Author: openjargon

ASX 200 bank shares have had a stellar run since the 2023 Santa Rally began in early November, as the following chart shows.

If you prefer the hard numbers, here’s a summary of the share price growth among the seven biggest ASX 200 bank shares since 1 November 2023:

• The Westpac Banking Corp (ASX: WBC) share price has soared 30.44%
• The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price has risen 26.32%
• The Commonwealth Bank of Australia (ASX: CBA) share price has lifted 25.03%
• The National Australia Bank Ltd (ASX: NAB) share price has ascended 22.64%
• The Macquarie Group Ltd (ASX: MQG) share price has increased 20.35%
• The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has lifted 14.85%
• The Bank of Queensland Ltd (ASX: BOQ) share price has risen 14.71%

By comparison, the S&P/ASX 200 Index (ASX: XJO) has lifted 15.21% and the S&P/ASX 200 Financials Index (ASX: XFJ) has increased 21.68% since 1 November.

Why have ASX 200 bank shares had such a good run?

The Motley Fool’s chief investment officer, Scott Phillips, says it probably reflects expectations that interest rates will come down soon and that the banks will suffer fewer mortgage defaults as a result.

Plus, as interest rates stagnate, and then fall, bank dividends will look more appealing to income investors.

Regardless of the reasons, this sort of strong capital growth among ASX 200 bank shares is unusual.

Historically, ASX 200 bank shares have typically been better income investments than growth investments.

At the ASX Investor Day in Sydney this month, attendees were reminded of this during a presentation by investment strategist Marc Jocum from exchange-traded fund (ETF) provider Global X.

Jocum showed a table documenting the 10-year history of both capital growth and dividend returns for each of the seven biggest ASX 200 bank shares. That table is shown below.

Source: Global X investor presentation, ASX Investor Day, Sydney

Jocum was discussing how to optimise an investment portfolio for income, and emphasised the importance of a ‘total returns approach’ that takes annual dividend returns into account.

According to his presentation:

Most of the largest Australian banks have had negative capital returns. Dividends can add as an important source of returns and help cushion drawdowns.

As the table shows, only one ASX 200 bank share delivered more capital growth than dividends over the past 10 years to 31 March 2024, and that was Macquarie.

The other ASX 200 banks delivered more in dividend returns than capital growth. In fact, some delivered negative capital growth.

But when you combined the growth and dividends, investors in every bank stock were in the green.

The three best ASX 200 bank shares for total returns were Macquarie, CBA and National Australia Bank.

The numbers demonstrate how important dividend returns are when selecting any type of ASX share or ASX ETF to buy.

For example, CBA shares delivered just 56.1% capital growth but 150.7% in dividends over the period.

Should you buy bank stocks?

After such strong share price gains over the past seven months, many brokers currently have sell or hold ratings on the banks.

Ray David, Portfolio Manager and Partner at Blackwattle Investment Partners, says bank shares “look like they’ve overstretched on valuations” and ASX 200 mining stocks are better value.

After the recent round of updates from the ASX 200 banks, Wilsons says it is retaining an underweight exposure and noted a “lacklustre medium and long-term EPS growth outlook facing the sector.”

In a new note this week, Goldman Sachs said bank fundamentals are weak and valuations are extreme, with bank stocks trading at “close to record expensive” levels.

Goldman said:

… while the deterioration in earnings appears to now be finished, we see very limited upside risk, and therefore, with valuations skewed asymmetrically to the downside, we now think a more negative view on the banks is appropriate …

The post ASX 200 bank shares: How dividends offset poor capital growth over 10 years appeared first on The Motley Fool Australia.

More reading

• Why Goldman Sachs just downgraded Westpac shares to a sell rating
• Why did NAB shares just get downgraded?
• Is now a good time to buy this high-yield ASX dividend stock?
• Why these 4 ASX 200 shares just got downgraded by top brokers
• An ASX dividend giant I’d buy over Westpac shares right now

Motley Fool contributor Bronwyn Allen has positions in Anz Group, Commonwealth Bank Of Australia, and Macquarie Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Bendigo And Adelaide Bank and Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Coming into Nvidia’s (NASDAQ: NVDA) fiscal 2025 first-quarter earnings report, expectations were sky-high.  

Nvidia stock has been the flag-bearer for the generative artificial intelligence (AI) revolution. The company makes the technological components — graphics processing units (GPUs) and related superchips — that form the backbone of AI infrastructure, allowing companies like OpenAI to run models like ChatGPT.

