If you’re looking for exposure to the beaten down tech sector, then Xero Limited (ASX: XRO) shares could be the answer.

Last week, two leading brokers reiterated their bullish views on the cloud accounting company’s shares in response to news that it has lifted its prices in the ANZ and UK markets.

What are brokers saying about the Xero share price?

According to a note out of Citi, its analysts have reiterated their buy rating and $108.00 price target.

Based on the current Xero share price of $82.93, this implies potential upside of 30% for investors over the next 12 months.

Citi commented:

We see Xero’s decision to increase prices in ANZ and UK as an indication of the company’s confidence in its position in its core markets. While the changes would not have a full impact in FY23e, we estimate the changes represent a 8% uplift to group ARPU and represents upside to our ARPU forecasts. An increase in churn is a factor to consider especially given the slowing economic outlook.

What else was said?

The team at Goldman Sachs is even more bullish on the Xero share price. Its analysts have retained their buy rating and $118.00 price target on the company’s shares.

This suggests that there’s potential upside of 42% for investors between now and this time next year.

Goldman appears to agree with Citi on these price increases. The broker also suspects that increases may be on the way for the rest of the business. It commented:

We remain confident Xero will be able to execute on these increases while preserving its existing subscriber base, noting their strong track record in putting through increases while driving churn lower. We would also not be surprised if NA/ROW markets were also considered for a pricing increase, given they previously followed ANZ/UK by 2 months in Nov-21.

The post Brokers give their verdict on the Xero share price (hint: they are bullish) 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. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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

Electric vehicles (EVs) will be one of the large secular growth stories of this decade. BloombergNEF researchers estimate that annual unit volumes for plug-in EVs will grow from 6.6 million in 2021 to 20.6 million in 2025.

Considering how much a new car costs, this is a trillion-dollar revenue opportunity for companies to go after.

That is why so many automakers — from EV pioneer Tesla (NASDAQ: TSLA) to upstarts like Rivian to legacy automakers like Ford (NYSE: F), Volkswagen, and Toyota — are investing so much money in their EV product lines.

But which stocks among these automakers provide the best investment opportunity at current prices? Let’s look at two key players — Tesla and Ford — and identify which stock looks most likely to 5x in the shortest time period.

Tesla: The EV pioneer

You probably know Tesla as the company that has driven the EV revolution over the past 10 years. With four models currently for sale and a few more in development, Tesla is the EV leader in many important markets around the world.

In 2021, the company delivered 936,000 vehicles to customers and has grown its production capacity at a rapid rate over the past decade.

Last year, the company reported $53.8 billion in revenue and $6.5 billion in operating income. With $17 billion in cash shoring up its balance sheet, investors are betting that Tesla can capture a good chunk of the projected bump in annual EV sales, driving its annual deliveries into the millions.

Tesla is also making bets on self-driving technology, solar energy, and battery storage deployments. However, it is difficult to estimate how much financial value these segments will provide considering solar/battery storage has negative gross margin right now, as well as the uncertainty around full self-driving technology, which many researchers think is years and years away. For now, it is probably smart for investors to not include these divisions when valuing Tesla stock.

As of this writing, Tesla has a market cap of $730 billion, one of the largest in the world. Tesla stock has a trailing price-to-sales ratio around 14 and investors are already pricing in a lot of growth over the next few years.

In order for the stock to 5x to a market cap of $3.65 trillion, Tesla would need to greatly exceed investors’ high expectations.

Ford: Making the EV transition

Unlike Tesla, Ford is a legacy automaker that still makes the majority of its sales from cars with internal combustion engines (ICEs).

Over the next decade, the company plans to invest heavily in EV operations, with $50 billion in planned spending from now until 2026. According to management, this will enable the company to get to 600,000 in annual EV manufacturing capacity next year and 2 million by 2026.

Looking at Tesla’s financials as a comparison, this could translate into over $100 billion in EV sales for Ford if it can execute on these objectives.

To do so, Ford has a robust lineup of EVs, including the Mustang Mach-E, F-150 Lightning, and E-Transit commercial van. There is a lot of uncertainty, though, as the company has not gotten many vehicles out on the road.

But like with Tesla and the other automotive manufacturers, with so many new sales to go after, there is a gigantic financial opportunity here.

As of this writing, Ford has a market cap of $54 billion and $29 billion in cash and equivalents. In order for the stock to 5x, investors would need to value Ford at a market cap of $270 billion, or less than 10% of what Tesla would need to be valued at in order to achieve the same jump.

A matter of math

I think it is clear that Ford is more likely than Tesla to 5x, simply because Tesla’s stock is valued so richly.

If Ford is able to hit $200 billion in annual sales after ramping up EV production and raise its operating margin to 15% (which is close to Tesla’s), the company would be generating $30 billion in operating income by 2026.

Using a typical earnings multiple for automakers of 10, that equates to a market cap of $300 billion, which clears the 5x hurdle.

Now let’s do the same calculation for Tesla. In order to hit an earnings multiple of 10 on a market cap of $3.65 trillion (Tesla stock’s 5x hurdle), the company would need to be doing $365 billion in operating income a year.

Assuming an operating margin of 15%, this would require over $2.4 trillion in annual sales. Achieving a 5x jump does not seem reasonable unless you think investors will perpetually value Tesla at an earnings multiple much higher than the rest of the industry. 

I don’t think either Ford or Tesla will 5x within the next five years. But if I had to bet on one stock doing this, it would be Ford, simply because of the starting valuation.

