Pro Medicus share price.

This is despite the fact that Pro Medicus is still trading on a FY22 forecast price-to-earnings (P/E) multiple of 100 times.

Why the Pro Medicus share price is tumbling in 2022

Shares trading at a steep premium have taken the brunt of the latest market sell-off. Their valuations take a big haircut as interest rates rise.

The US Federal Reserve is set to lead the way to higher global rates. The central bank is tipped to lift rates three times in 2022, and some experts are warning the Fed could even hike four times to tame inflation.

Against this backdrop, the Pro Medicus share price crashed by around 26% over the past month. It isn’t the only one swept up in ASX market sell-off. The Zip Co Ltd (ASX: Z1P) share price and Megaport Ltd (ASX: MP1) have also shed around 20% each over the period.

Is it time to buy Pro Medicus shares?

But, according to Morgans, investors should consider buying Pro Medicus shares ahead of next month’s profit reporting season. The broker has upgraded its recommendation to “add” from “hold”.

“With the share price now significantly more attractive than it was a month ago, we view current prices as a good entry for long-term investors, but also potential trading positions with reduced risk heading into in the upcoming result,” said the broker.

“Short-term risks around the upcoming results remain with full expectations.

“While we sit slightly below consensus, we view any miss as more likely due to timing of contract recognition rather than overheated underlying expectations.”

Long and shorter-term value emerging

Consensus forecasts have set a high hurdle for management to jump over. The average analyst estimate is for a more than 44% increase in revenue and more than 58% uplift in earnings before interest and tax over the same period last year.

But for those willing to ignore the shorter-term gyrations in earnings and market sentiment, Morgans believes the long-term growth drivers for the Pro Medicus share price remains strong.

Morgan’s 12-month price target on the shares is $54.49. This should give investors around a 20% upside if dividends are included.

The post Why this broker upgraded the embattled Pro Medicus (ASX:PME) share price to “buy” appeared first on The Motley Fool Australia.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended MEGAPORT FPO, Pro Medicus Ltd., and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• Vulcan shares are falling after it announced a potential expansion into Italy
• The lithium developer has identified a promising area which could provide sustainable lithium
• The Cesano Project covers an area of 11.5 km2 and is located 20km from Rome

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The Vulcan Energy Resources Ltd (ASX: VUL) share price is starting the week in the red.

In early trade, the lithium developer’s shares are down 4% to $9.01.

Why is the Vulcan share price falling?

The Vulcan share price is falling this morning after broad weakness in the lithium sector offset the release of a positive announcement relating to a potential expansion.

According to the release, the company has been granted a new research permit in Italy located 20 km north-northwest of Rome. The release notes that the permit has been given the name Cesano.

The Cesano permit extends over an area of 11.5 km2 and includes an area where a single geothermal well yielded two hot brine samples that contained high average lithium-in-brine historical (1976) grades of 350 and 380 mg/l Li.

Management believes the area could have potential for sustainable lithium battery chemicals development in line with its Zero Carbon Lithium business in Germany. This is based on the recorded high heat and lithium grades within the brine and encouraging flow rates.

Vulcan’s in-house geological team in Germany will now collaborate with Italian geologists and local stakeholders to collate and assess historical data, verify the lithium content, and assess the brine for potential lithium project development.

If successful, management believes the Cesano Project could provide a source of strategic, sustainable lithium in Italy for Europe’s battery and automotive market, and become a possible future additive to Vulcan’s Zero Carbon Lithium business.

“Project Rollo”

Vulcan’s Managing Director, Dr. Francis Wedin, notes that the Cesano Project is part of a wide project called Project Rollo.

He commented: “Vulcan is aiming to increase the future supply of our sustainable lithium production response to significant customer demand. By growing and diversifying our project development portfolio – an initiative we internally call “Project Rollo” – we ultimately aim to develop a global Zero Carbon Lithium business focused on Europe, and to become a significant producer of renewable energy and sustainable lithium for electric vehicles.”

“Ultimately, we aim to leverage our extensive experience in lithium extraction from heated brines to have a materially decarbonising effect on global electric vehicle supply chains and in doing so build stakeholder value.”

