Author: openjargon

The S&P/ASX 200 Index (ASX: XJO) stock Brickworks Limited (ASX: BKW) looks like a great opportunity in my opinion.

Not only is it a wonderful business with excellent assets, but it’s trading at a large discount to those assets.

When you can buy a good company at an appealing price-to-book ratio, it can lead to pleasing investment returns over time if the business keeps growing its underlying value. On top of that, I believe Brickworks is a solid ASX 200 dividend stock as well.

Brickworks’ excellent assets

The company has three areas – investments, property and building products.

In the investments segment, the key asset is 26.1% of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). Soul Patts is a large investment house that’s invested in sectors like telecommunications, resources, financial services, swimming schools and agriculture. Brickworks also owns 14.8% of bricklaying robot company FBR Ltd (ASX: FBR).

Brickworks owns various property assets, including land and manufacturing property, in its own name. It also owns half of a manufacturing property trust that owns some of the buildings used by Brickworks’ building products businesses and 50% of an industrial property trust.

The ASX 200 stock occasionally sells excess land into the industrial property trust, where partner Goodman Group (ASX: GMG) builds large, advanced warehouses on the land. This improves the value of the land and unlocks excellent rental income for Brickworks and Goodman. The property portfolio within the joint venture trust is steadily growing.

The industrial property trust is benefiting from tailwinds, including online shopping’s increasing demand for ‘list-mile’ logistics and warehousing. There’s also growing demand for sophisticated and higher-value facilities (including robotics and multi-storey).

Brickworks has building product operations in Australia and the US. In Australia, it’s the biggest brickmaker and is also involved with roofing, masonry and stone, specialised building systems, cement, and timber battens. In the US, it’s the largest brickmaker in the northeast of the country. Brickworks has assets related to those operations in both countries.

Large discount with the ASX 200 stock

At 31 January, the business reported it had $1.95 billion of net tangible assets (NTA) relating to the property trusts, $608 million of NTA relating to building products, $615 million of net debt and $384 million of 100%-owned development land, with an ‘as is’ market value.

Currently, 26.1% of Soul Patts’ market capitalisation is $3.1 billion.

Therefore, the latest known inferred value of those assets, excluding deferred tax liabilities, is around $5.4 billion, so Brickworks shares are trading at roughly a 23% discount to this at its current market capitalisation.

With the high-quality nature of the underlying assets, particularly the property and investments, I think the size of the discount is unwarranted and presents compelling value. Brickworks can grow its value further as the development land is utilised for more industrial properties, it improves its building product operations, and it benefits from the compounding of Soul Patts’ investment portfolio.

The ASX 200 stock can work as a buy-and-hold investment with its impressive dividend, which hasn’t been cut for almost 50 years. Brickworks currently has a grossed-up dividend yield of 3.5%.

The post I think this ASX 200 stock is a tremendous bargain today appeared first on The Motley Fool Australia.

More reading

• Are ASX real estate shares building towards a better FY25?
• Are Brickworks shares about to benefit from an industrial property boom?
• Should you buy Brickworks or Soul Patts shares today?
• How to invest for retirement in an inflationary environment
• 10 ASX shares that have raised dividends for a decade

Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, Goodman Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Three S&P/ASX 200 Index (ASX: XJO) mining shares just had their outlooks cut by leading brokers.

All three have a primary focus on different metals.

Namely gold, lithium and iron ore.

Yet the brokers expect all three could face some headwinds in the year ahead.

Which stocks are we on about?

Read on!

(Broker data courtesy of The Australian.)

Three ASX 200 mining shares with reduced outlooks

Gold miner Northern Star Resources Ltd (ASX: NST) is the first ASX 200 mining share to get hit with a broker downgrade.

The Northern Star share price is down 2.7% today, with shares trading for $13.05 apiece. Despite coming under selling pressure since late April, shares in the ASX 200 gold miner remain up 4% over a year. Northern Star shares also trade on a fully franked trailing dividend yield of 2.3%.

Now Barrenjoey has reduced its outlook for the big Aussie gold miner, cutting it to a neutral rating. However, with a $14.50 price target, the broker still foresees a potential upside of more than 11% from current levels.

This brings us to the second ASX 200 mining share to be downgraded by a broker: iron ore giant Fortescue Ltd (ASX: FMG).

