Day: 23 January 2023

Given how many shares to choose from on the ASX, it can be hard to decide which ones to buy. The good news is that brokers across the country are doing a lot of the hard work for you.

Three top ASX shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Liontown Resources Ltd (ASX: LTR)

According to a note out of Bell Potter, its analysts have retained their speculative buy rating on this lithium developer’s shares with a trimmed price target of $2.81. This follows the release of an update which revealed that the Kathleen Valley project’s capital cost will be now be $895 million instead of $545 million previously. While somewhat disappointed, the broker expects some of this to be offset by the scaling up of its plant and its direct shipping ore opportunity. The Liontown share price is trading at $1.45 this afternoon.

Pilbara Minerals Ltd (ASX: PLS)

A note out of Morgans reveals that its analysts have retained their add rating on this lithium miner’s shares with an improved price target of $5.40. This follows the release of a quarterly update which revealed record production that was well ahead of the broker’s expectations. Morgans has also lifted its medium-term lithium price assumptions on the belief that tight conditions will continue due to a trend of project slippage from other lithium producers. The Pilbara Minerals share price is fetching $4.82 on Monday.

Xero Limited (ASX: XRO)

Analysts at Citi have retained their buy rating and $92.40 price target on this cloud accounting platform provider’s shares. The broker has been looking at bankruptcy data. While they are up materially, it doesn’t appear too concerned as the numbers are lower than its customer churn assumptions. It also highlights that Xero’s churn rates usually trend below system levels. The Xero share price is trading at $73.88 at the time of writing.

The post Leading brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

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More reading

• Why Boss Energy, Pilbara Minerals, Sezzle, and Zip shares are charging higher
• Should I buy Pilbara Minerals shares following the lithium miner’s latest update?
• My top predictions for ASX lithium shares in 2023
• 5 things to watch on the ASX 200 on Monday
• My top predictions for ASX All Ords shares in 2023

Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Fortescue Metals Group Limited (ASX: FMG) shares are taking the conveyor belt lower today after a cracking start to the year.

As we enter mid-afternoon trading, investors in one of Australia’s biggest iron ore producers are taking their foot off the gas pedal. In a subdued start to the week, the company’s share price is down 0.58% to $22.47. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is faring slightly better, with a minor gain of 0.03% so far today.

The negative move comes after the completion of the annual World Economic Forum event held in Davos, Switzerland, where climate change was once again a topical point of discussion. Fortescue founder and executive chair Andrew Forrest attended the event spruiking the efforts of Fortescue Future Industries (FFI), starting from around 25:30 in the clip below.

Leading the Charge through Earth’s New Normal @Benioff (@salesforce), Andrew Forrest (@FortescueNews), @algore, Joyeeta Gupta, @YoYo_Ma, Roshni Nadar Malhotra (@hcltech), Gim Huay Neo, @petrogustavo, @jrockstrom and @PresFawnSharp #wef23 https://t.co/d4uCO9cMnS

— World Economic Forum (@wef) January 18, 2023

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However, one portfolio manager believes the green hydrogen business could be a red flag for Fortescue shares.

Rock digging and reinvention

Aside from being industry giants, it’s hard to see much resemblance between Fortescue and Facebook-owner Meta Platforms Inc (NASDAQ: META). However, Ben McGarry of Sydney-based Totus Capital thinks there might be a worrying similarity between the two.

Speaking to the Australian Financial Review, McGarry revealed the funds’ short positioning in Fortescue Metals shares. Delving into the reasoning, he highlighted how the expensive FFI venture of the Forrest-led miner was uncanny to Meta’s cash-incinerating metaverse hopes.

The worry stems from Fortescue’s plan to tip 10% of its net profit after tax (NPAT) into the green dream. For FY22, that would work out to be approximately US$620 million.

It’s a large sum of money to be burning on undeveloped technology, especially in a cyclic industry such as resources. However, Andrew Forrest believes the company could save around $1 billion annually by running its iron ore operations on green hydrogen.

