Author: therawinformant

One area of the market which has performed exceptionally well over the last decade has been the healthcare sector.

Since this time in 2010, the S&P/ASX 200 Health Care index has risen a remarkable 450%. This compares to a more modest ~39% gain by the S&P/ASX 200 Index (ASX: XJO) over the same period, excluding dividends.

The good news for investors is that there are a number of healthcare shares that have been tipped to continue to outperform the market. Here are two:

Nanosonics Ltd (ASX: NAN)

One thing the pandemic has taught us, is that infection control is very important. This bodes well for infection prevention company Nanosonics. It is the name behind the industry-leading trophon EPR disinfection system for ultrasound probes. It is also aiming to launch several new products in the near future which have similar addressable markets. Though, it is worth noting that these launches continue to be delayed.

Nevertheless, one broker that thinks investors should be patient is UBS. The broker believes Nanosonics is a high-quality and structural growth story and expects the company to benefit from post-COVID infection prevention tailwinds. Its analysts have put a buy rating and $7.20 price target on the company’s shares.

ResMed Inc. (ASX: RMD)

ResMed is a sleep treatment-focused medical device company that has been growing at a very strong rate over the last few years. This has been driven by its industry-leading products in a sleep treatment market that is growing fast. Pleasingly, management remains confident on its outlook and notes that there are an estimated ~1 billion people impacted by sleep apnoea worldwide. From these, it believes just ~20% have been diagnosed.

Analysts at Credit Suisse believe the company is well-placed for growth and have recently upgraded ResMed’s shares to an outperform rating with a $31.00 price target. It believes ResMed is well-placed to benefit from a shift to home healthcare following the pandemic.

More reading

• Where you could invest $20,000 into ASX shares today
• Why ResMed (ASX:RMD) and these ASX shares just hit record highs
• Top brokers name 3 ASX shares to buy next week
• Latest ASX small cap buy calls from top brokers
• Top brokers name 3 ASX shares to buy today

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 Nanosonics Limited. The Motley Fool Australia has recommended Nanosonics Limited and ResMed Inc. 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 Afterpay Ltd (ASX: APT) share price is trading lower on Monday after responding to a report by ASIC.

At the time of writing, the payments company’s shares are down 0.5% to $101.40.

What did Afterpay announce?

This morning Afterpay responded to the latest report from ASIC in relation to the Buy Now Pay Later (BNPL) industry.

The company notes that the report highlights ASIC’s new product intervention power and the forthcoming design and distribution obligations that will play an important role in promoting good consumer outcomes.

The report also comments that there is a significant role for industry self-regulation, with broad industry support and commitment to ensure good consumer outcomes.

Afterpay notes that this is consistent with the Government’s Senate Select Committee on Financial Technology and Regulatory Technology, which recommended regulation that is fit-for-purpose and considers the various emerging products and business models.

Furthermore, ASIC’s report recognises the significant shift from traditional forms of payment and the decline of credit cards usage. Consumers are benefiting from more choice as competition from newer players is expanding a previously narrow, bank dominated payments industry.

Why Afterpay is different.

In respect to the BNPL industry, ASIC’s report refers to BNPL as a collective term to describe a range of new businesses with fundamentally different business models.

And while Afterpay is easily the largest of the companies profiled with 73% of the total value of BNPL transactions, it represents a relatively small proportion (27%) of BNPL related consumer debt.

Management advised that this is a result of Afterpay’s differentiated business model that is unlike traditional credit or other BNPL providers, with built-in consumer protections that ensure average transaction values remain the lowest. Afterpay’s average transaction value is $147, compared to others with as much as $8,000.

It also notes that payment terms are strictly short-dated, 6-8 weeks versus up to 60 months, and customers cannot revolve in large or accumulating amounts of debt.

In addition to this, it notes that customers are immediately suspended from using Afterpay if they miss a single instalment payment. And unlike other providers, Afterpay does not rely on customers to drive revenue, generating the majority of revenue from merchants (over 85% in FY20). Further, Afterpay customers prefer debit cards over credit cards, with over 90% of all transactions in Australia linked to debit cards.

