Month: October 2022

The S&P/ASX 200 Index (ASX: XJO) is having a difficult day and is on course to end the week in a disappointing fashion. In afternoon trade, the benchmark index is down 0.9% to 6,785.6 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are dropping:

Brainchip Holdings Ltd (ASX: BRN)

The Brainchip share price is down 20% to 68 cents following the release of a dismal third quarter update. The struggling semiconductor company, which was valued at $1.5 billion prior to today, reported revenue of just $118,000 for the three months. Based on this quarterly performance, investors appear concerned that this meme stock could have developed a product that nobody wants.

Calix Ltd (ASX: CXL)

The Calix share price is down 18% to $4.50. This morning this environment technology company revealed that the Australian government has withdrawn previously announced grant funding. A total of $41 million earmarked for projects has been cancelled by the government.

Fortescue Metals Group Limited (ASX: FMG)

The Fortescue share price is down 8% to $14.75. Investors have been selling this mining giant’s shares following a sharp pullback in the iron ore price overnight. In addition, this morning the team at Bell Potter downgraded the company’s shares to a sell rating and cut its price target by ~19% to $14.09. The broker said: “We downgrade our recommendation to Sell, largely on the impact of the increased FFI investment commitment.”

ResMed Inc (ASX: RMD)

The ResMed share price is down almost 6% to $33.73. This follows the release of the medical device company’s first quarter update. ResMed delivered a 5% (9% constant currency) increase in revenue to US$950.3 million but flat net income of US$222.1 million (on a non-GAAP basis). While it achieved Goldman Sachs’ estimates on the top line, it missed on the bottom line.

The post Why Brainchip, Calix, Fortescue, and ResMed shares are sinking appeared first on The Motley Fool Australia.

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More reading

• Why are ASX 200 tech shares getting bashed around today?
• Why did this ASX All Ordinaries share crash 18% today?
• Why is the ResMed share price sinking 6% on Friday?
• Could Fortescue be on the hunt for an ASX lithium acquisition?
• The Fortescue share price has dumped over 10% since Monday. What’s going on?

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 ResMed Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed Inc. 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 plenty of All Ordinaries (ASX: XAO) shares that have plunged in 2022. But, with all of this pain, some investors are going bargain-hunting.

Fund manager Wilson Asset Management (WAM) has picked out the Life360 Inc (ASX: 360) share price as an opportunity.

Like many ASX tech shares, Life360 has been hit by lower investor sentiment, at least about its valuation.

In 2022 to date, the Life360 share price has dropped by around a third. In other words, it has dropped by around 33% since the beginning of the year.

What is Life360?

WAM described the ASX share as a market-leading information technology company providing location-based services, including sharing and notifications, allowing families to communicate and keep track of the people they care about.

The fund manager noted that Life360 has 42 million active monthly users.

WAM said the ASX tech share is a position in multiple portfolios: WAM Capital Limited (ASX: WAM) and WAM Active Limited (ASX: WAA). Both of these are listed investment companies (LICs).

Why does WAM like this All Ords ASX share?

The fund manager said the business has a clear marketing strategy for expansion and monetising its suite of products.

WAM explained that it’s attracted to the Life360 share price due to the customer value proposition in the current inflationary environment.

The business had been “delivering greater value to its customer base”, but it recently announced it was going to increase prices for its core mobile application by approximately 50%.

The fund manager pointed out that initial testing suggests the change “will have less than a 10% impact on customer retention, clearly demonstrating the strength of the company’s pricing power”.

Another element of the All Ords ASX share that WAM likes is the addition of more services. It wrote:

Life360 is building out a platform of location and protection orientated products. Following the acquisition of Tile, a tracking device that helps locate misplaced items, Life360 will look to bundle the Tile hardware solution in with its own premium tier plans. In our view, this will improve customer retention, increase revenue per customer and lead to margin expansion over time.

We remain positive on Life360 and confident in its strategic plan for growth.

Is the business still growing?

In the first half of FY22, it reported that subscription revenue was up 90%, and up 60% for core Life360 subscriptions.

In terms of its guidance, Life360 said the monthly pricing change isn’t expected to impact subscription revenue much in 2022.

However, a more significant positive impact on subscription revenue (along with the impact on subscriber churn) from the price increase is expected in 2023 and beyond.

