Month: October 2022

Why has the Whitehaven share price already dived 7% so far this week?
This week has so far been one to forget for the Whitehaven Coal Ltd (ASX: WHC) share price. It has dumped 7.3% since Friday’s close.

Its tumble follows on from last week’s strong performance that saw the stock hit four all-time record highs, peaking at $11.04 on Friday.

But its winning streak came to an end yesterday when the Whitehaven share price tumbled 4.65% to close at $10.45 amid a dire day for the S&P/ASX 200 Index (ASX: XJO).

And it’s back in the red today, down 2.82% to $10.15 at the time of writing after hitting an intraday low of $10.09. Meanwhile, the ASX 200 is posting a partial recovery, lifting 0.29%.

So, what might be going wrong for the coal producer this week? Let’s take a look.

What’s weighing on the Whitehaven share price?

The Whitehaven share price is in the doldrums this week alongside the broader S&P/ASX 200 Energy Index (ASX: XEJ).

The sector is the biggest weight on the market on Tuesday, falling 1.23% while only two of its constituents are trading in the green. It also fell 1.15% on Monday.

Right now, Whitehaven is the energy sector’s worst performer, while the share price of its coal-producing peer New Hope Corporation Ltd (ASX: NHC) is down 2.24%.

The two energy giants have benefited from surging coal prices this year. The black rock’s value has soared amid Russia’s invasion of Ukraine, which partially triggered the current European energy crisis.

Indeed, Whitehaven saw a record realised coal price of $325 a tonne in financial year 2022.

The crisis is expected to continue boosting coal prices in the near future.

However, Australia and New Zealand Banking Group Ltd (ASX: ANZ) analysts warn the commodity’s value could face downwards pressure from increasing Chinese production, as my Fool colleague Monica reports.

Fortunately, the Whitehaven share price has a long way to fall before it reaches the long-term red.

The stock has gained around 270% so far this year. It’s also nearly 200% higher than it was this time last year.

Comparatively, the ASX 200 has fallen 12% year to date and 8% over the last 12 months.

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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 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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11 October 2022
Why is the Woodside share price suffering on Tuesday?
The Woodside Energy Group Ltd (ASX: WDS) share price is in the red today.

Woodside shares are sliding 1.42% and are currently trading at $34.09 apiece. For perspective, the S&P/ASX 200 Index (ASX: XJO) is 0.26% in the green at the time of writing.

Let’s take a look at why Woodside is falling today.

Oil and gas prices

The Woodside share price is down today, but it is not the only gas and oil share in the red. The Santos Ltd (ASX: STO) share price is sliding 1.02%, while Beach Energy Ltd (ASX: BPT) shares are down 1.88%.

Energy shares are struggling after the oil price fell in global markets overnight.

Brent crude oil slid 1.2% to US$95.95, while WTI Futures slide 1% to US$90.91 per barrel overnight.

Oil prices fell as investors considered recession fears amid the tighter oil supply, CNBC reported.

Fear of more rate rises from the US Federal Reserve weighed on investors minds, an analyst cited by the the publication noted. Again Capital LLC partner John Kilduff said:

There’s more of the doom and gloom from those folks and what they’re going to do to the economy, because they’re not so convinced they have inflation under control, and that’s the macro play that’s weighing on oil.

European natural gas also slid amid “rising LNG imports and warmer than expected weather”, ANZ senior economist Catherine Birch said in a research note.

WTI crude oil is currently down 0.3% and fetching 90.86 a barrel, while Brent Crude Oil is sliding 1.77% to US$96.19 a barrel, Bloomberg data shows.

Woodside paid a 109 US cents per share fully franked dividend in FY22. Citi rates the company’s share price as a buy with a $36.50 price target, while Morgan Stanley has placed a $37 price target on Woodside shares.

Woodside share price snapshot

The Woodside share price has soared 55% in the year to date, while it has risen 34% in the past year.

For perspective, the ASX 200 has lost 8% in the past year.

Woodside has a market capitalisation of around $65 million based on the current share price.

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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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11 October 2022
The Liontown share price is roaring higher today. Is it too late to buy?
The Liontown Resources Limited (ASX: LTR) share price is having a strong day.

In morning trade, the lithium developer’s shares are roaring 3% higher to $1.58.

Can the Liontown share price keep rising?

The good news for shareholders is that there are at least two top brokers that believe the Liontown share price can keep rising from here.

