Author: openjargon

The share price of ASX defence company DroneShield Ltd (ASX: DRO) has been on a tear recently – soaring close to 35% higher in just the last month alone. This continues an impressive run for DroneShield (and its shareholders), with the stock up an eyewatering 440% over the past year.

Investors seemingly can’t get their hands on enough DroneShield shares. A recent share purchase plan, announced on 18 April, literally had to close early because of overdemand.

The company was only hoping to raise $5 million from retail investors but received orders for an eye-popping $40 million. The company had to scale back the amount raised to its maximum cap of $15 million and return the remaining funds to investors.

So, what’s the big deal about DroneShield? What has got investors so excited – and why has its share price been rising so much this past month?

What does DroneShield do?

DroneShield develops technology to protect military, government, infrastructure and other critical assets against attacks or surveillance by unmanned aerial devices (in other words, drones). Its products include tactical machinery that can be used to detect and disable drone attacks. It also develops software solutions that can analyse and assess drone threats in real time and launch a coordinated response.

Recent military conflicts in Ukraine and the Middle East have demonstrated how prevalent drones have now become in modern warfare. They are cheap and easy to manufacture, which makes them a particularly pernicious threat on the battlefield. So, it’s no real surprise that demand for technology that effectively counteracts them has been on the increase.

The financials

This uplift in demand is reflected in DroneShield’s recent financial performance. FY23 revenues (for the 12 months ended 31 December 2023) surged 226% higher versus the prior year to a record $55.1 million. DroneShield also reported net profit of $9.3 million for the year — the first time the company has posted an annual profit in its entire history.

And with revenues continuing to trend upwards at such a rapid rate, it’s unlikely to be the last.

In its most recent quarterly activities report, for the three-month period ending 31 March 2024, DroneShield stated that revenues were up a mind-blowing 1000% versus 1Q23, to $16.5 million. What makes this result even more eye-catching is that the March quarter is usually DroneShield’s weakest in terms of sales — which suggests 2024 is already shaping up to be another bumper year.

DroneShield also maintains a very strong balance sheet, with $56.4 million in cash and no debt (as of 31 March 2024).

Why is the DroneShield share price up over the past month?

DroneShield’s share price was buoyed by its 22 May announcement that it had been awarded a $5.7 million repeat contract with a US Government customer – with further ‘material orders’ expected. The order was for DroneShield’s counter-drone (‘C-UsX’) systems, which are capable of detecting and disabling attacks by unmanned devices on air, land and sea.

And this comes hot on the heals of DroneShield’s 17 April announcement that it had been awarded a framework agreement with NATO – the first such agreement awarded in NATO’s history. This could increase DroneShield’s sales by an ‘order of magnitude’ over the coming years, according to the company’s press release.

What’s in store for the future?

Things are going pretty well for DroneShield at the moment, and management is understandably bullish about its near-term outlook.

DroneShield considers the counter-drone market to still be in its infancy. It believes military and security companies are watching conflicts overseas and are realising just how vital counter-drone capabilities are going to be for their ongoing defence. This means spending on counter-drone technology could ramp up even further as militaries around the world bolster their stockpiles. As a global leader in counter-drone technology, DroneShield believes it is well-positioned to take advantage of these emerging trends.

The post Why the DroneShield share price is up 35% in a month appeared first on The Motley Fool Australia.

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• Why are ASX investors so excited by the DroneShield share price?
• Why Droneshield, TechnologyOne, Telix, and Webjet shares are rising today

Motley Fool contributor Rhys Brock 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 DroneShield. 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.

Appen Ltd (ASX: APX) used to be part of ASX tech royalty. It was a member of the once-vaunted WAAAX group of stocks, along with WiseTech Global Ltd (ASX: WTC), Altium Ltd (ASX: ALU), Afterpay – now owned by Block Inc (ASX: SQ2) – and Xero Ltd (ASX: XRO).

However, whereas the other WAAAX shares suffered through some rocky post-COVID years but have since mostly recovered to even greater highs (with the exception of Afterpay), the Appen share price has lagged far behind.

Like, really far behind.

Since topping out at a share price well above $40 back in August of 2020, Appen has lost close to 99% of its value, and is now trading for just 52 cents a share. Ouch!

A company that once had a market cap of nearly $5 billion, is now sitting at just over $100 million.

So, what went wrong?

To answer that question, let’s start by taking a closer look at what Appen actually does.

