Day: 1 February 2023

Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a number of broker notes this week.

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

IGO Ltd (ASX: IGO)

According to a note out of Citi, its analysts have retained their buy rating on this battery materials miner’s shares with a slightly trimmed price target of $17.10. Citi was pleased with the company’s performance during the first half and the record interim dividend. And while it suspects that lithium prices may have peaked, it still sees IGO benefitting from strong pricing for some time. The IGO share price is trading at $14.76 on Wednesday.

Megaport Ltd (ASX: MP1)

A note out of Goldman Sachs reveals that its analysts have retained their buy rating on this network services company’s shares with a reduced price target of $8.10. While Goldman wasn’t too impressed with operational trends during the first half, it remains positive on the company. This is due to Megaport having a clear product advantage versus peers and a decade-long runway for robust growth. The Megaport share price is fetching $5.78 this afternoon.

Pointsbet Holdings Ltd (ASX: PBH)

Analysts at Bell Potter have retained their speculative buy rating but cut their price target on this sports betting company’s shares to $3.50. This follows the release of a solid quarterly update earlier this week. And while Bell Potter believes that PointsBet will require a $100 million equity raising in FY 2024, it isn’t putting the broker off. It appears to believe that the company’s shares are a great long term option due to its very large opportunity in North America. The Pointsbet share price is trading at $1.48 on Wednesday.

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

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More reading

• Are Megaport shares mega cheap following Tuesday’s crash?
• 5 things to watch on the ASX 200 on Wednesday
• ASX 300 betting shares tumble on disappointing quarterlies
• 3 ASX lithium shares hammered after quarterly updates on Tuesday
• Why Bubs, Core Lithium, Megaport, and Pointsbet shares are crashing 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 Megaport and PointsBet. The Motley Fool Australia has recommended Megaport and PointsBet. 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 a good day for ASX shares investors today. The S&P/ASX 200 Index (ASX: XJO) is up 0.35% and the S&P/ASX All Ordinaries Index (ASX: XAO) is up 0.34%.

There’s some good economic news likely contributing to this market momentum today. The Reserve Bank of Australia has told a government hearing that it believes inflation in Australia has already peaked.

But that doesn’t mean there aren’t more interest rate rises coming.

Head of the RBA’s economic analysis team Marion Kohler fronted the senate select committee on the cost of living today.

In her opening statement, Kohler said:

… we think the peak in inflation was at the end of 2022 – at around 8 per cent – and that inflation will begin to ease over the course of this year”.

What does this mean for ASX shares?

Inflation is a problem for most ASX shares because it increases input costs for companies.

Some ASX shares are less affected by cost inflation because they can offset it. They can do this by increasing the prices they charge consumers for their products and services.

The companies that can do this without too much trouble are in the consumer staples sector of the ASX. Examples include Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW).

Some companies have inflation built into their contracts, which means when inflation goes up, so does their income. Examples include Transurban Group (ASX: TCL), which has about 70% of its toll road contracts linked to inflation. So, they’re somewhat protected.

But all in all, most companies will tell you they prefer inflation at the lower end of the scale. Typically, the lower their costs, the higher their profits.

What about interest rates?

Inflation is the sole reason interest rates have gone up so much over the past 12 months. So, if inflation has peaked, does that mean interest rates won’t go any higher?

Sorry, no.

Unfortunately, we have a long way to go before getting inflation back into the RBA’s comfort zone of 2% to 3%. And that’s what they want.

The latest quarterly inflation report for December showed a higher-than-expected increase in the consumer price index (CPI). It went up 1.9% over the quarter to bring the annual rate for 2022 to 7.8%.

The RBA Board is “focused on returning inflation to target”, according to Kohler. This means despite the pain that rising rates are causing businesses and borrowers, they will go on.

Kohler explained that continuing to increase rates meant inflation would fall faster.

She said:

We understand that some people are finding the rise in interest rates difficult to manage and others will have to cut back on discretionary spending.

However, higher interest rates are necessary to ensure that the current period of higher inflation and cost of living pressures does not persist too long.