Management points out that key metrics relevant to positive consumer outcomes have continued to improve since ASIC’s review period (2018 – 2019). One of these is Afterpay’s Gross Loss, which is currently industry leading (<1% globally in FY 2020). Another is late fees as a percentage of underlying sales, which has reduced to <14% globally in FY 2020.

Financial stress.

The release advises that ASIC’s consumer research identified the potential for financial stress among users of different financial products categorised as BNPL.

However, Afterpay’s own research of 144,000 customers found that there is no causal link between spending on Afterpay and changes in spending on essentials.

It notes that for customers who find themselves in trouble, Afterpay offers a generous and accessible hardship program where flexible payment timelines with no additional fees or cost can be agreed upon. Furthermore, Afterpay has never enforced a debt nor does it sell debts to collection agencies.

The company concluded: “Afterpay looks forward to participating in the Government’s upcoming review of the regulatory architecture of the Australian payments system, including whether the general policy and regulatory framework adequately accommodates new and innovative technology, such as the BNPL sector.”

“Afterpay remains committed to our customers and to working with ASIC, the Government, industry, consumer groups and all stakeholders to promote consumer protection outcomes and a competitive Australian FinTech industry.”

More reading

• ASX 200 Weekly Wrap: ASX continues to hit post-COVID highs
• 2 fast-growing ASX tech shares to buy
• 5 things to watch on the ASX 200 next week
• Why are ASX tech shares all over the place today?
• Why the Aristocrat (ASX:ALL) share price could jump next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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 Commonwealth Bank of Australia (ASX: CBA) share price lifted almost 3% last Wednesday following its resilient first quarter FY21 results.

First quarter results recap 

Considering the response from brokers, CBA delivered a fair result. Its home loan growth grew twice as much as the wider banking system, benefiting from higher application volumes and a continued focus on credit decision turnaround times. The domestic business lending growth was also above system, with solid growth across diversified sectors. Its strong operational performance helped offset ongoing margin pressures due to lower interest rates. Its unaudited cash net profit after tax was $1.8 billion for the quarter, down 16% on the prior corresponding period. 

The bank’s CET1 ratio was 12.1% as at 30 September, significantly above APRA’s ‘unquestionably strong’ benchmark of 10.5% and well in excess of the prudential minimum of 8%. This compares to the rest of the big four banks which currently maintain CET1 ratios between 11.13%–11.47%. 

What do the economic indicators suggest?

Economic indicators relevant for businesses, consumers and property suggest that the worst is behind us.

Australia’s November consumer confidence hit seven-year highs as consumers are more optimistic about the economy with the coronavirus pandemic now largely under control. The Westpac-Melbourne Institute index of consumer sentiment was tracking at 107.7 in November, 11% higher than its level a year ago. 

Similarly, in October, the Roy Morgan Business Confidence index jumped 13.1 points or 15.3% to 98.7, the highest monthly reading for more than 8 months since February 2020. The recovery in business confidence in October means the index has performed an unprecedented near-perfect ‘W’ pattern over the last 9 months. 

Auction clearance rates have been consistently strong around Australia, perhaps reflective of the recent strength in the REA Group Limited (ASX: REA) share price. This has been supported of course by the RBA’s recent interest rate cut and the ‘guarantee’ of rates remaining low for at least 3 years. 

Bank loan deferrals have been consistently falling. In the case of CBA, as at 31 October, approximately 46,000 home loans remained in deferral down from 125,000 loans in June 2020. 

Broker moves 

Macquarie raised its CBA share price target from $58.50 to $65.00 and retained its underperform rating. It likes the bank’s balance sheet strength, improvement in deferrals but risks remain with respect to lower margins. 

Similarly, Jefferies raised its CBA share price target from $52.85 to $75.50. It reacted positively to the bank’s quarterly trading update and upgrades its rating from underperform to hold.

More reading

• ASX 200 Weekly Wrap: ASX continues to hit post-COVID highs
• These ASX dividend shares offer yields 8 times greater than term deposits
• Top brokers name 3 ASX shares to sell next week
• Top brokers name 3 ASX shares to buy next week
• After 8 months, ASX 200 shares are finally out of correction territory

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The shares for a $278 million fashion retailer commence trading on the ASX this week.