What is an Appen?

Appen is a tech company that provides high-quality datasets to artificial intelligence (AI) companies. It uses a crowdsourced global workforce to annotate and curate data which it then sells to big tech companies to help ‘train’ their AI programs.

Large language models, like ChatGPT, work by ingesting huge amounts of data. The AI algorithm searches through this data to identify patterns, correlations, and other connections, to essentially ‘learn’ how human language is constructed.

Appen supplies the data.

But hold on – isn’t AI meant to be a booming industry right now? It’s all over the news – and American AI giant Nvidia Corp (NASDAQ: NVDA) even briefly broke through the magical US$3 trillion market cap barrier. That puts it right up alongside tech behemoths Apple Inc and Microsoft Corp as the largest listed companies in America.

So, if AI is booming, and AI programs need data to function, shouldn’t this be fertile ground for a massive rally in the Appen share price? So then why isn’t Appen following Nvidia to the top of the stock market?

I’m glad you asked.

Concentration risk

Concentration risk is when a company relies too heavily on a small group of large customers to generate its revenues. If those customers cut back on their spending, it leaves a massive hole in the company’s income statement.

Unfortunately, that is what happened to Appen.

It has relied heavily on five major customers to generate most of its revenues: Microsoft, Apple, Meta Platforms, Google parent company Alphabet, and Amazon. And while that might seem like an enviable list of clients to have in your rolodex, relying on them too heavily is still risky.

This came to a head back in 2021, when Apple changed the privacy policy on its operating system to limit the ability for digital advertisers to track customer activity across multiple apps. As part of the Apple update, users could now opt out of having their data collected.

This led to a cutback in digital AI advertising spending from Appen’s major clients.

As a result, Appen had to issue multiple earnings downgrades over the years, disappointing shareholders. For an indication of how far Appen has now fallen, compare its FY23 annual revenues of US$273.0 million with the record revenues of US$447.3 million it reported in FY21. That’s a decline of almost 40% in just two years.

And there was more bad news to come in January 2024, when Google parent company Alphabet announced it would be severing all ties with Appen. To put this in context, Google contributed US$83 million of the US$273 million total revenues Appen reported in FY23.

Can the Appen share price stage a comeback?

Despite what should be favourable macroeconomic conditions, Appen has continued to struggle – and this latest piece of bad news from Google isn’t going to help it at all in the near term.

However, if there is some silver lining to all this, it has been Appen’s pivot towards new markets – and away from its reliance on the big hitters in Silicon Valley. Appen’s Chinese clients delivered record-high quarterly revenue contribution of US$11.1 million in 4Q23. While this certainly won’t make up for the loss of Google, if anything is going to rescue Appen’s business it’s going to be new clients in new markets.

The post Can the Appen share price recover amid AI mania? appeared first on The Motley Fool Australia.

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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. 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 Rhys Brock has positions in Altium, Appen, Block, and WiseTech Global. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Altium, Amazon, Appen, Apple, Block, Meta Platforms, Microsoft, Nvidia, WiseTech Global, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has positions in and has recommended Block, WiseTech Global, and Xero. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Last week was a major one for Life360 Inc (ASX: 360) and its shares.

In case you missed it, the location technology company launched and completed its Nasdaq initial public offering (IPO).

It raised funds by offering a total of 5,750,000 shares of its common stock to US investors at US$27.00 per new share.

Life360 advised that it intends to use the net proceeds it receives from the offering to increase its capitalisation and financial flexibility, to create a public market for its common stock in the United States, and for general corporate purposes, including working capital, operating expenses and capital expenditures.

What are brokers saying about the IPO?

Bell Potter has been busy adjusting its financial model to reflect the IPO. It said:

We have updated our forecasts for the NASDAQ listing but there are no changes in our underlying revenue or EBITDA forecasts. The two key changes we have made are a 3.7m increase in the number of shares on issue – or 11.1m CDIs – and a net increase in cash of c.US$83m (i.e. we assume c.US$17m in underwriting commissions and other expenses related to the offering).

We assume most or all of the expenses related to the offering will impact statutory EBITDA in 2024 but at this stage we make no change to our forecast given the exact amount is unknown and in order to be consistent with the current guidance. We would expect the statutory EBITDA guidance to be updated at the release of the 1H2023 result in August when the actual costs are known and will then look to update our reported forecasts.

Should you buy Life360 shares?