Dr Wedin appears optimistic that the Cesano Project could be a valuable addition to its portfolio in the future.

He concluded: “After an extensive geological review, we have identified an area in Italy with positive flow rate, historical lithium grade and reservoir temperature indications that could be conducive to Vulcan’s unique method of using renewable heat to drive lithium processing, with net zero carbon footprint, for the European electric vehicle market. We will be working with local partners to ascertain the potential of the area in more detail, and ascertain next steps.“

The post Vulcan (ASX:VUL) share price tumbles despite Italian lithium project news appeared first on The Motley Fool Australia.

More reading

• Here’s why the Vulcan Energy (ASX:VUL) share price is powering ahead today
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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.

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Key points

• Adairs had a tough first half due to COVID-19 impacts
• While its sales were largely flat, its earnings almost halved
• Gross margin impacts from supply chain cost increases also weighed on Adairs’ performance

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In morning trade, the Adairs Ltd (ASX: ADH) share price has crashed lower following the release of a first half trading update.

At the time of writing, the furniture and homewares retailer’s shares are down 17% to a 52-week low of $3.15.

Adairs share price crashes amid near halving of first half profit

• Group sales broadly flat at $242 million including $12.5 million contribution from Focus on Furniture acquisition.
• Like for like sales growth of 2.7% adjusted for closures
• Online sales growth of 8.2% to $97.6 million
• Underlying earnings before interest and tax (EBIT) down between 45% and 47% to $32 million to $33 million

What happened during the first half?

Adairs had a mixed first half to FY 2022. Although its sales were largely in line with the prior corresponding period, a collapse in its margins saw its earnings almost halve.

Management notes that government mandated store closures reduced the overall number of store trading days by ~31%. This is estimated to have reduced Adairs’ sales by $30 million to $36 million and EBIT by ~$14 million to $18 million during the half.

Also weighing on Adairs’ earnings were gross margin pressures. The company revealed that it has been impacted by global supply chain cost increases, higher delivery costs to online customers, and additional promotional activity. One positive, though, is that its gross margin remains well ahead of the first half of FY 2020, which was prior to the pandemic.

Management commentary

Adairs’ CEO and Managing Director, Mark Ronan, appeared somewhat pleased with the company’s performance given the significant disruptions it was facing.

He said: “During the half, despite significant operational disruptions, we have made strides in progressing our strategic priorities by commissioning our new National Distribution Centre, upsizing selected stores, continuing to expand our range and adding to our omni channel capabilities. We also built our portfolio of vertical omni-channel retail brands by bringing forward the finalisation of the Mocka acquisition, and completing the acquisition of Focus on Furniture. The progress we’ve made against these priorities gives us confidence in the growth prospects of the Group.”

Adairs will release its half year results on 21 February.

The post Why the Adairs (ASX:ADH) share price is crashing 17% lower today appeared first on The Motley Fool Australia.

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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. owns and has recommended ADAIRS FPO. The Motley Fool Australia owns and has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• The Nasdaq Index plunged 2.7% on Friday and 7.55% over the course of last week
• It was weighed down by the Netflix share price – which fell 21.7% – as well as those of Tesla, Walt Disney, and Amazon
• The tech-heavy index’s weak performance could put pressure on ASX tech shares today

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ASX technology shares could be in for some pain on Monday after the United States’ tech-heavy Nasdaq Index slumped at the end of last week.

The Nasdaq Composite Index (NASDAQ: .IXIC) tumbled 2.72% on Friday. That brings last week’s plummet to 7.55% – its worst weekly performance since COVID-19 fears saw stocks plunge in March 2020.

Meanwhile, the S&P 500 slipped 1.89% on Friday and 5.68% over the course of last week.

According to reporting by CNBC, the indexes’ fall was due to rising government bond rates and expectations the United States Federal Reserve could soon increase interest rates.

Which shares weighed on the Nasdaq index on Friday?

The Nasdaq Index had a shocking end to last week after it was weighed down by some of its most recognisable names.

Netflix Inc (NASDAQ: NFLX) stock plunged 21.7% on Friday after the company released its fourth-quarter earnings.