Likewise, Meta has chewed through enormous capital as it searches for a new growth engine in virtual and augmented reality. Since 2021, Mark Zuckerberg’s pet project has gobbled up US$15 billion.

The rampant spending at Meta comes at a time when revenue growth is declining, as shown below.

Clearly, McGarry and the Totus team are worried that Fortescue might similarly be spending good money after bad.

Are Fortescue shares cheap?

If you’re thinking like a contrarian, you might ask yourself if Fortescue shares are ‘cheap’ now.

The Australian mining giant currently trades on a price-to-earnings (P/E) ratio of around 7.8 times earnings. This is mostly on par with its peers, such as BHP Group Limited (ASX: BHP) and Rio Tinto Ltd (ASX: RIO).

It’s worth noting that Fortescues’ earnings are forecast to decline in FY23 and FY24. According to estimates, earnings per share (EPS) could be 45% less in FY24 than in FY22.

All else being equal, that would push the P/E ratio up 45% to around 11.3 times — roughly in line with the industry average.

The post Why Fortescue shares could be facing a Meta-like problem appeared first on The Motley Fool Australia.

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More reading

• Should I buy ASX mining shares now or not?
• My top predictions for ASX 200 mining shares in 2023
• 3 high-yield ASX shares I think are dividend traps right now
• My Fortescue shares are up 30% in 3 months. Should I buy more?
• Fortescue shares: 4 reasons to buy (and not buy) in 2023

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Mitchell Lawler has positions in Meta Platforms. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms. The Motley Fool Australia has recommended Meta Platforms. 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 S&P/ASX 200 Index (ASX: XJO) is on course to start the week with a small gain. In afternoon trade, the benchmark index is up 0.1% to 7,460.5 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are charging higher on Monday:

Boss Energy Ltd (ASX: BOE)

The Boss Energy share price is up 7% to $2.44. This morning, this uranium developer announced that it continues to make strong progress on all fronts at its Honeymoon project. Committed expenditure under the re-development program has now reached the halfway mark, totalling $55.1 million of the budgeted ~$105.4 million capital expenditure. Management notes that this major milestone means the project is running on time and on budget.

Pilbara Minerals Ltd (ASX: PLS)

The Pilbara Minerals share price is up a further 6.5% to $4.85. Analysts at Morgans have responded to the lithium miner’s quarterly update by reiterating their add rating with an improved price target of $5.40. Morgans highlights that Pilbara Minerals’ production and revenue were ahead of expectations.

Sezzle Inc (ASX: SZL)

The Sezzle share price is up over 18% to 64 cents. This has been driven by the release of a trading update from the buy now pay later (BNPL) provider this morning. Sezzle revealed that in December it achieved its second consecutive month of profitability. This was underpinned by a 15.7% year-over-year boost in revenue to $19.9 million in December.

Zip Co Ltd (ASX: ZIP)

The Zip share price is up 15% to 78.5 cents. Investors have been buying Zip’s shares today in response to Sezzle’s aforementioned update. This appears to have sparked hopes that Zip will be able to achieve profitability as planned in the near future.

The post Why Boss Energy, Pilbara Minerals, Sezzle, and Zip shares are charging higher appeared first on The Motley Fool Australia.

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More reading

• Why is the Zip share price rocketing 18% higher today?
• Guess which ASX BNPL share just rocketed 24% on return to profitability
• Should I buy Pilbara Minerals shares following the lithium miner’s latest update?
• My top predictions for ASX lithium shares in 2023
• Here are the top 10 ASX 200 shares today

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 Zip Co. 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 Australian Foundation Investment Co Ltd (ASX: AFI) share price has risen sharply this Monday after the ASX listed investment company (LIC) reported its half-yearly earnings for the six months to 31 December 2022. 