The impact of further increases to interest rates on ASX shares is two-fold.

Firstly, it’s another rising input cost for any company with debt on its books.

Secondly, rising rates mean homeowners will keep tightening their belts, which usually means cutting back on discretionary items.

That’s not good for ASX consumer discretionary shares, nor other ASX shares like travel stocks.

The RBA Board will meet again on Tuesday to make its next monthly interest rate decision.

The experts reckon a 25 basis point rise is on the cards, taking the official cash rate from 3.1% to 3.35%.

The post ASX shares investors rejoice! RBA says inflation has now peaked appeared first on The Motley Fool Australia.

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More reading

• Should I buy Qantas shares before the company’s ASX earnings update?
• Guess which ASX 200 share dropped then popped on a 30% profit dive
• Up 30% in 4 months! ASX 200 gold share Newcrest is still trading cheap: fundie
• ASX 200 lithium share Sayona Mining leaps on strong quarterly
• The Pilbara Minerals share price has rocketed! Have I left it too late to buy?

Motley Fool contributor Bronwyn Allen 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 Coles 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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The lithium industry has started 2023 strongly. Since the start of the year, a number of ASX 200 lithium shares have generated stellar returns for investors.

This has been driven by optimism that lithium prices will remain higher for longer. This would be good news for miners and those on the cusp of pulling the battery-making ingredient out of the ground.

Should I buy ASX 200 lithium shares?

Well, firstly, I have had exposure to the lithium industry for a few years through my investment in what has become Allkem Ltd (ASX: AKE).

So, the question becomes, would I buy ASX 200 lithium shares today if I didn’t already own Allkem shares?

This is a difficult question to answer. While I have zero plans to sell my Allkem shares, I’m not certain that I would be jumping in right now.

That’s because when I make an investment, I like the risk/reward to be compelling.

This is something that I thought I saw in Domino’s Pizza Enterprises Ltd (ASX: DMP) shares back in November. Since that purchase, the Domino’s share price is up over 33%.

However, with the Allkem share price up approximately 20% since the start of the year, I don’t personally believe the risk/reward is overly compelling given the uncertainty over future lithium prices. And that goes for all the ASX 200 lithium shares.

But given the volatility that occurs in the lithium industry periodically, investors may not have to wait long until they get an opportunity to invest at a more favourable level. In light of this, I would sit tight and wait for a pullback before considering an investment.

Brokers remain positive

It is worth noting that some brokers aren’t holding back for a better price.

For example, Macquarie has an outperform rating and $7.50 price target on Pilbara Minerals Ltd (ASX: PLS) shares, Goldman Sachs has a buy rating and $15.50 price target on Allkem’s shares, and UBS has a buy rating and $112.00 price target on Mineral Resources Ltd (ASX: MIN) shares.

These price targets imply a minimum of 18% upside for each of these ASX 200 lithium shares.

The post Should I buy ASX 200 lithium shares now or not? appeared first on The Motley Fool Australia.

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More reading

• Jeremy Grantham just warned shares could crash 50%, but did he also suggest lithium stocks may have “a substantial advantage” over the long-term?
• The Pilbara Minerals share price has rocketed! Have I left it too late to buy?
• These were the best performing ASX 200 shares in January
• Why was the Lynas share price hit so hard on Tuesday?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday

Motley Fool contributor James Mickleboro has positions in Allkem and Domino’s Pizza Enterprises. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Domino’s Pizza Enterprises. The Motley Fool Australia has recommended Domino’s Pizza Enterprises. 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 secret that ASX shares had a cracking start to the year. Over January, the S&P/ASX 200 Index (ASX: XJO) rose from 7,038.7 to 7,476.7 points – a rise of 6.2%. That means that most ASX index funds would have recorded a similar level of gains. But the same can’t be said of the Vanguard MSCI Index International Shares ETF (ASX: VGS).

The Vanguard International Shares ETF is one of the most popular exchange-traded funds (ETFs) on the ASX. But it did not deliver for investors over January as an ASX 200 ETF would have.

