Category: Stock Market

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.

What happened

As investors continue to wade in the choppy cryptocurrency waters, a few top tokens continue to generate most of the interest in this sector. Among the key tokens of note for most has been Ethereum (CRYPTO: ETH), given this crypto’s long-awaited merge, which will shift the Ethereum blockchain to a proof-of-stake network and transform the largest decentralized finance ecosystem in substantial ways.

As of 12:30 p.m. ET, Ethereum has moved 2.8% higher over the past 24 hours. Much of this move higher appears to be tied to the upcoming Ethereum merge, which now officially has a semi-hard date of mid-September to be completed.

We’re now approximately a week past the Goerli testnet merge, which was a success. However, investors have been looking forward to the next step in the official merge process, which is the TTD (or Terminal Total Difficulty), the final stage in the shift to proof-of-stake. Recent reports indicate that the TTD for this merge should be 58750000000000000000000, with many approximating Sept. 15-16 as the likely date range for the shift.

So what

This Ethereum merge has involved a number of very technical steps to move to these final stages. Three testnet merges, which were generally very successful, indicate that validators and participants are generally on board with these upgrades. With an official timeline on the table, investors stand to benefit from greater certainty, something that has become very important to Ethereum investors of late.

A series of delays with this merge has driven significant volatility in Ether prices this year. Alongside other structural concerns in the crypto space, ETH hit a low of less than $900 per token in June, before rallying to nearly $1,700 per token at the time of this writing. This strong move off the bottom suggests more confidence in the structural integrity of the crypto market, as well as more excitement than apprehension right now around the merge.

Now what

There’s always the potential this final merge could result in some snags for the Ethereum network. Accordingly, there’s a rather polarized view being displayed on social media between investors who are concerned about these risks, and those who are very bullish about the benefits of this merge. 

Overall, I think this merge should prove to be more bullish than bearish. That said, it’s likely to be volatile times ahead for the world’s second-largest cryptocurrency by market capitalisation, at least over the next few weeks.

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

The post What investors are watching with Ethereum right now appeared first on The Motley Fool Australia.

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More reading

• Why Ethereum, Polkadot, and Dogecoin are rallying nicely today
• Why Ethereum, Solana, and Dogecoin are falling today
• 3 cryptos I would regret not buying on the dip
• The Aussie-born crypto platform taking on Ethereum
• 2 cryptos that could lead the market recovery

Chris MacDonald has positions in Ethereum. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Ethereum. 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.

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

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The Zip Co Ltd (ASX: ZIP) share price is in the green today after the company announced its full-year financial results for FY22.

Shares in the ASX buy now, pay later (BNPL) company are trading 1.8% higher at 99 cents at the time of writing, after touching an intraday high of $1.06 mid-morning.

Let’s go over the highlights from the company’s full-year report for the period ending 30 June 2022.

What did Zip report?

• Loss from ordinary activities after income tax up 63% year-over-year (YoY) to $1.10 billion
• Record revenue up 57% YoY to $620 million
• Record transaction volume (TTV) up 51% YoY to $8.7 billion
• Record transaction numbers up 80% YoY to $74.3 million
• Group cash earnings before taxes, depreciation, and amortisation at a $207 million loss
• Cash and liquidity of $279 million

When Zip’s losses are adjusted to account for non-recurring items, its adjusted loss before income tax was $256.5 million in FY22. The company’s largest once-off expense was $821.1 million in impairment of goodwill and intangibles, followed by a $20.3 million cost for global rebranding.

The expansion of its goodwill and impairment item losses were likely due to the changes in the fair market value and recorded costs of the company’s numerous acquisitions in FY21 and FY22.

During the reporting period, Zip acquired stakes in the companies Spotii, Central European BNPL, PayFlex, and Hemenal Finansman.

To help reduce costs in the future, Zip advised it decided to discontinue operations in Singapore and the United Kingdom and stop providing the Group’s Pocketbook, Trade, and Trade Plus products.

What else happened in FY22?

Cost of sales grew faster than revenue during the reporting period, growing 75.8% for a $469 million loss. This number included, among other items, bad debts and expected credit losses of $276.1 million, which grew 110%.

The company saw the greatest improvement in its the United States operating segment, with revenues growing 57% YoY to $603.1 million and transaction volumes up 67% to $4.09 billion.