AFIC shares are up a healthy 0.93% at the time of writing to $7.57 each. That is a substantial outperformance of the broader S&P/ASX 200 Index (ASX: XJO), which is up by a far more anaemic 0.09% at present.

AFIC shares lift after solid half-year results

• AFIC has reported revenues of $178.1 million, up 10.1% over the previous corresponding period 
• Profit after tax lifted 12.2% to $163.7 million 
• Net tangible assets (NTA) per share were $6.90 as of 31 December, a slide of 11.1% from where they stood on 31 December 2021 
• For the six months to 31 December, AFIC’s NTA rose by 7.1%, including the value of franking credits 
• AFIC has declared an interim dividend of 11 cents per share, fully franked, for the period – a 10% hike from the 10 cents per share interim dividend from the previous corresponding period 
• This will lift AFIC’s 12 monthly dividends to 25 cents per share, which will be a rise over 2021’s 24 cents per share 

What else happened in the half?

AFIC told its investors that its lift in profits was largely a result of “an increase in dividends across several holdings”. Those included Woodside Energy Group Ltd (ASX: WDS), Transurban Group (ASX: TCL), National Australia Bank Ltd (ASX: NAB) and Commonwealth Bank of Australia (ASX: CBA).

Further, AFIC built out a larger position in BHP Group Ltd (ASX: BHP) over the half, which has helped to boost profits and dividends as well.

Over the half, AFIC added to its Santos Ltd (ASX: STO), Goodman Group (ASX: GMG), Seek Ltd (ASX: SEK) and Woolworths Group Ltd (ASX: WOW) positions. It also initiated a new position in the home appliance company Breville Group Ltd (ASX: BRG).

Making way for these ASX shares were Orica Ltd (ASX: ORI) and Reliance Worldwide Corporation Ltd (ASX: RWC). AFIC stated that “we exited Orica and Reliance Worldwide considering long-term prospects for these companies will be increasingly challenged as competitive intensity increases”.

What did management say?

Here’s some of what AFIC’s management told investors about the half-year just gone:

Short term portfolio performance was impacted by adjustments in the market resulting from rising interest rates which produced a fall in the share price of many quality companies in the portfolio which had been trading at very robust valuations.

These companies are core holdings for the portfolio and have contributed strongly to long term portfolio performance. Geopolitical events also produced strong returns in the more cyclical stocks such as energy and utilities, where AFIC is generally underweight given its long term investment focus.

Portfolio return for the half year was 7.1%, including franking. The return for the S&P/ASX 200 Accumulation Index was 10.8% including franking. Over 10 years, the corresponding figures are positive 9.4% per annum for AFIC and positive 10.2% per annum for the Index.

What’s next?

Looking forward, AFIC hasn’t made any concrete guidances or predictions. The company noted that “the outlook for economic activity remains uncertain with subdued consumer and business sentiment and persistent cost inflation leading to higher operating costs for most companies”.

Management also flagged that “expectations are that interest rates will increase in the near term with the quantum and timing of rate increases remaining unclear”.

However, the company also reiterated that “our strategy of owning a diversified portfolio of quality companies well positioned to deliver earnings growth over the medium to long term remains appropriate”.

AFIC share price snapshot

AFIC shares have had a decent start to 2023, up almost 1.5% since the start of the year. However, as you can see above, the AFIC share price remains down by more than 11% over the past 12 months. Over the past five years, investors have enjoyed capital gains worth almost 20%.

At the current AFIC share price, this ASX LIC has a trailing dividend yield of 3.18%.

The post AFIC share price jumps on 10% dividend hike appeared first on The Motley Fool Australia.

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More reading

• Why Boss Energy, Pilbara Minerals, Sezzle, and Zip shares are charging higher
• Why Fisher & Paykel, Netwealth, Stanmore, and Terracom shares are dropping
• Perpetual share price gains as $2b Pendal acquisition officially completed
• This ASX 200 healthcare share just hit a new 52-week high. Here’s why
• Should I buy ASX mining shares now or not?

