Is the REA Group Limited (ASX: REA) share price a buy? It has been a strong performer since 23 March 2020. It’s an interesting question now that property activity is returning.

The REA Group share price has risen by around 50% since 23 March 2020. It’s now only down by 15% from 21 February 2020. That’s some recovery considering how much the landscape had been hit for REA Group.

Property listings were down significantly a few weeks ago. In April national residential listings were down 33% with Sydney listings down 18% and Melbourne listings down 24%.

Obviously REA Group is quite reliant on volume to make up a lot of its profit and cashflow. With some restrictions being lifted in different states, property listings, auctions and open houses can start to go back to normal. A return of property listings is good for the REA Group share price.

I’m not sure how many people will be wanting to list their properties in this environment with buyers agents reporting that house prices in some areas have already dropped 10% compared to pre-coronavirus prices. There will always be some sales going on due to personal circumstances, which should keep things ticking over.

Is the REA Group share price a buy?

I think it’ll be very interesting to see what happens when the bank mortgage holidays stop and jobkeeper ends. Will there be lots of forced sellers coming onto the market? More volume would be good news for earnings and the REA Group share price. I definitely prefer it to Domain Holdings Australia Ltd (ASX: DHG) as it comes with potential international growth. 

Lower interest rates do justify higher asset prices, but I’m not sure if a share price of around $100 is worth buying in the shorter-term. Patience may be the way to go for now. It certainly isn’t cheap considering the earnings hit in 2020.

More reading

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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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Is the Wesfarmers Ltd (ASX: WES) share price a buy? The conglomerate announced yesterday that it will be culling many Target stores across the country.

Wesfarmers is a diversified business with several different divisions. It runs Bunnings, Officeworks, Kmart, Target, Catch and other industrial businesses.

Target has been a disappointment for Wesfarmers for some time. It has tried to turn it around but this coronavirus period seems to have been the catalyst for Wesfarmers to decide to make a big change to Target. Investors didn’t seem to mind either way about the announcement either way, the Wesfarmers share price was essentially flat.

What was in the Wesfarmers announcement?

Wesfarmers said between 10 to 40 large Targets will be converted to Kmarts, subject to landlord support. “Approximately” 52 Target Country stores will change to small format Kmart stores. Around 10 to 25 large Target stores and the remaining 50 Target Country stores will be closed. The Target store support office will be significantly reduced.

Kmart Group will take a non-cash impairment of between $430 million to $480 million. The industrial and safety division will also take a non-cash impairment of approximately $300 million.

The FY20 will include a number of significant items. Both the negative ones I just mentioned and the gain of the sale of Coles Group Limited (ASX: COL) shares.

Time to buy Wesfarmers at this share price?

The two department stores of Kmart and particularly Target are struggling. But it’s important to remember that Bunnings, Officeworks and Catch are actually performing well during this period. If earnings hold up well then the Wesfarmers share price should be able to keep doing well too.

I think the key will be what Wesfarmers does with its large balance sheet. It’s positioned to be able to make one or more large acquisitions. This could be a great time to do it with some businesses being distressed. If Wesfarmers acquires well then it could be a buy, otherwise it might be wise to wait for another market selloff considering the Kmart Group weakness and restructuring.

More reading

• ASX 200 drops 1% on Friday
• Myer share price bounces after announcing its doors will be reopening across the nation
• ASX 200 down 0.2%: Wesfarmers overhauls Target, Sydney Airport has no plans to raise equity
• Wesfarmers share price lower after announcing major Target overhaul
• 3 high yield ASX dividend shares you can buy right now

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers 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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There has been much discussion lately regarding whether we have seen the worst of the economic fallout from coronavirus or if the bottom is yet to come. Could clues lie in the performance of Afterpay and its cohorts?

What can we learn from Afterpay and other ASX FinTechs?  

Afterpay Ltd (ASX: APT), Tyro Payments Ltd (ASX: TYR) and EML Payments Ltd (ASX: EML) have all provided business updates that shed light on how the Australian economy may have bottomed in April. 

Afterpay Business Update 

Afterpay’s business update highlighted that its sales moderated in the second half of March at a Group level. This coincided with the introduction of government-enforced lock-down measures across the world. Global underlying sales in the second half of March versus the first half of March were 4% lower. 

However, the company experienced positive growth in the first two weeks of April, with average daily underlying sales up approximately 10% on the second half of March globally. 

Tyro Payments COVID-19 Trading Update 

Tyro has committed to providing the market with weekly transaction value updates. These transaction volumes are derived largely from its EFTPOs terminals installed at customer cites. It has so far highlighted the following transaction volumes: 

• January up 27% 
• February up 30% 
• March up 3% 
• April down 38% 
• May to 15 May down 20%

EML Payments Business Update 

EML’s unaudited Group EBITDA for March was $1.9 million, down 37% on the prior corresponding period. This was significantly impacted by its gift and incentive (G&I) segment reflecting global mall closures. 

While social distancing and lockdown measures continued in April, the group’s unaudited EBITDA was $2.7 million. It expects a gradual reopening of malls in various countries during May and June 2020 onwards. This should represent an improvement to the trading conditions experienced in April.

Is it a Bottom? 

All 3 businesses collect some form of commission from an economic transaction across multiple sectors. Afterpay has broad sector verticals including retail, travel, health, entertainment and services. It operates across Australia, the US and the UK. Tyro Payments provides payment services to over 30,000 Australian merchants. From its prospectus back in June 2019, it cited that 77% of its customers were SMEs and 86% were in health, hospitality and retail sectors. Finally, EML provides G&I services to retailers, general purpose reloadables for salary packaging and gaming and virtual banking accounts.

Recovering revenues from lows in April across these 3 companies may be reflective of a broader improving economy. Sectors such as retail and hospitality have already reopened, albeit at a limited capacity. Meanwhile, other sectors such as entertainment and travel are expected to resume later on this year.

Foolish takeaway

The current challenge is buying shares at today’s prices, as many have already soared on the assumption that we have, in fact, seen ‘the bottom’. If this is not the case, however, and further economic pullback is still yet to come, I believe this would present greater opportunities to buy shares at much more optimal risk/reward levels.

More reading

• How these 3 ASX financial shares have proved their doubters wrong
• How to use ASX shares to become a millionaire
• Is the Afterpay share price a buy at $44?
• 3 ETFs perfect for an ASX growth investor
• 2 ASX stocks that could replace cash

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 owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended 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.

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