Author: therawinformant

Village Roadshow Ltd (ASX: VRL) today provided a further update on its proposed acquisition by BGH Capital announced on 7 August, 2020. The news has had a lacklustre effect on the Village share price which, at the time of writing, has edged 0.47% lower to $2.10. This compares to the All Ordinaries Index (ASX: XAO) which has risen 1.1% to 6,127 points.

Takeover agreement

The Village share price is flat today after the company announced that, under the agreement, its shareholders will receive up to $2.45 per share.

The offer will be either a $2.20 (structure A) or $2.10 (structure B) base price plus up to 25 cents per share, should the company be able to meet certain conditions. They include the reopening of theme parks and 75% of its cinema business reopening as well as Queensland border restrictions eased.

The implantation agreement is expected to be finalised on 16 December, 2020.

COVID-19 impact

The entertainment company has been severely hit by COVID-19 lockdown restrictions. Village Roadshow saw its entire cinema exhibition, theme parks and film distribution close, putting the company at a material loss.

As Australia has been improving its management of the outbreak, however, Village Roadshow has been slowly opening its services. Theme parks are open but operating at a reduced capacity, and its film distribution is coming back online.

The cinema business, predominately in Victoria, is focused on the reopening with pricing and tactical initiatives. It could be December however, before any cinemas open to the public in that state.

About the Village share price

The Village  share price has had an eventful year, reaching as high as $4.10 in January from the initial bidding war between BGH Capital and Pacific Equity Partners. The Village share price then fell to a low of 77 cents in March due to COVID-19 wreaking havoc on economic activity around the world. However, the Village share price now appears to be settled around its current levels where it has spent the majority of last four months.

More reading

• Pure Foods (ASX:PFT) share price lifts, bucking the falling market
• Here’s why Soul Patts (ASX:SOL) is the king of ASX dividend shares
• Why the Chalice (ASX:CHN) share price rocketed 28% today
• Why the iCandy (ASX: ICI) share price is on a wild ride
• ASX 200 Weekly Wrap: ASX 200 snaps 4 week losing streak… just

Motley Fool contributor Aaron Teboneras owns shares of Village Roadshow Limited. 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.

The post Village (ASX:VRL) share price edges lower after BGH takeover update appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/32YYJ3W

At lunch on Friday the S&P/ASX 200 Index (ASX: XJO) is on course to end the week on a very positive note. The benchmark index is currently up a sizeable 1.5% to 5,965.5 points.

Here’s what has been happening on the market on Friday:

Bank shares storm higher.

It certainly has been a great day for Commonwealth Bank of Australia (ASX: CBA) and the rest of the big four banks on Friday. All four banks are charging materially higher today and are playing a key role in the ASX 200’s strong gain. The catalyst for this is news that the Federal Government is planning to relax its responsible lending requirements.

Westpac rated as a buy.

The Westpac Banking Corp (ASX: WBC) share price is up over 7% at lunch. This appear to have been driven by the above-mentioned responsible lending news and also a broker note out of Goldman Sachs. Its analysts have retained their buy rating and placed a $19.80 price target on the banking giant’s shares after it announced a settlement with AUSTRAC. It commented: “With this significant overhang for the stock now behind it, at a digestible incremental financial cost, we expect the stock to begin to re-rate (currently trades at a 17% PER discount to peers, versus in line historically), and reiterate our Buy.”

Premier Investments delivers a record profit.

The Premier Investments Limited (ASX: PMV) share price is trading lower today despite announcing a record profit for FY 2020. For the 12 months ended 25 July, the retail conglomerate posted a 2.1% decline in revenue to $1.25 billion and a 29% increase in net profit after tax to $137.75 million. This profit growth was driven largely by high margin online sales. The company declared a full year dividend of 70 cents per share, which was flat year on year. It advised that government subsidies were not required for the payment of its final dividend.

Best and worst ASX 200 shares.