Motley Fool contributor Sebastian Bowen has positions in National Australia Bank. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Reliance Worldwide. The Motley Fool Australia has recommended Reliance Worldwide and Seek. 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 record a small gain. At the time of writing, the benchmark index is up 0.1% to 7,458.2 points.

Four ASX shares that have failed to follow the market higher are listed below. Here’s why they are dropping:

Fisher & Paykel Healthcare Corp Ltd (ASX: FPH)

The Fisher & Paykel Healthcare share price is down almost 3% to $23.68. This appears to have been driven by a broker note out of Citi this morning. Its analysts have downgraded the medical device company’s shares to a neutral rating on valuation grounds following a strong run over the last three months.

Netwealth Group Ltd (ASX: NWL)

The Netwealth share price is down a further 1.5% to $12.20. Investors have been selling the wealth management platform provider’s shares since the release of a trading update last week. Netwealth reported a significant slowdown in its net inflows. They came in at $2,087 million during the second quarter, which was down 42% on the prior corresponding period and 29% from the first quarter.

Stanmore Resources Ltd (ASX: SMR)

The Stanmore Resources share price is down 6.5% to $3.42. This follows the release of the coal miner’s fourth quarter update. Investors have been selling the company’s shares despite it achieving its second half guidance. Stanmore delivered production of 6.4Mt, compared to its guidance of 6Mt to 6.6Mt.

Terracom Ltd (ASX: TER)

The Terracom share price is down over 3% to $1.00. This coal miner’s shares are also dropping following the release of a quarterly update. Terracom reported operating EBITDA of $150 million from coal sales of 2.05Mt. Management also revealed that the company’s Blair Athol operation remains on track to achieve its full year guidance despite significant rainfall during the quarter. Investors appear to have been expecting an even stronger quarter.

The post Why Fisher & Paykel, Netwealth, Stanmore, and Terracom shares are dropping appeared first on The Motley Fool Australia.

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More reading

• Which ASX fintech stock is hot to buy right now?
• 3 all-star ASX 200 shares ECP is going all-in on
• Here are the top 10 ASX 200 shares today
• Why Fisher & Paykel, Pilbara Minerals, Resolute, and Whitehaven Coal are storming higher
• 3 ASX 200 shares leaping more than 5% on strong earnings updates

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 Netwealth Group. The Motley Fool Australia has positions in and has recommended Netwealth Group. 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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Look out, there’s a new asset management giant on the S&P/ASX 200 Index (ASX: XJO). The Perpetual Limited (ASX: PPT) share price is outperforming the broader market today after the company officially completed its mammoth acquisition of Pendal Group Ltd (ASX: PDL).

Perpetual boasts around $200 billion of funds under management following the merger, in which it offered one of its own shares and $1.65 cash for every seven Pendal shares.

The Perpetual share price is up 1.26% right now, trading at $26.53.

For comparison, the ASX 200 is up 0.04% right now at 7,455.3 points.

Let’s take a closer look at the latest news from the newly merged ASX 200 financial giant.

Perpetual share price outperforms on Monday

It’s shaping up to be a bright day for the Perpetual share price as the notably larger company looks to its future.

The completion of its major acquisition sees the company appointing two former Pendal directors to its board.

Kathryn Matthews and Christopher Jones will take a seat at the Perpetual table. Meanwhile, Craig Ueland will retire from the board tomorrow.

Perpetual chair Tony D’Aloisio also commented on the merger of “two of Australia’s oldest and most respected active asset management businesses”, saying:

Through this transaction we have created a leading global multi boutique asset manager with significant scale, diversified investment strategies, world-class ESG capabilities and a stronger global distribution capability, complemented by Perpetual’s high-quality wealth management and trustee businesses.

Perpetual managing director and CEO Rob Adams also flagged “the beginning of an exciting new chapter”.

