Author: therawinformant

The threat of a second stock market crash may leave some investors feeling unsure when it comes to managing their portfolios. For example, they may feel that buying stocks is a risky move. However, other assets such as cash and bonds offer disappointing returns in many cases.

Therefore, following the advice of Warren Buffett could be a sound move. His long track record of outperforming the stock market and his ability to use short-term challenges to his advantage could act as a useful guide during an uncertain period for the world economy.

Holding cash ahead of a stock market crash

Predicting when the next stock market crash will occur is extremely challenging. As this year’s market decline showed, a downturn can take place at any time without prior warning. However, the existence of risks such as Brexit and the coronavirus pandemic means that investor sentiment may be very changeable at the present time. As such, there may be a heightened chance of a second downturn across the global stock market in the coming months.

Therefore, following Warren Buffett’s lead and holding some cash could be a logical approach. He always has a significant amount of cash available should the stock market fall to more attractive buying levels. This has enabled him to buy undervalued stocks when other investors are selling them, thereby improving his chances of generating impressive long-term returns.

Of course, this does not mean that investors should sell all shares and hold only cash due to the threat of a stock market crash. However, having some spare cash available at all times may be a prudent step to take given the challenging economic outlook.

Identifying high-quality businesses

Some high-quality stocks have recovered strongly after the 2020 stock market crash. As such, they may no longer offer a margin of safety. Identifying them and waiting for their prices to reach a lower level in a future market decline could be a profitable move. It may allow an investor to access the best businesses in a specific sector when they offer sizeable capital growth potential.

Warren Buffett has always sought the most attractive businesses at the lowest prices. He has generally avoided simply buying cheap shares. Instead, he has focused on businesses with wide economic moats that can deliver relatively strong profit growth over the long run.

By making a list of the most attractive companies prior to a stock market crash, an investor can be ready to act on temporary market mispricings. As this year’s market downturn showed, sometimes stock prices can trade at low levels for only a short period of time. Therefore, undertaking the necessary research now as to which stocks to buy should they fall in price at a later date could be a logical strategy. It may allow an investor to follow Warren Buffett’s lead in buying high-quality companies when they trade at low prices.

More reading

• These ASX shares have more than doubled in value in 2020
• 5 fantastic ASX shares to buy today
• Is now the time to be buying crashing shares at cheap prices?
• Are these the new paths for growth of the Afterpay (ASX:APT) share price?
• 2 ASX blue chip dividend shares to buy this month

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The All Ordinaries index has been in fine form recently and has managed to narrow its year to date decline to just 1%.

Considering how far we fell at the height of the pandemic, this certainly is an incredible turnaround.

While the All Ords is still down slightly in 2020, the same cannot be said for some index constituents.

Two ASX shares that have more than doubled in value this year are listed below. Here’s why they are on fire:

Macquarie Telecom Group Ltd (ASX: MAQ)

The Macquarie Telecom share price is up a massive 130% since the start of the year. Investors have been buying the data centre and telecom company’s shares this year due to its strong performance in FY 2020 and positive outlook. This has been driven largely by increasing demand for cloud and cyber security services, particularly in the government sector.

In FY 2020, Macquarie Telecom delivered an 8% increase in revenue to $266.2 million and a 25% lift in earnings before interest, tax, depreciation, and amortisation (EBITDA) to $65.2 million. Management is expecting further growth in EBITDA in FY 2021. And this guidance was prior to the recent announcement earlier this month of a major contract for the provision of approximately 10MW of capacity at its Macquarie Park Data Centre Campus.

Whispir Ltd (ASX: WSP)

The Whispir share price has been a very stronger performer in 2020. Despite trading well below its 52-week high, the communications workflow platform provider’s shares are up a sizeable 108% since the start of the year. This has been driven by a surge in demand for its services during the pandemic which led to stellar growth in FY 2020.

For the 12 months ended 30 June 2020, the company delivered a 25.5% increase in revenue to $39.1 million and annualised recurring revenue (ARR) growth of 34% to $42.2 million. This was driven by increased usage from existing customers and a greater than forecast increase in net new customers.

Pleasingly, more strong growth is expected in FY 2021. Management provided guidance for ARR of $51.1 million to $55.3 million and revenue of $47.5 million to $51 million. The high end of these guidance ranges represent year on year growth of 31% and 30.4%, respectively.