The broker remains very positive on Life360’s shares and sees major upside for them over the next 12 months.

Bell Potter has responded to the IPO by reaffirming its buy rating with a slightly trimmed price target of $17.00. This implies potential upside of 23% for investors. It concludes:

We reduce the multiple we apply in the EV/Revenue valuation from 6.5x to 6.25x given the potential catalyst of the US listing has now been removed and, furthermore, the IPO price was at a discount to the market price on the ASX. There is, however, no change in the 9.3% WACC we apply in the DCF. The net result is a 4% decrease in our PT to $17.00 which is still >15% premium to the share price so we maintain our BUY recommendation. The next potential catalyst we see for the stock is the H1 result in August – or any update provided sooner – given we expect another solid result.

The post Why Life360 shares can rocket almost 25% appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Tuesday
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• Life 360 shares halted ahead of Nasdaq IPO

Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. 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 performance of the healthcare sector has been relatively underwhelming in recent times.

While this is disappointing, the team at Wilsons believes that things could change in the near future. This could make it a great time for investors to ensure that their investment portfolios are positioned to take advantage of this. The broker said:

After ~2 years of lacklustre performance at the index level, the outlook for the ASX 300 healthcare sector is highly attractive. The sector is well positioned to outperform over the medium-term given its earnings trajectory is considerably stronger than the broader market while the sector’s valuation is also at highly attractive levels.

But which ASX 300 healthcare stocks could be worth considering? Let’s take a look at three that its analysts are feeling bullish on and have in their Focus Portfolio. They are as follows:

CSL Ltd (ASX: CSL)

The first ASX 300 healthcare stock that Wilsons has in its Focus Portfolio is biotechnology giant CSL.

The broker is currently overweight on CSL’s shares. Though, it has admittedly been more positive in the past. It explains:

On balance, our increasingly constructive view on the outlook for Behring’s earnings recovery warrants our modest overweight exposure to CSL, albeit our level of conviction is tempered to an extent by the subdued outlooks of Vifor and Seqirus and the somewhat uncompelling level of R&D pipeline upside over the medium-term. Valuation wise, CSL is broadly in line with our ‘fair value’ range, balancing the fact that a) CSL trades on forward PE of ~27x which is below its 5-year average, and b) CSL is somewhat ‘expensive’ relative to global biopharma peers. To become more constructive on CSL, we are looking for a) developments in the R&D pipeline, b) demonstrated progress on Behring’s margin recovery, and/or c) a meaningful turnaround in the performance of Vifor and Seqirus.

ResMed Inc. (ASX: RMD)

Another ASX 300 healthcare stock that features is sleep disorder treatment ResMed.

Its analysts highlight that its shares trade at a sharp discount to historical multiples. And given how weight loss drugs concerns are starting to ease, it feels a re-rating could take place soon. Wilsons commented:

Notwithstanding RMD’s solid earnings-driven share price recovery, the company remains on an excessive valuation discount at a 12-month forward PE multiple of ~23x, which is a ~30% discount to both the 5-year average and RMD’s ‘pre GLP-1’ level. We expect RMD’s valuation to re-rate higher as GLP-1 concerns progressively abate and the market shifts its focus to the strong fundamental outlook of the business.

Telix Pharmaceuticals Ltd (ASX: TLX)

Finally, this high-flying radiopharmaceuticals company could be worth a closer look.

Wilsons is very positive on the ASX 300 healthcare stock’s Illuccix product and extensive pipeline. It said:

A key appeal of TLX is that its extensive pipeline offers significant valuation and earnings upside potential, which is complimented by the robust cash flows already generated by Illuccix. Following recent pipeline updates on TLX591 (SELECT rPFS data) and Zircaix (BLA submission) there is still a cavalcade of catalysts that represent ‘de-risking’ points in TLX’s valuation and will drive the share price over the next 12 months.

The post 3 ASX 300 healthcare stocks ‘well positioned to outperform’ appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in CSL, ResMed, and Telix Pharmaceuticals. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, ResMed, and Telix Pharmaceuticals. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool Australia has recommended CSL and Telix Pharmaceuticals. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Are you wanting exposure to the lithium industry while it is down in the dumps?

If you are, then it could be worth considering the three ASX lithium stocks listed below.

