Category: Stock Market

The Life360 Inc (ASX: 360) share price is having a stunning start to the week.

In morning trade, the location technology company’s shares are up a massive 22% to a record high of $14.84

This latest gain means that its shares are now up 96% since the start of the year.

To put this into context, a $20,000 investment at the end of last year would now be worth over $39,000.

Why is the Life360 share price rocketing today?

Investors have been scrambling to buy the company’s shares this morning following the release of a market update.

According to the release, Life360 has started FY 2024 in a very positive fashion and revealed strong operating metrics today.

The company’s global Monthly Active Users (MAU) were 66.4 million at the end of the first quarter. This is an increase of 4.9 million since the end of the fourth quarter, which represents a record for a first quarter. It is also more than double the net additions of 2.2 million the company recorded in the prior corresponding period.

That isn’t the only record that has been broken, which explains why investors are getting very excited today.

The company also revealed that it achieved record first quarter net additions to global paying circles of approximately 96,000 during the quarter. This was split approximately 65%/35% between its U.S. and International operations.

In the prior corresponding period, Life360 added 73,000 net additions to its global paying circles.

These metrics are materially ahead of what the market was expecting from the company during the first quarter. This goes some way to explaining the impressive performance by the Life360 share price on Monday.

One thing that wasn’t available with today’s release is the company’s revenue and earnings for the three months. As a result, management warned that it “cannot yet determine whether these quarterly operating metrics will have a material positive impact on revenue, net income (loss) or any other financial results for CY24 Q1.”

But investors won’t have to wait too long to find out. Life360 advised that it expects to release its first quarter results next month on 10 May 2024.

US listing

In other news, Life360 has revealed plans for a potential listing in the United States. This follows a proposal to amend its Certificate of Incorporation to bring the company in line with typical U.S. corporate practices.

In respect to the potential dual listing, the company said:

While there are many factors that would impact the Company’s decision to pursue a U.S. IPO, including U.S. market conditions, the Board believes that the resolutions included in the preliminary proxy statement provide flexibility to pursue a dual listing should the Company determine that conditions are favourable.

The post Why is the Life360 share price rocketing 22% to a record high? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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BHP Group Ltd (ASX: BHP) shares have had a mixed start to the year.

Since the launch of 2024, the BHP share price has plunged by 12%, as we can see in the chart below. But, it has lifted almost 6% from the 13 March 2024 low.

We can’t predict precisely what company share prices will do, particularly in the short term. So, let’s look at some of the positives and negatives that may influence the performance of this iron ore mining giant.

Challenges impacting BHP shares

According to Trading Economics, the iron ore price recently fell to a 10-month low of US$102 per tonne because “muted demand in China was magnified by ample supply”.

Why does that matter? Iron made up 62% of BHP’s FY24 first-half earnings before interest and tax (EBIT). Any weakness in the iron ore price can hurt upcoming profitability.

Trading Economics says demand concerns about the Chinese construction sector, stemming from the prolonged debt crisis for major developers, may have “long-lasting effects on commodity bidding”.

Here’s what it had to say:

A slow start to Chinese construction activity drove steel blast furnaces and smelters to pare input buying of iron ore, with new data showing that pig iron ore output in the country dropped by nearly 7% so far this year.

This was magnified by a fresh surge in iron ore exports out of Australia, supporting the view that a batch of mine maintenance programs have reached their conclusion following the end of the first quarter. Consequently, ore inventories at major Chinese warehouses soared to a one-year high of 130 million tonnes.

Meanwhile, the broker UBS has forecast that BHP’s profit could decline over the long term compared to the net earnings of US$12.9 billion in FY23. In FY26, net profit is forecast to drop to US$12 billion, decline again to US$10.4 billion in FY27, and drop to US$9.7 billion in FY28.

Profit has a very important influence on the BHP share price – the more profit the ASX mining share makes, the higher the valuation can be. But, the opposite can be true when profit is falling.

BHP also continues to face the fallout of the Samarco disaster in Brazil, with a recently updated provision of US$3.2 billion after tax, which UBS described as the current “best estimate” of settlement costs with public authorities.

And some positives

Forecasts are just educated guesses – analysts can be wrong. Experts have been forecasting the demise of the iron ore price for a number of years. It’s possible that the iron ore price could surprise again, if Chinese demand picks up.

Interestingly, according to UBS, BHP’s profit is actually expected to increase in FY24 to US$13.5 billion, which would put the forward price/earnings (P/E) ratio at around 11.