More reading

• The Whispir Ltd (ASX:WSP) share price is now 35% off its 52-week high. Time to buy?
• 2 ASX tech shares growing strongly in 2020
• Latest ASX stocks to be hit by a broker downgrade
• Macquarie Telecom (ASX:MAQ) share price surges on contract win
• 3 exciting small cap ASX tech shares to watch

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Whispir Ltd. The Motley Fool Australia has recommended Whispir Ltd. 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 are a large number of ASX shares to choose from on the Australian share market.

Five that come highly rated are listed below. Here’s why these ASX shares are being tipped as buys:

Altium Limited (ASX: ALU)

Altium is the printed circuit board (PCB) design software provider behind the Altium Designer and cloud-based Altium 365 platforms. Given that PCBs are found inside almost all electronic devices, the company has been benefitting greatly from the proliferation of electronic devices due to the Internet of Things and artificial intelligence markets.

Analysts at Morgan Stanley expect this to continue. They have an overweight rating and $40.00 price target on the company’s shares. The broker appears confident on the company’s long term growth prospects.

Appen Ltd (ASX: APX)

Appen provides and prepares the data that goes into artificial intelligence and machine learning models. This includes for some of the biggest tech companies in the world. Given the growing importance of artificial intelligence for businesses and governments, the company has been tipped for strong growth during the 2020s.

A note out of Macquarie reveals that its analysts have an outperform rating and $43.00 price target on the company’s shares. The broker believes Appen will benefit greatly from the increasing spend on artificial intelligence.

IDP Education Ltd (ASX: IEL)

IDP Education is a provider of international student placement and English language testing services. While it has been hit incredibly hard by the pandemic, it has been tipped to come out of the crisis in an even stronger market position. This could make it a big winner when a COVID-19 vaccine is released.

Earlier this month analysts at Morgans reiterated their add rating and lifted the price target on the company’s shares to $25.09. They believe the company is well-placed for growth once trading conditions return to normal.

NEXTDC Ltd (ASX: NXT)

NEXTDC is a leading data centre operator which has been benefiting from the increasing amount of data being generated by consumers and businesses. This has particularly been the case during the pandemic when the shift to the cloud led to a surge in demand for data centre capacity.

One broker that is particularly bullish due to this increasing demand is Goldman Sachs. It recently reiterated its buy rating and $13.20 price target on the company’s shares. It even suggested the NEXTDC share price could be worth upwards of $20.00 based on high but not unrealistic assumptions.

Pushpay Holdings Group Ltd (ASX: PPH)

Pushpay is a fast-growing donor management and community engagement platform provider for the faith sector. It has been an exceptionally strong performer this year and recently reported a 48% increase in total processing volume to US$3.2 billion and a 53% increase in operating revenue to US$85.6 million for the first half of FY 2021. This is still well short of management’s long term revenue target of US$1 billion.

Analysts at Goldman Sachs have a conviction buy rating and $10.35 price target on its shares. The broker notes that Pushpay’s platform is beginning to demonstrate sticky qualities and is well-positioned for growth.

More reading

• These were the worst performing ASX 200 shares last week
• Is the Altium (ASX:ALU) share price a buy?
• Is the Altium (ASX:ALU) share price in the buy zone?
• ASX 200 down 0.3%: Altium FY 2021 guidance, Crown drops, insurance shares sink
• Altium (ASX:ALU) share price pushes higher following AGM update

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen Ltd, Idp Education Pty Ltd, and PUSHPAY FPO NZX. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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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Buying crashing shares today at cheap prices may not necessarily produce high returns in the short run. A number of risks continue to face investors, such as a challenging economic outlook and the ongoing coronavirus pandemic. They, and other threats, could lead to a further market crash over the coming months.

However, over the long run, the stock market’s growth potential could make now the right time to purchase a diverse range of shares. They could benefit from a likely return to a sustained economic boom and improving investor sentiment that lifts valuations across a wide range of sectors.

Risks facing crashing shares in the short run

Crashing shares may already be cheap after their recent falls. They may trade at prices that are substantially below their historic averages. However, if investor sentiment weakens in response to challenging economic data or political uncertainty, it could cause many companies to record falls in their share prices.

Therefore, it is important to accept the potential for paper losses on investments made today over the coming months. The stock market crash from earlier this year showed that predicting market downturns is almost impossible. Therefore, there is always the prospect of experiencing falling share prices over a short time period should a deteriorating economic outlook cause investor sentiment to decline.