The best performer on the ASX 200 at lunch is the Westpac share price with its 7% gain. This follows the relaxing of responsible lending and the release of a positive broker note out of Goldman Sachs. The worst performer has been the Atlas Arteria Group (ASX: ALX) share price with a 2.5% decline. This is largely due to the toll road operator’s shares trading ex-dividend this morning.

More reading

• Why ASX bank shares are rocketing up Friday
• Why Adbri, Brickworks, Northern Star, & Westpac shares are surging higher today
• Why Atlas Arteria, Cochlear, Telix, & Treasury Wine shares are dropping lower
• Why this fund manager is backing ASX copper shares
• Why the Westpac (ASX:WBC) share price is storming 6% higher

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Premier Investments 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.

The post ASX 200 up 1.5%: Big four banks rocket higher, Premier Investments delivers record profit appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/366pghC

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

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

Electric car manufacturer Tesla Inc (NASDAQ: TSLA) has been growing by leaps and bounds, and with high demand exceeding its production capabilities, the company is at low risk for a slow season. In fact, a recently leaked email from CEO Elon Musk indicates that Tesla is about to beat yet another of its records for vehicles delivered during the quarter.

If that’s so, why aren’t analysts evaluating the company and its stock rejoicing? 

Delivery estimates are high

Tesla’s leaked email indicated that the company could record its highest-ever vehicle deliveries during the third quarter of 2020. The last record was set during the fourth quarter of 2019, with 112,000 vehicles delivered.

Why all this concern about deliveries? As a full-chain manufacturer that has control over its production from beginning to end, Tesla does not record any revenue on its products until the finished vehicle is delivered to its consumer. So the growing number of deliveries not only serves as a barometer for customer demand, but it also means the revenue recorded could potentially lag the company’s investment in parts and factories by a significant amount. 

However, given the wording of Musk’s email, the expected new record seems to refer to a narrow margin over the past record of 112,000, placing the company’s expected number of deliveries between 110,000 and 115,000. The only problem is that a general survey consensus expected 123,000 vehicle deliveries in the third quarter, given the company’s previous forecast of 500,000 deliveries for the entire year. That means Tesla expects to beat its previous record, but that the new record will actually be less than the analyst estimates. 

So what if it’s a miss?

Is it really such a big deal if Tesla comes in below estimates? Indeed, Tesla could be setting a new record despite economic kinks, and that is what investors should really be focusing on. 

Like many other companies during early 2020, Tesla had to close some of its factories as the COVID-19 pandemic has spread across the world. On one point earlier this year production came to a full stop, interrupting the company’s attempts to ramp up capacity and resulting in a year-over-year 5% drop in second-quarter revenue. Musk acknowledged that Tesla still has wrinkles to iron out before it can crank out more product. 

However, the Chinese appetite for Tesla cars increased by 56% during the first six months of 2020 compared to the prior-year period, and this was despite the pandemic-related shutdowns. If the third-quarter vehicle deliveries include US vehicles whose production was delayed during the second quarter, then it seems logical that Tesla, back at full-capacity production by now, should be able to meet or even beat estimates for third-quarter deliveries. 

The fact that the company is surpassing last year’s record quarterly deliveries is astounding in and of itself. But not meeting expectations means that the company is either still dealing with backlogged production or lagging demand in the new Chinese market. Since China’s deliveries are only increasing quarter after quarter, it seems likely that the issue here is too much demand for a still-scaling pipeline. 

Given all that, of course, Tesla is definitely in a better place than would be implied by missing delivery expectations. However, in order to justify its current valuation, Tesla would need to not just meet, but exceed, investors’ expectations, even during this pandemic. This automotive stock may be taking the long road to changing the car industry, but beating its own record in a time of economic downturn is already amazing enough.