The relatively low earnings multiple means the company can have a fairly appealing dividend yield. UBS suggests the BHP FY24 annual dividend could be US$1.47 per share, which would equate to a grossed-up dividend yield of 7.2%.

Another positive to keep in mind is that the ASX mining share is growing its exposure to ‘green’ commodities, which could see stronger demand as the world works on decarbonisation. Copper is important for electrification, and potash is a greener form of fertiliser.

Foolish takeaway

At the moment, I’d say it’s finely balanced between the positives and negatives – the share price of the ASX mining stock has fallen, but only back to where it was six months ago.

If I were looking to buy BHP shares to beat the market, I’d wait for a weaker iron ore price, which could send the BHP share price to US$40 or below. Until then, I’d look at other ASX dividend shares that could pay bigger yields or deliver more growth.

The post The pros and cons of buying BHP shares right now appeared first on The Motley Fool Australia.

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More reading

• Top brokers name 3 ASX shares to buy next week
• Own ASX 200 mining shares? Here’s the 5-year forecast for commodity prices
• 5 things to watch on the ASX 200 on Friday
• How this unexpected development in China could boost ASX 200 mining stocks
• Top brokers name 3 ASX shares to buy today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you have room in your portfolio for some ASX 200 growth shares, then it could be worth checking out the four listed below.

That’s because they have all recently been named as buys and tipped to rise meaningfully from current levels.

Here’s what you need to know about these top growth shares:

Flight Centre Travel Group Ltd (ASX: FLT)

The first ASX 200 growth share that could be a buy right now is travel agent giant Flight Centre.

The team at Morgans is positive on the company, highlighting that the “benefits of FLT’s transformed business model” mean that it is “well placed over coming years.”

Morgans currently has an add rating and $26.00 price target on its shares. This implies potential upside of 21% for investors.

IDP Education Ltd (ASX: IEL)

This language testing and student placement company could be another ASX 200 growth share to buy this month according to Goldman Sachs.

It believes the company is well-placed for long-term growth thanks to structural tailwinds and its dominant market position. The broker highlights its “structural growth in multi-destination placements” and its “reinvestment in digital capabilities to increase competitive moat and generate new earnings streams.”

The broker has a buy rating and $26.60 price target on IDP Education’s shares. This suggests that over 50% upside is possible from current levels.

Lovisa Holdings Ltd (ASX: LOV)

Morgans is also fan of Lovisa and sees it as an ASX 200 growth share to buy this month.

The broker believes the rapidly growing fashion jewellery retailer is well-positioned to continue its strong form thanks to its large global expansion opportunity. It also notes that its plan to “enter mainland China in FY24, [is] paving the way for significant longer-term growth.”

The broker currently has an add rating and $35.00 price target on its shares. This implies potential upside of 12% for investors.

Megaport Ltd (ASX: MP1)

Another ASX 200 growth share to look at is Megaport. It is a leading global provider of elastic interconnection services.

It has been growing at a rapid rate in recent years thanks to the cloud computing boom. Macquarie appears to believe this strong form can continue thanks to strong near-term operating leverage and the growth of its Megaport Cloud Router (MCR) and Megaport Virtual Edge (MVE) products.

The broker recently retained its outperform rating on Megaport’s shares with an improved price target of $18.00. This suggests upside potential of 32% for investors.

The post These top ASX 200 growth shares can rise 10% to 50% appeared first on The Motley Fool Australia.

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More reading

• These are the 10 most shorted ASX shares
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• Is Lovisa stock a good ASX investment in April?
• 3 beaten down ASX growth shares that could be dirt cheap
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has positions in Lovisa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group, Idp Education, Lovisa, Macquarie Group, and Megaport. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Flight Centre Travel Group, Idp Education, Lovisa, and Megaport. 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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Ideally, there are some ASX shares in my portfolio that I’d want to own for the rest of my life.

Owning good stocks for the ultra-long term can be really good for growing wealth because we can benefit from compounding and reducing the capital gains tax. If I never sell, then I’ll never activate any capital gains tax events.

Of course, I wouldn’t want to hold a stock for decades if it’s a mediocre business. The two ASX shares below are ones I’ve already held for several years. I think they’re quality, and I plan to hold them for a long time to come.

Rural Funds Group (ASX: RFF)

Rural Funds is a real estate investment trust (REIT) that owns farmland in different states and climactic conditions across Australia, offering good diversification.

Farmland has been a useful asset for a very long time, and I think it will continue to be important for the rest of my life. Rural Funds is invested in several different farming sectors, including cattle, almonds, macadamias, cropping, and vineyards.

