Stock Pick

Month: October 2022

  • Why is the NAB share price having such a stellar run today?

    Two businesspeople in suits run, one chasing the other.Two businesspeople in suits run, one chasing the other.

    It’s shaping up to be a good day for the National Australia Bank Ltd (ASX: NAB) share price.

    The banking giant’s stock is lifting 3.71% at the time of writing to trade at $30.99. That sees it among the top performers on the S&P/ASX 200 Index (ASX: XJO).

    Meanwhile, the index is posting a 0.52% gain.

    So, what might be driving the NAB share price higher into the green on Thursday? Let’s take a look.

    What might be boosting the NAB share price today?

    There’s been no news to explain the gains posted by the NAB share price on Thursday. Though, the stock isn’t alone in the green.

    It’s joined by many of its S&P/ASX 200 Financials Index (ASX: XFJ) peers. The financial sector is climbing 2.34% right now, driven by the Westpac Banking Corp (ASX: WBC) share price’s 4.26% jump.

    As is the case with NAB, there’s been no word from the Westpac camp either.

    Where there have been whispers, however, is Bank of Queensland Ltd (ASX: BOQ). The smaller ASX 200 bank posted its financial year 2022 earnings yesterday, sending its stock 11% higher.

    They came complete with a 15% year-on-year increase in after-tax profits and an upsized 24-cent final dividend, bringing the bank’s full-year offerings to 46 cents per share.

    On top of that, Bank of Queensland has been the focus of several brokers’ notes this morning. Goldman Sachs, for one, commented:

    One of the key highlights of the [bank’s] FY22 result was the disclosure of its 4Q22 [net interest margin (NIM)], which at 1.81%, was 6 basis points higher than the 2H22 half average NIM. Furthermore, management noted that the exit NIM was well in excess of the 4Q22 NIM.

    Fundamentally, this improving NIM outlook is being driven by inertia in deposit pricing as cash rates (and therefore asset interest rates) rise. It is for this reason we continue to believe the major banks are better positioned to benefit from the current environment.

    That’s likely good news for NAB and its big four peers, and could be helping to bolster their share prices on Thursday.

    The post Why is the NAB share price having such a stellar run today? appeared first on The Motley Fool Australia.

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    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 positions in and has recommended Goldman Sachs. 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 Scott Phillips.

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  • Down 25%, is it safe to invest in the S&P 500 right now?

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

    A man rests his chin in his hands, pondering what is the answer?

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

    It’s ugly out there. The S&P 500 (SNPINDEX: ^GSPC) is 25% below its January peak, and after its latest rout sits within sight of new multi-month lows. Yikes! Whether you’re a new investor or a veteran, it’s tough to feel confident about putting money into the market right now.

    If you truly believe in a long-term approach, though, this could be the time to do exactly that. Just buckle up if you’re going to take the ride.

    Not quite but close enough?

    The market could still easily move lower before moving higher again. The average bear market drags the S&P 500 to 36% below its peak, according to data from mutual fund company Hartford Funds, while brokerage firm Edward Jones calculates the average bear market lasts about 15 months. We’re not quite at either mark yet.

    Data by YCharts.

    Trying to step in at the precise end of a bear market and the very beginning of a new bull market, however, can prove costly for a couple of different (but related) reasons.

    The first reason: You’re not going to be able to identify the bottom while the bottom is being established.

    Plenty of pundits will argue with that, claiming the market gives clear hints it’s hitting bottom. And there might be something to their arguments — the stock market may be somewhat mechanical some of the time. But those hints are not consistent enough to count on when you’re making major buying and selling decisions. At best, it’s an exercise in futility; at worst, it’s a way of talking yourself out of a great opportunity at the worst possible time.

    Why? Consider the second reason you should be more inclined to invest right now despite the clear bearishness rather than hold off: Not being in the market for the entirety of any bullish reversal can cost you … a lot.

    Edward Jones had some curious findings regarding recoveries. Chief among them: The five most recent bull markets averaged a gain of 25% in just the first three months. That’s a sizable chunk of the average total bull market gain (more than 150% from beginning to end).