For example, last week the team at Macquarie retained its outperform rating and $2.50 price target on the company’s shares. This implies potential upside of 58% for investors over the next 12 months.

Macquarie is bullish on lithium and has been pleased with the progress being made at the Kathleen Valley lithium project. It highlights that major construction works have received government approval and can get underway.

Who else is bullish?

Elsewhere, a note out of Bell Potter from last month reveals that its analysts have a speculative buy rating and $2.87 price target on its shares.

This suggests even greater upside potential of 82% for investors over the next 12 months.

Bell Potter notes that Liontown is “roaring ahead.” It commented:

LTR is fully funded to develop Kathleen Valley and has binding lithium offtake agreements in place with Ford, Tesla and LG Energy Solution covering around 90% of initial production. With construction underway, we expect LTR to award further development contracts with a focus building the asset’s best in class ESG credentials. Studies into lithium refining are underway and could bring further strategic partnerships from major lithium groups. Optimisation of this downstream project will complement Kathleen Valley development news flow.

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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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11 October 2022
Why did this ASX 300 retail share just crash 25%?
The Baby Bunting Group Ltd (ASX: BBN) share price is having a day to forget on Tuesday.

In morning trade, the baby products retailer’s shares have crashed 25% to a two-year low of $2.92.

Why is the Baby Bunting share price crashing?

Investors have been selling down the Baby Bunting share price following the release of a trading update at the company’s annual general meeting.

According to the release, as of 7 October, Baby Bunting’s sales were up 12% year to date. This has been driven by total transaction growth of 15.2%, comparable store sales growth of 7.6%, and online sales growth of 19.6%.

However, things aren’t quite as positive for its earnings due to significant margin pressure.

What’s happening to its margins?

The release reveals that Baby Bunting’s first quarter gross profit margin was below expectations and down 230 basis points over the prior corresponding period to 37.2%.

This has led to first quarter net profit after tax falling $3 million year over year despite its double-digit top line growth.

Baby Bunting’s CEO, Matt Spencer, explained that this has been driven by the company’s decision to compete with rivals on pricing despite rising inflation. He commented:

In Q1 FY23, we expected a minor year-on-year reduction in gross margin as a result of the Loyalty program only commencing in November 2021 plus more products moving to Every Day Low Price. The amount of the actual reduction has been greater than anticipated.

In tougher economic times, we continue to emphasise value in a competitive environment. We have maintained entry price points across our range ensuring great value every day, every visit. During the quarter, we have seen some competitors discounting top selling items to drive sales. Our 5% Price Promise is a key part of our response to this and it means we will not be beaten on price.

In addition, unrecovered cost increases, soft demand for playgear, and loyalty program redemptions have been weighing on its margins.

Outlook

Positively, the company’s inventory levels are well-controlled and it has plans in place to address the first half impacts to recover earnings over the full year.

However, given “the continuing economic uncertainty, inflationary pressures and other global challenges”, Baby Bunting isn’t providing further guidance about FY 2023 earnings at this point.

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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 Baby Bunting. 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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11 October 2022
The AGL share price plummeted 17% in the first quarter. What now?
The three months ended 30 September were busy for ASX 200 energy retailer AGL Energy Limited (ASX: AGL) and the company’s share price.

The energy giant released its full-year earnings – covering a year in which its planned demerger was dumped following a brutal shareholder campaign – and revealed its pathway forward, complete with $20 billion price tag. On top of that, AGL continued work to restart a damaged unit at Loy Yang A.

All in all, the events of the first quarter of financial year 2022 weighed on the AGL share price. It fell 17% to close the period at $6.84. For comparison, the S&P/ASX 200 Index (ASX: XJO) fell 1.4% in that time.

So, what might the future hold for the embattled 185-year-old power company? Let’s take a look.

AGL share price struggles in Q1

The AGL share price suffered a major blow in the first quarter, seemingly instigated by the company’s full-year earnings.

Its underlying post-tax profit tumbled 58% year on year to $225 million in financial year 2022. Though, its revenue jumped 21% to $13.2 billion.

The company also waved goodbye to former chair Peter Botten as Patricia McKenzie stepped up to the helm. Botten wasn’t alone in hanging up his hat. Former CEO Graeme Hunt walked away from the company at the end of September.

Finally, the company revealed its $20 billion plan to ditch coal by financial year 2035. To do so, it will be investing in new renewable and firming capacity over the coming years.