The Fortescue share price is down 1.5% today at $21.33 a share. That sees the share price just about flat over the past 12 months, with the share price now having tumbled more than 27% in 2024. That pressure has largely come amid a big retrace in iron ore prices. The industrial metal kicked off 2024 trading above US$140 per tonne. Today, that same tonne is trading for around US$103.

With dividends holding up and the share price dropping, Fortescue shares trade on a juicy, fully franked trailing dividend yield of 9.8%.

Despite the big year-to-date fall, Barrenjoey believes the iron ore miner could continue to edge lower. The broker cut Fortescue’s share to an underweight rating with a $21.00 price target, about 1.5% below the current level.

Liontown Resources Ltd (ASX: LTR) rounds off the list of ASX 200 mining shares getting socked with a broker downgrade.

Shares in the lithium miner are taking a beating today, down 4.8% at 86 cents apiece. That sees the Liontown share price down a painful 70% since this time last year.

And Barrenjoey isn’t forecasting any big turnaround in the year ahead. The broker cut Liontown shares to an underweight rating.

The post 3 ASX 200 mining shares just downgraded by top brokers appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Are Fortescue shares a contrarian buy after falling 20% in a month?
• These are the 10 most shorted ASX shares
• 5 things to watch on the ASX 200 on Monday
• Is the FY25 outlook for Fortescue shares compelling?

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.

Yesterday was a good day for Westpac Banking Corp (ASX: WBC) shareholders.

That’s because it was pay day!

The banking giant rewarded its loyal shareholders with a fully franked 90 cents per share interim dividend.

And while some shareholders may have opted to use the bank’s dividend reinvestment program, others may now be looking for somewhere to invest these dividends.

Let’s look at two buy-rated ASX shares to consider snapping up:

NextDC Ltd (ASX: NXT)

The first option for your Westpac dividends could be NextDC. Morgans thinks that investors should snap up this data centre operator’s shares. So much so, it has the company on its best ideas list with an add rating and $19.00 price target. It commented:

NXT should deliver another good set of results in FY24 with some upside risk to guidance, in our view. Structural demand for cloud and colocation remains incredibly strong. NXT’s new S3 and M3 data centres are now open. Consequently, we expect significant new customer wins over the next six-to-twelve months (including CSP options being exercised). Sales should drive the share price higher. NXT looks comfortably on-track to generate over $300m of EBITDA in the next three to five years.

Woolworths Group Ltd (ASX: WOW)

If you are on the lookout for defensive options and a source of income, then it could be worth taking a closer look at Woolworths. It is of course one of the big two supermarket operators in Australia.

It could be a good option for those Westpac dividends based on what analysts at Goldman Sachs are saying. They currently have a conviction buy rating and $39.40 price target on its shares. The broker said:

WOW is the largest supermarket chain in Australia with an additional presence in NZ, as well as selling general merchandise retail via Big W. We are Buy rated on the stock as we believe the business has among the highest consumer stickiness and loyalty among peers, and hence has strong ability to drive market share gains via its omni-channel advantage, as well as its ability to pass through any cost inflation to protect its margins, beyond market expectations. The stock is trading below its historical average (since 2018), and we see this as a value entry level for a high-quality and defensive stock.

As for income, Goldman is expecting fully franked dividend yields in the region of 3% through to at least FY 2026.

The post Where to invest your Westpac dividends appeared first on The Motley Fool Australia.

More reading

• 2 ASX 200 retirement shares to buy in July
• 3 ASX shares that could create lasting generational wealth
• 2 ASX 200 compounding machines to buy and hold forever
• Overinvested in Westpac shares? Here are two alternative ASX dividend stocks
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor James Mickleboro has positions in Nextdc and 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.

If you want to grow your wealth in the share market, then investing in quality companies is always a good idea.

After all, the cream always rises to the top.

With that in mind, it could pay to listen to what one of Australia’s leading investment companies is saying about an ASX tech stock.

Blackwattle Investment Partners has described this stock as “one the highest quality companies on the ASX.”

Which ASX tech stock?

The stock in question is cloud accounting platform provider Xero Ltd (ASX: XRO).

According to the Blackwattle Mid Cap Quality fund, its strong recent performance has been underpinned partly by Xero’s high-flying shares.