He noted that, so far, 98% of Pendal clients (by revenue) whose consent for the change of control was required have given it.

Perpetual updates earnings guidance

Now, the company will work to realise an expected $60 million of run-rate pre-tax expense synergies.

That’s expected to bring a one-off pre-tax cost of around $110 million over the coming 18 months, while transaction costs are tipped to come in at around $40 million.

Next month, Perpetual still expects to post between $65 million and $70 million of underlying profit after tax for the first half.

Its full-year expense growth is also on track to come in at the higher end of its previous guidance.

Further full-year guidance is expected to be released in April.

A long road to get here  

It’s been nearly 10 months since Perpetual first put forward a bid for Pendal. And it’s been a dramatic ride to get here.

The takeover was first flagged back in April 2022. Then, Perpetual offered one share and $1.67 cash in exchange for 7.5 Pendal shares. That bid was soon rejected by Pendal.

Months later, Perpetual put forward a second bid, offering one share and $1.976 cash for 7.5 Pendal shares. That offer was later changed, though its value stayed put.

Pendal shareholders received one Perpetual share and $1.65 cash for seven stocks. That valued Pendal shares at $6.161 apiece and the company at $2.4 billion as of mid-November.

In the meantime, Perpetual itself became a takeover target. Last year, a consortium bid as high as $33 per share for the asset manager.

The post Perpetual share price gains as $2b Pendal acquisition officially completed appeared first on The Motley Fool Australia.

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More reading

• This ASX 200 healthcare share just hit a new 52-week high. Here’s why
• Here are the 10 most shorted ASX shares
• Can income investors bank on a 6% dividend yield from NAB shares?
• The ASX 200 share that could thrive in a recession: Scott Phillips
• 5 things to watch on the ASX 200 on Monday

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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S&P/ASX 200 Index (ASX: XJO) healthcare share Pro Medicus Ltd (ASX: PME) is marching higher today, up 1.51% at the time of writing.

That sees the healthcare stock trading for $63.06 per share after hitting $63.35 late this morning, a fresh 52-week high. It’s also now less than 4% below the all-time Pro Medicus share price high, reached in August 2021.

What’s sending the ASX 200 healthcare share higher?

Investors are rewarding Pro Medicus after the health imaging company announced on Friday that Visage Imaging, its 100% owned United States subsidiary, signed a $25 million, seven-year contract with the University of Washington’s UW Medicine health system.

UW Medicine employs 29,000 healthcare professionals, researchers, and educators.

The ASX 200 healthcare share reported UW Medicine will implement its cloud-engineered Visage 7 Enterprise Imaging Platform throughout its network “providing a unified diagnostic imaging platform”.

Planning for the cloud-based rollout will start immediately. Pro Medicus expects the first go-lives to commence in the second half of 2023.

Commenting on the contract, Pro Medicus CEO Sam Hupert said:

UW Medicine joins our growing list of Tier 1 academic clients and will provide us with a strong presence in the Northwest region of the United States. With its highly regarded University of Washington School of Medicine, it has the added benefit of exposing Visage to an ever-increasing number of the doctors of tomorrow.

Hupert noted that the contract encompasses all Pro Medicus Visage products.

“Our pipeline remains strong and spans all market segments,” he said. “And as has been the case with many of our recent sales, this deal is for our ‘full-stack’ comprising all three Visage products namely viewer, workflow and archive, a trend we see continuing.”

Pro Medicus share price snapshot

As you can see in the chart below, the Pro Medicus share price strongly outperformed over the past 12 months, gaining 40% compared to a 4% gain posted by the ASX 200.

Investors who bought into the ASX 200 healthcare share five years ago will be sitting on some superbly healthy gains of 683%.

The post This ASX 200 healthcare share just hit a new 52-week high. Here’s why appeared first on The Motley Fool Australia.

