Month: May 2022

Some ASX growth shares are now looking really good value, according to some experts.

Volatility continues to be elevated on the ASX share market. Lower prices can mean investors get to buy businesses at a better value.

Here are two that experts now think offer large upside:

Airtasker Ltd (ASX: ART)

Airtasker describes itself as Australia’s leading online marketplace for local services, “connecting people and businesses who need work done with people who want to work”.

The company’s main customer base is currently in Australia. However, it’s rapidly growing in the UK and the US as well.

In the third quarter of FY22, Airtasker saw US marketplace-posted task growth of 90%, quarter on quarter. It is focused on four key cities in the US: Atlanta, Dallas, Kansas City, and Miami. However, it’s also seeing other marketplaces emerging in non-core cities.

In the UK, the ASX growth share’s third-quarter gross marketplace volume (GMV) increased 138% year on year.

Overall, the business saw third-quarter GMV growth of 24.9% to $51.5 million.

In the first half of FY22, the company saw a gross profit margin of 93%. A high gross profit margin means the business can re-invest most additional revenue into further growth initiatives.

How good value is the Airtasker share price? It has fallen by 60% over the last six months to 41 cents. Morgans rates it as a buy with a price target of $1.15. That implies a possible rise of around 180% over the next year. It likes that the company is managing to keep growing despite the wider economic issues that are happening.

City Chic Collective Ltd (ASX: CCX)

This ASX growth share specialises in retailing plus-size clothing, footwear, and accessories to women.

The company may be best known for its City Chic brand, which has a local store network. City Chic also has partnerships with various businesses in the northern hemisphere.

However, the company also has a large and growing presence in the northern hemisphere with businesses that it has acquired over time. In the UK, it owns the Evans brand. Avenue is its main business in the US. In Europe, City Chic wants to grow the Navabi business.

City Chic has a focus on growing its business through online channels. In the first half of FY22, the company said that 77% of its sales over the prior 12 months were online. In the actual half-year period, online comparable sales rose by 52.5%, with an 83% online penetration rate.

The ASX growth share points to a US$180 billion total global plus-size market, with a forecast that it will grow by around 7% annually. City Chic says there are increasing rates of plus-size women globally and the average annual spend on ‘plus-size’ is currently “materially less” than the rest of the women’s apparel market.

For the first 17 weeks of the second half of FY22, it reported “strong” total sales growth of 25% year on year, with US total sales growth of 47%. Australian online sales were up 13%. Second-half earnings before interest, tax, depreciation, and amortisation (EBITDA) is expected to be higher than the first half.

It’s currently rated as a buy by the broker Macquarie, with a price target of $6.70. That implies a possible rise of around 160%. That’s after the City Chic share price has fallen almost 60% over the past six months to $2.55. Macquarie likes the growth that the business is achieving and things seem good for the longer term.

According to Macquarie, the City Chic share price is valued at 14x FY23’s estimated earnings.

The post Buy these great value 2 ASX growth shares: experts appeared first on The Motley Fool Australia.

More reading

• Why is the Airtasker share price edging higher today?
• Airtasker share price dives 6% as trading resumes
• Analysts say these small cap ASX shares have big futures
• Airtasker share price on ice amid major acquisition news
• Best ASX shares to buy in May 2022

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Airtasker Limited. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Iron ore giant Rio Tinto Limited (ASX: RIO) is likely to cut its 2022 dividend after paying a whopping $5.3 billion payout to shareholders in the last financial year.

But the miner will remain one of the best dividend yielding shares on the S&P/ASX 200 Index (ASX: XJO), according to brokers’ forecasts.

Conditions were perfect for Rio Tinto to pay a record regular and special dividend of US$10.40 ($14.23) a share in FY2021. This is thanks to high iron ore prices and relatively low capex requirements.

Rio Tinto’s 2022 dividend cut

Many of the tailwinds remain and cash is still spilling out of its coffers – although at a slower pace. This means Rio Tinto’s dividends have probably peaked – at least for the next few years.

The analysts at Macquarie Group Ltd (ASX: MQG) are forecasting a dividend payment of US$9.38 for the financial year.

While that represents a close to 10% cut to the FY2021 dividend, the 20% tumble by the Rio Tinto share price means its shares are sitting on a dividend yield of around 13% for financial year 2022 (on today’s exchange rate).