Over the month just gone, this ETF went from $91.98 per unit to $93.10 by the end of January. That’s a rise worth 1.22%:

Nothing to turn one’s nose up against – but still enough to make this ETF a significant market lagger over January.

So what happened here to cause such a chasm of value between the Vanguard International Shares ETF and the ASX?

What’s behind the Vanguard International Shares ETF’s lukewarm start to 2023?

Well, there’s a relatively simple explanation: the Vanguard International Shares ETF is not related to the ASX at all. In fact, it holds no ASX shares within its portfolio.

That’s because this index fund tracks the MSCI World ex-Australia Index. This index holds around 1,500 shares holdings from advanced economies around the world. Most of its holdings are American, but it also has exposure to the Japanese, British, Canadian, and European markets.

Its largest holdings are dominated by the US tech giants though. Among the most dominant are Apple, Microsoft, Alphabet, and Amazon, as well as Johnson & Johnson, Exxon Mobil, and Berkshire Hathaway.

So this explains why the Vanguard International Shares ETF had such a different January to the ASX 200. Or does it?

On closer inspection, many of the largest shares within this ETF’s portfolio actually had stunning Januarys. Apple rose by around 10% last month. Microsoft was up by 3.3%, and Alphabet and Amazon shares rose by 12% and 22.8% respectively.

So what’s going on here?

Dollars and dollars

Well, there is one factor that has probably blunted this ETF over the past month – the Australian dollar. The Aussie dollar had a particularly strong month against the US dollar. Our dollar finished 2022 at around 68 US cents.

But it ended January at around 71 cents after going as high as 72 cents a few days earlier. This might not seem like a big difference, but it represents a move of up to 6%.

When US assets are priced in Aussie dollars (as this ETF is by virtue of its ASX listing), a rising Aussie dollar reduces the value of the US-priced assets. So currency fluctuations seem to have taken a big chunk of value out of the Vanguard International Shares ETF over January.

So that’s what investors in this ETF can probably blame for the miserly performance that the fund had last month against the ASX 200.

Saying that, the Vanguard International Shares ETF has still returned an average of 10.65% per annum since its inception in 2014.

The post The Vanguard MSCI Index International Shares ETF lagged the market in January. Here’s why? appeared first on The Motley Fool Australia.

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More reading

• 3 popular ETFs that could be top picks right now
• Forget gold, I’m using the Warren Buffett method to try and get rich!
• 3 fantastic ETFs for ASX investors to buy this month
• With almost no investments at 30, can ASX shares still make me rich?
• 3 of the best ASX ETFs for investors to buy in January

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Alphabet, Amazon.com, Apple, Berkshire Hathaway, Johnson & Johnson, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon.com, Apple, Berkshire Hathaway, Microsoft, and Vanguard Msci Index International Shares ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Johnson & Johnson and has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway, short January 2023 $265 calls on Berkshire Hathaway, and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet, Amazon.com, Apple, Berkshire Hathaway, and Vanguard Msci Index International Shares ETF. 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 was the best of times, it was the worst of times. The last five years have been a rollercoaster for Zip Co Ltd (ASX: ZIP) shares. 

What is now ASX’s largest buy now, pay later (BNPL) provider began life on the market as resource stock Rubianna. It transformed into the Zip we know today after acquiring the fledgling BNPL business in 2015 – a year after it first launched.

The Zip share price then gained more than 3,500% over the following years, hitting a record high of $14.53 in early 2021. But the years since haven’t been nearly so kind.

Of course, past performance is not an indication of future performance. Still, I’d argue it’s important to look to the past to determine how a company came to be where it is, and how it might move forward.

Recapping the Zip share price

The Zip share price has fallen more than 90% over the last two years to trade at 66 cents today. Looking further back, it’s fallen 48% over the last five years – an average of nearly 10% each year.

Of course, there’s more to the company’s story than those numbers. It rose to its highest heights during the 2021 tech rally alongside former market darling Afterpay.