I don’t know what’s going to happen with interest rates over the long term, but I think the current valuation (more than) takes into account the headwinds of the higher RBA cash rate. Rural Funds said it had an underlying net asset value (NAV) of $3.07 in December 2023.

Rural Funds is benefiting from steady rental increases, with some contracts having fixed annual increases and others being linked to CPI inflation, plus market reviews.

The ASX share aims to grow its distribution by 4% per annum, though it has maintained in the last couple of years at 11.73 cents per unit. It’s currently paying a distribution yield of 5.7%.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts is an investment house that has been a listed business since 1903 – and it has paid a dividend every year since then.

The business has sizeable investments in many other ASX shares, including Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), TPG Telecom Ltd (ASX: TPG), Tuas Ltd (ASX: TUA), BHP Group Ltd (ASX: BHP), Macquarie Group Ltd (ASX: MQG), CSL Ltd (ASX: CSL), Goodman Group (ASX: GMG) and Wesfarmers Ltd (ASX: WES).

It also has quite a few private businesses, including agriculture, water rights, swimming schools, Ampcontrol (electrical parts), and Ironbark (financial services). And it invests in credit and property.

I like the diversification that Soul Patts’ portfolio offers. But, most importantly, in my mind, the company has the flexibility and investment mandate to search for future opportunities across industries and asset classes. This ability can help the business future-proof its portfolio and help ensure that it’s still around for the decades ahead.

Soul Patts has built its portfolio to focus on typically defensive assets that can pay useful cash flow and help the company fund dividends to shareholders. The business has grown its dividend every year since 2000, which is a great record. It currently has a grossed-up dividend yield of 3.8%.

The post 2 ASX shares I plan to hold til I’m 100 appeared first on The Motley Fool Australia.

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More reading

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Motley Fool contributor Tristan Harrison has positions in Brickworks, Rural Funds Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, CSL, Goodman Group, Macquarie Group, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Brickworks, Macquarie Group, Rural Funds Group, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has recommended CSL and Goodman Group. 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 Vanguard Australian Shares Index ETF (ASX: VAS) is the most popular exchange-traded fund (ETF) on the ASX. At the end of February 2024, it was $14.7 billion in size.

The VAS ETF tracks the returns of the S&P/ASX 300 Index (ASX: XKO), which comprises 300 of the biggest ASX shares by market capitalisation.

Being popular doesn’t necessarily mean it’s the best investment, so I’m going to look at four key areas that could influence whether the VAS ETF is effective to own.

Fees

One of the best reasons to own almost any Vanguard ETF is that the fund manager offers its ETFs as cheaply as possible through low management fees. Lower fees mean more of the fund value stays in the hands of investors rather than lining the pockets of a fund manager.

The VAS ETF has an annual management fee of 0.07%, making it one of the cheapest ways to invest in ASX shares through a diversified portfolio.

On this measure, it gets a tick from me.

Dividend yield

Many ASX blue-chip shares have relatively high dividend yields thanks to the combination of a fairly high dividend payout ratio and trading at a relatively low earnings multiple. In other words, they pay out a lot of profit as a dividend and have a low price/earnings (P/E) ratio.

According to Vanguard, the VAS ETF has a dividend yield of 3.9%. Franking credits boost the cash yield.

For investors wanting passive income, I think the Vanguard Australian Shares Index ETF is a decent option for dividend yield.

Diversification

The VAS ETF invests in 300 different businesses, which is a lot of diversification in a single investment. It can lower the risk compared to owning just one company, whether it’s Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Woolworths Group Ltd (ASX: WOW) or Telstra Group Ltd (ASX: TLS).

However, when we look at the sector allocation, the VAS ETF gives two industries more than 50% weighting, so I wouldn’t say it’s as diversified as it could be. At the end of February 2024, ASX financial shares had a weighting of 29.7%, while mining shares had a weighting of 22.4%. The big businesses in these sectors make up most of the allocations to those two sectors.

It’s a positive for investors who want a large weighting in these sectors. However, some people may want a bigger allocation to sectors with more growth potential, such as technology or ASX retail shares. So, I’d give the VAS ETF half a tick for diversification.

Returns

The Vanguard Australian Shares Index ETF’s return is simply the combined return of all of the different businesses it holds in its portfolio.

Since its inception in May 2009, the ETF has returned an average of 9.05% per annum. Of that return, 4.58% per annum was in the form of distributions, while 4.47% per annum was capital growth.