Throw in franking credits and this lifts its gross yield to 19%.

Will Rio Tinto appeal to income investors?

But ASX mining shares don’t typically make good income shares as their dividends can be volatile.

This is certainly the case for Rio Tinto. The expected easing in the iron ore price from its current elevated levels will see its dividend continue to fall.

Macquarie is forecasting Rio Tinto’s dividend to come in at US$6.52 per share in FY2023 and US$5.58 in the following year.

Varying dividend forecasts

However, Credit Suisse is more cautious in its assumptions. The broker is tipping the 2022 Rio Tinto dividend of US$7.72 a share. This puts the miner’s dividend yield at 10.7% if franking credits are included.

Credit Suisse’s lower dividend estimate is based on its more sombre outlook for Rio Tinto’s earnings. The broker is forecasting adjusted earnings per share (EPS) of US$9.58 when consensus is standing at US$12.08.

Is Rio Tinto a good dividend share to buy in 2022?

Nonetheless, the Rio Tinto share price still represents good value, according to Credit Suisse. It is recommending the shares as outperform with a 12-month price target of $138 a share.

Macquarie is also upbeat about the miner. It too rates the Rio Tinto share price as outperform with a 12-month price target of $140 a pop.

The post How big will the Rio Tinto dividend be in 2022? appeared first on The Motley Fool Australia.

More reading

• Why are ASX 200 mining shares in the green today?
• Why are ASX 200 mining share prices slipping today?
• The Rio Tinto share price has dumped 8% in a week. Is it now cheap?
• Which ASX 200 mining shares were the worst-performing on Friday?
• Why is the Rio Tinto share price stretching down a further 3% on Friday?

Motley Fool contributor Brendon Lau has positions in Macquarie Group Limited and Rio Tinto Ltd. 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 Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Commodity prices may be rocky lately, but could this S&P/ASX 200 Index (ASX: XJO) mining share go higher?

The Nickel Mines Ltd (ASX: NIC) share price has dropped 12% in the past week. For perspective, the S&P/ASX 200 Resources Index (ASX: XJR) has slid 5% in a week.

Let’s take a look at the outlook for this ASX 200 mining share.

Undervalued share

The Nickel Mines share price is undervalued, according to Fidelity Australian Opportunities Fund portfolio manager Kate Howitt.

In comments reported by the Australian Financial Review, Howitt said:

The company’s output will roughly triple over the next few years, making it one of the few resources companies not needing commodity prices to do the heavy lifting of earnings growth. 

The company’s latest quarterly showed a great outcome on both production and margins; a few more quarterlies like that and the risk discount in the shares will be squeezed out.

The Nickel Mines share price jumped in late April amid the company’s quarterly results. Nickel Mines shares leapt 6% on 28 April after the company reported record earnings before interest, taxes, depreciation, and amortisation (EBITDA) of US$81.7 million, an 18.7% rise.

The company also sold US$7,386 per tonne of nickel, a 22.5% increase on the previous quarter.

Nickel Mines shares were turbulent in March during the “nickel squeeze”, as my Foolish colleague Zach reported.

However, on 24 March, the team at Bell Potter predicted the Nickel Mines share price could rise 40% in the next 12 months.

Nickel Mines share price snapshot

The Nickel Mines share price has climbed 6% over the past 12 months, but it has descended 22% year to date.

For perspective, the ASX 200 Resources Index has lost almost 4% in the past year but gained roughly 2% year to date. The benchmark ASX 200 has lost less than 1% over the past year.

Nickel Mines has a market capitalisation of about $3 billion based on the current share price.

The post Is this ASX 200 mining share set to surge, regardless of commodity prices? appeared first on The Motley Fool Australia.

More reading

• These were the best performing ASX 200 shares last week
• Here are the top 10 ASX shares today
• Nickel Mines share price lifts following record quarter
• What’s happening to ASX nickel shares today?

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

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It has been a tough couple of weeks for the Macquarie Group Ltd (ASX: MQG) share price, falling by 15%.

The financial service provider released its full year results on 6 May, reporting double-digit increases across its key metrics. However, this wasn’t enough to stop the bloodshed with its shares falling 7.78% on the day.

Nonetheless, the board opted to increase its upcoming final dividend to eligible investors.