With the explosion in AI demand, Nvidia’s revenue has skyrocketed, more than tripling over the last few quarters. And that pattern continued in fiscal 2025’s first quarter.

According to the report released Wednesday afternoon, revenue jumped 262% year over year to $26 billion, topping estimates at $24.7 billion and growing 18% sequentially. Revenue in the data center, where the AI revolution is happening, soared 427% year over year to $22.6 billion.

Margins expanded again, a testament to Nvidia’s pricing power in the data center market, as it has an estimated 98% share of the data center GPU market. On a generally accepted accounting principles (GAAP) basis, gross margin jumped from 64.6% to 78.4%, driving operating income up 690% to $16.9 billion, giving the company an operating margin of 64.9%. On an adjusted basis, earnings per share jumped from $1.09 to $6.12, beating the consensus analyst estimate of $5.59.

Nvidia enters a new stage

The first-quarter earnings report also marks something of a milestone for Nvidia, as the company’s year-over-year comparisons will get harder from here. In other words, the initial explosion in demand driven by the launch of ChatGPT and other AI applications will start to fade.

However, the business still looks well-positioned for continued growth. The company is forecasting revenue of $28 billion in fiscal 2025’s second quarter, suggesting 107% year-over-year growth and 7.5% sequential growth. It also expects gross margin to moderate slightly over the rest of the year, calling for a full-year gross margin in the mid-70% range. Second-quarter guidance indicates GAAP operating income will be essentially flat on a sequential basis, though the company has a pattern of topping its own guidance.

Despite its moderating growth, CEO Jensen Huang and Nvidia’s management team shared several anecdotes on the earnings call that show that demand for Nvidia’s products is still heating up. For example, management said that inference drove 40% of data center revenue over the last quarter, implying that training represented the majority of data center revenue as training and inference are the two primary functions needed to run AI models.

Demand for inference is expected to be much larger than training as generative AI matures, so that data point indicates that the development of these models is still in a very early stage. The company also noted large purchases from customers like Tesla and Meta Platforms, which implies growing demand for inference from Nvidia later.

Additionally, Huang said that demand for its Hopper platform is still strong and growing, even though it announced the next iteration, Blackwell, at its GTC conference in March. Huang elaborated:

We … expect demand to outstrip supply for some time as we now transition to H200, as we transition to Blackwell. Everybody is anxious to get their infrastructure online. And the reason for that is because [customers are] saving money and making money, and they would like to do that as soon as possible.

The fact that customers aren’t waiting for the newer model to drop shows how high demand is for Nvidia’s products, and that should continue to provide a tailwind over the coming quarters.

Is Nvidia stock a buy?

Some billionaire investors, like Stanley Druckenmiller and David Tepper, have begun selling off their stakes in Nvidia following the chip stock’s dramatic surge over the last year or so. However, there’s still room for the stock to move higher as the business keeps delivering incredible results.

Investors shouldn’t expect the triple-digit revenue growth in the business to continue, and the stock’s blowout gains are also likely in the past as its market cap approaches $3 trillion. However, the business looks even stronger than it did three months ago, and there’s no sign of any competitive pressure despite recent product launches from Advanced Micro Devices and Intel.

Huang sees the company building “AI factories” and driving the “next industrial revolution.” Those are bold statements, but the numbers back them up, and if the opportunity is that big, Nvidia will have a lot of growth in front of it.

Investors sent Nvidia stock up 7% in pre-market trading on Thursday, a sign that the company has more upside potential. If the company can keep executing like this, the stock will continue to be a winner. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia did it again. Is the AI stock a buy after another round of record profits? appeared first on The Motley Fool Australia.

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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 Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and recommends Advanced Micro Devices, Meta Platforms, Nvidia, and Tesla. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Are you on the hunt for some ASX 200 shares to add to your retirement portfolio?

If you are, then the three ASX 200 shares listed below could be top options right now. Here’s what analysts are saying about them:

CSL Limited (ASX: CSL)

CSL could be a great option for a retirement portfolio. The ASX 200 biotech share is arguably one of Australia’s highest quality companies.

This is thanks to its collection of industry-leading therapies, which includes Privigen, Hizentra, Idelvion, and Afstyla. In addition, the company invests around US$1 billion (and growing) into its research and development activities each year. This ensures that CSL has a pipeline filled to the brim with potentially lucrative and life-saving drug candidates.

Macquarie is a big fan of CSL and has an outperform rating and $330.00 price target on its shares. It also sees scope for its shares to rise beyond $500 in the next three years.

Transurban Group (ASX: TCL)

Another ASX 200 share that could be worth considering for a retirement portfolio is Transurban.