Long-term potential

Buying crashing shares could produce high returns over the long run. Value investors such as Warren Buffett have a long track record of purchasing high-quality companies when they trade at low prices. Over time, they have often soared in value as investor sentiment has improved and company valuations have more accurately reflected their financial prospects. With many companies appearing to fall into this category at the present time, there seem to be opportunities to capitalise on low valuations in a wide range of sectors.

The stock market’s past performance shows that a recovery and sustained bull market is likely to take place following short-term volatility. Of course, this can take a matter of months, or even years. Therefore, it is important for investors to manage their expectations when purchasing shares that have fallen in value. Although a recovery may be likely should the company in question have a solid financial position and a wide economic moat, it can take some time for it to be achieved.

Managing risks

It is also important to manage risks when purchasing crashing shares. For example, owning a diverse range of companies within a portfolio can reduce an investor’s reliance on a small number of companies or sectors. It can also mean smoother returns should one industry be less affected by a specific risk or threat compared to others.

Furthermore, identifying high-quality businesses that have fallen heavily in price could be a logical strategy. It may enable an investor to purchase those companies that are not only cheap, but that also offer the best value for money on a long-term basis. Over time, they could be among the least risky opportunities. They may also deliver the highest returns within an index over the coming years.

More reading

• 5 fantastic ASX shares to buy today
• Are these the new paths for growth of the Afterpay (ASX:APT) share price?
• 2 ASX blue chip dividend shares to buy this month
• These were the worst performing ASX 200 shares last week
• These were the best performing ASX 200 shares last week

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Much has been made of the Afterpay Ltd (ASX: APT) share price of late. That’s generally what happens when a high-flying WAAAX growth share makes yet another brand new all-time high. This is precisely what occurred with the Afterpay share price this week, when it hit a new top of $105.80 on Monday.

Earlier this week, we discussed how the competition was heating up for the company, with the entrance of a few new competitors in the buy now, pay later (BNPL) space that Afterpay has made so famous.

However, reminiscent of Mark Zuckerberg’s famous unofficial motto for Facebook Inc (NASDAQ: FB) in the company’s early years – ‘move fast and break things’ – Afterpay is not a company that finds its laurels too comfortable to rest on.

Reporting in the Australian Financial Review (AFR) this week shed some light on Afterpay’s growth plans. According to the AFR, Afterpay co-founder and co-CEO, Anthony Eisen, has told investors that the company wants to “capitalise on its enormous 11-million strong customer base by better targeting young customers and supporting cross-border purchases”.

Afterpay eyes the horizon

Appearing at the AFR’s Banking and Wealth Summit this week, Mr. Eisen is reportedly exploring new ways to monetise the company’s 11 million (and growing) base of customers. One of these ‘ways’ is a plan to allow merchants in one country to sell products in another country, and “providing foreign exchange services to facilitate cross border transactions.”

The AFR quotes Mr. Eisen as stating that these plans, as well as the company’s small but growing presence in Asia, were “early irons in the fire”. However, he also notes that global retailers are “encouraging [Afterpay] to expand into new regions”. These retailers include Chinese e-commerce giant Tencent Holdings Ltd (HKG: 0700), which Afterpay has an arrangement with dating back to May this year. It was also at this time that Tencent, an e-commerce powerhouse in its own right, acquired a large tranche of Afterpay shares. Some of the apps Tencent owns, such as WeChat, have billions of monthly users. However, Mr. Eisen still says that although the two companies have “some fabulous conversations”, the relationship remains at “arms-length”.

Turning to the prospect of future regulation, a bugbear seemingly always on the minds of Afterpay investors, Mr. Eisen was indifferent: “It’s never been a point about avoiding regulation” he told the AFR, noting that ASIC (the Australian Securities and Investment Commission) has a “fit for purpose” approach to the BNPL space. He also praised ASIC for “recognising that Afterpay was differentiated from the broader sector”.

It’s worth noting, however, that not everyone shares this view. The AFR also quotes Commonwealth Bank of Australia (ASX: CBA) CEO, Matt Comyn, who reckons that “regulation is inevitable but not imminent”.

More reading

• I have too many tech shares: Do I sell, buy or hold?
• Is the Afterpay (ASX:APT) share price a buy today?
• Top brokers name 3 ASX shares to buy today
• Afterpay (ASX:APT) share price under pressure by US BNPL giant
• ASX 200 rises again on Tuesday

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Facebook. 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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If you’re looking to add some blue chip dividend shares to your portfolio, then the two listed below might be ones to consider.