Let’s take a look below at what you need to know in regards to the latest dividend.

What’s the deal with the Macquarie final dividend?

The Macquarie share price has backtracked recently as investor vented out their disappointment following the company’s financial scorecard.

The company is set to pay out $3.50 per share to wrap up the FY22 year ending 31 March 2022. That’s 4.5% higher than last year’s final dividend of $3.35 per share paid to shareholders.

Furthermore, the payout ratio for the latest dividend is at 50% (in line with the target range of 50% – 70% of the company’s profit).

The higher dividend came on the back of the company recording a 56% lift in net profit after tax (NPAT) to $4,706 million. In the previous period (FY21), the group achieved NPAT of $3,015 million.

When can shareholders expect to be paid?

Macquarie will pay the final dividend to eligible shareholders on 4 July.

However, to be eligible you’ll need to own Macquarie shares before the ex-dividend date which falls on Monday 16 May. This means if you want to secure the dividend, you will need to purchase the company’s shares by the close of business today.

It is worth noting that on the ex-dividend day, the share price traditionally falls in proportion to the dividend amount.

In addition, the dividend is 40% franked which means that investors will receive some tax credits for this.

Currently, Macquarie has a dividend trailing yield of 3.37% and a market capitalisation of roughly $69.87 billion.

The post Hoping to bag the next Macquarie dividend, here’s what you need to do appeared first on The Motley Fool Australia.

More reading

• Time is running out to secure dividends from these 3 ASX 200 shares
• Leading brokers name 3 ASX shares to sell today
• Leading brokers name 3 ASX shares to buy today
• Macquarie share price tumbles 4% to 9-week low. Is it time to pounce?
• Why Macquarie, REA, Temple & Webster, and Xero shares are sinking

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 Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Washington H Soul Pattinson & Co Ltd (ASX: SOL) shareholders will have something to cheer about today as the company pays out its latest dividend.

The investment house is rewarding eligible investors with a fully franked interim dividend of 29 cents per share.

At Wednesday’s market close, the Soul Patts share price finished 3.27% lower to $26.34.

For context, the S&P/ASX 200 Index (ASX: XJO) also headed south yesterday with a 1.75% loss to 6,941 points.

Let’s take a look at all the details regarding the Soul Patts dividend.

Soul Patts pays out interim dividend

Soul Patts delivered a solid performance for its first-half results for the 2022 financial year in March.

In summary, Soul Patts reported strong numbers despite its statutory net profit after tax (NPAT) recording a loss of $643 million.

Major contributors to the top line result were New Hope Corporation Limited (ASX: NHC), Brickworks Limited (ASX: BKW), and Round Oak Metals as well as higher dividends from the large-cap equities portfolio. The latter increased by roughly $2.7 billion due to the Milton acquisition which was completed on 5 October 2021.

The biggest win for shareholders came from the board’s decision to increase the interim dividend by 11.5% over H1 FY21.

Net cash flow from investments stood at $182.6 million, up 114% on the prior corresponding period which supported the higher dividend.

Notably, this reflected one of the highest first-half dividends in the history of Soul Patts.

When calculating against the current share price, the company is trailing on a forecast dividend yield of 2.35%.

Soul Patts share price snapshot

This year to date, the Soul Patts share price has fallen 11% on the back of weakened investor sentiment. It is also down around 10% over the past 12 months.

A series of market shocks such as the Omicron lockdown, the war in Ukraine, and steep inflationary movements haven’t helped the company.

Nonetheless, the group previously noted it has ample firepower on its balance sheet to purchase attractive investments during market downturns.

Soul Patts has a price-to-earnings (P/E) ratio of 23.53 and commands a market capitalisation of roughly $9.5 billion.

The post The Soul Patts dividend is being paid today. Here’s what you need to know appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Why did the South32 share price beat the other ASX 200 miners today?
• 2 ASX 200 shares clocking multi-year highs on Thursday
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Blockdown! Why is the Block share price crashing by 16% today?

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 positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Are you interested in adding some ASX growth shares to your portfolio this month? If you are, you may want to look at the two listed below that have recently been named as buys.