While there’s heaps of competition in the BNPL space today – Apple Inc (NASDAQ: AAPL), PayPal Holdings Inc (NASDAQ: PYPL), and even some of Australia’s big four banks boast BNPL offerings – back in 2020 and 2021 consumers wishing to pay for purchases in instalments only had a handful of choices, Zip being one. And its revenue was growing. However, it didn’t grow fast enough.

The market turned on unprofitable companies in 2022 as surging inflation dinted consumers’ back pockets and led to rate hikes around the globe.

In turn, the cost of borrowing soared and concerns Zip could face more bad debts amassed.

Looking to the future

So, that’s what brought Zip shares to where they find themselves today. Could worst be behind them?

The obvious happening that could turn things around for the stock would be a maiden profit.

Passing the financial milestone could boost both sentiment and confidence in the stock, thereby bolstering its price.

Zip posted record revenue and transaction volume for the December quarter. Its United States segment also became profitable during the period.

Not to mention, the company expects to be cash earnings before tax, depreciation, and amortisation (EBTDA) positive on a sustainable basis at the end of this financial year.

It also boasted $78.5 million of cash and liquidity – enough to see it through to the milestone, according to the company. That suggests it mightn’t need to raise cash in the near future.

Could Zip shares provide returns in 2023?

With that in mind, it’s definitely possible the Zip share price could pull itself up by the bootstraps and charge forward in 2023. Indeed, it could be on track to post a notable recovery before the year is out.

However, I’m still sceptical of the BNPL giant’s future. Unprofitable outfits generally house a considerable level of uncertainty. Additionally, many of the factors weighing on Zip in 2022 haven’t abated yet.

For that reason, I’m passing on Zip shares for now. Instead, I’ll keep a hold of my cash until I come across an investment I have more confidence in.

The post If I buy $1,000 of Zip shares now, what could my returns be this year? appeared first on The Motley Fool Australia.

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More reading

• Avoid my biggest mistake in investing: fund manager
• The Zip share price: Has it bottomed out?
• Why Coronado Global, Mincor, OFX, and Zip shares are dropping today
• Zip share price on the move amid record quarter and US profitability
• Why Boss Energy, Pilbara Minerals, Sezzle, and Zip shares are charging 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 Apple, PayPal, and Zip Co. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple and PayPal. 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 ASX share market is having a fairly decent day of trading so far this Wednesday. At present, the All Ords has gained a robust 0.43%, putting it back over 7,700 points. But one ASX lithium stock isn’t joining in on the party.

The Winsome Resources Ltd (ASX: WR1) share price closed at $2.33 yesterday. And that’s where it’s going to stay, at least for a while.

That’s because, this morning, Winsome released an ASX announcement to the markets. This declared that the company’s shares would enter a trading halt, effective from today.

Why are Winsome Resources shares in a trading halt?

Winsome told investors that, “the trading halt is requested pending release of details of a capital raising“. It also stated that “the trading halt will remain in place until the earlier of the release of the announcement to the market or commencement of trading on Friday 3 February 2023″.

So it looks as though Winsome shares will be off the market until at least tomorrow, and probably until Friday.

Winsome hasn’t yet provided any details of this capital raising. But in an investor presentation released yesterday, the company outlined its plans for further acquisitions, as well as an intention to further exploration activity, particularly at its Decelles site, in Quebec, Canada.

It’s been a busy few months for Winsome Resources. It was only back in November last year that the company conducted a Canadian capital raising program, which netted Winsome just under $7 million at $1.67 per share.

In December, Winsome also announced that it has completed a secondary share listing on the ‘over-the-counter (OTC) US markets. This was done to provide “ease of trading for US and Canadian investors”.

So we’ll have to wait for Winsome shares to resume trading to find out how investors will react to this latest capital raising.

In the meantime, the last Winsome Resources share price gives this ASX lithium stock a market capitalisation of $363.39 million.

The post Why is ASX lithium stock Winsome Resources on ice? appeared first on The Motley Fool Australia.

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More reading

• Why BHP, Core Lithium, Santos, and Winsome shares are charging higher
• Why ASX lithium share Winsome Resources is surging 22% today

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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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a solid gain. At the time of writing, the benchmark index is up 0.4% to 7,508.7 points.

