Will Afterpay Ltd (ASX: APT) join the likes of Commonwealth Bank of Australia (ASX: CBA) and CSL Limited (ASX: CSL) and be an ASX blue chip of tomorrow?

The way the Afterpay share price has been performing in recent weeks would indicate so, at least.

Afterpay shares have been on an absolute tear since reaching a two-year low back in March. Then, Afterpay reached as low as $8.01 a share – a level not seen since June 2018.

Today, it’s a different story, with Afterpay at fresh all-time highs above $44 a share. Anyone who picked up some Afterpay shares in late March would be looking at a gain of over 400% in just two months.

So will this breakneck growth continue for Afterpay long enough to justify that coveted ‘blue chip’ status?

Does Afterpay have what it takes to become an ASX blue chip?

On current prices, Afterpay has a market capitalisation of $11.9 billion. That’s enough to put the company in the S&P/ASX 200 Index (ASX: XJO) to be sure – even into the ASX 50. But (at the time of writing), there is still a lot of space between Afterpay’s market cap, and the market cap of real ASX blue chips like Woolworths Group Ltd (ASX: WOW), Commonwealth Bank and CSL.

But there’s more to being a blue chip than just sheer size.

The term ‘blue chip’ derives from poker, where the highest value gambling tiles are coloured blue. Conventionally, ‘blue chip’ shares represent not just size, but safe cash flows and a robust business model. Afterpay is yet to fulfil those two criteria in my view.

But that doesn’t mean it won’t in the near future.

Afterpay’s opportunity for ‘blue chip’ status

For Afterpay to be a true ASX blue chip, I think it has to cement its position in the crowded field of the payments sector. It will need to prove it can become reliably profitable and prove it can fend off competition from the real blue chips in the payments space – the US giants MasterCard and Visa.

These companies are stupendously profitable and have market caps of $US292.2 billion and US$405.8 billion respectively.

Australia is a fantastic economy, but it’s my belief that it doesn’t offer Afterpay enough scale and ammunition for ‘blue chip’ status on its own, given Afterpay’s small-margin ‘clip the ticket’ business model. For Afterpay to truly succeed and become a blue chip, it needs to operate on a global scale much like MasterCard and Visa.

The good news is that Afterpay is heading in the right direction. Its US growth numbers are very pleasing, as are its numbers from the UK and Europe. Its partnership with Chinese giant, Tencent Holdings is also conducive for growth opportunities in Asia.

We’ll have to see if Afterpay can truly become an ASX blue chip. But I think it’s treading the right path!

More reading

• Here are all the ASX 200 shares that have doubled or more since the bottom of the bear market
• Brokers name 3 ASX 200 shares to buy right now
• Is Telstra about to be caught in a new mobile phone war?
• Why Aristocrat Leisure, Afterpay, Corporate Travel, and Sydney Airport are pushing higher
• ASX 200 down 0.2%: Wesfarmers overhauls Target, Sydney Airport has no plans to raise equity

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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 Is Afterpay an ASX blue chip of tomorrow? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2ZplLQ2

The reopening of the Australian economy and record-low interest rates has made the S&P/ASX 200 Index (ASX: XJO) and All Ordinaries (ASX: XAO) rife with opportunities. For investors interested in the technology sector, here are three leading ASX 200 tech shares to consider buying today. 

1. EML Payments Ltd (ASX: EML) 

The EML share price ascended to an almost ‘market darling’ status following years of consistent organic growth and strategic acquisitions. However, global social distancing and lockdown measures due to the coronavirus have derailed its business model that is largely dependent on shopping centres and recreational activities. 

Prior to EML’s acquisition of Irish firm, Prepaid Financial Services (PFS), its revenue from shopping centre gift cards represented approximately 65% of group revenues. Its long-term strategy is to diversify its earnings away from its dependency on shopping centres. The acquisition of PFS pivoted its earnings to more General Purpose Reloadable (GPR) than Gift & Incentive (G&I). GPRs have various applications including salary packaging benefit accounts, fintech and digital banking, and sports betting/gaming. 