Here’s what you need to know about these ASX growth shares:

Breville Group Ltd (ASX: BRG)

The first ASX growth share to look at is Breville. It is a leading appliance manufacturer behind a range of brands that have been very popular with consumers for many years. Combined with its investment in research and development and its global expansion, this has helped underpin consistently solid sales and earnings growth.

The good news is that this is expected to continue in FY 2022. In fact, a recent presentation reveals that Breville expects its earnings before interest and tax (EBIT) in FY 2022 “to be consistent with the markets’ consensus forecast of ~$156m.” This will be a 14.3% increase from FY 2021’s EBIT of $136.4 million.

Morgans is a very positive on Breville. The broker currently has an add rating and $32.00 price target on its shares.

Webjet Limited (ASX: WEB)

Another growth share for investors to look at is online travel agent, Webjet. For obvious reasons, it has been hit incredibly hard by the pandemic. The good news, though, is that it has started to bounce back as the travel market recovers.

In fact, Goldman Sachs expects the company to report a small EBITDA profit when it releases its FY 2022 results next week. Goldman has forecast FY 2022 revenue of $143.6 million and EBITDA of $1.5 million.

After which, with the wind firmly back in its sails, the broker is expecting a material lift in EBITDA to $155.4 million in FY 2023 and then a 32.8% jump to $206.4 million in FY 2024.

In light of this, its analysts believe investors should be buying the company’s shares now with a long term view. Goldman currently has a buy rating and $6.90 price target on Webjet’s shares.

The post Here are 2 ASX growth shares experts have named as buys appeared first on The Motley Fool Australia.

More reading

• Broker says Webjet share price is a buy ahead of its FY22 results
• Own Webjet shares? Here’s what to expect from next week’s FY22 results
• Will Webjet pay a dividend in 2022?
• Are ASX 200 travel shares already fully valued in May?
• These are the 10 most shorted ASX shares

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

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The Fortescue Metals Group Limited (ASX: FMG) share price could be a consideration given how large of a potential dividend yield the ASX mining share is going to pay in FY22.

Fortescue is one of the world’s largest iron ore miners, alongside BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO). It has a few different mining hubs in Australia including Chichester, Solomon, and Western.

The relatively high dividend payout ratio of the business and relatively low price-to-earnings (p/e) ratio means that it normally has a large dividend yield.

How big is the Fortescue dividend going to be in FY22?

Each analyst has a different view on how large the Fortescue dividend yield will be in the current financial year.

Based on the forecast on Commsec, Fortescue could pay a grossed-up dividend yield of 14%.

However, one of the latest brokers to have their say on Fortescue has been Credit Suisse, which has estimated a grossed-up dividend yield of 16% in FY22 and then 18.4% in FY23.

One of the reasons for the large dividend expectations is that the iron ore price has been higher than at the end of 2021.

Credit Suisse is expecting the iron ore price to remain stronger for longer because of lower production by the large miners, which is affecting the relationship between global supply and demand. The broker thinks Fortescue’s lower grade iron ore will see a smaller discount compared to higher grade iron in the coming months.

In the first half of FY22, Fortescue declared a fully franked interim dividend of 86 cents per share, representing a dividend payout ratio of 70% of the net profit after tax (NPAT).

Is the Fortescue share price a buy?

For Credit Suisse, the broker is currently ‘neutral’ on the business, with a price target of $20. That implies a small potential rise over the next year on the current price of $19.01.

Other brokers have less optimistic price targets. For example, Morgan Stanley currently has an ‘underweight’ rating on the business with a price target of just $15.95. It noted the increasing cost of Iron Bridge – this is the project Fortescue is involved in that will produce high-grade iron ore.

Some analysts are also focusing on the large potential cost of the projects that Fortescue Future Industries (FFI) is working on, including green hydrogen. FFI is the green segment of Fortescue that is trying to decarbonise Fortescue and help reduce emissions in sectors that are hard to decarbonise. The uncertainty of the costs is seen as a negative.

FFI also recently acquired a high-performance battery business called Williams Advanced Engineering. Fortescue said this business “provides critical technology and expertise in high-performance battery systems and electrification to increase Fortescue’s operational efficiency, lower maintenance costs, and accelerate the decarbonisation of its mining operations”.

WAE will also be a “significant” new global battery growth business for Fortescue, according to the company.

Fortescue share price snapshot

The Fortescue share price has fallen by 4% since the start of the 2022 calendar year and by 19% over the past 12 months.

