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  • REA Group shares are up 53% since late March. Is it too late to invest?

    online real estate shares

    The REA Group Limited (ASX: REA) share price has risen very strongly by 53% since the ASX started to see the beginning of a market rebound on 23 March.

    In comparison, the S&P/ASX 200 Index (ASX: XJO) has only risen by 19% during that time.

    Has the buying opportunity passed for investors wishing to take a stake in Australia’s largest online real estate portal?

    Solid third-quarter results

    The market reacted very positively to REA Group’s third-quarter results for FY 2020. This was released to the market last Friday morning, with a very strong 7.7% share price rise seen on the day.

    Despite the very tough trading conditions caused by the coronavirus crisis, REA Group still managed to deliver a 1% increase in revenue to $199.8 million and an 8% lift in earnings before interest, tax, depreciation and amortisation (EBITDA). While national residential listings declined 7% for the quarter, they were actually up in Melbourne by 6% and in Sydney by 5%.

    Considering the devastating impact that the coronavirus crisis has had on our property market, with property open for inspections and auctions virtually coming to a halt, I think that this was actually quite a strong result. So I am not surprised that the market reacted so favourably.

    Property inspections and on-site auctions begin to reopen

    Already there are signs of the beginning of a residential property market recovery, and investors appear to be encouraged by the release of the Federal Government’s 3-step plan to reopen Australia last Friday. This plan aims to see the majority of Australian businesses re-opened by the end of July.

    As part of this plan, NSW agents and vendors began traditional property inspections and on-site auctions last weekend after a 6-week limited shutdown due to the coronavirus.

    Is it too late to invest in REA shares?

    Despite the recent rally in the REA Group share price, I don’t believe it is too late for investors with a long-term investment horizon to purchase shares. REA Group shares closed on Friday at $95.17, which is still well below its peak in February of $117.30. I believe there is still potential for more upward movement in its share price, as the further opening up of the nationwide property market in the months ahead is likely to lead to increased property listings.

    I also believe that the long-term outlook for REA Group still looks bright due to the fast-growing Australian residential property market, driven by overseas migration. In addition, REA Group looks set to capitalise over the next few years on its growing international business divisions. In my view, this places it in a better position than its main rival in Australia, Domain Holdings Australia Ltd (ASX: DHG), which only has a local presence.

    5 cheap stocks that could be the biggest winners of the stock market crash

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    Returns as of 7/4/2020

    More reading

    Motley Fool contributor Phil Harpur owns shares of REA Group Limited. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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  • Tencent Weathers China Slowdown But a Deeper Threat Looms

    Tencent Weathers China Slowdown But a Deeper Threat Looms(Bloomberg) — The Covid-19 pandemic likely barely dented Tencent Holdings Ltd.’s growth, thanks to its dominance of online spheres from gaming to social media. Now that China’s industries are emerging from the worst of the outbreak, the bigger long-term threat may be the growing posse of challengers to its internet leadership.The WeChat operator is expected to unveil 18% revenue rise when it reports earnings Wednesday, offering investors the earliest glimpse into how China Internet Inc. fared in the coronavirus-stricken first quarter. That’s down a tad from 20%-plus in prior quarters but still decent, thanks to its burgeoning cloud and finance services and a billion-plus entertainment-starved players confined to home. It’s why Tencent’s market value has surged more than $28 billion since Covid-19 first broke out, defying a global market rout and a record Chinese economic contraction.But once the dust settles, Tencent will have to contend with a renewed challenge from giants like Alibaba Group Holding Ltd. and ByteDance Ltd., that are increasingly encroaching on its turf. Like in Silicon Valley years ago, when the biggest cash-rich players from Amazon.com Inc. to Facebook Inc. invaded each other’s territories, China’s largest tech corporations can now resume expanding beyond their mainstay businesses and developing services from advertising to gaming and payments in direct competition with Tencent.“These large internet platforms are ambitious and they will try to leverage their scale to go into businesses which are not core to them. Over the years I have seen many of them try to do it, but so far none has succeeded at overtaking the incumbent,” said Bloomberg Intelligence analyst Vey-Sern Ling. “I think large companies will continue to focus on strengthening their core, while engaging in battles with their rivals on the fringe.”TikTok operator ByteDance has been luring users and advertisers away and into its viral social networks. It’s also readying a foray into hardcore gaming. Alibaba-backed Ant Financial is creating its own version of a lite-app universe, taking a leaf from the book of Tencent’s WeChat. And even Pinduoduo Inc. — a Groupon-like platform backed by Tencent itself — has turned to live-streaming and virtual gifts to keep consumers glued to its app.Their efforts coincide with a maturing of Tencent’s gaming business. Tencent’s marquee titles like Honor of Kings and Peacekeeper Elite picked up millions of new players during virus lockdowns — yet not everyone’s a loyal patron. Its mobile game revenue for the first quarter may shrink sequentially due to weak performance from these aging hits, according to Bloomberg Intelligence citing Sensor Tower data. New releases from Alibaba’s gaming unit and Bilibili Inc. jumped in sales in recent weeks, according to the analytics firm, trailing closely behind Tencent’s two offerings.Longer term, ByteDance appears the more significant threat. It’s looking to exploit its social platforms to distribute games where players will splurge on virtual weapons and cosmetics, much as Tencent did more than a decade ago when it first entered the arena. ByteDance has built a gaming division with more than 1,000 people — including hires from Tencent — and is planning to launch two hardcore games this spring, Bloomberg News has reported.Competition at home has spurred Tencent to increasingly look overseas for future growth. It’s taken Honor of King’s global edition to scores of new markets from Russia to the Middle East. International titles contributed 23% of Tencent’s online games revenue in 2019’s final quarter. It’s also planning to launch music app Joox to Africa’s most populous nations.Tencent itself is exploring new markets. Taken together, fintech and cloud services are now Tencent’s fastest-growing division, making up more than a quarter of the company’s revenue in 2019.Its fintech business took a surprising hit in the first quarter, after the brick-and-mortar stores that account for the bulk of WeChat payments shuttered nationwide to contain Covid-19. Ant Financial’s Alipay, meanwhile, is seeking to draw more merchants and transactions partially by replicating the lite-app model WeChat championed. Alipay’s own mini programs — featured more prominently in a recent upgrade and used for everything from hotel booking to tax filing — now have more than 600 million monthly active users, according to Ant Financial.For cloud, the pandemic boosted Tencent’s nascent consumer-facing division as workers stranded at home had to rely on collaborative office software. But enterprise customers — a more significant source of revenue — were forced to delay their projects. Tencent’s cloud service revenues surpassed 17 billion yuan ($2.4 billion) in 2019, versus rival Alibaba’s 35.5 billion yuan. Alibaba said last month it will invest 200 billion yuan on cloud infrastructure such as data centers over the next three years.What Bloomberg Intelligence SaysThe company’s social-ad business could continue to grow strongly, despite challenging industry conditions, on high demand and new inventory released in mid-February, but its fintech and business services segment could deliver slower growth as offline payments declined during the pandemic and some cloud computing projects were delayed.\- Vey-Sern Ling and Tiffany Tam, analystsClick here for the research.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • Cochlear share price lower after reporting 60% sales decline in April