It owns a portfolio of roads in Australia and North America, as well as a significant project pipeline.

As these roads are always in demand with drivers, particularly given population growth and urbanisation, Transurban has defensive qualities that could make it attractive for retirees.

The team at Citi sees a lot of value in Transurban’s shares at current levels. It has a buy rating and $15.50 price target on them.

Another positive is that the broker expects some attractive dividend yields from its shares in the near term. It is forecasting yields of 5% in FY 2024 and 5.1% in FY 2025.

Woolworths Limited (ASX: WOW)

A final ASX 200 share that could be a good option for a retirement portfolio is Woolworths. It is Australia’s largest supermarket chain, as well as the owner of Big W and a growing pet care business.

Woolworths could be a good option for a retirement portfolio due to its defensive qualities, strong market position, and positive growth outlook. Goldman Sachs notes that the latter is being underpinned by its omni-channel advantage and sticky loyalty program.

It is for this reason that the broker is tipping Woolworths as a buy with a $39.40 price target on its shares.

In addition, Goldman is expecting attractive dividend yields from its shares in the coming years. It is forecasting yields of 3.4%, 3.6%, and 3.9%, respectively, over the next three financial years.

The post 3 of the best ASX 200 shares to buy for your retirement portfolio appeared first on The Motley Fool Australia.

More reading

• Buy these ASX dividend stocks for passive income
• Can CSL shares deliver market-beating returns for investors?
• Dividend deals: 2 top ASX shares that still look undervalued
• Don’t get clever, just buy stability: 2 defensive ASX shares to buy now
• Here are the top 10 ASX 200 shares today

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Goldman Sachs Group, Macquarie Group, and Transurban Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Westpac Banking Corp (ASX: WBC) shares were out of form on Thursday.

The banking giant’s shares ended the day almost 1% lower at $26.87.

Why did Westpac shares fall?

Investors were hitting the sell button after analysts at Goldman Sachs downgraded the bank following a review of the sector.

According to the note, the broker believes bank valuations “are at extremes” at present. It said:

Australian bank valuations are at extremes, with absolute 12-month forward PERs at the 99th percentile, our DCF valuations are, on average, 175% below current share prices, and the spread between bank fully-franked yields and the 10-year bond yield is currently at its lowest level in nearly 15 years.

The broker concedes that versus industrials the bank’s don’t look expensive. It adds:

However, the one metric where valuation support for the banks still exists is how their PER trades against the non-bank industrials’. On this basis, while the sector has re-rated significantly over the past 12 months, it continues to trade nearly 5% below longer-run historic averages.

Though, it feels this approach to valuing the banks is flawed. Goldman explains:

However, the above analysis is overly simplistic and takes no account of how relative fundamentals between the banks and non-bank industrials may have evolved over time. On this front, the recent reporting season did show that the pace of deterioration in bank fundamentals does appear to be slowing. However, our analysis suggests we should not be expecting a material improvement in fundamentals from here.

So, while the deterioration in earnings appears to now be finished, we see very limited upside risk, and therefore, with valuations skewed asymmetrically to the downside, we now think a more negative view on the banks is appropriate.

Westpac downgraded

In light of the above, the broker has downgraded Westpac shares to a sell rating (from neutral) with an unchanged price target of $24.10.

Based on its current share price of $26,87, this implies potential downside of over 10% for investors over the next 12 months. It concludes:

WBC to Sell from Neutral, given i) execution, cost and timing risks relating to its technology simplification, ii) of the major banks, WBC’s balance sheet is the most overweight domestic housing, which we expect will be more growth constrained than commercial lending over the medium term, iii) NIM has been supported by a shorter duration replicating portfolio but this will give them less longevity, and d) WBC’s 14.2x 12-mo fwd PER is more than one standard deviation expensive vs. its 12.7x historic average.

The post Why Goldman Sachs just downgraded Westpac shares to a sell rating appeared first on The Motley Fool Australia.

More reading

• Why these 4 ASX 200 shares just got downgraded by top brokers
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• Are Westpac shares good value or expensive?
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• Here’s what Wilsons is saying about ANZ, CBA, NAB, and Westpac shares

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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.

The Australian share market is a great place to generate a passive income.

That’s because there are lots of ASX shares that pay out a portion of their profits twice a year to their lucky shareholders.

But given the vast number of options out there, it can be hard to decide which ones to buy over others.

Let’s take a look at two ASX shares that have been named as buys and could be a good source of passive income:

Accent Group Ltd (ASX: AX1)

Accent Group could be a great ASX share to buy if you are looking for passive income from your investments.