The post Is the Fortescue share price a buy for its 16% dividend yield? appeared first on The Motley Fool Australia.

More reading

• Is the Fortescue Future Industries hydrogen dream more fantasy than feasible?
• Why is the Fortescue share price rebounding today?
• Why are ASX 200 mining shares in the green today?
• Why are ASX 200 mining share prices slipping today?
• Fortescue share price dives another 3%, down 12% in a week

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals 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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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There are some high-quality exchange-traded funds (ETFs) that have suffered significant sell-offs amid the current market volatility.

While a lower price may not automatically mean a business or investment is better value, it does allow investors to invest at a lower price.

The businesses in the below two ETFs are exposed to industry tailwinds:

VanEck Video Gaming and Esports ETF (ASX: ESPO)

As the name suggests, this ETF is all about the global video gaming and e-sports world.

For some specific names, these are the biggest 10 positions in the ESPO ETF’s portfolio: Tencent, Nvidia, Activision Blizzard, Netease, Nintendo, Advanced Micro Devices, Electronic Arts, Nexon, Bandai Namco, and Zynga.

There is a sizeable double-digit representation in the portfolio from the US, Japan, and China. So, there is a bit of global geographic diversification in the portfolio away from Australia.

The global video gaming industry has seen annualised double-digit revenue growth since 2015, with e-sports revenue growing even faster (which has risen by an average of 28% per annum since 2015).

E-sports is actually opening up a number of revenue streams with the large gaming audiences that it gets. Examples of those new sources of revenue include game publisher fees, media rights, merchandise, ticket sales, and advertising.

Video gaming is now such a large sector that it is bigger than the combined entertainment industries of music and movies.

The ETF has annual management fees of 0.55%.

How much cheaper is the ESPO ETF? It has dropped by 28% since the beginning of 2022.

Betashares Global Cybersecurity ETF (ASX: HACK)

This ETF’s name also gives a clear indication of its purpose. It’s about the global cybersecurity sector.

There are a total of around 40 positions in the HACK ETF portfolio. These are the biggest names in the ETF’s holdings: Cisco Systems, Palo Alto Networks, Crowdstrike, Zscaler, Mandiant, Booz Allen Hamilton, Leidos, Cloudflare, Sailpoint Technologies, and Akamai Technologies.

BetaShares says that with cybercrime on the rise, the demand for cybersecurity services is expected to grow strongly for the foreseeable future. According to Statista, the global cybersecurity market is expected to rise from US$151.67 billion in 2018 to US$248.26 billion in 2023.

The fund provider notes that “Australian investors currently have few local options for gaining exposure to the fast-growing cybersecurity sector”. There are “very few pure-play cybersecurity firms listed on the Australian sharemarket”.

The HACK ETF comes with an annual management fee of 0.67%.

This investment has also seen a sizeable drop since the beginning of 2022, falling by 20%.

The post Here are 2 quality ETFs that are now a lot cheaper appeared first on The Motley Fool Australia.

More reading

• 3 fantastic ETFs for ASX investors to buy this week
• Here are 2 ETFs delivering breakneck ASX performance
• Are these 2 compelling ASX shares buys in May 2022?
• 2 excellent ETFs for investors to buy in May
• 3 top ETFs for ASX investors to buy and hold for 10 years

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Activision Blizzard, Advanced Micro Devices, BETA CYBER ETF UNITS, Cisco Systems, Cloudflare, Inc., CrowdStrike Holdings, Inc., Nvidia, and Zynga. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Electronic Arts and NetEase. The Motley Fool Australia has positions in and has recommended BETA CYBER ETF UNITS. The Motley Fool Australia has recommended Activision Blizzard, CrowdStrike Holdings, Inc., Nvidia, and VanEck Vectors ETF Trust – VanEck Vectors Video Gaming and eSports ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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There is much encouragement from experts to buy up ASX shares after they’ve been heavily discounted in recent months.

In fact, FNArena founder Rudi Filapek-Vandyck only warned a few days ago that the proportion of “buy” recommendations from the analyst community is at an all-time high.

“The only precedent over the past 16 years occurred in 2011 when financial markets were gripped by anxiety that debt-laden Greece might turn into the bombshell that would cause the implosion of the European Union.”