Speaking of its coal-fired activities, AGL identified a defect in a critical part during testing of its Loy Yang A Unit 2 last month. The generator is now expected to be back online in the coming weeks.

What else might the future hold for AGL?

The company’s annual general meeting (AGM) is set to go ahead next month. There, McKenzie might go head to head with major investor Grok Ventures – the investment company of Atlassian Corporation (NASDAQ: TEAM) billionaire Mike Cannon-Brookes.

The AGL chair revealed the company’s board won’t recommend three of the four candidates Grok nominated to join it last week.

McKenzie reportedly told the Australian Financial Review‘s Energy & Climate Summit:

This is an independent board of directors and in our opinion we need to have an independent board of directors that represents 100% of the shareholders, and 88% of those are not Grok.

Meanwhile, the company expects to post between $1.25 billion and $1.45 billion of underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) in financial year 2023. It also believes its underlying net profit after tax (NPAT) will come in at $200 million to $320 million.

Marcus Today’s Layton Membrey recently tipped AGL as a hold, saying, courtesy of The Bull:

Stronger futures prices are expected to drive higher customer prices and gross margins for an extended period.

At the same time, Morgans is expecting the AGL share price to rise to $8.20, slapping the stock with an outperform rating, my Fool colleague James reports. It’s currently trading for $6.90.

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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 Atlassian. 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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11 October 2022
Why is the BHP share price bolting out of the gates on Tuesday?
The BHP Group Ltd (ASX: BHP) share price has been a solid performer on Tuesday.

In morning trade, the mining giant’s shares are up 2% to $40.85.

Why is the BHP share price rising today?

Investors have been buying BHP shares today despite there being no news out of the mining giant.

However, it is worth noting that the materials sector is the best-performing sector on the Australian share market today after the iron ore price rose overnight.

According to CommSec, iron ore futures rose by US$1.73 or 1.8% to US$97.35 a tonne.

This has seen fellow miners Fortescue Metals Group Limited (ASX: FMG) and Rio Tinto Limited (ASX: RIO) also push higher this morning.

Anything else?

Something else that could be supporting the BHP share price today was a note out of Goldman Sachs.

Its analysts have been looking at the mining sector and have given their verdict on a range of shares, including the Big Australian.

According to the note, the broker has retained its buy rating with an improved price target of $43.50. Based on the current BHP share price, this implies potential upside of 6.5% for investors over the next 12 months.

Goldman is also expecting a 6% dividend yield over the next 12 months, which stretches the total potential return to over 12%.

Its analysts commented:

BHP to continue trading at a premium to global mining peers (~0.5x premium to global mining peers over 10-yrs) which we believe can be maintained. […] BHP is trading on an attractive FCF/DPS yield of c. 5%/6% over the next 12-m.

All in all, this could make BHP shares one to consider if you’re looking for options in the materials sector right now.

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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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11 October 2022
Qantas share price jumps higher following security breach
The Qantas Airways Limited (ASX: QAN) share price is marching higher in early trade, up 0.8%.

Shares in the flying kangaroo closed yesterday trading for $5.20 and are currently trading for $5.24 apiece.

The gains come despite a security screening breach at Melbourne Airport that led to lengthy delays for passengers early this morning.

What happened at Melbourne Airport?

The Qantas share price appears unimpacted by news of the major security breach.

Thousands of passengers who had already passed through the security checkpoint needed to return from the terminal to be screened a second time. As you’d expect, this led to lengthy queues and flight delays for frustrated travellers.

The cause for the disruptions appears to be an accidental move by one of the passengers at the airport.

Commenting on the occurrence, a Qantas spokesperson said:

A passenger appears to have inadvertently passed from an unscreened area to a screened area of the airport in Melbourne. As a precaution all Qantas operations have been put on hold and passengers in the terminal are being rescreened, which is causing delays to some services this morning.

Qantas stressed that the rescreening was done with safety foremost in mind and apologised for the trouble that was caused:

Safety is our number one priority, but we know this disruption is causing some inconvenience for our passengers and we apologise for that. We are investigating how this incident occurred.

With numerous flights delayed in Melbourne, the interruptions are likely to impact airports and travellers across Australia today.

Qantas share price snapshot

Despite still recovering from the pandemic impacts, the Qantas share price has managed to outperform the S&P/ASX 200 Index (ASX: XJO) in 2022.