Those returns aren’t terrible at all, but there are other ETFs that have performed better over the long term.

Foolish takeaway

I think VAS ETF is an effective way to get cheap exposure to ASX blue-chip shares.

However, from my perspective, it doesn’t have as many capital growth prospects as some other globally-focused ETFs. So, I’d want to balance the Vanguard Australian Shares Index ETF with other options like Vanguard MSCI Index International Shares ETF (ASX: VGS).

The post Is the Vanguard Australian Shares Index ETF (VAS) a good long-term investment? appeared first on The Motley Fool Australia.

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More reading

• Is the Vanguard Australian Shares ETF (VAS) just a big ASX bet on banks and miners?
• How is the Vanguard Australian Shares ETF (VAS) falling almost 1% today?
• 3 excellent ASX ETFs for smart investors in April
• Want the latest dividend from the Vanguard Australia Shares ETF (VAS)? Here’s what you have to do
• How much would I need invested in the Vanguard Australian Shares ETF (VAS) for a comfortable retirement?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Vanguard Msci Index International Shares ETF. 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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Owning ASX dividend stocks can be a very rewarding experience. Large dividend yields with possible capital growth — what’s not to like?

However, not all high dividend yields last forever. Sometimes, a large payout in one year may be much smaller in the subsequent year. For example, BHP Group Ltd (ASX: BHP) recently cut its interim dividend by 20% to US 72 cents per share. The broker UBS thinks the dividend will decline in size in FY26, FY27, and FY28.

I’m going to talk about two ASX dividend stocks where the long-term profit growth looks promising, and the current dividend yields are large.

Shaver Shop Group Ltd (ASX: SSG)

This ASX retail share is a specialty retailer of male and female grooming products. It wants to be the market leader in everything related to hair removal in Australia.

It aims to sell a wide range of quality prices at competitive prices, with “excellent staff product knowledge”. The company says it’s able to negotiate exclusive products with suppliers.

Shaver Shop is looking to diversify its earnings by selling products in oral care, hair care, massage, air treatment, and beauty categories. It can grow its earnings by opening more stores, increasing its online sales, offering more products, and benefiting from Australia’s population growth.

Shaver Shop has grown its dividend each year since 2017, when it started making payments to shareholders. The last two dividend payments from the ASX dividend stock equate to a grossed-up dividend yield of 12.7%.

Metcash Ltd (ASX: MTS)

Metcash supplies many independent businesses in Australia, including IGA, Foodland, Cellarbrations, The Bottle-O, IGA Liquor, Porters Liquor, Camel, Big Bargain Bottleshop, and Duncans. It also supports bars, pubs, restaurants, and hotels.

The ASX dividend stock also has a hardware division that owns a number of brands, including Mitre 10, Home Timber & Hardware and Total Tools. It supports small operators under the brands Thrifty-Link Hardware and True Value Hardware.

Metcash also recently announced it’s buying Bianco Construction Supplies, Alpine Truss and Superior Food. Each of these businesses add diversification to Metcash’s earnings and open up another growth avenue.

It can grow profit through opening more stores, increasing online sales, and the overall growth of Australia’s population. There could also be a rebound in hardware demand once interest rates start to reduce.

Metcash has committed to a dividend payout ratio of 70% of underlying net profit after tax (NPAT), which is a healthy payment. It’s enough for a good dividend yield, but the ASX dividend stock also keeps a useful amount within the business for re-investment.

According to Commsec, the company is estimated to pay an annual dividend per share of 20 cents per share in FY24, which would be a grossed-up dividend yield of 7.3%.

The post 2 ASX dividend stocks with yields over 7% to buy today appeared first on The Motley Fool Australia.