Universal Store Holdings Limited (ASX: UNI) has raised $147.8 million through its initial public offering (IPO) and its shares will be available midday Monday AEST on a conditional basis.

Any transactions on Monday and Tuesday are expected to be settled on Wednesday morning before the ASX opens. Shares will then be open to normal trading from the start of market on Wednesday.

The IPO price per share was $3.80, which equates to a market capitalisation of $278.1 million.

The ASX listing is the brainchild of billionaire, Brett Blundy, who has previously listed retailers Adairs Ltd (ASX: ADH) and Lovisa Holdings Ltd (ASX: LOV), as well as commercial property company Aventus Group (ASX: AVN).

Blundy’s company acquired Universal two years ago for $110 million from its founders.

The youth fashion seller then went against the rest of the industry by posting strong revenue growth in recent years. The last seven weeks has seen a 33% increase in Universal’s year-on-year sales.

“Today is a milestone in the growth of Universal Store,” said Universal Store chief executive, Alice Barbery.

“Our culture and care for our customers is at the heart of all that we do and is critical to our continued success.”

Physical stores roaring back

Universal has 65 stores nationally, but had 12 Melbourne outlets closed during that city’s second lockdown.

Those stores have now been reopened for two weeks, posting sales growth of 23% year-on-year during that period.

“We are delighted to have all our Victorian stores open and trading again in the lead up to school holidays and the Christmas season,” Barbery said.

“We are also encouraged by the prospects for our stores and online sales in Melbourne as restrictions are further eased over coming weeks.”

Although Universal has an online store, the majority of its revenue comes from physical outlets. This could point to an upside in the next 18 months as solutions potentially come along for COVID-19.

The ASX has welcomed two other high-profile retailers to its boards over the last month.

Adore Beauty Group Ltd (ASX: ABY) came in with a market cap of $635 million but is currently down on its IPO share price of $6.75, sitting at $6.

Mydeal.ComAu Pty Ltd (ASX: MYD) has fared much better, pushing its IPO share price of $1 up to $1.25.

More reading

• Suncorp (ASX:SUN) share price higher after trading update
• Why the BWX (ASX:BWX) share price is charging higher today
• Althea (ASX:AGH) share price on watch following 2 new agreements
• 10 hottest (and coldest) Aussie ETFs right now
• The Qantas (ASX:QAN) share price soared 12% higher last week

Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia has recommended ADAIRS FPO and AVENTUS RE UNIT. 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 Suncorp Group Ltd (ASX: SUN) share price is pushing higher following the release of a trading update.

At the time of writing, the insurance and banking giant’s shares are up 1% to $9.26.

What was in the Suncorp update?

This morning Suncorp provided an update on the expected impacts of COVID-19 on its General Insurance and Banking businesses and the APRA September quarter General Insurance statistics.

In respect to COVID-19, the impact on Suncorp’s General Insurance portfolio for the first half of FY 2021 is expected to be broadly neutral. Management notes that potential business interruption (BI) claims and premium waivers have been largely offset by reductions in motor claims.

In respect to its BI claims, management remains confident the intention of its BI policies is clear and that policies do not respond to pandemics.

Nevertheless, due to its prudent approach to provisioning, the company’s BI provisioning is sufficient to cover claims costs in 90% of possible outcomes. This includes in the event of an unfavourable judgement for the Insurance Council of Australia BI industry test case.

Taking into account the breadth and depth of the second Victorian lockdown, the company now expects to recognise a further $125 million (pre-tax) provision for potential BI claims. This will take its total provision for potential BI claims in relation to COVID-19 to $195 million (pre-tax).

Suncorp Bank.

Moving to its banking business. Management advised that Suncorp Bank’s credit quality remains strong, with total impairment losses of $3 million for the September quarter.

At the end of September, Suncorp Bank had $3 billion of loans under temporary loan deferral arrangements. This represents 4% of its housing portfolio and 7.6% of its SME portfolio.