Here’s what you need to know about them:

Westpac Banking Corp (ASX: WBC)

Westpac is one of Australia’s largest banks with a market capitalisation of $72 billion. Times have certainly been hard for the bank in recent years, but its outlook is improving significantly. This is thanks to an improving housing market, the relaxing of responsible lending rules, and the prospect of an effective COVID-19 being developed in the very near future.

And although its shares have staged a strong recovery in recent weeks, one broker that believes they can still go higher from here is Morgans. Earlier this month its analysts put an add rating and $21.00 price target on the company’s shares. The broker is also forecasting dividends of 88 cents per share and 144 cents per share for FY 2021 and FY 2022, respectively. The latter represents a fully franked 7.2% dividend yield.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is the owner of a number of Australia’s most popular retailer such as Kmart, Target, Catch, Officeworks, and Bunnings. It also owns a number of chemicals and industrials businesses. The key business by far is the Bunnings business. In FY 2020 the hardware giant contributed 64.1% of Wesfarmers’ earnings before tax.  

The good news for shareholders is that Bunnings has been on fire so for in FY 2021. For the first four months of the financial year, it delivered sales growth of 25.2% over the prior corresponding period.

According to a note out of Credit Suisse, its analysts believe Wesfarmers is well-placed for growth this year. As such, they have an outperform rating and $51.59 price target on the company’s shares. The broker is also forecasting a dividend of 181 cents per share in FY 2021. Based on the latest Wesfarmers share price, this represents a fully franked 3.7% dividend yield.

More reading

• What would it take for the ASX 200 to hit 7,000 again?
• Why ASX bank share dividends might be surging soon
• Morgan Stanley updates its share price targets for the big 4 banks
• Why Aristocrat Leisure, Chalice Gold, Westpac, & Whitehaven Coal shares are charging higher
• Here’s the ASX bank share rated as a conviction buy

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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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Positive COVID-19 vaccine news gave investor sentiment a lift last week and sent the S&P/ASX 200 Index (ASX: XJO) charging higher again. The benchmark index rose 2.1% to finish at 6539.2 points.

Unfortunately, not all shares climbed higher with the market last week. Here’s why these were the worst performers on the ASX 200 over the period:

Evolution Mining Ltd (ASX: EVN)

The Evolution share price was the worst performer on the ASX 200 last week with an 8.9% decline. Improving risk appetite thanks to positive COVID-19 vaccine developments weighed on the gold price last week. Combined with a broker downgrade from Macquarie, this put a lot of pressure on the Evolution share price. A number of other gold miners including Gold Road Resources Ltd (ASX: GOR), Silver Lake Resources Limited (ASX: SLR), and Northern Star Resources Ltd (ASX: NST) also fell heavily last week for similar reasons.

Elders Ltd (ASX: ELD)

The Elders share price was the next worst performer (excluding gold miners) with a 7.1% decline. Last week the agribusiness company released its full year results. Elders reported a 29% increase in sales revenue to $2,092.6 million and a 71% jump in underlying profit after tax to $109 million. This was driven partly by the acquisition of AIRR and strong demand for products from the recent winter cropping season. While this result was stronger than expected, analysts at Morgans believe its shares are fair value now and put a hold rating and $11.68 price target on them.

Charter Hall Group (ASX: CHC)

The Charter Hall share price was out of form and dropped 6.9% lower last week. This was despite the property company announcing that its wholesale partnership, LWHP, has made an acquisition. The partnership has acquired a $353 million portfolio of six Bunnings Warehouse assets located in prime metropolitan markets. This portfolio of modern Bunnings Warehouse retail stores was acquired on a yield of 4.63%.

NEXTDC Ltd (ASX: NXT)

The NEXTDC share price was out of form and fell 6.7% over the five days. With no news out of the data centre operator, this decline may have been driven by profit taking from investors. After all, even after this decline, the NEXTDC share price is up 84% since the start of the year. This has been driven by increased demand for its data centres due to the accelerating shift to the cloud following the pandemic.