Zip welcomed 11.4 million new customers, growing 56% YoY to 11.4 million, and 90.7 thousand merchants, growing 77% YoY.

What did management say?

Zip co-founder and global CEO Larry Diamond said:

In our half-year results, we acknowledged changes in the external environment were quicker and more severe than first anticipated. Against this backdrop, we changed strategy and shifted to delivering sustainable growth, right-sizing our global cost base and accelerating the path to profitability.

To that end, I want to share that we have already delivered on a number of initiatives to reduce cash burn, manage credit losses and improve unit economics. Our ability to pivot and adapt to the new world, showcases the resilience and viability of our business model as we focus on the opportunity ahead in FY23.

What’s next?

Zip’s end goal is to accelerate toward EBTDA profitability in FY24. It plans to do this by pursuing several avenues.

In its core markets, these include launching enterprise markets with top US retailers, enhancing its rewards program, launching new products, and innovating its existing product line.

A focus on reducing credit losses is also a priority, and it plans to accomplish this through enhanced credit management and streamlining repayments and collections.

Other initiatives will include improving cost base and margins by reducing its operating cost on technology and to third parties.

Zip share price snapshot

It’s been a challenging period for the Zip share price, down 86% in the past 12 months and 77.3% year to date. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is down around 7% since the start of 2022.

The company’s market capitalisation is $681 million based on today’s price.

The post Zip share price lifts despite $1 billion loss for FY22 appeared first on The Motley Fool Australia.

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• Earnings preview: Here are the ASX shares reporting today
• How did the Zip share price respond last time the company reported?
• Looking to buy Zip shares? Here’s what to look for in tomorrow’s results
• Why is the Zip share price sinking 5% on Monday?
• Why is the Block share price tumbling 6% today?

Motley Fool contributor Matthew Farley 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 ZIPCOLTD FPO. 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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The Pendal Group Ltd (ASX: PDL) share price jumped 15% in morning trade as investors reacted to the news that the takeover by Perpetual Limited (ASX: PPT) is going ahead.

At the time of writing, the Pendal share price has retreated a little to $5.33, up 9.2%.

Investors have sent the Perpetual share price down in response — it’s currently in the red by 8.2%.

The two investment managers have agreed to a deal after “extensive engagement” between them.

What’s the acquisition price?

The fund manager revealed that Perpetual offered more for Pendal.

The takeover deal is priced at one Perpetual share for every 7.5 Pendal shares, plus $1.976 cash for each Pendal share. The offer will be reduced by the amount of any final dividend paid to Pendal shareholders for the six months to 30 September 2022.

Pendal outlined that this offer has an implied undisturbed value of $6.54 per Pendal share based on Perpetual’s closing share price on 1 April 2022. That was the last trading day before Pendal announced receipt of the offer on 4 April 2022. That value of $6.54 represented a 46% premium to the Pendal closing price on 1 April 2022.

Based on Perpetual’s closing price on 24 August 2022, the offer has an implied value of $6.016 per Pendal share. This represents a 23.3% premium to Pendal’s closing share price.

Pendal shareholders will own approximately 47% of the combined group. Up to three Pendal directors will join the Perpetual board after the implementation of the deal.

The Pendal board unanimously support the offer. It also has the “strong support” of the investment teams. There has been a commitment from Perpetual to preserve the “culture of investment independence”.

Why is this a good thing for shareholders?

The Pendal Chair, Deborah Page, wrote this in a letter to shareholders:

If the scheme is approved by you, our shareholders, the proposed transaction will see two iconic financial services firms brought together to create Australia’s pre-eminent global asset manager, with combined funds under management of $201 billion.

We believe this is a compelling opportunity for shareholders and the business alike. The combination will deliver a significant increase in scale, boost our position in an increasingly competitive global market and bring strategic benefits in the dynamic sectors in which we operate, both domestically and internationally.

Furthermore, the combined company, through its multi-brand strategy, culture of investment independence, expanded distribution network and enhanced sustainable and impact investing capability, will be well positioned to deliver long-term shareholder value.

What next for Pendal shares?

Pendal said shareholders don’t need to take any action at this stage.

Shareholders will receive a booklet ahead of the meeting at which they will vote on the takeover. Pendal expects to hold the meeting either in December 2022 or early 2023. The timing will depend on when they receive regulatory approvals and the consent of clients.