    Or think about it like this: While this bear market isn’t 15 months old and hasn’t reduced the S&P 500’s value by 36%, it’s closer to both of those milestones than not.

    The real danger

    Whether or not it’s safe to step into the S&P 500 now that it’s 25% below its peak mostly depends on your personal situation.

    If you’re going to need the capital in the very near future (say, for college tuition or to buy a home), then there’s danger in being exposed to stocks here. If you’re nearing retirement, that also complicates the answer.

    Impending retirement doesn’t necessarily mean you should remain on the sidelines. While you may start withdrawing some of your retirement funds right away, for most investors the bulk of any retirement savings won’t be tapped for years down the road. It would be nice to grow that piece of your nest egg in the meantime, and stocks are still the best long-term growth engine around.  

    Perhaps a better question to ask is this: Are you more afraid of losing money in the short run, or more afraid of missing out on an opportunity to make money in the long run? If your portfolio reflects an outlook of five years or longer, your bigger danger isn’t being in the market when things are a little rough — it’s not being in the market once things finally take a turn for the better.

    Most investors fear the former until they’ve had a chance to consider the consequences of the latter.  

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

    The post Down 25%, is it safe to invest in the S&P 500 right now? appeared first on The Motley Fool Australia.

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    James Brumley 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.

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

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  • Why this heavily shorted ASX 200 share could be a buy: expert

    Smiling man sits in front of a graph on computer while using his mobile phone.Smiling man sits in front of a graph on computer while using his mobile phone.

    It’s been a rough year for the share price of S&P/ASX 200 Index (ASX: XJO) tech stock Megaport Ltd (ASX: MP1).

    Not only has it dumped 60% year to date to trade at $7.67, but the company’s short position has been on the up and up.

    Megaport’s short position had leapt to 10% as of The Motley Fool Australia’s latest weekly short-selling breakdown. As my colleague James noted, short-sellers’ eyes might have been caught by valuation concerns and weakness in the tech sector.

    But not all are bearish on the ASX 200 tech share. Indeed, some experts are tipping the stock as a buy, while others are suggesting it could offer more than 80% upside.

    Let’s take a closer look at what might be going right for the embattled short target.

    Is ASX 200 tech share Megaport a buy right now?

    The future could be bright for the Megaport share price, with some experts flagging it as a buy.

    The company uses software-defined networking to provide cloud connectivity and on-demand data networking globally.

    The tech share has been sold off alongside the S&P/ASX 200 Information Technology Index (ASX: XIJ) this year. The sector has dumped 37% year to date amid rising interest rates.

    Its tumble might have brought about a buying opportunity, however.

    Market Matters author and Shaw and Partners portfolio manager James Gerrish thinks the stock is a buy, saying growth challenges facing the company are likely already priced into its share price. He continued, telling Livewire:

    Obviously, they’ve had to refocus on how they sell their product. They had some issues with the level of growth they were achieving. I think they’ve addressed that. They’re providing a little bit more clarity and information to the market and I think that’s a positive. 

    The company’s average revenue per customer grew 24% last financial year. Its major focus will be growing towards profitability this fiscal year.

    But not all are bullish on its stock. Investors Mutual portfolio manager Lucas Goode said, via Livewire:

    I think with Megaport they’ve got a really interesting product, but it’s one that, while it should have really high incremental margins, they’ve really struggled to generate the returns that you would expect because it’s actually a very difficult sales cycle.

    Fortunately, top brokers seem more inclined to agree with Gerrish over Goode.

    Goldman Sachs has a buy rating and a $10.30 price target on Megaport shares, implying the ASX 200 tech stock has a 37% upside.

    And Citi is even more hopeful, tipping the stock as a buy and slapping it with a $13.90 price target, The Motley Fool Australia recently reported. That marks a potential 81% upside.

    The post Why this heavily shorted ASX 200 share could be a buy: expert appeared first on The Motley Fool Australia.

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    Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 positions in and has recommended Goldman Sachs and MEGAPORT FPO. 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 Scott Phillips.