As at the end of May, the fund was up 16.95% over the past six months. This compares to 11.45% for its benchmark, which means a 5.5% outperformance.

Commenting on the ASX tech stock, the investment company said:

Xero was the largest positive contributor to performance during the month. XRO rose 11% in May, on the back of a very strong FY24 result and solid outlook. XRO is a market-leading, global accounting SaaS platform. XRO’s FY24 result showcased the benefits of the cultural change brought in by CEO Sukhinder Singh-Cassidy in early 2023, balancing top-line growth with profitability. XRO delivered a record EBITDA margin of 31% and free cash flow growth of over 280%, significantly beating market expectations.

The good news is that Blackwattle still sees plenty of upside for Xero despite this outperformance. It adds:

This result has cemented our view of XRO being one the highest quality companies on the ASX. We continue to see significant upside for XRO, as they continue their journey to being the market-leading, global accounting software for SMEs, while delivering strong financial metrics.

Is anyone else bullish?

Blackwattle isn’t alone with its bullish view on this ASX tech stock.

Goldman Sachs is very bullish on the company and currently has a conviction buy rating and $164.00 price target on its shares. It said:

We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$100bn TAM. Given the company’s pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – the stock is Buy rated.

The post This tech stock is ‘one the highest quality companies on the ASX’ appeared first on The Motley Fool Australia.

More reading

• 2 ASX 200 compounding machines to buy and hold forever
• 7 excellent ASX growth shares to buy next week
• What are the best ASX shares to buy with $500 in 2024?
• 3 explosive ASX tech stocks to buy and hold forever
• Why Xero could be one the best shares to buy in the Asia-Pacific

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

Race Oncology Ltd (ASX: RAC) shares burst out of the gates on Wednesday morning.

In early trade, the ASX healthcare stock was up as much as 15% to $1.96.

The clinical stage biopharmaceutical company’s shares have eased back a touch since then. At the time of writing, they are up 7% to $1.83.

Why is this ASX healthcare stock surging?

The catalyst for this strong gain has been the release of a positive announcement relating to its RC220 bisantrene formulation.

The company is advancing RC220 to address the high unmet needs of patients across multiple oncology indications.

In October, Race Oncology contracted Attentive Science and Agilex Biolabs to undertake the regulatory-standard Good Laboratory Practice (GLP) non-clinical toxicology and safety pharmacology studies required to advance RC220 bisantrene into human clinical trials.

These studies aimed to demonstrate in two animal species that RC220 bisantrene is safe and amenable to administration via peripheral IV infusion in humans. In addition, they aimed to establish an acceptable starting dose for Phase I clinical studies.

According to the release, this GLP program has been delivered on time and on-budget.

More importantly, the GLP toxicology and safety pharmacology studies showed no unexpected or unacceptable toxicities. As a result, management notes that the completed data package supports the use of RC220 bisantrene in human clinical trials.

The company advised that three doses of RC220 bisantrene were administered via peripheral veins. These were low, medium and high doses, which reflect the expected dose-range in humans. Pleasingly, these doses showed similar systemic effects to those seen when using the historical bisantrene formulation administered via a central line.

Examination of the animals after a four-week post-dose recovery period showed that all observed toxicities were reversible. Importantly, there were no formulation-specific adverse macroscopic or histological findings at the sites of infusion.

What now?

Data from these studies will be used to support regulatory and ethics submissions for evaluation of RC220 bisantrene in human clinical trials. This includes the upcoming Phase 1a/1b trial in Australia, Hong Kong, and South Korea, an investigator-sponsored Phase 1/2 AML trial, and a US FDA Investigational New Drug (IND) application in 2025.

The ASX healthcare stock’s CEO, Dr Daniel Tillett, described the news as “another major milestone” for the company. He commented:

Receiving clear confirmation of the safety of RC220 bisantrene in these studies and identifying a suitable starting dose for our upcoming trial is another major milestone in bringing our new drug product to cancer patients. I congratulate and thank the Race preclinical team, Attentive Science and Agilex Biolabs for completing these studies on time and on-budget.

Following today’s gain, Race Oncology’s shares are now up approximately 115% since the start of the year.

The post Guess which ASX healthcare stock is surging 15% on a ‘major milestone’ appeared first on The Motley Fool Australia.