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

Argosy Minerals Limited (ASX: AGY)

The Argosy Minerals share price is up 5% to 66.7 cents. This morning, the lithium developer provided an update on its Rincon project in Argentina. Argosy Minerals revealed that it remains on track to start steady-state production by the end of the second quarter of calendar year 2023.

Credit Corp Group Limited (ASX: CCP)

The Credit Corp share price is up 2.5% to $22.20. This follows the release of the debt collection company’s half year results. Credit Corp reported an 8% increase in revenue to $220.5 million but a 30% decline in profit to $31.8 million. The market appears to have been expecting even worse for its profits.

Flight Centre Travel Group Ltd (ASX: FLT)

The Flight Centre share price is up 9% to $17.27. Investors have responded positively to the travel agent’s plan to acquire United Kingdom-based luxury travel brand Scott Dunn for $211 million. To support the acquisition, Flight Centre has raised $180 million from institutional investors at a 7.8% discount of $14.60 per new share. Flight Centre also released a solid trading update yesterday.

Mesoblast Ltd (ASX: MSB)

The Mesoblast share price is up over 11% to $1.06. This morning, the biotech company revealed that it has resubmitted its Biologics License Application (BLA) to the U.S. Food and Drug Administration (FDA) for the approval of remestemcel-L in the treatment of children with steroid-refractory acute graft versus host disease (SR-aGVHD). The resubmission contains substantial new information as required by the FDA.

The post Why Argosy Minerals, Credit Corp, Flight Centre, and Mesoblast shares are racing higher appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX 200 share dropped then popped on a 30% profit dive
• ASX 300 lithium share Argosy Minerals soars 6% on imminent production
• Guess which ASX All Ords biotech share is rocketing 13% on FDA news
• Flight Centre share price rockets 15% as ASX 200 travel stock resumes trading
• Flight Centre share price frozen amid $211m ‘luxury’ acquisition

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 Flight Centre Travel 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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1) US markets closed out January with solid gains as, according to Bloomberg, “investors cheered signs of labour costs easing and inflation cooling.”

“Data on Tuesday showed US housing prices continued to cool, while another report highlighted consumer confidence unexpectedly falling. Hanging over everything is Wednesday’s Fed decision, with the central bank widely expected to raise rates by a quarter percentage point.”

Marketwatch reported the Nasdaq Composite Index (NASDAQ: .IXIC) cemented its best January performance since it notched a 12.2% gain in 2001, while the S&P 500 Index (SP: .INX) booked its best start to a year since 2019, according to Dow Jones Market Data.

2) Here in Australia, the S&P/ASX 200 Index (ASX: XJO) ended January 6.2% higher, with the AFR reporting the one month rally in the stock market “entirely recouped last year’s losses.”

It’s a salient reminder that if you miss the best few days or months – in a futile attempt to get in and out of the market with perfect timing – your returns are likely to lag that of the market.

Perhaps not surprisingly, two of the best performing ASX 200 stocks in January were lithium stocks, with the Sayona Mining Ltd (ASX: SYA) share price gaining 37% and the Pilbara Minerals Ltd (ASX: PLS) share price jumping 27% higher.

To my detriment, I’ve let the whole lithium stock boom pass me by, just as I steered clear of the whole cryptocurrency and NFT craze. Fear of missing out (FOMO) is not an investing strategy. I don’t have the skills or frankly the interest in working out whether a lithium stock – and the lithium sector – will be a good investment or not.

3) In the AFR’s Chanticleer column titled “Why bad news is good news for lithium stocks”, author James Thomson quotes Macquarie as saying…

“Supply response will lag demand, resulting in a market deficit and elevated lithium prices. In addition, we believe the capex upgrades could also shift the cost curve upwards, translating to higher lithium prices in the long term.”

Rising electric vehicle (EV) production is fuelling demand for lithium, and this is translating into the surging prices of lithium stocks, something at Thomson says “speaks in part to a return to the global burst of speculative bullishness, and in part to new data suggesting lithium demand over the next decade could be even stronger than expected.”