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More reading

• Top ASX dividend shares to buy in April 2024
• Should ASX investors buy Metcash stock for its 5.7% dividend?
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• 2 ASX dividend shares that could pay huge yields in 2026
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Motley Fool contributor Tristan Harrison has positions in Metcash. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Metcash and Shaver Shop Group. 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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At the start of each week, I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Pilbara Minerals Ltd (ASX: PLS) continues to be the most shorted ASX shares with short interest of 20.6%, which is up slightly week on week. Short sellers don’t appear to believe that lithium prices will rebound any time soon.
• IDP Education Ltd (ASX: IEL) has 14.1% of its shares held short, which is up week on week yet again. Short sellers seem to believe that regulatory changes to student visas will weigh heavily on this language testing and student placement company’s performance.
• Syrah Resources Ltd (ASX: SYR) has short interest of 13.7%, which is up week on week. Weak graphite prices have been weighing heavily on Syrah’s performance.
• Liontown Resources Ltd (ASX: LTR) has seen its short interest remain flat at 10.1%. Short sellers continue to target this lithium developer despite it recently announcing debt funding for the Kathleen Valley Lithium Project.
• Flight Centre Travel Group Ltd (ASX: FLT) has seen its short interest rise to 9.9%. Short sellers seem to believe that Flight Centre will fall short of expectations in FY 2024 and FY 2025.
• Core Lithium Ltd (ASX: CXO) has short interest of 8.5%, which is up week on week. Short sellers continue to target this lithium miner’s shares despite them crashing 82% over the last 12 months.
• Genesis Minerals Ltd (ASX: GMD) has seen its short interest ease again to 7.7%. Unfortunately for short sellers, this gold miner’s shares are up over 50% since this time last year thanks to a soaring gold price.
• Weebit Nano Ltd (ASX: WBT) has returned to the top ten with 7.2% of its shares held short. This is likely to be due to valuation concerns and the semiconductor company’s abject revenue generation.
• Sayona Mining Ltd (ASX: SYA) has short interest of 7.2%, which is down sharply week on week. This lithium miner’s shares are down 80% over the last 12 months. Short sellers don’t appear to believe the declines are over.
• Australian Clinical Labs Ltd (ASX: ACL) has short interest of 7.1%, which is down week on week again. This pathology company has been struggling due to tough trading conditions.

The post These are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

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More reading

• 3 beaten down ASX growth shares that could be dirt cheap
• When will Pilbara Minerals resume paying dividends?
• Why is this tiny ASX gold share soaring 10% on Friday?
• Own ASX 200 mining shares? Here’s the 5-year forecast for commodity prices
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Idp Education. The Motley Fool Australia has recommended Flight Centre Travel Group and Idp Education. 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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ASX shares that pay dividends can be a wonderful source of passive income — which might be exactly what retirees, in particular, are looking for.

The Australian Securities Exchange (ASX) includes many of the country’s leading businesses, such as Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and Telstra Group Ltd (ASX: TLS).

However, the biggest ASX blue-chip shares aren’t necessarily the most resilient or the best dividend-paying options. If I were a retiree, I’d want to have the following two stocks in my income-focused portfolio.

Medibank Private Ltd (ASX: MPL)

Medibank is the leading private health insurer in Australia with two main brands – Medibank and ahm.

People tend to value their health highly, so I’d guess that many would continue paying for private health insurance even during an economic downturn.

One of the growth drivers of the business is the ageing population in Australia, which may mean more people sign up to have private health insurance for any operations or specialised care they may need. Indeed, Australia’s overall population is rapidly increasing too, which is helping grow the number of potential policyholders.

Medibank’s FY24 first-half result demonstrated its steady growth — group revenue from external customers grew by 3.3% to $4 billion, with group operating profit growing by 4.2% to $319.4 million.

The ASX share had a generous dividend payout ratio of 75.5% in HY24, enabling it to pay a dividend per share of 7.2 cents (a 14.3% year-over-year rise).

According to Commsec, the business could pay a grossed-up dividend yield of 6.2% in FY24.

Centuria Industrial REIT (ASX: CIP)

This business is the largest pure-play industrial real estate investment trust (REIT) in Australia.

It benefits from strong tenant demand that is skewed to urban markets as industrial users prioritise proximity to a large population. There is limited new supply within these markets – the REIT’s manager Jesse Curtis recently said:

…rental growth is expected to be prolonged providing the opportunity for continued positive rental reversion. Additionally, CIP’s embedded development pipeline provides the optionality to unlock further value to take advantage of the mismatch between supply and demand and deliver value to unitholders.

The ASX share is seeing enormous rental growth – in the FY24 first-half result it reported positive re-leasing spreads of 51%. That means that new rental contracts are showing a 51% increase compared to the old rental rate those buildings were on.

The business expects to pay a distribution of 16 cents per unit in FY24, which is a forward distribution yield of 4.6%. I think it can provide stable and resilient rental profits for retirees.

The post If I were a retiree, I’d buy these ASX shares this week appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. 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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Life360 Inc (ASX: 360) shares certainly have been on fire this year.

Despite recent weakness in the tech sector, the ASX 200 tech stock is up over 60% year to date.

But if you thought you were too late to the party, think again.

Goldman Sachs has been looking at the location technology company and still sees major upside ahead for its shares.