More reading

• These were the best performing ASX 200 shares last week
• ASX 200 ends flat on Friday
• Why the Oil Search (ASX:OSH) share price is the worst performer today
• What would it take for the ASX 200 to hit 7,000 again?
• Takeover battle for Regis (ASX:REG) share price triggers sector-wide upgrade

Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia has recommended Elders 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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The S&P/ASX 200 Index (ASX: XJO) was on form again last week and charged higher again. The benchmark index rose 2.1% to 6,539.2 points thanks to further positive vaccine news.

While a good number of shares climbed higher with the market, a few recorded particularly strong gains.

Here’s why these were the best performing ASX 200 shares last week:

Unibail-Rodamco-Westfield CDI (ASX: URW)

The Unibail-Rodamco-Westfield share price was the best performer on the ASX 200 last week with a 25.7% gain. Investors have been buying the shopping centre operator’s shares amid hopes that the COVID-19 vaccine will give its struggling business a big lift in 2021. Despite its strong gains in recent weeks, the company’s shares are still down 60% from their 52-week high.

Bendigo and Adelaide Bank Ltd (ASX: BEN)

The Bendigo and Adelaide Bank share price was on form and charged 14.5% higher over the five days. This was despite there being no news out of the regional bank. However, a number of bank shares recorded strong gains last week after investor sentiment improved greatly in the sector. This may have been driven by the vaccine news and hopes that APRA would soon remove its limits on bank dividends.

Alumina Limited (ASX: AWC)

The Alumina share price wasn’t far behind with a 12.8% gain last week. Once again, this was despite there being no news out of the alumina and bauxite company. However, with aluminium prices on an upward trend, investors may be feeling confident about the company’s prospects in FY 2021.

Mesoblast limited (ASX: MSB)

The Mesoblast share price was a strong performer last week and stormed 12% higher. Almost all of this gain came on Friday following the announcement of an agreement with pharma giant Novartis. The two parties have agreed an exclusive worldwide license and collaboration agreement for the development, manufacture, and commercialisation of Mesoblast’s mesenchymal stromal cell product remestemcel-L. Novartis will make a US$50 million upfront payment and could pay upwards of US$1.25 billion milestone payments.

More reading

• ASX 200 ends flat on Friday
• Why the Oil Search (ASX:OSH) share price is the worst performer today
• What would it take for the ASX 200 to hit 7,000 again?
• Why Accent, Mesoblast, Redbubble, & Regis Healthcare shares are charging higher
• Takeover battle for Regis (ASX:REG) share price triggers sector-wide upgrade

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Kogan.com Ltd (ASX: KGN) share price a buy after holding its annual general meeting (AGM) and revealing that its profit was up 270% in the year to date of FY21?

What is Kogan.com?

Kogan.com is an e-commerce business that sells a variety of products or services. It has an online marketplace where it sells a wide array of products like TVs, appliances, devices, furniture, food, toys, garden items, shoes, clothes and so on.

The company also sells a variety of other services like insurance, money products (like credit cards and superannuation), travel, cars, internet and mobile. 

Kogan.com also has a membership program called Kogan First which provides members with free shopping and some other benefits.

What was said at the AGM?

First, the company reminded investors about its performance in FY20 where net profit grew 55.9% and gross sales increased by 39.3%.

Kogan.com said that in the year to date for FY21 to October 2020, gross sales went up 99.8%, gross profit increased 131.7% and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 268.8%.

The company said that in the year to date, it has seen a strong performance from its product divisions and Kogan Marketplace. The company pointed out that November and December are typically the most important months of the year for the business.

It has been investing in its marketing to grow its customer base and brand, which it expects will have long-term benefits for the company.

The company also pointed that over the past four years it has delivered growth in the gross margin, contribution margin, EBITDA margin and adjusted EBITDA margin. In FY17 the adjusted EBITDA margin was 5.2%, in FY18 it was 6.3%, it FY19 it was 7.2% and in FY20 it was 10%.

Kogan.com also continues to launch new services for customers with partners. For example, in the first half of FY20 it launched Kogan Mobile NZ with Vodafone, Kogan Money Super with Mercer, Kogan Money Credit Card with Citi and Kogan Energy with Powershop (which is part of Meridian Energy Ltd (ASX: MEZ)).

Is the Kogan.com share price a buy?