While hardware revenue has “stabilised”, the ASX All Ords share said it has limited visibility into the “critical” fourth-quarter holiday season.

It will update its guidance as part of the third-quarter earnings release on 15 November 2022.

Despite falling heavily in 2022, the Life360 share price is up by almost 30% in the last month.

The post Down 32% in 2022, this ASX All Ords share is a bargain-buy opportunity: WAM appeared first on The Motley Fool Australia.

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More reading

• Up 200% since June, it’s not too late to buy these 2 ASX shares: experts
• Why Life360, Novonix, Pilbara Minerals, and Vulcan shares are storming higher today
• Leading brokers name 3 ASX shares to buy today
• Brokers say these exciting ASX growth shares are buys
• Why Adairs, Life360, Siteminder, and Whitehaven Coal shares are racing higher

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 Life360, Inc. 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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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to end the week in the red. At the time of writing, the benchmark index is down 0.85% to 6,787.6 points.

Four ASX shares that are not letting that hold them back are listed below. Here’s why they are charging higher:

AGL Energy Limited (ASX: AGL)

The AGL share price is up 3% to $6.87. This is despite there being no news out of the energy company today. However, the utilities sector has been performing strongly. This could be due to investors seeking safe havens amid today’s market volatility.

Mirvac Group (ASX: MGR)

The Mirvac share price is up over 2% to $2.00. This morning this property company announced the appointment of its new managing director and CEO, Campbell Hanan. According to the release, Campbell Hanan will take up this appointment from early March 2023, succeeding Susan Lloyd-Hurwitz. Hanan currently serves as the Head of Mirvac’s Integrated Investment Portfolio.

PeopleIn Ltd (ASX: PPE)

The PeopleIn share price is up 3.5% to $3.27. This follows the release of the workforce management provider’s market update this morning. PeopleIn advised that operating conditions continue to be highly positive, given the strength of the employment market and extensive demand from its clients. This allowed the company to reaffirm its FY 2023 earnings guidance for normalised EBITDA of $62 million to $66 million.

SkyCity Entertainment Group Limited (ASX: SKC)

The SkyCity share price is up 3.5% to $2.53. This morning the casino and resorts operator released a trading update ahead of its annual general meeting. Management revealed that it has started the year strongly with “revenue and EBITDA exceeding” internal expectations. This includes its Adelaide operation achieving its highest revenue result yet in the first quarter.

The post Why AGL, Mirvac, PeopleIn, and SkyCity shares are charging higher appeared first on The Motley Fool Australia.

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More reading

• Why the AGL share price can surge 35%: Morgans
• 2 much-maligned ASX shares cheap enough to buy now: experts
• Could chasing high yields mean missing out on potentially top-notch ASX dividend shares?
• Is AGL really an ASX 200 ‘business with huge, huge upside for shareholders’?
• Dividend beasts: Experts name 3 ASX dividend shares that could deliver 50% returns next year

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 Peoplein. The Motley Fool Australia has recommended Peoplein. 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 $6.6 billion listed investment company (LIC) Argo Investments Limited (ASX: ARG) doubled its holdings of Santos Ltd (ASX: STO) shares in 2022.

Argo now has $165 million invested in the oil & gas producer, according to its 2022 annual report. 

At Argo’s annual general meeting (AGM) this week, managing director Jason Beddow said:

We believe some market trends are now entrenched regardless of disruptions to economies or the economic cycle.

From an energy perspective, the growing shortages and increasing prices have refocused global attention on the importance of energy security, an issue which now sits alongside the need for decarbonisation and affordability.

Beddow said the energy price shock in Europe had alerted investors and governments to the importance of reliable gas production.

He reckons the biggest beneficiaries of rising global demand will be the big oil & gas companies on the ASX. Namely, Santos and Woodside Energy Group Ltd (ASX: WDS).

Argo buys up Santos shares and Woodside shares

Argo purchased another 10.16 million Santos shares in 2022 to take its total holding to 21.1 million shares.

Argo’s Santos shares are currently worth $165.67 million based on today’s share price of $7.85. Santos shares are up 19% year to date.

Argo also almost doubled its position in Woodside Energy Group Ltd (ASX: WDS) as well.