More reading

• 3 ASX healthcare shares smashing new 52-week highs today
• Why Capitol Health, Infratil, Newmont, and Race Oncology shares are charging higher
• ASX healthcare stock surges 11% on ‘incredibly valuable’ FDA news
• Why Arizona Lithium, Bapcor, Race Oncology, and Tower shares are pushing higher

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 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 S&P/ASX 200 Index (ASX: XJO) is down 0.7% in early trade, with ASX 200 uranium stock Boss Energy Ltd (ASX: BOE) suffering heavier losses.

Shares in the Aussie uranium producer closed yesterday trading for $3.98. In morning trade on Wednesday, shares are changing hands for $3.84 apiece, down 3.8%.

Boss Energy isn’t alone in underperforming the benchmark today, with most ASX uranium shares deep in the red this morning.

And Boss is sliding despite the miner releasing promising drill results from its South Australian satellite project.

ASX 200 uranium stock tumbles despite promising drill results

Investors are bidding down the ASX 200 uranium stock today despite the company’s reporting on high-grade drill results at its Gould’s Dam satellite deposit.

Gould’s Dam is located 80km from the company’s flagship Honeymoon Uranium Mine. The project currently contains a JORC-compliant resource of 25 million pounds (Mlbs) of indicated and inferred U308.

The ASX 200 uranium stock’s management highlighted that the drill results showed “the potential for Gould’s Dam to help lift Honeymoon’s production rate from the current nameplate capacity of 2.45M lbs a year to the export permit limit of 3.3M lbs a year and/or extend the mine’s useful life”.

The latest drilling campaign is targeting three areas within the inferred resource envelope at Gould’s Dam – Sunrise, Billeroo and Beulah.

Infill and step-out drilling at the Sunrise and Billeroo targets is almost complete. To date, 96 mud rotary holes have been drilled for 12,911 metres.

Uranium mineralisation highlights include:

• 4.00m @ 2,925ppm pU3O8
• 3.25m @ 2,230ppm pU3O8
• 3.25m @ 1,406ppm pU3O8

The ASX 200 uranium stock said the exploratory program would assist it with wellfield planning and other pre-development work. Work has already commenced on accelerating the development of Gould’s Dam.

Ongoing exploration will now focus on the Beulah satellite deposit, where Boss Energy plans to drill 40 holes to better define the region’s mineralisation and geological characteristics.

It will also enable Boss to complete detailed geological and mineralisation models to support the development work and preparation for an ISR Mining Lease proposal for Gould’s Dam.

According to the release:

This will lead into the next phase of mine plan development, including pump testing of the mineralised aquifer within the Gould’s Dam Indicated resource (utilising monitoring wells installed during the 2023 drilling campaign) and core sample test work.

The global Honeymoon Mineral Resource stands at 71.6Mlbs (52.4Mt) with an average grade of 620ppm U308, using a cut-off grade of 250ppm.

Boss Energy share price snapshot

Amid growing global nuclear power generation plans, the Boss Energy share price has increased 22% over the past 12 months.

The ASX 200 uranium stock has lost ground over the past month, though, which sees shares now down 10% in 2024.

The post ASX 200 uranium stock tumbles despite significant new production potential appeared first on The Motley Fool Australia.

More reading

• Paladin Energy shares on ice as fission-powered acquisition rumours grow
• How the ‘nuclear renaissance’ could send ASX uranium stocks like Paladin through the roof
• Here’s why ASX uranium shares like Deep Yellow are running hot today
• What Bill Gates, ASX uranium shares and the AI revolution have in common
• 3 reasons ASX uranium stocks can keep charging higher into 2025

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.

There are many exchange-traded funds (ETFs) on the ASX. Dozens and dozens, in fact. And many of them I would consider to be smart investments in June 2024. So picking the smartest ASX ETF to buy with $1,000 right now isn’t the easiest choice.

In my view, you can never go wrong with a simple index fund like the Vanguard Australian Shares Index ETF (ASX: VAS) or the iShares S&P 500 ETF (ASX: IVV).

I’ve also written extensively about my love of the VanEck Vectors Wide Moat ETF (ASX: MOAT), and I would happily recommend that fund to any investor who wants to aim for market-beating returns from here.

But after much thought, I would consider the BetaShares Global Cybersecurity ETF (ASX: HACK) the smartest ASX ETF to put $1,000 into right now.