But it’s not a matter of just hoovering up everything in sight.

There are still many stocks that face hardships for a while yet.

Rising interest rates worry some sectors more than others

The big hurdle in Australia at the moment is rising interest rates.

The Reserve Bank of Australia increased the cash rate this month by 25 basis points. But many economists reckon there are more to come.

In such an environment, the team at Wilsons warn that there are some risks to consider for ASX shares:

• Lower disposable income
• Lower house prices
• Higher cost of debt for businesses
• RBA policy error 

These risks mean that there are some parts of the market Wilsons would avoid when bargain-hunting.

“We believe that investors should remain underweight sectors such as retail and housing to avoid the risks cited above,” it noted in a memo to clients.

“We think this is sensible until there is more certainty around the quantum of rate hikes over the next year.”

The retail sector is the most direct victim of Australians with less money to spend.

“This could be a very challenging period for retailers,” read the memo.

“Consumer confidence has already been impacted by expectations of higher interest rates and higher inflation; further declines could lead to a substantial slowdown in consumer spending.”

And housing is not far behind, with mortgage repayments set to rise and dampening demand.

“In 2009-10, rate hikes were quickly followed by a period of weaker prices,” stated the Wilsons team.

“For Australian equities, risks remain elevated on sectors and companies associated with housing activity.”

Stocks that could be under pressure

The memo named 3 particular stocks that will be impacted from the housing slowdown:

• Domain Holdings Australia Ltd (ASX: DHG)
• Mirvac Group (ASX: MGR)
• Stockland Corporation Ltd (ASX: SGP)

Wilsons is concerned about sales listings falling, which would affect the earnings of a classifieds site like Domain.

Real estate developers Mirvac and Stockland face multiple pressures.

“The housing development sector should be weaker from lower demand for housing (if prices fall),” the memo read.

“Elevated timber and steel prices could add to build costs. These companies are unlikely to be able to pass these costs onto buyers.”

The post Warning: 3 ASX shares under pressure from rising interest rates appeared first on The Motley Fool Australia.

More reading

• Why Block, Domain, Metcash, and Zip shares are pushing higher
• 2 ASX tech shares to buy for dirt cheap right now: experts
• AMP share price sinks amid asset sale complications 
• Why Betmakers, Brambles, Challenger, and Stockland shares are charging higher

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Thursday, the Commonwealth Bank of Australia (ASX: CBA) share price pushed higher despite the market selloff.

This was driven by a positive reaction to the banking giant’s third quarter update.

What happened during the third quarter?

For the three months ended 31 March, compared to the quarterly average during the first half, Australia’s largest bank revealed a 1% decline in operating income to $6,103 million and flat cash earnings of $2,400 million.

According to note out of Goldman Sachs, this means that the bank’s quarterly cash earnings are run-rating 10% ahead of its second half forecasts. In addition, it was 9% ahead of the analyst consensus estimate.

Is the CBA share price in the buy zone?

Despite the bank impressing during the quarter, Goldman Sachs still doesn’t see enough value in the CBA share price to change its recommendation.

As a result, this morning the broker has retained its sell rating with an improved price target of $89.86.

Based on the current CBA share price of $102.15, this implies potential downside of 12% for investors over the next 12 months.

Why is the broker bearish?

The main reason that Goldman is bearish on the CBA share price is its valuation. The broker just doesn’t believe that the bank’s shares deserve to trade at such a premium to its rivals.

Goldman explained:

Overall we reiterate our Sell rating given: i) while CBA’s balance sheet is strong and operationally, exhibited superior performance on volume growth versus its major bank peers (ANZ at 0.3x system average WBC at 0.4x, but NAB at 1.2x), ii) NIMs remain soft, with CBA more exposed to sector wide headwinds (elevated swap rates, portfolio mix effects and price competition). As such we do not believe this justifies the 53% PPOP premium it is currently trading on versus peers (peers adjusted for ex-dividend; versus 26% 15-yr average).

The post Broker says the CBA share price is expensive and a sell appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Why CBA, Incannex, Judo Capital, and Orica shares are rising
• ASX 200 midday update: CBA’s Q3 update impresses, Xero and Block crash
• CBA share price pushes higher on consensus-beating quarterly update
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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 Scott Phillips.

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