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

More reading

• Tesla stock will surge 27% to $500, according to this analyst
• Why this fundie still sees an ASX tech share surge
• How Elon Musk’s Tesla delivered a body blow to these ASX stocks
• Elon Musk’s ‘Battery Day’ could see these ASX mining shares soar, and volatility hits the markets
• Tesla’s ‘Battery Day’ is a dud; stock tumbles

Christine Williams 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 Tesla. 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.

The post Why Tesla’s record vehicle deliveries sound better than analysts might think appeared first on Motley Fool Australia.

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

from Motley Fool Australia https://ift.tt/33YAOB6

Responsible lending rules brought in after the global financial crisis are about to be scrapped.

Federal treasurer Josh Frydenberg will reportedly strip Australian Securities and Investments Commission’s (ASIC) oversight into bank lending, to allow more cash to flow to alleviate the COVID-19 recession.

The effect of Frydenberg’s reforms will be that lenders will no longer be punished if loan applicants mislead them about their circumstances. Banks can take the borrower’s income and expenses information on face value, rather than be nervous about them lying.

Now banks like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking GrpLtd (ASX: ANZ) are ready for the good times to roll again.

All four major have seen their share prices shoot up Friday morning, with Westpac up 6.78%, NAB up 6.22%, ANZ up 5.28% and CBA up 3.57% shortly before 12noon. 

Why responsible lending rules?

The Labor government brought in the responsible lending rules in 2009 as a response to the global financial crisis. The GFC itself was triggered by US subprime loan defaults.

Ever since then there’s been a tug-of-war on the topic between ASIC, the big banks, the Reserve Bank and the finance industry Royal Commission.

ASIC and the Royal Commission argued that lenders must apply the rules as they stand. The banks and the Reserve Bank complained it was too hard to give out credit that would otherwise boost the economy.

Irresponsible lending will send many Australians broke

Consumer groups on Friday roundly panned Frydenberg’s reform plan, arguing Australians could fall into debt traps.

“The problem people are having right now is too much debt and not enough income. The government’s solution is to take on more debt with fewer protections,” said Financial Rights Legal Centre chief Karen Cox, who appeared as the first witness at the Royal Commission. 

“Unsustainable debt hurts real people and is a short-sighted fix for a flailing economy.”

Choice chief executive Alan Kirkland said putting more people in debt has never resolved an economic downturn.

“We got rid of the idea of ‘buyer beware’ in consumer law decades ago. To make it the principle that guides lending in the middle of a recession has disaster written all over it,” he said.

“Products like credit cards are complex. That’s why banks make so much money out of them. Banks are in a much better position to assess a person’s ability to repay, so they need to shoulder some of the responsibility.”

Financial Counselling Australia boss Fiona Guthrie said we had already learnt from the GFC that weaker lending criteria would lead to trouble.

“There is significant profit to be made in pushing borrowers to the edge… Removing responsible lending obligations will free banks up to aggressively push credit onto their customers.”

Banks have not recently indicated any hardship in handing out credit, according to Consumer Action chief Gerard Brody.

“The Commonwealth Bank recently said that the flow of credit is above pre-COVID levels and that lending is growing at a strong pace. And none of the big banks opposed the responsible lending laws at the recent House of Economics committee hearings.”

Cox said it was incredible that the lessons from the Royal Commission have been “so quickly forgotten”.

“Watering down credit protections will leave individuals and families at severe risk of being pushed into credit arrangements that will hurt in the long term.”

More reading

• ASX 200 up 1.5%: Big four banks rocket higher, Premier Investments delivers record profit
• Why Adbri, Brickworks, Northern Star, & Westpac shares are surging higher today
• Why the Westpac (ASX:WBC) share price is storming 6% higher
• 5 things to watch on the ASX 200 on Friday
• Westpac (ASX:WBC) share price hits 4-month low. Is it time to buy the ASX bank?

Motley Fool contributor Tony Yoo 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.