At the same time, the Amazon.com Inc (NASDAQ: AMZN) share price tumbled 5.9% and Telsa Inc (NASDAQ: TSLA) slumped 5.2%.

Meta Platforms Inc (NASDAQ: FB) also suffered, slipping 4.2%.

What could that mean for ASX tech shares?

S&P/ASX 200 Index (ASX: XJO) tech shares – and technology stocks that don’t reside on the ASX 200 – tend to follow the Nasdaq Index’s movements. Meaning Australian stocks might be in for some pain today.

Keen-eyed market watchers will likely have their sights set on both the S&P/ASX 200 Info Tech Index (ASX: XJO) and the S&P/ASX All Technology Index (ASX: XTX).

Individual shares that could be worth keeping an eye on include Zip Co Ltd (ASX: Z1P), Xero Limited (ASX: XRO), Appen Ltd (ASX: APX), and TechnologyOne (ASX: TNE).

Also worth noting, ASX shares could be under pressure due to the anticipated release of the consumer price index for the December quarter. It’s set to drop tomorrow morning.

The post The Nasdaq Index fell 2.7% on Friday. What does that mean for ASX tech shares? appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to sell next week
• Top brokers name 3 ASX shares to buy next week
• Why Allkem, Nuix, Whitehaven Coal, and Zip shares are sinking today
• Zip (ASX:Z1P) share price sinks 8% to 52-week low after brokers weigh in on its Q2 update
• Why Anteotech, Appen, Boral, and Kogan shares are rising today

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. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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. owns and has recommended Appen Ltd, Meta Platforms, Inc., Xero, and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended Appen Ltd and Xero. The Motley Fool Australia has recommended Amazon, Meta Platforms, Inc., and Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key Points

• Webjet shares impacted following latest announcements by the West Australian government
• No definitive reopening of domestic borders
• WebBeds business performing well in key overseas markets

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The Webjet Limited (ASX: WEB) share price rapidly descended last week on the back of a broader market sell-off.

At Friday’s market close, the online travel agent’s shares tumbled 2.30% to $5.09 apiece. This means that its shares lost 6.78% since this time last week, reflecting a near 6-month low.

In contrast, the S&P/ASX 200 Index (ASX: XJO) dropped 2.27% to 7,175.8 points on Friday. The benchmark index sunk 3.99% for the week, which was a 7-month low.

What happened to Webjet shares?

Investors have continued to dump the Webjet share price following a sluggish recovery of the travel market.

A rise in COVID-19 cases across Australia has led the Western Australian government to delay the reopening of their borders. This has not only led domestic passengers to cancel holiday plans but has also affected international tourists.

Double vaccinated interstate and international travellers would have been able to enter Western Australia without quarantine from 5 February. However, with the border remaining closed indefinitely, it could be until easter before the restriction is lifted.

A reported 6,000 interstate and international passengers were expected to arrive at Perth Airport on the border reopening date.

Investor confidence has turned sour following COVID-19 outbreaks across the country. No doubt, this has caused a dent in potential Webjet earnings for the 2022 financial year.

Nonetheless, the company’s WebBeds business in North America is tracking ahead of pre-COVID total transaction value (TTV) volumes. On the other hand, Europe is forecasted to return to pre-COVID TTV levels in the second-half of FY23.

A retained global footprint, hotel supply relationships and global customer network have led the charge.

Looking ahead, Webjet is scheduled to report its FY22 results towards the backend of May 2022.

Webjet share price summary

Year to date, the Webjet share price has fallen by almost 2% following a surge in COVID-19 cases in Australia.

Based on valuation grounds, Webjet has a market capitalisation of around $1.94 billion, with approximately 380.51 million shares on issue.

The post Why did the Webjet (ASX:WEB) share price fall 7% last week appeared first on The Motley Fool Australia.

More reading

• ASX travel shares are nosediving today amid border opening delays
• Will the Webjet (ASX:WEB) share price travel higher in 2022?
• Why are ASX 200 travel shares down today?
• These are the 10 most shorted ASX shares
• How did the Webjet (ASX:WEB) share price perform in 2021?

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 has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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