The fund now owns 3.32 million Woodside shares. They’re worth $121.27 million based on today’s share price of $36.51. Woodside shares are up 61% year to date.

So, Argo clearly likes the future prospects of both major energy shares, but Santos looks to be its preferred exposure.

A ‘global squeeze’ on gas til 2025

The International Energy Agency (IEA) released its world energy outlook yesterday.

According to reporting in The Australian, the IEA is tipping a global squeeze on gas supplies and prices until 2025. This is largely due to the Russia-Ukraine conflict.

As per the article, the benchmark European TTF gas contract is projected to remain between $US20 to $US30 per million British thermal units until the mid‐2020s. That’s triple historical levels.

The IEA said:

The global supply squeeze has led to record high prices in several gas markets around the world
and the balance is not expected to ease until mid-decade, when large new LNG exports come
onstream.

Federal Budget forecasts show an anticipated 20% increase in retail gas prices in Australia over FY23. It predicts another 20% rise in FY24 as well.

After the Argo AGM, Beddow said: “It’s becoming more accepted that gas is crucial in the energy transition,” according to the AFR.

He said we may eventually see parallels between gas prices and skyrocketing coal prices.

The post ‘Some market trends are now entrenched’: Why this expert tips greatness for Santos shares appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Why did Santos and Woodside shares beat the ASX 200 today?
• Batten down the hatches as RBA may hit households with ‘supersized’ interest rate hike on Melbourne Cup day
• Is the Woodside share price a buy for dividends right now?
• Could ASX 200 lithium shares bask in sky-high lithium prices into the future? Here’s what Argo says

Motley Fool contributor Bronwyn Allen has positions in Woodside Petroleum 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 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 Zip Co Ltd (ASX: ZIP) share price has been on a descending rollercoaster ride during the month of October.

Zip shares have fallen 11.59% from 68.5 cents at the market close on 30 September to 61 cents at the time of writing today. Monday will be the last day of trading in October.

Let’s take a closer look at what is happening with the Zip share price.

What’s been going on?

Zip shares certainly have had some highs and lows in October. Between 5 and 11 October alone, the ASX buy now, pay later (BNPL) share plunged nearly 19% as fears of interest rate hikes weighed earlier in the month.

A broker downgrade from Macquarie may have also impacted investor interest in buying Zip shares. Analysts tipped Zip to underperform and placed a 60-cent price target on the company’s shares.

However, on 18 October, Zip shares had a ripper of a day, soaring 13%. Zip shares surged on this day amid a wider rally of shares, including BNPL companies.

Zip shares also charged higher on 20 October amid a positive first-quarter update from the company. Transaction volume lifted 15% to $2.2 billion, while revenue leaped 19% to $163.2 million. Customer numbers lifted 50% to 12 million.

In other news this month, Zip CEO and co-founder Larry Diamond moved to the USA to capitalise on what he sees as a “significant opportunity” for the company. Diamond said:

It is important to be there to demonstrate what we have done in Australia. There is still a significant opportunity for fintech in the US, as US banks are asleep at the wheel.

Despite recent woes, Diamond believes Zip can be the next Commonwealth Bank of Australia (ASX: CBA). Quoted in the Australian Financial Review (AFR) earlier this week, he said: “We still believe, in this market, we can be the next CBA. Why not? We have the right leadership, the best technology, and the best people”.

Diamond suggested deposits and mortgages could be part of the Zip business plan going forward. He added:

There is no reason why deposits and mortgages can’t be inside Zip, if customers trust us.

Share price snapshot

The Zip share price has fallen a hefty 91% in the past 12 months, while it has shed 86% year to date.

In comparison, the S&P/ASX 200 (ASX: XJO) has slid nearly 9% in the past year.

Zip has a market capitalisation of around $427 million based on the current share price.

The post Why has the Zip share price dumped 12% in October? appeared first on The Motley Fool Australia.

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More reading

• Could this represent another nail in the Zip share price coffin?
• Zip shares have fallen 85% this year but Diamond still says ‘We can be the next CBA’
• How has the Zip share price been tracking in October?
• These are the 10 most shorted ASX shares
• Zip share price charges 13% higher on Q1 update

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 positions in and has recommended ZIPCOLTD FPO. 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 Arafura Resources Limited (ASX: ARU) share price is sinking by more than 6% on Friday afternoon. This comes after the company released its most recent quarterly activities report after Thursday’s closing bell.