A lot can change in a decade. History says there will be some big winners in the lithium space, and some will flame out. Good luck sorting the wheat from the chaff.

4) As ever, it takes two or more participants to make a market.

The bulls – buoyed by the great January – will point to inflation as having peaked, interest rates close to a peak, and corporate profits holding up. A soft economic landing could – somewhat amazingly given all we’ve been through since COVID first struck in early 2020 – see the stock market hit new highs this year.

The bears will point to inflation being a tough nut to crack, meaning interest rates will rise higher than current expectations, which in turn will see unemployment rise causing an inevitable recession. In effect, a hard landing. 

Good luck picking the winner. As an eternal optimist, I’m hoping the global economy will keep muddling through as it resets from the massive external shocks of COVID, Ukraine war, inflation and one of the sharpest pace of interest rate hikes on record. If markets can average a gain of 7 to 10% per annum over the next five years, I’ll be content. 

On the other hand, noted bear Jeremy Grantham continues to warn investors of a potential 50% decline in the stock market this year as he believes valuations are still too high, according to a report on Markets Insider. 

As an asset manager, billionaire Grantham can’t sit in cash waiting for the crash. Nor can he short the whole market, for the timing of any potential stock market crash is unknown. 

As for what Grantham is backing, Markets Insider quotes from his 2023 outlook letter…

“Despite the generally unattractive nature of the U.S. equity market and the extremely tricky global economy, there are still a surprising number of reasonable investment opportunities even if they are not sensational… emerging markets are reasonably priced and the value sector of emerging is cheap.” 

Australia may not be an emerging market, but we aren’t the US equity market. Writing on Livewire Markets, AMP Chief Economist Shane Oliver gives seven reasons why Australian shares are likely to outperform global shares over the medium term. Included are a new super cycle in commodities, population growth, higher dividends and a thawing in the China relationship.

Back to Grantham, who also says…

“For those with a longer horizon than average, say 5 years and above, I believe stocks related to addressing the problems of climate change and the increasing pressure on many raw materials have a substantial advantage over the rest of the economy as the world’s governments and corporations begin to accept the urgency of these problems.” 

Super cycle in commodities.

Climate change.

China.

Lithium stocks, anyone?

The post Jeremy Grantham just warned shares could crash 50%, but did he also suggest lithium stocks may have “a substantial advantage” over the long-term? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bruce Jackson 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 S&P/ASX 200 Index (ASX: XJO) is back on form on Wednesday. In afternoon trade, the benchmark index is up 0.4% to 7,509.2 points.

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

Appen Ltd (ASX: APX)

The Appen share price is down 2.5% to $2.49. This is despite there being no news out of the artificial intelligence data services company. However, it is worth noting that the shares of Snapchat owner, Snap Inc, crashed on Wall Street in after-hours trade following a poor update. In its earnings call, CEO Evan Spiegel commented that digital advertising demand hasn’t improved. This could mean less demand for Appen’s ad relevance services.

Gold Road Resources Ltd (ASX: GOR)

The Gold Road share price is down 2% to $1.61. This may have been driven by a broker note out of Ord Minnett. Its analysts were disappointed with the gold miner’s quarterly update and have downgraded its shares to an accumulate rating with a trimmed price target of $1.80.

Healius Ltd (ASX: HLS)

The Healius share price is down 2% to $3.14. The catalyst for this may have been a note out of Morgans. While the broker remains positive on the healthcare company, it has removed it from its best ideas list. Morgans highlights that the “timing remains uncertain as to when volumes and revenue revert to long-term trends.”

Pinnacle Investment Management Group Ltd (ASX: PNI)

The Pinnacle share price is down over 4% to $9.95. Investors have been selling this fund manager’s shares after analysts at UBS downgraded them to a sell rating from neutral. The broker has also cut its price target on the company’s shares to $8.50. UBS is expecting Pinnacle to disappoint this earnings season.