Pendal share price snapshot

Despite today’s rise, Pendal is still down by 8% in 2022 to date.

The post Pendal share price soars 15% on takeover news appeared first on The Motley Fool Australia.

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More reading

• Perpetual share price tumbles on full-year earnings and takeover news
• Here are the top 10 ASX 200 shares today
• Perpetual shares climb amid response to media speculation
• Looking for value: The ASX shares this fundie is holding amid rising inflation

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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The Humm Group Ltd (ASX: HUM) share price has fallen straight into the red on Thursday. It appears the market is not taking a liking to Humm’s full-year FY22 results today.

At the time of writing, shares in the financial services company are down 2.7% to 54 cents. For context, the S&P/ASX 200 Index (ASX: XJO) has some spring in its step this morning, moving 0.6% higher.

Humm share price slips on underwhelming result

• Consumer finance volume up 13% on prior corresponding period to $2.4 billion
• Commercial and leasing volume up 103% to $1.1 billion
• Gross income down 1% to $440.4 million
• Cash net profit after tax (NPAT) down 25% to $51.1 million
• Statutory NPAT swinging to $170.3 million loss from $60.1 million profit
• Final fully franked dividend of 1.4 cents per share

The considerable statutory loss stemmed from a $181.2 million impairment expense. Specifically, management determined the fair value of its goodwill and software should be reduced.

What else happened in FY22?

While Humm garnered a greater amount of receivables in FY22, the company’s profitability suffered at the hands of its buy now, pay later (BNPL) segment. All of Humm’s various BNPL operations — aside from ‘Big Things AU’ — delivered a loss in the reporting period.

Unfortunately for shareholders, Humm was unable to unload the business to Latitude Group Holdings Ltd (ASX: LFS) earlier this year. Originally, the company was eyeing a consideration of $335 million for the consumer-focused division. However, on 17 June, both parties announced the termination of the sale agreement, weighing on the Humm share price.

On a brighter note, the commercial side of Humm is humming along. Unlike the consumer business, cash profits for commercial actually increased in FY22. The segment was responsible for a tidy $28.7 million in cash earnings, up 28.7% year on year.

What did management say?

Humm CEO Rebecca James discussed the company’s core focus during FY22, stating:

At the group level we are focused on our core business as a bigger ticket instalment financier across both our businesses. We have taken a disciplined approach and prioritised our strategic initiatives resulting in the closure of certain products and a focus on margin to ensure that we are in the strongest position to continue to grow our business in a profitable and competitive manner.

Furthermore, James listed some of the actions Humm has taken in light of the challenging operating environment, noting:

Humm Group is focused on margin management, already repricing portfolios to offset rising funding
costs. Enhancing operational leverage, during the second half Humm Group reduced marketing spend
and lowered the number of people employed in the business by 10%.

What’s next?

Looking ahead, management refrained from giving any revenue or earnings guidance. However, shareholders were informed that a further $15 million to $20 million of cost savings are being targeted in FY23.

Additionally, capital expenditure is expected to be tapered from $30 million to $18 million. Overall, management plans on taking a prudent approach to remain cash profitable moving forward.

Humm share price snapshot

As with most companies in the BNPL sector, the Humm share price has been dealt a blow over the past 12 months. Anyone holding Humm shares is now down 44% compared to where they would have been a year ago.

Based on the current Humm share price, the company holds a market capitalisation of $270 million.

The post Humm share price dips after profits tumble 25% appeared first on The Motley Fool Australia.

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• Why is the Sezzle share price surging 8% on Wednesday?

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Humm Group Limited. 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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Reporting season can be a great time for investors to get some insights into how businesses have been performing, management’s plans and what could happen next. And at the moment, I think that there are a handful of ASX tech shares that look very interesting at their current levels.

Not every technology business is automatically worth owning just because it operates in a certain sector.

However, I do think there are some attractive opportunities in that sector because of how quickly tech businesses can grow thanks to the intangible nature of what they offer customers or clients. ASX tech shares also have the potential to achieve good profit margins because of how cheaply software can be provided.

With that in mind, after seeing their reports, I really like the look of these two names:

ELMO Software Ltd (ASX: ELO)

This business provides cloud-based solutions for small businesses and mid-market organisations that help them manage people, processes, pay and expenses. It operates in Australia, New Zealand and the UK.