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  • Is Google now joining the crypto party following its latest move?

    group of asx 200 investors celebrating increasing share pricegroup of asx 200 investors celebrating increasing share price

    Alphabet Inc (NASDAQ: GOOG), or Google to you and me, looks to be joining the crypto party.

    Google has been gradually increasing its footprint in the crypto space for some time now.

    And this week, the tech giant announced a partnership with Coinbase Global Inc (NASDAQ: COIN) to improve the Web3 ecosystem.

    Google Cloud to accept crypto payments

    According to news provided by Google Cloud, that partnership will see certain customers be able to pay for their cloud services via select digital tokens.

    Coinbase supports numerous cryptos, including Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Dogecoin (CRYPTO: DOGE).

    Following the initial rollout in early 2023, Google will likely expand that offering to more customers.

    Atop enabling payments in select tokens, CNBC reports that Google is also looking into the possibility of employing Coinbase Prime. Coinbase Prime stores companies’ cryptos alongside enabling trades.

    What did management say?

    Commenting on the partnership that will see Google Cloud accept crypto payments, Coinbase CEO Brian Armstrong said: “We are excited Google Cloud has selected Coinbase to help bring Web3 to a new set of users and provide powerful solutions to developers.”

    Armstrong continued:

    With more than 100 million verified users and 14,500 institutional clients, Coinbase has spent more than a decade building industry-leading products on top of blockchain technology. We could not ask for a better partner to help execute our vision of building a trusted bridge into the Web3 ecosystem.

    Google Cloud CEO Thomas Kurian also touted the advantages for Web3 developers:

    We want to make building in Web3 faster and easier, and this partnership with Coinbase helps developers get one step closer to that goal… Our focus is making it frictionless for all customers to take advantage of our scalability, reliability, security, and data services, so they can focus on innovation in the Web3 space.

    It’s unclear if Google intends to hold the Bitcoin, Ethereum or other cryptos it receives as payment for its cloud services or swap them for fiat currency.

    The post Is Google now joining the crypto party following its latest move? 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. Motley Fool contributor Bernd Struben 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 Alphabet (A shares), Alphabet (C shares), Bitcoin, and Ethereum. The Motley Fool Australia has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Bitcoin, and Ethereum. 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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  • Brokers give their verdict on the Bank of Queensland share price

    A trio of ASX shares analysts huddle together in an office with computer screens all around them showing share price movements

    A trio of ASX shares analysts huddle together in an office with computer screens all around them showing share price movements

    The Bank of Queensland Ltd (ASX: BOQ) share price is pushing higher again on Thursday.

    In morning trade, the regional bank’s shares are up 1% to $7.65.

    This means the Bank of Queensland share price is now up 11% this week.

    Why is the Bank of Queensland share price storming higher?

    Investors have been buying the bank’s shares this week following the release of its full year results.

    Although Bank of Queensland’s results fell a touch short of expectations, its exiting net interest margin (NIM) got investors excited and appears to show that rising interest rates are boosting profitability in the banking sector.

    It was for this reason that the big four banks all charged higher along with the Bank of Queensland share price on Wednesday.

    Can its shares keep rising?

    According to a note out of Goldman Sachs, its analysts have retained their neutral rating on the company’s shares this morning.

    However, it is worth noting that the broker’s price target of $8.51 still implies potential upside of 11% for investors. And that’s before dividends!

    Goldman was pleased with Bank of Queensland’s exiting NIM, but fears that rising costs could hold it back in FY 2023. It explained:

    We reiterate our Neutral call on BOQ. Despite valuation support, we believe its NIM leverage will ultimately underperform peers and its expenses will remain under pressure given the current inflationary environment and headwinds from running legacy systems along with building its new digital bank, which are expected to offset ME Bank synergies and restructuring benefits.

    Citi remains bullish

    One broker that is more bullish on the Bank of Queensland share price is Citi.

    This morning the broker has retained its buy rating and $8.75 price target on the bank’s shares.

    This implies potential upside of 14% for investors over the next 12 months.

    The post Brokers give their verdict on the Bank of Queensland share price 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 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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  • Can ASX 200 lithium shares bank on the price of lithium to keep soaring?