APRA September 2020 Quarterly General Insurance Statistics.

The company notes that on 26 November, the Australian Prudential Regulation Authority (APRA) will publish institution-level financial statistics for the general insurance industry. This is based on regulatory filings for the quarter ended September 2020 and includes statistics for its AAI business.

Management has highlighted that the APRA statistics do not include the impact to the profit and loss statement of several key adjustments, particularly the valuation of its long tail insurance portfolio which is conducted on a half yearly basis and included in Suncorp’s regular financial disclosures.

Included within the regulatory filing are the results of AAI’s Liability Adequacy Test (LAT) for the September quarter. The LAT is undertaken to test whether unearned premium liabilities on the balance sheet are sufficient to cover the cost of expected future claims.

The company advised that there is significant seasonality in its LAT calculation, with premiums earned on a straight-line basis, while future claims reflect the seasonality of natural hazards. Furthermore, the September quarter is typically the weakest LAT outcome, with the company exposed to the upcoming summer season.

In light of this, a deficit of $173 million will be revealed, but this is expected to have substantially unwound by 31 December 2020, and to be profit neutral for FY 2021. In other words, investors need not panic over AAI’s weak numbers in APRA’s update.

More reading

• Can the Suncorp (ASX:SUN) share price go higher from here?
• Why the AMP (ASX:AMP) share price could be set to rocket higher today
• These could be the next ASX stocks to unlock value by selling assets
• The Suncorp (ASX:SUN) share price is slightly lower on day of AGM
• Invest your Suncorp dividends in these ASX shares today

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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The BWX Ltd (ASX: BWX) share price is charging higher on Monday.

In morning trade the personal care products company’s shares are up over 4% to $4.22.

What did BWX announce?

This morning BWX announced a strategic partnership with British ecommerce company THG Holdings.

According to the release, THG will provide a full-service solution, including localised digital capabilities for taking BWX brands direct to consumers across Europe and Asia.

THG Ingenuity, the technology services division of Manchester Airport-based THG Holdings, is a global proprietary technology platform. It specialises in taking brands direct to consumers.

Management notes that the agreement will provide BWX with an end-to-end e-commerce solution and access to THG’s digital platform and full-service supply chain to build more meaningful scale for the company’s brand portfolio across Europe and Asia.

What now?

BWX has advised that the collaboration will initially target five priority markets. After which, it is aiming to increase this to 14 markets by FY 2022.

Management expects this to play a key role in the company achieving its targeted revenues of between A$30 million and A$50 million from the European region by the end of FY 2023.

Also part of its strategy in the region is expanding the Sukin brand across all priority sales channels. This includes Supermarkets and Hypermarkets, European Drugstores, and E-Retailers. The Andalou Naturals brand is then expected to follow in FY 2022.

It is also aiming to drive brand activity via direct-to-consumer channels and re-position the Sukin brand for the European market. The latter includes maximising its Australian provenance and the A-Beauty trend across Europe.

BWX’s Chief Operating Officer, Rory Gration, believes the partnership with THG is an important step for bringing its product innovation to more consumers at a time when the Natural beauty category is thriving.

He commented: “We are delighted to announce our partnership with THG, as we leverage the already-strong consumer connection to our brands Sukin and Andalou Naturals in the UK market over recent years.”

“Combining BWX’s house of Natural brands and insights with THG’s digital brand services, cross-border expertise and sophisticated technology means we can build more meaningful brand footprints in what is a fast-evolving retail environment,” Mr Gration concluded.

More reading

• 3 ASX shares you’ll regret not buying during this correction
• 3 small cap ASX shares I’d buy with $3,000 right now
• Is it time to go all in on ASX shares?
• Where I’d invest $10,000 in ASX shares for growth

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BWX 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 Althea Group Holdings Ltd (ASX: AGH) share price will be on watch today after the company announced the signing of two new agreements expected to uplift revenue. At the close of trading last week, the Althea share price was asking 44 cents.

So, let’s take a look at what Althea does and what it announced.

What does Althea do?