One of the attractive features of its business model is that it operates as a software as a service (SaaS) company, it receives recurring subscription revenue. This is helpful in several ways, including the visibility of cash flow and keeping clients onto its systems.

The FY22 result included plenty of growth. Revenue rose 32% to $91.4 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) went up from $6.5 million to $7.1 million. Annualised recurring revenue (ARR) rose 29% to $108.2 million. ELMO is expecting ARR to grow organically between 24% to 29% to a range of $134 million to $140 million.

It has a high gross profit margin of around 90% and the business seems like it’s scalable, meaning that its other profit margins can rise as it gets larger. The ASX tech share is expecting to be cash flow breakeven in FY23.

I think the business has a good opportunity of profitable growth in the coming years, particularly as it grows geographically, adds new modules and improves its margins.

Bailador Technology Investments Ltd (ASX: BTI)

In my opinion, this is one of the most interesting ASX tech shares on the stock exchange.

Bailador describes itself as a growth capital fund focused on the information technology sector. It invests in private tech companies at the ‘expansion stage’.

There are a number of characteristics that the Bailador investment team looks for: run by the founders, two to six years in operation, international revenue generation, “huge” market opportunity and the ability to generate repeat revenue.

It wants to have eight to twelve positions in its portfolio. Bailador currently has eight names in the portfolio, those are: Siteminder Ltd (ASX: SDR), Straker Translations Ltd (ASX: STG), InstantScripts, Rezdy, Access Telehealth, Nosto, Mosh and Brosa.

Three of those positions are worth $10 million in the ASX tech share’s portfolio.

Siteminder, the biggest investment position in the portfolio, is a “world leader in hotel channel management and distribution solutions for online bookings.”

InstantScripts is a “digital platform enabling convenient access to high-quality doctor care and routine prescription medication.”

Rezdy is an online channel manager and booking software platform for tours and activities.

After selling its whole stakes in Instaclustr and SMI for around $140 million, it now has a large cash pile. I’m excited by what Bailador might do with this cash, aside from simply paying dividends.

Paul Wilson, the co-founder and managing partner of Bailador, said:

There remain a significant number of very high-quality expansion stage technology companies in Australia. Capital market movements don’t change that. The difference is that there is currently less capital chasing those companies, and valuations are more reasonable. This environment gives us the opportunity to get access to those quality companies at reasonable valuations, and we are well positioned to do so.

At 31 July 2022, the Bailador net tangible assets (NTA) per share was $1.94. The Bailador share price is at a 20% discount to this, but share prices are changing all the time.

The post 2 ASX tech shares I think are top buys after reporting appeared first on The Motley Fool Australia.

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More reading

• Elmo share price surges after 32% revenue boost
• Bailador Technology share price leaps 5% as FY22 profits soar
• Buy this ASX tech share with 170% upside: expert
• Elmo share price soars on 30% revenue boost and optimistic FY23 guidance

Motley Fool contributor Tristan Harrison has positions in Bailador Technology Investments Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bailador Technology Investments Limited and Elmo Software. The Motley Fool Australia has positions in and has recommended Elmo Software. The Motley Fool Australia has recommended Bailador Technology Investments Limited. 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 Appen Ltd (ASX: APX) share price took off in early trade on Thursday before tumbling into the red after the company posted its earnings for the first half.

As The Motley Fool Australia reported earlier, the provider of data for machine learning and artificial intelligence posted an after-tax loss of US$9.4 million for the six months ended 30 June. That’s down from the prior corresponding period’s US$6.7 million profit.

While the loss didn’t initially deter the market, it has since performed an about-face. The Appen share price opened 0.7% higher at $4.20 before taking off to reach a high of $4.565 – representing a 9.5% gain.

Since then, the stock has slumped to swap hands at $4.14 apiece, 0.7% lower than its previous close.

Let’s take a closer look at the latest news from the former S&P/ASX 200 Index (ASX: XJO) constituent.

Appen share price wobbles on first-half earnings

The Appen share price surged higher before nosediving after the company posted apparently disappointing first-half earnings.

Notably, the tech stock scrapped its interim dividend as its after-tax profit hit the red.

But there were a few silver linings within today’s release.

The company noted that, while trading hasn’t yet improved in the second half, its revenue order book, including year-to-date revenue and orders in hand, stands at US$360 million with deliveries skewed to the final quarter.