Why? Well, there are two reasons.

Why is HACK the best ASX ETF to put $1,000 in today?

The first is this ETF’s nature.

As its name (and ticker code) suggests, this ETF invests in a portfolio of global companies that are all movers and shakers in the cybersecurity industry. Some of the fund’s top holdings include CrowdStrike Holdings, Broadcom, Palo Alto Networks and Zscaler.

This is arguably one of the most important industries in the world right now. In our modern world, every individual, business and government holds sensitive data that they need to protect from prying eyes.

When these data stores are breached, it can have catastrophic impacts on our personal lives and finances, for one. But when we are talking about a business or a government, the potential impacts can be catastrophic. Just ask Optus or Medibank Private Ltd (ASX: MPL).

Global cybersecurity threats will only increase as the world becomes ever more connected. As such, it is reasonable to assume that individuals, businesses, and governments will increasingly be prepared to spend top dollar to prevent these embarrassing and potentially disastrous data breaches.

If realised, this trend stands to benefit every single company in the ASX’s Betashares Global Cybersecurity ETF.

The numbers don’t lie

Secondly, there’s past performance to consider with this ASX ETF. We should never base a potential investment decision on its past performance, or assume that performance will simply continue into the future.

However, I believe that, in this case, the HACK ETF’s track record vindicates the growth trajectory of the cybersecurity sector that we just discussed.

As of 31 May, the Betashares Global Cybersecurity ETF has returned 18.23% over the past 12 months. That becomes an average of 12.13% per annum over the past three years, and stretches to 16.09% per annum over the past five.

Since this ASX ETF’s inception in August 2016, investors have bagged an average of 16.49% per annum.

Putting all of these factors together, I think that this ASX ETF is the smartest place to put $1,000 into this June and beyond.

The post The smartest ASX ETF to buy with $1,000 right now appeared first on The Motley Fool Australia.

More reading

• 5 excellent ASX ETFs to grow your wealth
• 4 of the best ASX ETFs to buy and hold for a decade
• ‘Unique and defensive’: Why this ASX tech ETF is a buy
• Why these 5 ASX ETFs could be quality options for investors
• 4 excellent ASX ETFs to buy this month

Motley Fool contributor Sebastian Bowen has positions in VanEck Morningstar Wide Moat ETF and Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended BetaShares Global Cybersecurity ETF, CrowdStrike, Palo Alto Networks, Zscaler, and iShares S&P 500 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom. The Motley Fool Australia has positions in and has recommended BetaShares Global Cybersecurity ETF. The Motley Fool Australia has recommended CrowdStrike, VanEck Morningstar Wide Moat ETF, and iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

BHP Group Ltd (ASX: BHP) shares are falling on Wednesday morning.

At the time of writing, the mining giant’s shares are down over 1% to $42.85.

Why are BHP shares falling?

Today’s decline may have been driven by the release of the company’s decarbonisation update this morning.

According to the release, the Big Australian is on track to reduce its operational greenhouse gas (GHG) emissions (Scopes 1 and 2 from operated assets) by at least 30% by FY 2030 from FY 2020 levels.

But management isn’t resting on its laurels. It has a goal to achieve net zero operational GHG emissions by 2050.

It acknowledges that to succeed, its technology must advance rapidly. It also highlights that “the pathway to net zero will be non-linear” as it organically grows its business, and it is using its capital allocation framework to maximise the returns on its GHG emissions abatement.

To support its long-term goal of net zero Scope 3 emissions by 2050, management notes that it has made strong progress on its strategy in the areas of steelmaking and maritime decarbonisation via partnerships, trials, and pilots.

What’s been happening?

Management points out that its haul trucks are the largest user of diesel at BHP globally.

Its preferred pathway to eliminate diesel is via electrification. BHP feels that operational trials and collaborations to accelerate development are critical to success. The good news is that it is working with a number of major players such as Caterpillar Inc. (NYSE: CAT) and Komatsu to make this a reality.

A trial with Caterpillar starts this year and with Komatsu in 2026. If everything goes to plan, these technologies will then be deployed in 2028.

The Big Australian is also collaborating with steelmakers to reduce GHG emissions in steelmaking. It notes that it has nine partnerships, representing ~20% of global steel production, to help tackle long-term steel transition through the decades to come. Management said:

We are progressing a diverse project portfolio to larger scale; covering routes we believe have greatest potential to support decarbonisation from use of our products.