    Young boy with glasses in a suit sits at a chair and reads a newspaper.Young boy with glasses in a suit sits at a chair and reads a newspaper.

    ASX 200 lithium shares have soared ahead in 2022, but how will lithium prices impact their fortunes in the future?

    Lithium shares on the S&P/ASX 200 Index (ASX: XJO) include Pilbara Minerals Ltd (ASX: PLS), Allkem Ltd (ASX: AKE) and Core Lithium Ltd (ASX: CXO). Sayona Mining Ltd (ASX: SYA) is a recent addition to the ASX 200.

    The Office of the Chief Economist has recently revealed its lithium price predictions. So what is the outlook?

    Lithium prices tipped to rise, then ease

    Pilbara Minerals shares have risen 62% in the year to date, while Allkem shares have soared 37%. Core Lithium shares have surged 95% this year so far, while Sayona shares have rocketed 73%.

    The price of lithium impacts the earnings of ASX lithium shares, particularly those that are producing or planning production soon.

    Lithium prices will rise in 2022 and 2023 before easing in 2024, a Resources and Energy September quarterly report predicts.

    The report predicts spodumene prices will jump from an average of US$598 a tonne in 2021 to US$2,730 a tonne in 2022. In 2023, spodumene prices are tipped to soar to US$3,280 a tonne before easing to US$2,490 a tonne in 2024.

    Meanwhile, lithium hydroxide prices are forecast to increase from US$17,370 a tonne in 2021 to US$38,575 a tonne in 2022. In 2023, lithium hydroxide prices are tipped to soar to US$51,510 before pulling back to US$37,650 in 2024.

    The report stated:

    World demand for lithium is estimated to increase from 583,000 tonnes of lithium carbonate equivalent (LCE) in 2021 to 724,000 tonnes in 2022.

    Asia remains the major source of demand for lithium, despite the spread of new battery manufacturing capacity into Europe and the US.

    Global electric vehicle sales soared 26% in the 2022 financial year, the report noted. Chinese sales surged 110%, European sales rose 6% and North American sales lifted 27%.

    UBS rates the Allkem share price as a buy but has recently recommended investors sell Pilbara Minerals shares.

    ASX 200 lithium share price snapshot

    In the past year, Allkem shares have lifted 69%, while Pilbara shares have exploded 153%.

    Sayona Mining shares have risen 50% in a year, while Core Lithium shares have charged 140% higher.

    The post Can ASX 200 lithium shares bank on the price of lithium to keep soaring? appeared first on The Motley Fool Australia.

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    Motley Fool contributor Monica O’Shea 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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  • Why is the NIB share price crashing 8% today?

    A businesswoman pulls her glasses down in shock to look at the bad news on her computer.

    A businesswoman pulls her glasses down in shock to look at the bad news on her computer.

    The NIB Holdings Limited (ASX: NHF) share price has returned from its trading halt and sunk deep into the red.

    In morning trade, the private health insurer’s shares are down over 8% to $6.88.

    Why is the NIB share price crashing?

    The weakness in the NIB share price on Thursday has been driven by the completion of the company’s $135 million institutional placement.

    According to the release, following a bookbuild process, NIB was able to raise the funds at $6.90 per new share. This represents a discount of 8.1% to the NIB share price prior to the halt.

    This was also the floor price for the underwritten placement, which may be an indication that demand wasn’t overly strong for the offering.

    NIB will now push ahead with its non-underwritten share purchase plan with the aim of raising a further $15 million. These funds will be raised at the lower of the institutional placement price or a 2% discount to the five-day volume weighted average price on 7 November.

    Why is NIB raising funds?

    The proceeds from the equity raising will be used to fund its entry into Australia’s National Disability Insurance Scheme (NDIS) sector as a Plan Manager. NIB has identified a number of potential acquisitions and signed an agreement for one.

    It will start with the acquisition of Maple Plan, which is the seventh largest Plan Manager with ~7,000 participants and revenue of approximately $10.4 million in FY 2022.