The post Why ASX bank shares are rocketing up Friday appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3j31eHY

The S&P/ASX 200 Index (ASX: XJO) is storming higher on Friday thanks to strong gains in the banking sector. At the time of writing, the benchmark index is up 1.6% to 5,969.9 points.

Four shares that have climbed more than most today are listed below. Here’s why they are surging higher:

The Adbri Ltd (ASX: ABC) share price has risen 5% to $2.85. Investors have been buying the building materials company’s shares on Friday after the government announced plans to relax its responsible lending rules. This has sparked hopes that it could boost the housing market and ultimately lead to increasing demand for Adbri’s products. This would be a big lift for its struggling Australian business.

The Brickworks Limited (ASX: BKW) share price is up almost 3% to $19.20. This appears to have been driven by a positive broker note. This morning analysts at Morgans upgraded the company’s shares to an add rating with an improved price target of $19.98. It was pleased with Brickworks’ better than expected FY 2020 result and notes that management’s outlook was cautiously optimistic.

The Northern Star Resources Ltd (ASX: NST) share price has climbed 2.5% to $13.51. Investors have been buying Northern Star and other gold mining shares today after the spot gold price rebounded from its two-month low overnight. This has led to the S&P/ASX All Ordinaries Gold index rising by a solid 2% at the time of writing.

The Westpac Banking Corp (ASX: WBC) share price has jumped almost 7% to $17.49. This follows the aforementioned news that the government intends to relax responsible lending rules. These changes should be a boost to the bank’s lending in the near term. In addition, this morning analysts at Goldman Sachs put a buy rating and $19.80 price target on its shares. They believe Westpac’s shares could re-rate higher now its AUSTRAC issue has been settled.

More reading

• Why the Westpac (ASX:WBC) share price is storming 6% higher
• Is the Soul Patts (ASX:SOL) share price a buy?
• 5 things to watch on the ASX 200 on Friday
• ASX 200 falls 0.8%, Afterpay (ASX:APT) share price drops 6%
• Westpac (ASX:WBC) share price hits 4-month low. Is it time to buy the ASX bank?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Brickworks. 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 Why Adbri, Brickworks, Northern Star, & Westpac shares are surging higher today appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2RXXxrm

In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to finish the week on a very positive note. The benchmark index is currently up a sizeable 1.6% to 5,971.5 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

The Atlas Arteria Group (ASX: ALX) share price is down almost 3% to $6.11. This morning the toll road operator’s shares traded ex-dividend for its 11 cents per share interim dividend. In addition to this, rising coronavirus cases in Europe appear to be weighing on its shares. Atlas Arteria has a collection of toll roads in France which could experience subdued traffic volumes in the near term if Europe goes back into lockdown.

The Cochlear Limited (ASX: COH) share price is down almost 1% to $200.65. Earlier this week UBS reaffirmed its sell rating and $175.00 price target on this hearing solutions company’s shares. Its analysts believe that the market is expecting too much from Cochlear in respect to sales growth in the coming years.

The Telix Pharmaceuticals Ltd (ASX: TLX) share price has fallen 1.5% to $1.75. This decline appears to be down to profit taking after some strong gains in recent months by the biopharmaceutical company’s shares. For example, prior to today, Telix’s shares were up a massive 115% over the last six months.

The Treasury Wine Estates Ltd (ASX: TWE) share price has dropped almost 1% to $9.00. Investors have been selling the wine company’s shares despite it being subject to a positive broker note out of Credit Suisse yesterday. The broker has upgraded Treasury Wine’s shares to an outperform rating with a $12.30 price target. This price target implies potential upside of almost 37% for its shares over the next 12 months. Clearly some investors aren’t as bullish on its prospects.