One way to achieve this could be with its electric smelting pilot facility. A pilot plant is targeted for 2027 with widespread commercial deployment targeted post-2030.

Another area the mining giant is targeting is shipping. It has a 2030 goal of a 40% emission intensity reduction of BHP-chartered shipping of BHP products from a 2008 baseline. After which, it is aiming for net zero for the GHG emissions from all shipping of BHP products by 2050. It commented:

We see significant potential in the trial and adoption of low to zero-emissions alternatives such as ammonia. A promising future fuel with potential to drive a step change reduction in GHG emissions on a per voyage basis compared to conventional fuel.

It’s fair to say that this is promising from BHP. However, one thing missing from the presentation is how much this all will cost. This uncertainty may be what is weighing on BHP shares today.

The post BHP shares fall on decarbonisation update appeared first on The Motley Fool Australia.

More reading

• CBA share price outpacing BHP shares on Monday in the race for biggest ASX stock
• Top 10 most traded ASX shares and US stocks in May
• 3 top ASX 200 stocks that could create lasting passive income into retirement
• What’s the outlook for ASX 200 mining shares in FY25?
• Buy BHP and these ASX dividend shares

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 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.

It certainly has been a tough week for the Cettire Ltd (ASX: CTT) share price.

Since the start of the week, the ASX tech stock has lost over 50% of its value.

Why has this ASX tech stock been sold off?

Investors have been selling off the online luxury products retailer’s shares in response to the release of a trading update.

Cettire warned that “the operating environment within global online luxury has become more challenging” with heightened levels of discounting.

In response to these difficult operating conditions, management “has selectively participated in the promotional activity, leading to an increase in marketing costs relative to sales and a decline in delivered margin percentage.”

This appears to have spooked investors, who may now believe that this marks an end of the ASX tech stock’s explosive sales and earnings growth.

Broker says buy the selloff

Analysts at Bell Potter were not overly impressed with Cettire’s trading update. Commenting on the update, the broker said:

Cettire (CTT) provided a FY24 trading update (Apr-Jun) and sales revenue of $735m745m (FY +78% on pcp and 4Q +54% on pcp) was broadly in line with BPe, however Adjusted EBITDA of $32-35m was a material miss to BPe/Consensus ($44m). We note that the current trading in the seasonally key 4Q has been impacted by the intense promo environment during the Northern Hemisphere Spring/Summer ’24 sales period from mid-May leading to challenging product margin outcomes (BPe ~32% for 2H24). The direct platform in mainland China was also launched ahead of the end of 4Q24.

While our topline assumptions remain largely unchanged, we see continuing pressure on 1H25 product margins in achieving a BPe ~26% net revenue growth for FY25e until the industry stock levels and promo intensity normalise over the coming months. We believe that the timing of recovery would be dependant on the ongoing industry consolidation at present given the exit of some players and overall consumer demand.

However, the broker appears to see the selloff that ensued as an overreaction.

Major upside potential

In response, Bell Potter has reaffirmed its buy rating but cut its price target by 35% to $2.60 (from $4.00).

Despite this valuation cut, it still suggests that the ASX tech stock could more than double in value from its current share price of $1.12.

Its analysts conclude:

Our PT decreases 35% to A$2.60 (prev. A$4.00) driven by our earnings revisions and a reduction to our target multiple (12x vs prev. 13.5x). Despite a weak trading update, CTT continues to perform relatively better than peers in the luxury industry and we believe that CTT’s ability to outperform far outweighs luxury e-comm peers. While the market consolidation continues across large to smaller players, CTT’s sub-1% market share and flexibility in the drop-ship inventory model highly supports growth. At our downgraded PT of $2.60, the TER is >100% so we maintain our BUY rating.

The post This smashed up ASX tech stock could rebound 100%+! appeared first on The Motley Fool Australia.

More reading

• Why Cettire, Metcash, ResMed, and Star Entertainment shares are sinking today
• Why did the Cettire share price just crash 42%?
• 6 ASX retail shares to buy this month
• 3 beaten-up ASX shares fundies love right now
• Why Cettire, Neuren, Peter Warren, and Qantas shares are falling today

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 Cettire. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.