The post Why Appen, Gold Road, Healius, and Pinnacle shares are dropping today appeared first on The Motley Fool Australia.

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More reading

• Top ASX shares to buy in February 2023
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• Why is the Block share price surging 6% on Tuesday?
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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 Appen and Pinnacle Investment Management Group. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management 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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Qantas Airways Limited (ASX: QAN) shares are up 1.1% to $6.41 at the time of writing.

The S&P/ASX 200 Index (ASX: XJO) stalwart is moving with the market today. The benchmark is also well into the green, up 0.61%.

Some of today’s momentum may relate to exciting news out of fellow ASX 200 travel share Flight Centre Travel Group Ltd (ASX: FLT).

Flight Centre shares were up 15% in earlier trading. The bump relates to yesterday’s news of a $180 million placement to acquire United Kingdom-based luxury travel brand, Scott Dunn.

Should you buy Qantas shares ahead of the next report?

So, earnings season is upon us, and Qantas is due to announce its FY23 half-year results on 23 February.

The last time Qantas gave us an update was in November last year. It upgraded its earnings guidance for the second time in just over a month due to continued strength in travel demand.

The airline said it was on course to deliver a stronger-than-expected profit for FY23. This pleased investors, who bidded up Qantas shares by 6% on the day.

In terms of numbers, management estimated an underlying profit before tax of between $1.35 billion and $1.45 billion for the half. That was $150 million above the guidance range it gave in early October.

Qantas noted that limits on international capacity were driving domestic leisure demand.

All of this is pretty impressive, particularly given Qantas expects a record fuel bill for FY23. It estimates fuel costs of about $5 billion due to elevated oil prices.

Qantas said it also expected net debt to fall to between $2.3 billion to $2.5 billion by the end of December. This estimate was about $900 million better than its guidance just one month before.

So, if Qantas manages to achieve all of this or better, it’s likely to get a share price boost on 23 February.

What do the brokers think?

Well, it’s hard to find a broker not backing Qantas shares right now.

As my Fool colleague Tristan reports, Commsec has 12 buy ratings, two hold ratings, and no sell ratings on the travel stock. And that’s despite the Qantas share price hitting a post-COVID high of $6.69 last month.

Morgans is bullish on the Qantas share price. It ranks the company as its top travel stock under coverage “given it has the most near-term earnings momentum”.

The broker has an add rating and an $8.50 price target on Qantas shares.

In a new note, Morgans says:

Looking across travel companies globally, airlines are now in the sweet spot given demand is massively exceeding supply.

QAN is trading at a material discount compared to pre-COVID multiples, despite having structurally higher earnings, a much stronger balance sheet, a better domestic market position, a higher returning International business and more diversification (stronger Loyalty/Freight earnings).

The strong pent-up demand to travel post-COVID should result in a healthy demand environment for some time, underpinning further EBITDA growth over FY24/25.

Goldman Sachs has a conviction buy on Qantas shares. The broker reckons they could go as high as $8.20 within 12 months.

Goldman said: “We believe the stock is not appropriately pricing QAN’s improved earnings capacity.”

UBS also has a buy rating on Qantas shares with a price target of $7.60.

Will Qantas pay a dividend in 2023?

Goldman Sachs tips that Qantas might pay a 10-cent per share dividend in FY23 and 20 cents in FY24.

Morgans says Qantas is more likely to conduct share buybacks than pay dividends due to a lack of franking credits. It forecasts a $400 million on-market buyback to be announced with the half-year result.

Morgans doesn’t foresee any dividends from Qantas shares as far out as FY25.

The post Should I buy Qantas shares before the company’s ASX earnings update? appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX 200 share dropped then popped on a 30% profit dive
• Up 30% in 4 months! ASX 200 gold share Newcrest is still trading cheap: fundie
• Morgans names 2 of the best ASX 200 shares to buy in February
• ASX 200 lithium share Sayona Mining leaps on strong quarterly
• The Pilbara Minerals share price has rocketed! Have I left it too late to buy?

Motley Fool contributor Bronwyn Allen has positions in Qantas Airways. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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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