Qantas shares are up 2% this calendar year compared to a year-to-date loss of 12% posted by the benchmark index.

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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 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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11 October 2022
Which ASX shares I’d buy with $5,000 right now
I have long been a fan of buying ASX shares at good prices. This month seems a very useful time to be investing because of how low some valuations have gone.

Inflation and higher interest rates seem to have really spooked the market.

When you look at the long-term performance of the share market on a graph, there are a few periods of time that stick out as good times to buy such as the GFC and the COVID crash in 2020.

Past crashes seem like major opportunities. But the current one we’re going through (whether it’s this one or another) seems dangerous. I don’t think that shares are magically going to fall by themselves, there needs to be a genuine problem to cause the drop.

The situation of rapidly rising interest rates (from a very low base) is a rare problem. But, whether ASX shares bounce back quickly or not, I believe the prices we’re seeing are too good to ignore for the long term. With that in mind, I’ve picked out some interesting ideas that I could see myself investing $5,000 into:

Temple & Webster Group Ltd (ASX: TPW)

This business is a leading e-commerce business, selling a wide range of furniture pieces and homewares.

I think the 50% fall in the Temple & Webster share price offers a much cheaper entry point to an ASX share that’s doing the right things to grow for the long term.

Firstly, I’ll acknowledge that a retailer will see bumps – it’s unlikely to deliver continuous growth every year. But I think the long term looks promising with a growing uptake of online shopping by consumers.

The company is investing in technology, such as an AI interior design start-up based in Israel. Another example is the company’s augmented reality service that enables customers to ‘see’ a piece of furniture in their room.

It’s also investing in efficiencies, which will help the company’s unit economics and long-term profitability.

I think that Temple & Webster’s revenue can continue to grow at a solid pace over this decade, particularly if the revenue per active customer keeps growing.

Sandfire Resources Ltd (ASX: SFR)

I’m not typically an investor in resources or commodity businesses. However, I would definitely consider a business that is involved in a commodity that has a compelling long-term future. A buying opportunity could be when that commodity falls in price which also affects the business valuation.

That seems to have happened with this copper miner. The Sandfire Resources share price has dropped by 43% this year.

I think copper is a good commodity to have exposure to because it’s important for the electrification and decarbonisation of the world. As the world aims for net zero, copper demand could rise.

The ASX share is currently focused on developing projects, such as the Motheo copper project in Botswana, which could eventually reach copper production of around 55kt per annum.

I’m not expecting a quick rebound of copper prices, but I think Sandfire is one of the most interesting ‘value’ ASX mining shares to consider for the long term at this low price.

Nick Scali Limited (ASX: NCK)

A business that sells furniture may not sound like a compelling ASX share.

But I think there are a number of things to like about this company. For starters, the Nick Scali share price has dropped 38% this year.

I believe the boss – Anthony Scali – is one of the best retailing leaders in Australia. He also has a lot of skin in the game because he owns millions of shares, so he should be very motivated to do well for the ordinary shareholder.

Individual store sales will probably suffer downturns. But, Nick Scali had 62 stores at June 2022 and has a long-term target of 86 across Australia and New Zealand. Opening new stores can offset some same-store sales pain.

It recently acquired another furniture business, Plush, and plans to grow that store network from 46 to between 90 to 100 in the coming years.

Between Nick Scali and Plush, the scale benefits of an enlarged business can help margins.

The online segment of Nick Scali is small but very profitable, in my opinion. Written sales order growth was 35.8% in the second half of FY22. The full e-commerce offering was launched in Australia by the ASX share in May 2022, which drove growth in June and July 2022.

Cycling against lockdowns, Nick Scali reported total written sales order growth of 64.1% for July 2022, the first month of FY23. Plush’s earnings are a boost to Nick Scali, seeing as it didn’t own the business in the prior corresponding period. On its own, Nick Scali’s total written sales orders were up 28.8% in July 2022.

Finally, Nick Scali pays an attractive dividend. It could be lower in FY23 or FY24 (compared to COVID years). But, the FY24 estimate on CMC Markets puts the annual dividend at 64.5 cents per share, which translates into a grossed-up dividend yield of around 9.5%.

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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 Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group 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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11 October 2022
Telstra share price higher on AGM update
The Telstra Corporation Ltd (ASX: TLS) share price is edging higher on Tuesday.

In morning trade, the telco giant’s shares are up 0.5% to $3.84.