Althea is an Australian licensed producer, supplier and exporter of pharmaceutical grade, medicinal cannabis. The company offers a range of products, education, and other services to support patients in undertaking medicinal cannabis treatment.

What were the agreements?

According to the release, Althea subsidiary, Peak, advised it has entered into a licencing agreement with Canadian-based, Earth Kisses Sky.

The contract will involve the manufacture of two topical products, with an order of 150,000 units split evenly between the two. Production is expected to commence immediately with all units expected to be purchased in the first year of the agreement.

In addition, Peak also signed a manufacturing and distribution services agreement with Canadian cannabis beverage company, Electric Brands Inc. The new deal involves two canned beverage SKU’s with an initial order of 50,000 units.

Electric Brands Inc. was founded by executives from Canopy Growth Corp and Coca-Cola Co (NYSE: KO), Canada. The beverage company aims to develop global cannabis infused drinks for the Canadian cannabis market.

In total, Peak revealed it has projected revenue of up to CAD$4.65 million over the next 12 months. The uplift in revenue over original estimates comes as the company maintains a strong sales pipeline heading into 2021.

Furthermore, Peak’s standard processing licence obtained from Health Canada in mid-September is also projected to support greater sales.

What did the CEO say?

Althea CEO, Mr Joshua Fegan, commented on the Peak update. He said:

Since Peak received its Standard Processing Licence from Health Canada a couple of months ago, we have been busy ramping up commercial operations at the facility, and are in the process of expediting the product launch dates for both new and existing customers.

Peak has received an influx of enquiries for its industry leading Cannabis 2.0 product development, manufacturing, and distribution services, and has already signed contracts representing forecasted revenue of up to CAD$4.65m over the next 12 months.

Peak remains uniquely positioned to cater for the big consumer brands seeking to enter the recreational cannabis market and I look forward to updating the market on further agreements shortly.

About the Althea share price

The Althea share price is higher since the beginning of the year, up 12.8%. However, from mid-September, after updating the market with its standard processing licence news, the Althea share price has fallen over 30%.

More reading

• ASX stock of the day: Elixinol Global (ASX:EXL) shares blaze new highs
• Here’s why ASX cannabis shares are falling today
• How did ASX cannabis shares perform last quarter? 

Motley Fool contributor Aaron Teboneras 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 Australian exchange-traded fund (ETF) industry shows no signs of slowing down, with 3 funds attracting nine-figure amounts from investors last month.

Investors put in the highest-ever amount of dollars into local ETFs in October, but some products fared far better than others.

A BetaShares report showed cash, bond and fixed interest ETFs featured prominently among the top 10 ETFs that saw the largest inflow of cash last month. 

This perhaps indicated some anxiety with investors about the US election result and sky-high share valuations.

Top 10 hottest Australian ETFs

ETF	October 2020 inflow
iShares Core S&P/Asx 200 Etf (ASX: IOZ)	$326 million
Vanguard Australian Shares Index ETF (ASX: VAS)	$197.1 million
Vanguard Global Aggregate Bond Index (Hedged) ETF (ASX: VBND)	$101.2 million
Vanguard Msci Index International Shares Etf (ASX: VGS)	$95.3 million
Betashares Australian High Interest Cash ETF (ASX: AAA)	$88.3 million
Vanguard Australian Fixed Interest Index ETF (ASX: VAF)	$84.3 million
iShares Core Composite Bond ETF (ASX: IAF)	$77.5 million
Betashares Nasdaq 100 ETF (ASX: NDQ)	$54 million
iShares S&P 500 AUD Hedged ETF (ASX: IHVV)	$51.7 million
Betashares Asia Technology Tigers ETF (ASX: ASIA)	$50.3 million
Source: BetaShares; Table created by author

ETF pioneer Vanguard dominated the top of the charts. 

Its Vanguard Australian Shares Index ETF (ASX: VAS), Vanguard Global Aggregate Bond Index (Hedged) ETF (ASX: VBND), Vanguard Msci Index International Shares Etf (ASX: VGS), and Vanguard Australian Fixed Interest Index ETF (ASX: VAF) collectively brought in about $478 million for the company.