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

The post More likely to 5x first: Tesla vs. Ford? appeared first on The Motley Fool Australia.

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Brett Schafer 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 Tesla and Volkswagen AG. 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.

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

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The lithium industry has been running cold in 2022 after being the hottest part of the market in 2021.

Concerns over a potential sharp decline in the price of the battery making ingredient in the near future have been weighing heavily on sentiment.

This is because there are many developers and explorers on the Australian share market that could miss out on the sky-high prices of today and eventually commence operations when prices are much lower. This would have a significant impact on their profitability.

And as the market is a forward-looking machine, these lower future profits impact the valuation of a company today.

Luckily, some ASX lithium shares are already producing the white metal and are benefiting from record-breaking prices.

Which lithium shares are already producing?

Allkem Ltd (ASX: AKE), Mineral Resources Limited (ASX: MIN), and Pilbara Minerals Ltd (ASX: PLS) are already producing lithium and have plans to grow their output in the future.

For example, Allkem is planning to increase its lithium production three-fold by 2026 and maintain a 10% share of the global lithium market over the next decade.

Whereas Mineral Resources recently agreed to accelerate the resumption of production from Train 2 at Wodgina. The first spodumene concentrate from this train is expected in July with a nameplate capacity of 250,000 dry metric tonnes.

What about the rest?

There are a number of developers and explorers on the ASX, which are still a little way off producing lithium.

• Liontown Resources Limited (ASX: LTR) is targeting first lithium concentrate production in 2024.
• Piedmont Lithium Inc (ASX: PLL) is aiming for the first half of 2023.
• Sayona Mining Ltd (ASX: SYA) is targeting production during the first quarter of 2023.
• Vulcan Energy Resources Ltd (ASX: VUL) is planning to construct its first commercial plant in 2024.

Finally, the next ASX lithium share that is likely to be producing is Core Lithium Ltd (ASX: CXO). In fact, it proudly labels itself as “Australia’s next lithium producer.” It is targeting production at the Finniss Project by the end of 2022.

What should investors do before investing in lithium?

Valuations arguably got out of control last year with investors valuing companies as if lithium prices would stay at record levels forever. So, just because a share is down 50% from its high doesn’t necessarily mean it is a bargain now.

If you’re looking to invest in lithium explorers, you might want to consider just how profitable (or not) they will be if battery material prices do tumble as predicted by analysts.

The post Which ASX lithium shares are producing and which are not? appeared first on The Motley Fool Australia.

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• Why is the Vulcan Energy share price tumbling 6% today?
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• Is it too late to buy ASX lithium shares?

Motley Fool contributor James Mickleboro has positions in Allkem 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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The BetaShares Global Banks ETF (ASX: BNKS) is one of those ASX exchange-traded funds (ETFs) that seems to fly under the radar. Chances are many ASX investors haven’t even heard of BNKS, despite the fact it has been around since 2016.

But in this high inflation, rising interest rate world, bank shares have seen a spike in interest for their supposed inflation-resistant properties. So in light of this, now could be a good time to check out what’s under the hood of this ETF.

The BetaShares Global Banks ETF does pretty much what you would expect it to do. According to the provider, this ETF aims to hold “a diversified portfolio of the world’s largest banks in a single ASX trade”.

BNKS holds 60 different bank shares sourced from around the world, although not Australia, which the provider actively excludes. So don’t expect to see the likes of Commonwealth Bank of Australia (ASX: CBA) or National Australia Bank Ltd (ASX: NAB) here.

What’s under the hood of the BetaShare Global Banks ETF?

Instead, it has significant exposure to US banks, which make up almost 40% of the total BNKS portfolio. Other significant contributors include Canada (18.1%), Britain (7.8%), China (6.4%), and Japan (5.2%).

Of the BetaSahres Global Banks ETF’s 60 bank shares, here are the top 10 that appear in its portfolio as it currently stands:

1. JPMorgan Chase & Co with a portfolio weighting of 8%
2. Bank of America Corp with a weighting of 7.1%
3. Wells Fargo & Co with a weighting of 6%
4. Royal Bank of Canada with a weighting of 5.4%
5. The Toronto-Dominion Bank with a weighting of 4.9%
6. HSBC Holdings plc with a weighting of 4.1%
7. Citigroup Inc with a weighting of 3.7%
8. The Bank of Nova Scotia with a weighting of 2.9%
9. Mitsubishi UFJ Financial Group with a weighting of 2.8%
10. China Construction Bank Corp with a weighting of 2.6%

So certainly a mixed bag there.

According to BetaShares, this ETF currently offers a trailing 12-month dividend distribution yield of 4%, reflecting the traditionally high levels of dividends that bank shares pay out (a phenomenon not confined to the ASX).

However, this ETF’s performance has hardly set the world on fire in recent years. As of 31 May, BNKS has returned -3.57% over the preceding 12 months. It has averaged a return of 3.71% per annum over the past three years and 2.23% over the past five.  By contrast, an ASX index ETF like the Vanguard Australian Shares Index ETF (ASX: VAS) has averaged 8.06% per annum over the past three years and 8.95% over the past five.

The BetaShares Global Banks ETF charges a management fee of 0.57% per annum.

The post Own the BetaShares Global Banks ETF? Here’s what you’re invested in appeared first on The Motley Fool Australia.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Sebastian Bowen has positions in JPMorgan Chase and National Australia Bank Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended BetaShares Global Banks ETF – Currency Hedged. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended HSBC Holdings. 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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