More reading

• The Aussie dollar at a critical juncture and could turn fortunes for these ASX stocks
• Top brokers name 3 ASX shares to sell today
• Why Iron Road, Nuchev, Telix, & Treasury Wine shares are pushing higher today
• Telix (ASX:TLX) share price charges higher on FDA update
• Forget BrainChip (ASX:BRN) and buy and hold these outstanding ASX shares

James Mickleboro owns shares of TELIXPHARM DEF SET. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia has recommended Cochlear 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 Why Atlas Arteria, Cochlear, Telix, & Treasury Wine shares are dropping lower appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/368Mt2O

The best placed ASX copper shares are enjoying some healthy share price gains as the price of copper trades at levels not seen in more than 2 years.

At the current price of US$6725.50 per tonne, copper has gained 37% since its 20 March lows.

You’ll find copper used extensively in construction areas such as plumbing and roofing, as the metal is highly resistant to corrosion. As nations move to revive their economies after the coronavirus slowdowns, that should help drive continued strong demand.

But copper’s main appeal is its superior electrical conductivity. Its widely used in buildings’ wiring, but also faces a likely surge in demand as electric vehicle (EV) production begins to take off.

John Forwood is the portfolio manager at the Lowell Resources Fund and he has a keen eye on the burgeoning EV market. But rather than guess at which battery technology – and hence which metals – will win the technology race, he’s focusing on copper. As noted by Australian Financial Review, Forwood says:

The way we really like to play the electrification theme – all the charging stations, the cars themselves – require a lot more copper. So that’s probably the safest bet. Rather than trying to pick battery chemistry – is it going to be cobalt, is it going to be titanium, is it going to be tin or zinc or whatever. Every month, there’s a new battery chemistry that gets touted.

If the demand for copper continues to outpace new supply, it should bring more good news to OZ Minerals Limited (ASX: OZL) shareholders.

What does Oz Minerals do?

Based in South Australia, OZ Minerals is a mining company primarily focused on copper. It owns and operates the high-quality Prominent Hill copper-gold mine and the Carrapateena advanced exploration copper-gold project. Both sites are located in South Australia.

OZ Minerals also has extensive operations in Brazil and an exploration project in Sweden.

How has the OZ Minerals share price been performing?

Oz Minerals’ share price is down 8% from 3 September, when shares were trading at 5-year highs.

As you’d expect, the company’s share price fell hard alongside the copper price in the first months of the global pandemic, dropping 45% from 20 January through 23 March. Since that low, the share price is up 131%, putting it up 31% so far in 2020.

By comparison the S&P/ASX 200 Index (ASX: XJO) is down 12% year-to-date.

The Oz Minerals share price is unlikely to leap another 131% any time soon. But with copper inventories running low and demand likely to remain strong, this is one share you might want to add to your portfolio.

More reading

• The Aussie dollar at a critical juncture and could turn fortunes for these ASX stocks
• 2 ultra-cheap ASX ETFs any investor can add to a share portfolio
• 2 must buy ASX 200 shares to snap up right now
• Is the Transurban (ASX:TCL) share price a secret cash cow?
• Why the Telstra (ASX:TLS) share price could be under pressure in 2021

Motley Fool contributor Bernd Struben 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.

The post Why this fund manager is backing ASX copper shares appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3mKiCDT

It certainly has been a difficult month for the Zip Co Ltd (ASX: Z1P) share price.

Since this time last month, the buy now pay later provider’s shares have crashed a disappointing 38% lower.

This makes it the worst performer on the S&P/ASX 200 Index (ASX: XJO) over the period ahead of IOOF Holdings Limited (ASX: IFL) and Nearmap Ltd (ASX: NEA).

Why is the Zip share price down 38% in a month?

There have been a couple of catalysts for the underperformance of the Zip share price this month.

The first has been a major tech selloff on Wall Street’s Nasdaq index, which has weighed heavily on the local tech sector.

In addition to this, news that payments giant PayPal intends to launch its own buy now pay later offering in the United States in the final quarter of 2020 has weighed heavily on its shares.

While Zip’s US-based QuadPay business has a large and growing customer base in the country, it has nowhere near the same traction as market leaders Afterpay Ltd (ASX: APT) and Klarna.