But the most attractive fund of October, iShares Core S&P/Asx 200 Etf (ASX: IOZ), alone pulled in a stunning $326 million of investor funds.

Top 10 coldest Australian ETFs

At the other end of the charts, foreign assets seemed to go out of favour with Australian ETF investors.

The trend could be a validation of the successful suppression of COVID-19 in Australia while the northern hemisphere copped a third wave as it headed into the colder months.

ETF	October 2020 outflow
Ishares Edge MSCI World Multifactor ETF (ASX: WDMF)	$50.7 million
BetaShares Australian Resources Sector ETF (ASX: QRE)	$34.8 million
iShares MSCI South Korea ETF AUD (ASX: IKO)	$19.5 million
BetaShares Geared Australian Equity (Hedge Fund) (ASX: GEAR)	$7.06 million
iShares Core Cash ETF (ASX: BILL)	$7.02 million
BetaShares US Dollar ETF (ASX: USD)	$6.4 million
BetaShares Australian Equities Bear Hedge (ASX: BEAR)	$5.8 million
ETFS S&P/ASX 300 High Yield Plus ETF (ASX: ZYAU)	$3.6 million
iShares Europe ETF AUD (ASX: IEU)	$3.4 million
Platinum International Fund (Quoted Managed Hedge Fund) (ASX: PIXX)	$2.8 million
Source: BetaShares; Table created by author

iShares Edge MSCI World Multifactor ETF (ASX: WDMF), iShares MSCI South Korea ETF AUD (ASX: IKO), BetaShares US Dollar ETF (ASX: USD), iShares Europe ETF AUD (ASX: IEU) and Platinum International Fund (Quoted Managed Hedge Fund) (ASX: PIXX) all suffered significant outflows.

BetaShares itself had $34.8 million pulled out of its BetaShares Australian Resources Sector ETF (ASX: QRE), which was the 2nd highest amount.

It’s often hard to pinpoint the exact reasons for outflows from a particular ETF, BetaShares head of strategy Ilan Israelstam told The Motley Fool.

“Investors will have their own motivations for increasing or reducing their positions,” he said.

“On QRE in particular, our suspicion is that most of the selling was due to investors taking profits, given QRE was up around 34% from its lows in March.”

Betashares and AMP Limited (ASX: AMP) recently closed down a trio of ETFs they jointly operate due to a lack of investor interest. Those funds will trade on the ASX for the last time on 4 December.

The last two months have been the only time in history that the Australian ETF industry saw more than $2 billion come inwards each month.

Local ETFs collectively manage $73.8 billion, which is another all-time record.

More reading

• 2 quality ETFs that are popular with ASX investors
• Best performing Aussie ETFs right now
• Australian ETFs just broke an all-time record
• 2 tech ETFs generating big returns
• Is the AMP (ASX:AMP) share price really worth $2.45?

Tony Yoo owns shares of Vanguard MSCI Index International Shares ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS and Vanguard MSCI Index International Shares ETF. 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 Qantas Airways Limited (ASX: QAN) share price was a strong performer last week and soared notably higher.

Over the five days, the airline operator’s shares ascended by 12% to end the week at $5.11.

This was the highest level the Qantas share price has traded at since March.

Why did the Qantas share price soar last week?

Qantas and a number of other travel shares were in demand with investors last week after biotech giant Pfizer released an update on its COVID-19 vaccine trial.

While it is still early days, its trial results appear to demonstrate the initial evidence of its vaccine’s ability to prevent COVID-19 infections.

According to the update, the vaccine candidate was found to be more than 90% effective in preventing COVID-19 in participants with no evidence of prior SARS-CoV-2 infection.

This was better than experts, and even Pfizer, were expecting and has sparked hopes that global travel markets could rebound much quicker than forecast.

This would be great news for Qantas, which has experienced a sharp reduction in demand for flights during the pandemic.

For example, at its recent annual general meeting, CEO Alan Joyce revealed that Group Domestic capacity was below 30% of pre-COVID levels in late October. This compares to its forecast of operating at about 60% of pre-COVID levels by now.