The CEO and founder of Kogan.com, Ruslan Kogan, said with the FY20 report release: “There is a retail revolution taking place as more and more shoppers learn about the benefits of e-commerce. We’re seeing record numbers of first time customers, who then go on to make repeat purchases at a 40% faster pace than previously. For us this is a very exciting trend that shows that once customers learn about shopping online, they change their ongoing behaviour. Once someone discovers the benefits of online hopping, I struggle to see why they would ever go back to the old way of doing things. After almost 15 years of preparation, the revolution occurring in retail represents a significant opportunity for Kogan.com.”

Mr Kogan also referred to the benefit to the company of its growing number of people using its loyalty scheme: “The Kogan First community of members grew exceptionally during the second half, and importantly these loyal members on average purchase and save much more often than non-members, demonstrating loyalty to the platform, and also demonstrating the significant savings and other benefits available through the loyalty program.”

The Motley Fool Share Advisor service currently rates Kogan.com as a buy. According to estimates on Commsec, it’s trading at 29x FY23’s estimated earnings.

More reading

• ASX 200 ends flat on Friday
• Here’s how the voting went down at the Kogan (ASX:KGN) AGM
• Why Kogan, Oil Search, Orica, & Soul Pattinson shares are dropping lower
• Kogan (ASX:KGN) share price lower on AGM and trading update
• Tussle at Kogan (ASX:KGN) over executive compensations

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. 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 Altium Limited (ASX: ALU) share price a buy? The company held its annual general meeting (AGM) this week.

Altium is an electronics PCB software business that counts businesses and organisations like Space X, Tesla, Apple, NASA, Amazon, Google, John Deere, Microsoft, Disney and Honeywell.

What did Altium say at its AGM?

The company outlined its various plans for growth, particularly revolving around Altium 365.

Altium reminded investors that it is going through its ‘Netflix moment’ with a hard pivot to the cloud. Altium is creating a new organisational structure separating its cloud business (Altium 365) from its ‘software’ business.

It’s planning for the rapid development and adoption of Altium 365. It will reinvent Altium’s transactional sales on a digital platform. The company is preparing a “major offensive” into the high-end PCB market through NEXUS and Altium 365 Enterprise, whilst also deeply integrating Octopart and Altium 365.

Another part of the plan is launching preparations for Altium 365 into China and bringing smart manufacturing to Altium 365.

Altium is still planning for market domination with a target of 100,000 Altium Designer subscribers. The company says that its Altium Designer business is the dominance engine, whilst the cloud platform Altium 365 is the transformation engine.

The ASX tech share said that the shift to the cloud is from a position of strength and does not force its customer to change their licensing model or the way they use Altium’s existing software. But Altium 365 does provide future opportunities for direct monetisation from transaction fees on manufacturing or premium services.

Altium revealed that momentum is building with 40% growth of Altium 365 adoption since July. It has 3,739 monthly active accounts and 7,486 monthly active users.

In terms of a market update and outlook, Altium said that the 2021 financial year is a pre-vaccine environment for Altium’s path to 2025, meaning the financial performance will be affected.

Altium said that macro environment remains challenging with a second wave of COVID-19 and uncertainty that has surrounded the US elections.

Management said that the first half is still being affected by COVID-19 but there are some signs of momentum coming back for the second half.

Altium confirmed the company’s guidance range for the full FY21. Revenue is expected to be between US$200 million to US$212 million, which would be growth of 6% to 12%. It’s also expecting earnings before interest, tax, depreciation and amortisation (EBITDA) to be in the range of US$76 million to US$89 million.

Is the Altium share price a buy?

The Motley Fool Pro service still rates Altium shares as a buy. At the current Altium share price of around $36 it’s trading at about 56x FY22’s estimated earnings.

Altium CEO Aram Mirkazemi spoke about the shift to Altium 365: “The implication of all this, is that the adoption of Altium 365 will implicitly change the nature of Altium’s revenue from being old world perpetual and maintenance based to the new world of term-based and software as a service (SaaS). This means, as far as Altium’s existing software revenue is concerned, Altium may very well be able to accomplish a Sun Tzu move in winning a war without fighting a battle.”

Altium is expecting the change to significantly increase renewal rates for maintenance subscription and reduce church, which should have the most dramatic impact on revenue and the climb to 100,000 subscribers.

Mr Mirkazemi said: “Our software business is regarded as world class and is well on the way to achieving worldwide dominance, which will essentially give us a position of absolute market dominance similar to what has been achieved by Adobe or Microsoft software, for the electronics industry.”

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Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia has no position in any of the stocks mentioned. 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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