Therefore, there are fears that smaller players such as QuadPay and Sezzle Inc (ASX: SZL) could get drowned out by the arrival of this behemoth in the market. Especially given how PayPal already has such a vast footprint in the lucrative market.

Is the Zip sell off a buying opportunity?

While the arrival of PayPal in the market is definitely a blow, it is worth remembering that the US market is estimated to be worth $5 trillion a year.

This means there’s plenty of room for multiple players to operate successful and profitable businesses in this market.

In light of this, I think a long term and patient investment in Zip’s shares could generate strong returns for investors over the 2020s.

Though, given the risks involved, it may be best to restrict the investment to just a small part of a balanced portfolio.

More reading

• ASX 200 down 1.2%: Westpac hit with $1.3bn penalty, Brickworks disappoints, tech shares lower
• Where next for the Zip (ASX:Z1P) share price?
• BrainChip (ASX:BRN) and Afterpay (ASX:APT) were among the most traded shares on the ASX last week
• New $280 million ASX tech share listing Wednesday
• What you need to know about Tyro’s share price roller coaster 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 Nearmap Ltd. and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Nearmap Ltd. and Sezzle 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.

The post The Zip (ASX:Z1P) share price is down 38% in a month: Is this a buying opportunity? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/308aHX7

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

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

Online payments giant PayPal (NASDAQ: PYPL) is seeing a surge in new accounts and engagement amid the COVID-19 pandemic, and it’s doing everything it can to capitalise on the moment. During its second-quarter earnings call in late July, PayPal CFO John Rainey shared plans to invest an additional $300 million in new products and improvements in the second half of the year.

And the pace of product rollouts has been torrid. CEO Dan Schulman says he expects the number of product releases in the second half of 2020 to equal the number of new products released in the previous six years of his tenure at PayPal. Here’s what the company’s been up to and what it means for investors.

Accelerating the product pipeline

At the start of the year, Schulman talked about the need for PayPal to increase its presence in stores in order to achieve his aspiration of reaching 1 billion users transacting through PayPal nearly every day. The impact of COVID-19 has accelerated that product pipeline.

The company rolled out QR codes in the PayPal app and cash-transfer app Venmo last quarter. It’s since partnered with CVS Health to integrate the QR codes into their POS systems, and it’s looking for additional partners.

Schulman views QR codes as the fastest way for PayPal to expand its in-store presence. He also sees an opportunity to grow in-store payments with debit and credit cards. The company is releasing a Venmo credit card later this year. It expanded its partnership with Mastercard to bring the PayPal Business debit card to more countries earlier this month.

Lastly, PayPal also wants to use contactless payments technology to facilitate payments. It already has long-standing deals in place with dozens of global payment card companies to use their tokenization technology. The challenge it faces is overcoming the restrictions on access to phone hardware, which is particularly cumbersome on Apple devices.

PayPal isn’t neglecting online payments, either. It launched an installment payment program last month called Pay in 4, which allows merchants to receive funds on a purchase upfront while consumers pay for the purchase in installments. The product moves the company’s brand further up the sales funnel from the checkout page to the product page, where consumers can see the option to pay over time.

PayPal is also working on several other online payment services, including more ways for consumers to use PayPal online at more merchants, the ability to pay in different ways (e.g., credit card rewards, digital currency), and deeper integration with Honey, its web browser extension that automatically searches out deals on products and services being searched by the user.

Relying on the network and ecosystem

Most of PayPal’s new products aren’t actually monetized directly. Pay in 4, for example, doesn’t cost merchants anything and consumers aren’t paying interest, either. That’s a unique proposition that few other companies can offer. That’s because PayPal sees increased engagement from users that use Pay in 4 or in-store payment options across its other products, which offsets the costs of those new offerings.