In light of this, despite its rampant cost cutting, this delay resulted in a $100 million negative impact on its earnings for the first quarter of FY 2021. A similar impact is expected in the second quarter as well.

As a result, the sooner a vaccine is available and travel markets return to normal, the sooner Qantas will be profitable again.

Is the Qantas share price in the buy zone?

One broker that still sees a little bit of upside for the Qantas share price is UBS. It recently put a buy rating and $5.25 price target on the company’s shares.

Though, there’s every chance the broker will reassess this price target in the coming weeks as more is known about the Pfizer vaccine. So, stay tuned for that.

More reading

• Virgin shareholders left high and dry
• Vaccine hopes cause ASX 200 to rise on Tuesday
• Why the Sydney Airport (ASX:SYD) share price rocketed 24% higher today
• ASX 200 up 1.6%: COVID-19 vaccine news sends Flight Centre, NAB, & Qantas surging higher
• Qantas (ASX:QAN) to replace airport service desks with kiosks, app

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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Shares in ASX cloud-based communications company, Dubber Corp Ltd (ASX: DUB), have been on an absolute tear recently. In the last two months, the Dubber share price has surged 60% higher to $1.54, following a flurry of business activity and positive results announcements. Overall, the company’s shares have now risen more than 30% this year and are up over 300% since bottoming out at a 52-week low of 38 cents at the height of the coronavirus selloff back in March.

What does Dubber do?

Dubber operates a software-as-a-service (SaaS) business model. It develops cloud-based call recording software that helps companies manage and analyse large volumes of calls as well as meet compliance targets. The software offers advanced search capabilities and allows business users to easily categorise and sort calls. Although particularly useful for call centres, Dubber’s software has a variety of sophisticated applications, and even has the ability to use artificial intelligence (AI) technology to measure customer sentiment.

What’s drving the Dubber share price?

Dubber has been one of several ASX companies, along with Whispir Ltd (ASX: WSP) and Megaport Ltd (ASX: MP1), to have seen their business opportunities actually increase as a result of the COVID-19 pandemic. FY20 saw record growth in customer numbers for Dubber, and annualised recurring revenues jumped by 95% year on year in FY20 to $16.1 million. Dubber’s cloud-based software has helped its clients transition away from traditional communications infrastructure during the move to remote working arrangements.   

The company has been able to leverage this positive performance through a series of capital raisings. It raised $10 million from institutional and sophisticated investors at the onset of the COVID-19 crisis in April. It then raised a further $35 million in October, again from institutional and sophisticated investors.

And just last week, the Dubber share price was on the rise after the company announced its share purchase plan (SPP) offered to retail investors had closed well oversubscribed. The company had intended to raise $6 million through the SPP, but had received applications totalling over $33 million. In the end, the company elected to keep $10 million and refund the remaining applications.

And it has already been putting the cash raised to good use. Back in May, Dubber announced it was acquiring CallN, a call recording company based in Australia. Dubber also hired former chief marketing officer (CMO) and chief operations officer of Xero Limited (ASX: XRO), Andy Lark, as CMO, and conducted a comprehensive rebranding.

Part of this rebranding exercise was to overhaul the company’s strategic priorities. And Dubber has set itself some lofty targets. It would like its call recording software to one day be part of every network and communications solution across the world. Achieving this goal will require significant investment in sales and marketing, as well as in improving its AI technology. Currently, the company has $16 million in cash on hand to help it achieve these outcomes.

Ultimately, only time will tell whether this will be enough cash to sustain Dubber’s growth trajectory. Based on the current Dubber share price, the company has a market capitalisation of just under $370 million.  

More reading

• Why the Dubber Corp (ASX:DUB) share price is surging today
• Why are ASX tech shares all over the place today?
• Why the Dubber (ASX:DUB) share price is soaring 8% today
• Why the Dubber (ASX:DUB) share price rocketed 16% today

Rhys Brock owns shares of Dubber Ltd, MEGAPORT FPO, and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia has recommended MEGAPORT FPO and 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.

The post The Dubber (ASX:DUB) share price is up 60% in two months appeared first on Motley Fool Australia.

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