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More reading

• Can income investors bank on a 6% dividend yield from NAB shares?
• The ASX 200 share that could thrive in a recession: Scott Phillips
• 5 things to watch on the ASX 200 on Monday
• How to find undervalued ASX shares to buy now and hold in 2023
• Here are the top 10 ASX 200 shares today

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 Pro Medicus. The Motley Fool Australia has positions in and has recommended Pro Medicus. 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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ASX mining shares were some of the standout performers over what was a tough year in 2022. While the S&P/ASX 200 Index (ASX: XJO) went backwards by 5.5% last year, many ASX mining shares smashed that loss.

Take the BHP Group Ltd (ASX: BHP) share price. BHP is the largest mining company on the ASX. BHP shares rose by a healthy 9.95% last year. Add on BHP’s impressive dividends in 2022, and we get a return that could be double that (depending on what price you bought the shares for).

It wasn’t just BHP though. Fortescue Metals Group Limited (ASX: FMG) shares rose by more than 6.7%, which were also juiced up by monster dividends.

Rio Tinto Limited (ASX: RIO) shares were up more than 16% as well, while coal miner Whitehaven Coal Ltd (ASX: NHC), while technically an ASX 200 energy share, rocketed an extraordinary 185%.

As such, it was a fantastic year to own most ASX mining shares in 2022.

But that doesn’t mean it’s automatically a good idea to keep owning these companies in 2023. So today, let’s discuss whether or not we should be buying ASX mining shares.

The problem with miners

Mining shares are a rather unique beat in the investing world. Most companies have a lot of control when it comes to what they sell their goods and services for. For example, if Woolworths Group Ltd (ASX: WOW) wanted to boost its profits, it could quite easily boost its supermarket prices almost instantly.

But miners don’t run that way. They are forced to accept whatever price the international market sets their chosen commodity at. If iron ore is going for US$100 per tonne, BHP can’t go to a buyer and tell them they are charging US$150 per tonne.

The only control miners generally have over their products is how much it costs them to extract said products.

As such, miners are hostages to the whims of the global commodity markets.

This can be great at times, of course. Miners had such a strong 2022 because commodity prices surged last year.

Wars, inflation and supply chain bottlenecks all combined to push up oil, iron ore, copper, gas and coal to very expensive levels. That’s why some of these companies were making money hand over fist in 2022.

But what of 2023?

Is 2023 the year to buy ASX mining shares?

Well, my philosophy when it comes to miners is very simple. They are inherently cyclical businesses. Therefore, they will not steadily compound your wealth the same way a well-run company in another sector might.

So it only really makes sense to buy a miner at the bottom of a commodity cycle. In 2021, iron ore was at record highs of over US$200 per tonne. But the price has come down significantly. As of today, this base metal is asking just over US$123 per tonne.

But this is certainly not even close to the lower bounds iron ore has plummeted in the past. In 2016, for example, iron ore was under US$50 a tonne.

Iron ore could well bounce back to above US$200 a tonne in 2023. But it could also go back to below US$50. I have no idea which way it’s going to go, nor do most investors.

As such, I see investing in miners now as not being too different to deciding between red or black at the roulette table. I’m an investor, not a gambler. So I’ll be staying away from miners in 2023 until I’m reasonably confident a commodity only has one way to go – up.

The post Should I buy ASX mining shares now or not? appeared first on The Motley Fool Australia.

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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 Zip Co Ltd (ASX: ZIP) share price is having a stellar start to the week.

At the time of writing, the buy now pay later (BNPL) provider’s shares are up 18% to 80.5 cents.

Though, as you can see below, the Zip share price remains down 75% over the last 12 months.

Why is the Zip share price racing higher?

Today’s gain appears to have been driven by the release of a trading update from BNPL rival and former merger target Sezzle Inc (ASX: SZL).

That update revealed that during December, Sezzle delivered its second consecutive month of profitability. And while its profit was certainly on the modest side, it is a big step in the right direction for an industry known to burn through cash and raise capital.