    The Cochlear Limited (ASX: COH) share price is edging lower after providing an update this morning.

    At the time of writing the hearing solutions company’s shares are down slightly to $181.22.

    What did Cochlear announce?

    This morning Cochlear released an update on the tough trading conditions it is facing because of the pandemic.

    According to the release, as was forewarned in March, the company has experienced a substantial, temporary negative impact on cochlear implant surgeries in the US and Western Europe as hospitals prioritise their COVID-19 responses.

    During the month of April, sales revenue across the business fell by ~60% on the prior corresponding period. The sales of cochlear and acoustic implants were the most severely affected.

    Cochlear implant unit sales declined by ~80% across developed markets, with most elective surgeries postponed across the US and Western Europe. In addition to this, the company notes that many ear, nose, throat (ENT) surgeons have been diverted to help treat COVID-19 patients.

    Positively, in China things are recovering quickly. Surgeries recommenced in late February and continued to recover throughout April.

    As a result, surgeries are now running close to pre-virus run rates despite Beijing, the largest surgery centre, remaining largely closed to elective surgery. Though, the majority of cochlear implants in China are for children.

    Also being impacted by the pandemic is the Services business, which represents around 30% of business-as-usual revenue. Its sales declined by ~30% during the month of April.

    Management advised that while many recipients have been able to access sound processor upgrades remotely, clinic closures have delayed access for other users.

    In light of these sales declines, Cochlear is currently cash flow negative and expects to continue being so for the coming months.

    However, thanks to its recent capital raising, an increase in its debt facilities, and its cost cutting, management believes its liquidity position is strong enough to navigate these tough times.

    Outlook.

    Management expects the immediate term to be tough for the company but remains very positive on its long term outlook.

    CEO & President, Dig Howitt said, “Longer-term, there remains a significant, unmet and addressable clinical need for cochlear and acoustic implants that is expected to continue to underpin the long-term sustainable growth of the business. Following the capital raising and expansion of debt facilities, we have strengthened our balance sheet and liquidity position, which enables the business to weather the expected temporary decline in demand caused by COVID-19, while continuing to progress the R&D pipeline.”

    5 cheap stocks that could be the biggest winners of the stock market crash

    Investing expert Scott Phillips has just named what he believes are the 5 cheapest and best stocks to buy right now.

    Courtesy of the crashing stock market, these 5 companies are suddenly trading at significant discounts to their recent highs… creating what could be incredible opportunities for bargain-hungry investors.

    Simply click here to scoop up your FREE copy and discover the names of all 5 cheap shares to buy now… before the next stock market rally.

    See the 5 stocks

    Returns as of 7/4/2020

    More reading

    James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

    The post Cochlear share price lower after reporting 60% sales decline in April appeared first on Motley Fool Australia.

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