Why is the Telstra share price edging higher?

The Telstra share price is on the move on Tuesday after the company released its annual general meeting presentation ahead of the event.

That presentation includes a trading update, which reveals that Telstra has started the year positively.

According to the release, Telstra’s new CEO, Vicki Brady, has confirmed Telstra’s guidance for FY 2023. Telstra continues to expect:
- Total income of $23bn to $25bn ($22bn in FY 2022)
- Underlying EBITDA of $7.8bn to $8bn ($7.3bn in FY 2022)
- Capex of $3.5bn to $3.7bn ($3bn in FY 2022)
- Free cash flow of $2.6bn to $3.1bn ($4bn in FY 2022)
Brady commented:

Guidance across all measures includes our Digicel Pacific acquisition that completed in July. Our Underlying EBITDA guidance is consistent with our previous FY23 ambition, plus a contribution from Digicel Pacific.

Our Capex guidance includes an uplift in mobile investment, around $150m for Digicel Pacific, and around $350m of strategic investment outside of BAU for the inter-city fibre and Viasat infrastructure projects. Finally on guidance, we expect to continue to achieve strong cash flow, enabling us to invest for growth and deliver returns to shareholders.

Optus cyberattack

Telstra’s chair, John Mullen, spoke briefly about the Optus cyberattack and the growing threat facing all companies. He said:

Vicki will touch further on cyber-security shortly, but may I just say that it is easy for third parties to be critical of companies who have suffered devastating cyber-attacks such as happened recently to Optus.

Let me be blunt, however, and say that it is easy to be critical when it isn’t you in the firing line, and we should all avoid hubris because no-one can be complacent and no organisation can ever be 100% sure that it is completely protected and safe.

The threat and sophistication of the attackers grows every day, and to address the threat business needs to put aside competitive rivalry, and work constructively across industries, with government, and with the community to protect Australia from this modern scourge.

Scheme meeting

It is also worth noting that Telstra will also be holding its scheme meeting today. This will see shareholders vote on the restructure of the company, which is a key component of the T25 strategy.

If shareholders approve the restructure, it will see the establishment of Telstra Group Limited as the head entity of the Telstra group. InfraCo Fixed (physical network infrastructure assets), InfraCo Towers (physical mobile tower assets), ServeCo (customer service and products), and Telstra International will then be below it.

After which, Telstra will consider selling some of its assets or demerging them into separate ASX listings to unlock value for shareholders. The latter is being seen as the likely option for the InfraCo Fixed business.

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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 positions in and has recommended Telstra Corporation 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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11 October 2022
Guess which ASX ecommerce share is rocketing 17% higher today
The Cettire Ltd (ASX: CTT) share price has taken off on Tuesday morning.

At the time of writing, the luxury fashion online retailer’s shares are up 17% to 98 cents.

Why is the Cettire share price shooting higher?

Investors have been bidding the Cettire share price higher after the company released an update on its performance during the first quarter.

The good news for shareholders is that rising living costs and recession concerns haven’t yet impacted Cettire’s sales.

According to the release, the company’s gross revenue grew 62% over the prior corresponding period to $84.4 million during the quarter.

This was driven by the year over year doubling of its active customers to 287,626 (up 10.5% since the end of FY 2022) and improvements in repeat customer spending, which was partially offset by a lower average order value.

Another positive for the Farfetch rival was that its operating earnings were in positive territory during the quarter. Cettire reported adjusted EBITDA of $5.5 million, on a delivered margin greater than 20%.

It also revealed that its marketing investment (including brand investment) decreased to low double-digits as a percentage of sales revenue.

Cettire’s CEO, Dean Mintz, commented:

Cettire continues to demonstrate strong progress on its strategy to grow penetration of the large global personal luxury goods market. Our marketing initiatives and commercial offering are resonating with customers and we observed an acceleration in revenue and AOV growth into the quarter end, providing confidence in our Q2 outlook. The demand environment remains healthy and our quarterly performance also serves to highlight the attractiveness and resilience (to economic challenges) of the global luxury consumer.

Q1 is traditionally a seasonal low point for the business. The strong profit result highlights the advantages of our proprietary software-driven automation and the uniqueness of our business model, benefiting from a highly flexible cost base, low overheads and minimal inventory exposure. Further, our profitability and supportive working capital dynamics translated into positive quarterly cash flow.

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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 Cettire 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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11 October 2022