It’s this network effect that’s enabling rapid development and experimentation with new products and gives PayPal an advantage in pricing. It’s the same strategy fellow fintech leader Square (NYSE: SQ) has been following for several years. But Square is only planning to release one or two major new products on its consumer side per year. PayPal just released or expanded three products in the last month: Pay in 4, the business debit card, and Instant Transfer.

PayPal’s faster product release schedule is supported by its larger network. It had 346 million active accounts between PayPal merchants and consumers, Venmo, and Honey as of the end of the second quarter. That’s far more than Square’s 30 million Cash App users and an undisclosed number of Square merchants.

In turn, PayPal’s producing tons of free cash flow – $2.2 billion in the second quarter alone. By comparison, Square’s free cash flow was sitting around $500 million on a trailing-12-month basis before the impact of COVID-19. As such, PayPal has a lot of room to experiment with new products.

An additional $300 million in incremental product investment will still allow PayPal to grow free cash flow and expand its operating margin, while also taking advantage of one of the biggest periods of opportunity in the company’s history.

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

More reading

• Share price opportunities to buy this week
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
• Why the Zip share price is plummeting 15% today
• PayPal scares investors in BNPL shares, time to sell?
• Afterpay and Zip shares sink lower after PayPal announces Pay in 4 BNPL product

Adam Levy owns shares of Apple and Mastercard. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple, Mastercard, PayPal Holdings, and Square. The Motley Fool recommends CVS Health and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia has recommended Apple, Mastercard, and PayPal Holdings. 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 PayPal’s doubling down on new products appeared first on Motley Fool Australia.

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

from Motley Fool Australia https://ift.tt/3j2ASGi

The Westpac Banking Corp (ASX: WBC) share price is pushing notably higher on Friday.

At the time of writing the banking giant’s shares are up a sizeable 6% to $17.38.

Why is the Westpac share price storming higher?

Today’s gain appears to be news of favourable changes to responsible lending laws and a positive broker note out of Goldman Sachs.

In respect to the latter, this morning the leading broker reiterated its buy rating and trimmed its price target ever so slightly to $19.80.

This price target implies potential upside of 14% over the next 12 months excluding dividends. Including dividends this potential return increases to approximately 20%.

Why is Goldman Sachs bullish on Westpac?

The broker notes that Westpac has reached an agreement with AUSTRAC to settle the civil proceedings commenced in November last year in relation to its contraventions of the Anti-Money Laundering and Counter-Terrorism and Financing Act.

Westpac has agreed to pay a civil penalty of $1.3 billion, the largest in Australian corporate history.

While this penalty is larger than it originally expected ($900 million) and is likely to have a big impact on its earnings in FY 2020, the broker believes the lifting of this dark cloud could be a big positive for the company’s shares.

It commented: “With this significant overhang for the stock now behind it, at a digestible incremental financial cost, we expect the stock to begin to re-rate (currently trades at a 17% PER discount to peers, versus in line historically), and reiterate our Buy.”

Foolish Takeaway.

I think Goldman Sachs is spot on with its assessment and would suggest investors consider buying Westpac’s shares before they begin to re-rate.

Especially if you’re on the lookout for a source of income in this low interest rate environment.

Based on its last close price, Goldman Sachs estimates that Westpac’s shares offer investors a fully franked 6.5% FY 2021 dividend yield and an 8.2% FY 2022 dividend yield.

More reading

• 5 things to watch on the ASX 200 on Friday
• Westpac (ASX:WBC) share price hits 4-month low. Is it time to buy the ASX bank?
• ASX 200 down 1.2%: Westpac hit with $1.3bn penalty, Brickworks disappoints, tech shares lower
• Why Afterpay, Evolution, Westpac, & Whitehaven shares are sinking lower today
• Westpac (ASX:WBC) share price on watch after settling AUSTRAC case for $1.3 billion

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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.

The post Why the Westpac (ASX:WBC) share price is storming 6% higher appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/304evbO