    NIB’s managing director, Mark Fitzgibbon, commented:

    The NDIS has become a vitally important part of Australia’s social capital and a significant economic sector. Already it supports 530,000 participants with more than 800,000 expected by 2030. NDIS funding is expected to double from around $29 billion in 2022, to $59 billion by 2030.

    We believe we can contribute to the success of the NDIS and improve outcomes for participants. There is an alignment between supporting NDIS participants and our 70-year history as a private health insurer.

    The post Why is the NIB share price crashing 8% 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. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended NIB Holdings 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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  • Why has the iron ore price taken a hit this week?

    Boxer falls down in the ring, indicating a share price performance low.Boxer falls down in the ring, indicating a share price performance low.

    The iron ore price is dropping and this is hitting the valuation of miners. For example, over the last two trading sessions, the Fortescue Metals Group Limited (ASX: FMG) share price is down 8%. BHP Group Ltd (ASX: BHP) shares are down 1.3%, and the Rio Tinto Limited (ASX: RIO) share price is down 2.5%.

    One thing to remember with commodity businesses is that they are heavily reliant on the commodity price for short-term profitability and investor sentiment.

    Why the iron ore price matters

    Think about this – if it costs a miner US$20 to produce one tonne of iron ore and it can sell that iron for US$100 per tonne, then that’s a good amount of operating profit for the miner. If the iron ore price rose to US$110 per tonne, but it still costs US$20 to produce one tonne, then that extra US$10 is mostly extra profit for the business, aside from paying more to the government.

    But, the same is true when the commodity falls in value. A reduction of US$10 per tonne would largely cut into net profit.

    What’s happening?

    According to reporting by Bloomberg, on Tuesday the iron ore price in Singapore dropped 2.8% lower to US$94.25 per tonne.

    The news outlet noted that the start of China’s peak construction for infrastructure and steel-related demand is usually in September and October. But, the resurgence of the iron ore price hasn’t occurred.

    Bloomberg reported that the Chinese economy is dealing with a downturn in housing as well as COVID-19 lockdowns. Real estate developers reportedly saw new home sales decline by a quarter in September.

    Steel mills are apparently only buying what they need, rather than restocking, according to reporting by Bloomberg.

    Analyst Kamal Ailani at Dow Jones business McCloskey by OPIS suggested that the iron ore price could fall further from here. However, it’s still “well supported around $85 a tonne”. If it were to drop below that price, smaller iron ore miners may need to reduce production because of higher costs.

    Are the ASX iron ore mining shares an opportunity?

    I think it’s a good idea to consider the cyclical nature of the iron ore price, and most commodities.

    It’s impossible to say when a commodity price will see a downturn. Or an upswing.

    But, I do think that declines can prove to be buying opportunities with resource businesses. Iron ore is an important part of steelmaking. Steel has many uses, though its demand isn’t going to be consistent every single month.

    If the iron ore price goes below US$90 per tonne, I think this could cause iron ore miners to drop in value as well. Even at a lower price, I think Fortescue shares, BHP shares and Rio Tinto shares are all capable of producing decent dividends for shareholders at a lower iron ore price while investors wait for another upswing.

    I’m a shareholder in Fortescue because of its green energy efforts, namely green hydrogen.

    I think BHP is attractive because of its diversified portfolio, which includes copper, nickel, potash and coal. However, it did just lose a High Court appeal. The appeal was to “block shareholders who are not Australian residents from participating in a class action against the company,” according to reporting by the ABC.

    Rio Tinto shares could be an opportunity as well, as the miner increases its participation in decarbonisation-linked commodities with copper and lithium exposure.

    The post Why has the iron ore price taken a hit this week? appeared first on The Motley Fool Australia.

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    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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  • The 1 cryptocurrency that’s on fire today

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

    Concept image of a man in a suit with his chest on fire.

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

    What happened

    The broader cryptocurrency market has been seeing rather low levels of volatility of late. Whether that’s investors believing that much of the macro news that’s already impacted markets has been priced in or not remains to be seen. However, with most tokens hovering around flat today, and the overall market down only 0.3% at the time of writing, many are focusing on tokens that are making unusual moves.