I believe EML’s positive business update and depressed share price bodes well with the reopening global economy. Its G&I segment should see volumes recover as lockdowns ease and trading conditions improve. 

2. Data#3 Limited (ASX: DTL) 

Data#3 is a business communications technology leader that provides an integrated array of solutions including cloud, mobility, security data and analytics and IT lifecycle management. The company’s 1H20 results announced that revenue had increased by 11.6% to $718.9m and NPAT jumped 41.5% to $8.7m. 

On 2 April the company provided an update on the impact of COVID-19. It cited that, to date, there has been no material change to its overall sales pipeline. Customers have been shifting their priorities to address immediate remote working, cloud and security requirements. Its performance to date and current pipeline of opportunities will help it achieve its full year financial objectives.

However, it noted that its performance is typically dependent on significant earnings in the fourth quarter, and it is too early to provide more specific guidance at this point in time. It reassured the market that approximately 60% of its revenue is recurring from contracts with government and large corporate customers. 

3. Tyro Payments Ltd (ASX: TYR) 

Tyro is one of the many businesses that will benefit from a reopening Australian economy. The company offers payment solutions for credit and debit card transactions.

As of 30 June 2019, 77% of Tyro’s merchants were SMEs and 86% were in the health, hospitality and retail sectors. Despite these sectors being hit the hardest by lockdown rules, Tyro only experienced a 38% fall in transaction values in April and 20% fall in the first two weeks of May (on prior corresponding period). The reopening of retail, restaurants and cafes should see volumes improve moving forward. 

More reading

• ASX 200 ends the day higher, EML share price rises another 12%
• Do the Altium and Xero share prices still represent good long-term buys?
• Why ALS, Clover, Computershare, & EML Payments shares are storming higher
• ASX 200 down 0.2%: Big four banks lower and TPG announces demerger plans
• Why the EML Payments share price is rocketing over 12% higher today

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited and Tyro Payments. The Motley Fool Australia has recommended Data#3 Ltd. and Emerchants 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.

The post 3 leading ASX 200 tech shares to buy now appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2Zr9Z80

Australia’s top brokers have been busy adjusting their estimates and recommendations again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Aristocrat Leisure Limited (ASX: ALL)

According to a note out of UBS, its analysts have retained their buy rating and lifted the price target on this gaming technology company’s shares to $31.80. The broker believes investors need to overlook the difficult trading conditions it is facing at present and focus on the future. It remains positive on its outlook thanks to its fast-growing digital business and the reopening of casinos. I agree with UBS on Aristocrat and would be a buyer of its shares.

Qantas Airways Limited (ASX: QAN)

A note out of Morgan Stanley reveals that its analysts have retained their overweight rating but trimmed the price target on this airport operator’s shares slightly to $5.20. According to the note, the broker expects Qantas’ passenger numbers to return to previous levels in 2023. Though, a return to profitability is likely to come a year earlier. This should mean it has sufficient liquidity to ride out the storm. I think Qantas could be a good option for investors, but you might want to restrict an investment to just a small part of your portfolio. Just in case there is a second wave that hinders the reopening of Australia.

Telstra Corporation Ltd (ASX: TLS)

Analysts at Goldman Sachs have retained their conviction buy rating but trimmed the price target on this telco giant’s shares slightly to $4.05. According to the note, the broker has been looking into the sustainability of its 16 cents per share dividend. It concludes that it sees little risk of a cut in the next three years, even after stress testing several bear case scenarios. I think Goldman Sachs is spot on and Telstra would be a great option for investors at the current level.

More reading

• Is Telstra about to be caught in a new mobile phone war?
• Where growth, income, and value investors can invest right now
• Why Aristocrat Leisure, Afterpay, Corporate Travel, and Sydney Airport are pushing higher
• ASX 200 down 0.2%: Wesfarmers overhauls Target, Sydney Airport has no plans to raise equity
• 3 reasons the Telstra dividend is sustainable for the foreseeable future

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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.

The post Brokers name 3 ASX 200 shares to buy right now appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3bSnFeN