These lithium shares have just been named as buys by brokers this month and could generate decent returns. Here’s what they are saying about them:

Arcadium Lithium (ASX: LTM)

Bell Potter remains very positive on the lithium industry and believes that Arcadium Lithium’s beaten down shares offer significant value for money.

It has the lithium giant on its favoured list due to partly to its diversified exposure to lithium and significant production growth potential. The broker said:

LTM provides the largest, most diversified exposure to lithium in terms of mode of upstream production, asset locations, downstream processing and customer markets. It is a key large-cap leverage to lithium prices and sentiment, which we expect to improve over the medium term. The group has a strong balance sheet and growth portfolio.

Bell Potter has a buy rating and $9.50 price target on its shares.

IGO Ltd (ASX: IGO)

Goldman Sachs may be bearish on lithium, but it is bullish on this ASX lithium stock.

This is due largely to the company’s low costs. It feels this leaves IGO well-positioned to navigate the current environment of low prices. It said:

Greenbushes is the lowest cost lithium asset in our coverage. Production growth more than offsets increasing strip ratio: The addition of CGP3 (under construction) and CGP4 (planned) should take Greenbushes production capacity from ~1.5Mtpa today to ~2.4Mtpa (excluding tailings processing of ~0.3Mtpa), and they are planned to be funded from existing Greenbushes debt facilities, combined with Greenbushes cash flows (though we factor in below nameplate). We reiterate our belief that further Greenbushes expansion remains one of the most economically compelling brownfield lithium projects.

Goldman has a buy rating and $8.10 price target on IGO’s shares

Latin Resources Ltd (ASX: LRS)

A speculative option for investors to consider buying is Latin Resources.

It is an ASX lithium stock that is developing the 100% owned Salinas Lithium Project in Minas Gerais, Brazil.

Bell Potter was pleased with its recent mineral resource estimate at the Colina deposit. And given its bullish view on the lithium market, it sees the company as well-positioned for the future. It said:

Colina has the potential to deliver new lithium supply into what we expect to be structurally short markets. Uncommitted offtake and an open share register provide further strategic appeal.

Bell Potter has a speculative buy rating and 40 cents price target on its shares.

The post 3 ASX lithium stocks to buy in June 2024 appeared first on The Motley Fool Australia.

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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 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.

If you’re on the hunt for some juicy dividend yields, then you may want to check out the three ASX dividend shares listed below.

That’s because analysts have named them as buys and are tipping them to provide income investors with above-average dividend yields in the near term.

Here’s what you can expect from them:

Accent Group Ltd (ASX: AX1)

The first ASX dividend share that has been tipped to provide big yields is Accent Group. It is a retailer and distributor of performance and lifestyle footwear across over 800 stores in Australia and New Zealand and multiple online stores. Its store brands include HypeDC, Sneaker Lab, Platypus, Stylerunner, Subtype, and The Athlete’s Foot.

Bell Potter is forecasting 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 $1.99, this represents dividend yields of 6.5% and 7.3%, respectively.

The broker has a buy rating and $2.50 price target on them.

Deterra Royalties Ltd (ASX: DRR)

Over at Morgan Stanley, its analysts think that Deterra Royalties could be a top ASX dividend share to buy. It is a mining royalties company, generating cash from operations such as Mining Area C, which is operated by BHP Group Ltd (ASX: BHP).

Morgan Stanley is forecasting the company to pay dividends of 32.7 cents in FY 2024 and then 39 cents in FY 2025. Based on the current Deterra Royalties share price of $4.58, this will mean yields of 7.1% and 8.5%, respectively.

The broker currently has an overweight rating and $5.60 price target.

Dexus Industria REIT (ASX: DXI)

A third ASX dividend share that has been named as a buy is Dexus Industria. It is a real estate investment trust with a focus on industrial warehouses.

Morgans is a fan of the company due to its belief that its “industrial portfolio remains robust with the outlook positive for rental growth.” In addition, it notes that “the development pipeline also provides near and medium-term upside potential and post asset sales there is balance sheet capacity to execute.”

The broker expects this to underpin dividends per share of 16.4 cents in FY 2024 and then 16.6 cents in FY 2025. Based on the current Dexus Industria share price of $2.97, this will mean dividend yields of 5.5% and 5.6%, respectively.

Morgans has an add rating and $3.18 price target on its shares.

The post Buy these ASX dividend shares with 5% and 7% yields appeared first on The Motley Fool Australia.

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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 no position in any of the stocks mentioned. 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.