At the time of writing, shares of the rare earths producer are down 6.45% to 29 cents apiece.

Let’s go over the highlights of the report for the quarter ended 30 September 2022.

What did Arafura report?

• Net cash used in operating activities: $14.17 million
• Net cash used in investing activities: $1.06 million
• Cash and cash equivalents at end of the period: $49 million
• Estimated quarters of funding available: 3.2

Arafura made progress within its front-end engineering and design works (FEED) for its Nolans project during the quarter. This included finalising key process design documents for its hydrometallurgical plant and commencing the tendering of its on-site power station.

The company also commented on its macro environment both in Australia and internationally. It expects more attention drawn to neodymium-praseodymium oxide (NdPr) production thanks to the National Reconstruction Fund earmarking $1 billion to “move Australia further up mineral value chains” through mineral processing development.

On a global level, Arafura expects China’s increasing aggression towards Taiwan as a catalyst for the world to need an alternative to China for NdPr production, which could potentially play in its favour.

It also mentioned that the United States’ Inflation Reduction Act of 2022 has earmarked a sizable $US369 billion for energy security and handling climate change, which could benefit Australian mineral producers.

What else did the company announce?

Arafura notes that the spot price of NdPr contracted considerably over the quarter, dropping 32% from US$139 per kg to US$94 per kg. This was said to be due to softer Chinese demand, particularly for magnets used for its domestic economy.

However, in the near future, the outlook for magnet demand is anticipated to improve by 2023, growing to 300,000 tonnes, which Arafura described as being “much higher” than the demand observed in 2022.

Overall the company notes that the renewable energy and e-mobility markets will help keep demand for NdPr stable.

Arafura share price snapshot

The Arafura share price is up around 40% year to date. That’s considerably better than the performance of the S&P/ASX 200 Index (ASX: XJO), which is down almost 9% over the same period.

The company’s market capitalisation is around $535.50 million.

The post Why is the Arafura share price sliding 6% on Friday? appeared first on The Motley Fool Australia.

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More reading

• Why is the Arafura share price falling in a hole today?
• Here’s why the Arafura share price is rebounding 10% today

Motley Fool contributor Matthew Farley 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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It’s no doubt one of the best days in WAM Capital Limited (ASX: WAM) investors’ calendars today. That’s because shareholders of this popular ASX listed investment company (LIC) are scheduled to receive their latest dividend payment today.

WAM Capital is amongst the larger LICs on the ASX. It was founded back in 1999 and today boasts a market capitalisation of $1.83 billion – helped by the generous premium the company trades at over its net tangible assets (NTA).

To illustrate, as of 30 September, WAM Capital had an NTA per share of $1.41. But today it trades at a share price of $1.69. That’s despite a five-year share price loss of almost 30%.

But most of WAM Capital’s investors probably don’t buy this LIC for share price appreciation. Rather, WAM Capital is famous for its large and fully franked dividend yields.

What’s WAM Capital’s latest dividend worth?

As we already mentioned, the LIC’s latest dividend payment is heading to investors’ bank accounts today. It is a payment of 7.75 cents per share. That’s the same dividend that WAM Capital investors have received every six months for four years now.

But shareholders would have had to own WAM Capital shares before the company’s ex-dividend date of 17 October to be eligible to receive this latest payment.

Together with the last interim dividend of the same value, WAM Capital has now paid out a total of 15.5 cents per share over the past 12 months. On the current share price, this gives the LIC a trailing dividend yield of 9.17%. That grosses up to a hefty 13.1% with the full franking.

As of 30 September, the WAM Capital investment portfolio has delivered an average of 5% per annum (including dividend returns). This underperformed the benchmark S&P/ASX All Ordinaries Accumulation Index, which returned 7.1%. However, WAM Capital’s performance is calculated before the management fee of 1% per annum.

The post The WAM Capital dividend is hitting bank accounts today. Here’s the lowdown appeared first on The Motley Fool Australia.