What is the broker saying about this ASX 200 tech stock?

While the key driver of Life360’s outperformance this year has been its financial performance, its launch of an advertising business has also got investors excited. With 60 million monthly active users, the company has a huge network for advertisers to target.

Goldman believes that initial revenues from advertising will be incremental rather than game-changing based on its experience with peer Duolingo Inc (NASDAQ: DUO). It commented:

The company’s recently announced strategy to further monetise its sizeable user base via the introduction of advertising appears strategically sound and in line with its global app-based internet peers. To frame the potential opportunity and provide basis for our advertising estimates, we have conducted a detailed peer and industry benchmarking, concluding that Life360’s ad revenue strategy is likely to initially be an incremental, rather than game-changing, driver of earnings and valuation upside.

The broker expects revenue in the region of US$6 million from advertising in FY 2024, growing to US$18 million in FY 2026. It adds:

Our analysis of app-based internet peers (incl. Duolingo, Life360’s closest comp) suggests that initial advertising revenue is likely to index toward the lower end of user monetisation given low banner ad yields, relatively low time spent in app, and less purchasing intent from users. As Life360’s advertising strategy is nascent with many unknowns, we factor a relatively small amount of incremental ad revenue into our base-case assumptions (US$6/$16/$18mn FY24/25/26E revenue) but see potential upside as the ad strategy develops (e.g., higher ad load, different ad formats).

The good news is that this revenue is expected to be high-margin, which means it should be a nice boost to earnings. The broker said:

In addition, ad revenue can provide a helpful boost to group earnings with likely high incremental margins (>50% EBITDA). In our view little value is being imputed for ads given that the core subscription business remains undervalued, therefore we see valuation upside on successful execution.

Big gains ahead

The note reveals that Goldman has reiterated its buy rating and $14.20 price target on the location technology company’s shares.

Based on where the ASX 200 tech stock currently trades, this implies potential upside of 17% for investors over the next 12 months. It concludes:

With potential for EBITDA upgrades through FY24E, and incremental monetisation from advertising, we believe Life360 can continue to re-rate towards local and global tech peers.

The post Buy this high-flying ASX 200 tech stock for a big return appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Qantas Airways Limited (ASX: QAN) shares could be an opportunity that may fly soon enough, according to one fund manager.

The Qantas share price has lost altitude over the last year, as we can see on the chart below.

Some investors think this decline has opened up a chance to buy Australia’s leading airline at a discounted price. Let’s look at why one fundie has boarded Qantas stock.

Strong demand continues

The fund manager L1 recently noted that Qantas continued to benefit from domestic demand remaining “robust” despite higher airfares.

The investment team believe Qantas is “extremely well placed” to compete strongly after its $1 billion cost-out program, the “exceptional” loyalty program and its leading domestic market position.

The strong demand can continue to be seen in the financials.

In its FY24 first-half result, Qantas reported underlying profit before tax of $1.25 billion and statutory net profit after tax (NPAT) of $869 million. With that large profit generation, the company announced an additional on-market share buyback of up to $400 million. The company reported a “significant improvement in customer satisfaction” though there was “more work to do”.

Profit generation is an important factor for Qantas shares.

Positive upcoming developments

L1 is expecting Qantas to outline its plans in April to improve its loyalty offer to enable easier access for frequent flyer members to use their points.

The investment team believes new CEO Vanessa Hudson is rapidly and methodically addressing customer “pain points”. These changes will “improve sentiment from both customers and potential investors”, according to the fund manager.

Another reason L1 thinks Qantas is positioned well for the next few years is that it will have Australia’s “best loyalty business”, which could see a doubling of earnings over the next five to seven years. It also has a number of new, more fuel-efficient aircraft.

‘Project Sunrise’, which will enable direct flights from Melbourne and Sydney to London and New York, is also expected to be positive for the airline.

Finally, Qantas shares could benefit from having sufficient balance sheet capacity to continue its share buyback and then recommence paying fully franked dividends next year.

Are Qantas shares trading at a cheap valuation?

L1 has estimated that Qantas shares are valued at a price/earnings (P/E) ratio of just 6x. That means the Qantas share price trades at a multiple of six times its earnings.

The fund manager thinks this is a very cheap valuation considering Qantas’s dominant industry position, exposure to the structural tailwinds of Asian inbound tourism to Australia, and a high-growth, light-light loyalty division that remains “incredibly underappreciated by the market”.

The post Why one fund manager thinks Qantas shares are cheap and ‘incredibly underappreciated’ appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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