    One such token that fits this criteria today is Hedera Hashgraph (CRYPTO: HBAR). The world’s 36th-largest token by market capitalization, Hedera has surged 6.2% higher over the last 24 hours as of 1:30 p.m. ET. This is the largest upside move of any token today.

    Recent reports that Hedera has seen developer interest in its enterprise-grade network surge may be behind this move. According to recent data from Sentiment, Hedera is currently in third place in terms of development activity, behind Polkadot and Cardano. 

    So what

    The race for developer talent to build out decentralized applications on Layer 1 networks like Hedera is on. The fact that so many are choosing this lesser-known (but significant) blockchain is something worth diving into. I intend to do a deep dive on this blockchain project at some point moving forward. My interest has been piqued by this move. 

    The idea behind Hedera is relatively simple. Via an open-source network, Hedera allows developers to compete for the ability to deploy decentralized applications, with the same competition applying to users vying for transactions on this network. Some level of competition can spur interest among a certain personality type, making this network intriguing, to say the least.

    Now what

    On days like today, when broadly bearish sentiment continues to rein over any indications that bullish catalysts can be on the horizon, upside moves such as the one seen in Hedera are worth noting. This is a crypto project I’ve yet to explore deeply, but I intend to do so, on the basis of what appears to be relatively strong demand for these tokens. 

    When times get tough, projects that stand out tend to get even more attention. Such appears to be the case with Hedera today.  

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

    The post The 1 cryptocurrency that’s on fire today 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 Scott Phillips.

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

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  • Why are Flight Centre shares still the most popular among ASX short-sellers?

    a man sitting in an aeroplane seat holds the top of his head as he looks at his airline ticket with an annoyed, angry expression on his face.a man sitting in an aeroplane seat holds the top of his head as he looks at his airline ticket with an annoyed, angry expression on his face.

    Shares in Flight Centre Travel Group Ltd (ASX: FLT) have come in as the market’s most shorted every week of 2022 so far.  

    As of The Motley Fool Australia’s latest weekly shorting breakdown, the S&P/ASX 200 Index (ASX: XJO) travel giant had a short position of 14.6%. That’s around 10% higher than it was prior to the pandemic.

    Meanwhile, the Flight Centre share price has dumped 20% since the start of the year to trade at $14.88 at Wednesday’s close. Comparatively, the ASX 200 has fallen 12% so far this year.

    So, with that tumble under its belt, why are short-sellers seemingly expecting the travel agent’s stock to continue falling? Let’s take a look.

    What attracts short-sellers to Flight Centre shares?

    Flight Centre shares have been a magnet for short-sellers this year, with its short position peaking at a whopping 18.5% in April.

    And the company’s latest earnings release might have the answer. The company didn’t provide financial year 2023 guidance when it dropped its full-year results in August.

    Instead, it said a lack of capacity is impacting airfare pricing while cancellations, delays, and high demand are fuelling a “renaissance of the expert travel advisor”.

    Meanwhile, Morgans senior analyst Belinda Moore said such reduced capacity sees Flight Centre with less bargaining power with airlines.

    Additionally, Moore said “cyclical factors”, such as high airfares, business mix changes, and lower commissions, will weigh on the company’s margins in the near term.

    Morgans has a hold rating on Flight Centre shares, dropping its price target to $18.25 following the company’s earnings, my Fool colleague James reports.

    And there are more reasons investors might be sceptical of the stock’s future.

    Monash Investors director and co-founder Simon Shields appears bearish. Monash is among those shorting Flight Centre shares, the fundie said, courtesy of Livewire.

    Shields noted the fund’s shorting of the stock comes down to “structural reasons”.

    While the travel industry is recovering, Flight Centre is struggling against lower commissions from airlines and inflationary pressures on its brick-and-mortar retail model, the fundie said.

    However, not all are so doubtful. Goldman Sachs has tipped the stock to rise to $19.60. Though, the top broker hasn’t gone so far as to recommend Flight Centre as a buy, instead maintaining its neutral rating.

    The post Why are Flight Centre shares still the most popular among ASX short-sellers? appeared first on The Motley Fool Australia.

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    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 positions in and has recommended Goldman Sachs. 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 Scott Phillips.

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