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More reading

• These 2 ASX 200 shares are ‘compelling growth opportunities’: fund manager
• Why is the WAM Capital share price having such a lousy start to the week?
• Want to snare the next WAM Capital dividend? Here’s how

Motley Fool contributor Sebastian Bowen 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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The Wesfarmers Ltd (ASX: WES) share price has gone through a lot of pain in 2022, but I think it’s now in bargain territory. I think that’s even more the case after seeing the update and comments from the annual general meeting (AGM) this week.

While it didn’t give much in terms of numbers, I think the ASX share’s comments were promising. I also like the company’s long-term plans.

Overall, I believe that Wesfarmers has a promising future, which is why I think it’s worth owning.

Promising AGM update

Earlier this week, Wesfarmers told investors how FY23 had been going so far.

It said that retail trading conditions have “remained robust” and management has been “pleased” with sales in FY23 to date.

Rob Scott, managing director of Wesfarmers, said:

Australian consumer demand continues to be supported by low unemployment and high levels of accumulated household savings, but rising interest rates and the impact of inflation are starting to affect consumer behaviour.

Over recent months, shopping patterns and customer feedback indicate some customers are becoming more price sensitive, as they try to manage household budgets. We see these conditions as an opportunity for our businesses, which are well known for their everyday low prices, to outperform relative to others in their markets.

Bunnings, the key profit generator for Wesfarmers, has seen sales impacted by prolonged wet weather. But overall sales growth for the financial year so far “remains resilient and continues to be supported by strong demand from commercial customers”. Sales growth from DIY customers remains positive, but it has moderated from high levels experienced through COVID.

Combined sales growth for Kmart and Target “continue to be pleasing, with strong trading results even when adjusted for the impact of lockdowns in prior periods.”

Kmart’s low product prices could be attractive to shoppers during this period when households are looking for value.

Officeworks sales are “in line” with the prior year, while Catch’s online sales are lower with lockdowns finished.

The chemicals energy and fertiliser division has continued to benefit from “strong customer demand and elevated commodity prices”. The Mt Holland lithium project is “progressing well”.

Results from the new health division have been “pleasing”, with “strong” growth in wholesale and improvements in performance for both Priceline and Clear Skincare.

Scott also said that the balance sheet is “strong” and that it has the capacity to effectively manage a range of economic scenarios.

Why I’m positive about the Wesfarmers share price

For starters, for the first half of FY23 at least, the comparable period in FY22 is for locked down periods. It provides an easier year-over-year growth rate for the group’s retailers, particularly Kmart and Target. This will also help the overall picture for FY23.

Second, the strong lithium price could be very helpful for Mt Holland’s future earnings. Wesfarmers pointed out that the production from the lithium hydroxide project will be equivalent to powering 1 million battery electric vehicles. In two years it will be selling lithium hydroxide, which will be refined in Kwinana in Western Australia.

I’m also impressed by the recent acquisitions. The health division has attractive long-term tailwinds thanks to Australia’s demographics. Bunnings’ acquisition of Tool Kit Depot and Beaumont Tiles gives Bunnings more scope for growth.

I appreciated Scott’s comments about making acquisitions, but still focusing on returns for shareholders:

I should stress that our investments in these new areas are all about delivering returns to shareholders. We do not seek growth for the sake of growth. Rather, we focus on building businesses where we have unique assets and capabilities, that will deliver attractive returns to our shareholders.

In my opinion, the lower level of the Wesfarmers share price and growth venues makes it one of the most attractive ASX blue-chip shares to consider.

The post Why I think the Wesfarmers share price is a buy after this week’s AGM appeared first on The Motley Fool Australia.

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More reading

• How I’d build a portfolio by investing in top ASX shares now
• 22 high-yield ASX dividend shares Wilsons is targeting
• No savings at 35? I’d buy cheap ASX shares to try and retire rich
• Looking to buy Wesfarmers shares? Here’s what to watch at this week’s AGM
• 5 ways to be carefree during the next ASX share market downturn

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 no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Wesfarmers 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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The Novonix Ltd (ASX: NVX) share price is failing to entice buyers on Friday following the release of its FY23 first-quarter report.

Nearing lunchtime, shares in the battery materials company are getting bite taken out of them. At the time of writing, the damage toll is sitting around 3.48%, dragging the share price down to $2.77. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is experiencing its own languishing today, down 0.66%.