It is the owner of numerous footwear focused retail store brands such as HypeDC, Stylerunner, Platypus, and The Athlete’s Foot.

Its shares have fallen out of favour with investors over the last 12 months. This has seen them lose approximately 14% of their value over the period.

Bell Potter sees this as a very attractive buying opportunity for investors. Particularly given its expectation for some very juicy dividend yields from its shares.

For example, the broker expects Accent to pay fully franked dividends per share of 13 cents in FY 2024 and then 14.6 cents in FY 2025. Based on the latest Accent share price of $1.75, this represents dividend yields of 7.4% and 8.3%, respectively.

If its analysts are accurate with their estimates, a $10,000 investment would yield $740 and $830 in dividends over the next two financial years.

Bell Potter currently has a buy rating and $2.50 price target on its shares. This implies potential upside of almost 43% for investors.

Telstra Corporation Ltd (ASX: TLS)

This telco giant’s shares have been well and truly out of form over the last 12 months. So much so, Telstra’s shares are now down over 20% since this time last year.

This has been driven by Telstra being treated as a bond proxy by investors and disappointment over a recent trading update.

While this is disappointing, it could prove to be a buying opportunity for income investors. Especially given how this decline has made the potential dividend yields on offer with its shares even more attractive.

For example, Goldman Sachs is forecasting fully franked dividends of 18 cents per share in FY 2024 and then 18.5 cents per share in FY 2025. Based on the current Telstra share price of $3.46, this would mean yields of 5.2% and 5.35%, respectively.

To put that into context, a $10,000 investment would return $520 and $535 in dividends.

In addition, with a buy rating and price target of $4.25, Goldman Sachs sees scope for this ASX share to rise almost 23% over the next 12 months.

The post 2 of the best passive-income-focused ASX shares to consider buying in June appeared first on The Motley Fool Australia.

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• Why these 4 ASX 200 shares just got downgraded by top brokers
• Dividend deals: 2 top ASX shares that still look undervalued
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• What are brokers saying about the Telstra share price after this week’s update?
• Buy these ASX shares and get 6% and 7% dividend yields

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 Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

When you think of Woodside Energy Group Ltd (ASX: WDS) shares, data centres probably aren’t the first thing that springs to mind.

But the S&P/ASX 200 Index (ASX: XJO) oil and gas stock is eyeing the booming growth of data centres, and the booming growth in energy demand they’re likely to spawn.

As you’re likely aware, the artificial intelligence (AI) revolution is heating up to meteoric speed.

This is likely to present a host of positives and negatives for humanity over the decade ahead.

One of the challenges is providing the energy all this new computing power requires. Particularly in a world intent on reaching net zero emissions by 2050.

You see, not only will the rapid advancement of AI see more data centres constructed. These AI enabled data centres also use roughly 10 times as much energy as traditional facilities.

Enter Woodside shares.

How Woodside shares could power your AI co-pilot

As The Australian Financial Review reported, Woodside CEO Meg O’Neill has been discussing the potential for “a liquid hydrogen value chain” with a several data centre operators in Singapore.

The island nation’s government has stipulated that data centres must secure their own sustainable energy sources.

Back in March, O’Neill was championing the company’s since rejected Climate Transition Action Plan (CTAP) as a potential boon for Woodside shares.

“I firmly believe Woodside is built to thrive through the energy transition and our Climate Transition Action Plan shows how we plan to achieve this,” she said.

Indeed, the report released to the ASX contains the word hydrogen 18 times, with Woodside noting its intentions to leverage “infrastructure to monetise undeveloped gas, including optionality for hydrogen”.

The company also revealed plans for commercial scale renewable hydrogen produced from electrolysis.

Now, CTAP is headed back to the drawing board after shareholders voted it down in late April.

O’Neill was clearly frustrated by the result. She commented:

The world wants reliable energy, they want cheap energy, they want green energy, and they want all of those three things tomorrow. And the pathway to get from where we are today to where the world would like to be is a pathway that is going to take time.

But Woodside shares could still become more closely linked with hydrogen.

And data centres could help pave the way.

Addressing the data centre operators she’s been speaking with in Singapore earlier this week, O’Neill said:

With that kind of customer, we feel like we have an opportunity to work with them to find a solution that will meet their needs and allow us to make these investments in low carbon fuels.

The post How data centres could lift Woodside shares appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
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• How much could a $10,000 investment in Woodside shares be worth in 12 months?
• Buying ASX 200 energy shares? Here’s the latest IEA oil forecast

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 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.