This appears to have sparked hopes that Zip’s profitability targets are not as farfetched as many feared.

Sezzle update

For the month of December, Sezzle reported a 15.7% year-over-year and a 1.7% month-on-month increase in revenue to US$19.9 million.

This helped take the company’s net income for the fourth quarter to US$500,000, which compares very favourably to a net loss of US$25.9 million in the same period a year earlier. What a difference 12 months makes!

Sezzle’s CEO, Charlie Youakim, appears to believe this could mean the end of capital raisings for the company. Particularly given its cash balance of US$69.7 million. He said:

In 2022, we set out on a mission to become profitable by year end… We are excited, as we have shown investors that we are clearly on the path to profitability with a well-capitalised balance sheet that does not require additional capital.

All in all, this could be interpreted as a positive read through for other BNPL providers, which explains why the Zip share price has responded so positively today.

The post Why is the Zip share price rocketing 18% higher today? appeared first on The Motley Fool Australia.

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More reading

• Should I buy the dip on Zip shares right now?
• Why Arafura, Data#3, Leo Lithium, and Zip shares are charging higher today
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Zip Co. 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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Buy now, pay later (BNPL) shares were the kings of the ASX over much of 2020 and 2021.

However, they appeared to fall out of favour as inflation reared its ugly head last year, spurring central banks to hike interest rates, thereby dinting consumers’ pockets. Add in the market’s distaste for unprofitable companies, and most BNPL stocks crumbled.

Now, the ASX looks like it could soon be down a BNPL share.

Laybuy Holdings Ltd (ASX: LBY) shares are in a trading halt this morning. Meanwhile, the company appears to be preparing to announce its removal from the Aussie bourse.

Let’s take a closer look at what’s been going on with the tiny BNPL outfit lately.

Are Laybuy shares about to be stripped from the ASX?

The Laybuy share price is in the freezer on Monday as the company prepares to release news on an application to be removed from the ASX.

It follows a dire period for the stock and its BNPL peers. The Laybuy share price has tumbled 69% over the last 12 months to trade at 6 cents at Friday’s close.

Longer-term investors have had a worse time, however.

The company – which says it boasts a market-leading position in New Zealand and the United Kingdom, as well as a presence in Australia – offered shares for $1.41 apiece in its $80 million initial public offering (IPO), undergone in 2020.

Sadly, while its future seemingly appears brighter, the market might not see the company’s maiden profit. Commenting on its outlook in November, managing director Gary Rohlof said:

We anticipate strengthening results and are on track to achieve [earnings before interest, tax, depreciation, and amortisation (EBITDA)] profitability in March 2023, making Laybuy one of the first pure play publicly-listed BNPL providers to achieve profitability.

ASX BNPL shares have suffered in recent years

Fortunately or unfortunately, Laybuy shares have been far from alone in their recent suffering.

Iconic ASX BNPL stock Zip Co Ltd (ASX: ZIP) rocketed to a record high of $14.53 in 2021. It’s since fallen 95% to trade at 75 cents today.

Meanwhile, shares in recently-profitable BNPL stock Sezzle Inc (ASX: SZL) peaked at around $11.34 in mid-2020. The stock is currently swapping hands for 65 cents after the company revealed a second consecutive month of profitability this morning.

Even former-market darling Afterpay saw its share price tumble 30% over the course of 2021. It was snapped up by Block Inc (ASX: SQ2) in January 2022.

The post One less fish in the sea: ASX BNPL share prepares to jump ship appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX BNPL share just rocketed 24% on return to profitability
• Why Alumina, Block, Liontown, and Nanosonics shares are dropping today
• Should I buy the dip on Zip shares right now?
• Here are the top 10 ASX 200 shares today
• Why Ampol, Block, JB Hi-Fi, and Telix shares are racing higher

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 Block and Zip Co. The Motley Fool Australia has positions in and has recommended Block. 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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