The disappointing performance could have something to do with $25 million getting incinerated in Q1.

Let’s take a closer look at the details.

Progress at a cost

The sentiment for Novonix shares has soured today amid the company’s quarterly activities report. While the anode and cathode materials manufacturer made progress in the three-month period, the price tag for it might be catching investors off guard.

According to the report, Novonix made headway in its development and expansion efforts. For instance, the company completed the installation of an analytical lab to allow materials analysis on-site during the quarter.

In addition, Novonix commenced the installation of equipment that should enable the company to generate 10 tonnes per year of anode materials. The company expects to commission the installation by December 2022.

Another positive, Nononix continued to engage with Samsung SDI and Sanyo — as well as other battery cell and automotive manufacturers — during the quarter. These discussions were centred around capacity planning for future production.

However, the in-roads made during the quarter came at a meaningful cost to the balance sheet. Over the three-month period, Novonix chewed through $25.3 million of cash. The most significant costs were attributed to property, plant, and equipment investments reaching $20.2 million.

A possible antidote to the outflow of capital could be in the works, though, with Novonix nominated to be in the running for a A$240 million grant.

Whirlwind year for Novonix shares

The Novonix share price has suffered a destructive year as excitement for loss-making companies has waned. Since the start of 2022, shares in the company have sunk a colossal 73% — dragging the share price from above $10 to below $3.

Although, anyone who picked up a bundle of Novonix shares in the past month has been rewarded. In the space of a month, the company’s shares have soared 58%, mostly due to the recent grant announcement.

The post Novonix shares go for a swim after burning through $25 million appeared first on The Motley Fool Australia.

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More reading

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• Down 65% in 2022, chair says Novonix ‘share price will respond appropriately’
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia 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 Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is defying the market weakness and pushing higher on Friday.

In afternoon trade, the banking giant’s shares are up 0.5% to $25.11.

Where next for the ANZ share price?

Unfortunately for investors, one leading broker believes the ANZ share price is about fair value now and unlikely to climb meaningfully higher.

According to a note out of Goldman Sachs, in response to the bank’s full year results, the broker has retained its neutral rating with a slightly improved price target of $26.25.

Based on the current ANZ share price, this implies potential upside of 4.5% for investors.

Though, it is worth remembering that the bank is a dividend payer, so there’s more to it than just potential share price gains.

Goldman is now expecting a fully franked dividend of $1.58 per share in FY 2023, up from its previous estimate of $1.57. This equates to a generous 6.3% yield, taking the total potential return closer to 11%.

What did the broker say?

Goldman was pleased with ANZ’s full year results and has updated its earnings estimates to reflect a higher than expected exit net interest margin (NIM). It explained:

ANZ’s FY22 cash earnings were up 5% on pcp and 1.4% ahead of GSe, with the beat driven primarily by outperformance on the BDD charge. We revise our FY23/24/25E EPS by +6.1%/+0.9%/+0.6%, largely due to higher NIMs in FY23, and as a result, our 12-mo TP moves to A$26.25 (from A$26.09).

And while ANZ’s NIM is peaking higher and sooner than expected, the broker ultimately expects the majority of this benefit to be wiped out by increasing costs in FY 2024. It said:

Today’s result suggested that while ANZ’s NIM is likely to peak at higher levels than we previously forecast, this peak is also likely to come through earlier (GSe 1H23). While this bodes well for ANZ’s FY23E revenue growth (GSe +16%), the benefits do not sustain into FY24E, while cost pressures will. To this end, we note our revised FY24E PPOP growth is flat. Therefore, with the stock trading on 6.5x PPOP earnings, broadly in line with its 15-yr average, stay Neutral.

In light of the above, the broker sees the ANZ share price as fairly valued now and prefers other options in the sector.

The post Goldman Sachs gives its verdict on the ANZ share price appeared first on The Motley Fool Australia.

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More reading

• 5 big ASX announcements making news this week
• 5 things to watch on the ASX 200 on Friday
• Batten down the hatches as RBA may hit households with ‘supersized’ interest rate hike on Melbourne Cup day
• Why ANZ, Australian Clinical Labs, Core Lithium, and Kogan are sinking today
• Everything you need to know about the latest ANZ dividend

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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