It also saw growth in its China business, with its revenue rising 141%.

However, looking at the company as a whole, revenue was down about 7% to US$182.9 million and underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) before foreign exchange impacts slipped 66% to a $9.6 million loss last half.

Today’s share price movement sees Appen trading 5% higher than the multi-year low of $3.94 it reached earlier this month. Though, it’s still down 63% year to date and 70% over the past 12 months.

The post Appen share price rockets then stalls on US$9m half-year loss appeared first on The Motley Fool Australia.

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More reading

• Appen share price on watch as interim dividend scrapped
• Earnings preview: Here are the ASX shares reporting today
• The Appen share price is down 20% in a month. Is it going lower?
• Why A2 Milk, Appen, Boral, and REA shares are dropping today
• Why Appen, Imugene, OZ Minerals, and Paradigm shares are charging higher

Motley Fool contributor Brooke Cooper 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 Appen Ltd. 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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Motley Fool Australia Chief Investment Officer Scott Phillips joined Michael Thomson for Nine’s Late News on Wednesday night to discuss the highs and lows of earnings season, the Regional Express Holdings Ltd (ASX: Rex) loss and Santos Ltd (ASX: STO)’s call for government support for carbon capture and storage.

[youtube https://www.youtube.com/watch?v=12VvdgNM2vg?feature=oembed&w=500&h=281]

The post Earnings highs and lows, and energy policy in focus. Scott Phillips on Nine’s Late News appeared first on The Motley Fool Australia.

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Motley Fool contributor Scott Phillips 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 EML Payments and WiseTech Global. The Motley Fool Australia has positions in and has recommended EML Payments and WiseTech Global. 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 IDP Education Ltd (ASX: IEL) share price is surging more than 11% into the green during early trade on Thursday.

The move comes after the company posted its FY22 annual results. At the time of writing, the IDP share price is resting at $29.81.

IDP share price surges on robust FY22 earnings

Key takeouts from the period include:

• Revenue of $793 million, up 50% year over year (yoy)
• Adjusted earnings before interest and tax (EBIT) of $163 million, up 127% from the previous year
• A record number of students placed into a total of 55,400 courses
• IELTS testing volumes also grew 67% yoy to a record 1.92 million tests approximately
• Reported net profit after tax (NPAT) of $106 million
• More than 101 new computer-delivered IELTS centres opened in FY22 along with 29 student placement offices
• Dividend of 13.5 cents per share (cps) declared for H2 FY22, bringing total FY22 dividend to 27 cps.

What else happened last period for IDP Education?

Notably, IELTS testing volumes were a standout, exhibiting a 67% gain over the previous year. The company conducted about 1.9 million tests, over a total of 55,400 courses.

This delivered a substantial jump in revenue to more than $790 million, which the company brought down to a record adjusted EBIT of $163 million.

Part of the upside was driven by IDP’s launch of IELTS Online. The platform gives test-takers greater choice and flexibility and opens the door for more tests to be conducted at one time.

Given the strength of its operations, the IDP Board declared a 13.5 cps dividend that brought the total FY22 dividend to 27 cps.

Analysts at UBS were quickly on to the result, noting the company beat consensus estimates of earnings per share (EPS) by 8%.

The broker values IDP at $26.80 per share with a buy rating following the company’s FY22 results.

Management commentary

Speaking on the results, IDP chief executive officer, Andrew Barkla said:

This year, as global mobility resumed, IDP customers reignited their international dreams. When they did, our teams were by their side with new innovations that helped them fast track their goals.

Importantly, we strengthened our relationships with our customers, evidenced by a fourpoint increase in our global Net Promoter Score across the year.

In addition to expanding our IELTS and student placement office network in key growth markets, we also delivered new data-driven study application services that will move our industry forward.

IDP Education share price snapshot

In the past 12 months, the IDP Education share price has climbed 5% into the green, after rallying off a 52-week low on 17 June. However, it is down 15% this year to date.

The post IDP Education share price leaps 11% as revenue surges in FY22 appeared first on The Motley Fool Australia.

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• Experts name 2 ASX growth shares to buy when the market reopens
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Motley Fool contributor Zach Bristow 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 Pty Ltd. 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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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.

Amazon (NASDAQ: AMZN) is the largest e-commerce company in the world with a market value of over $1.3 trillion. Its website generated 2.7 billion hits last month, making it a no-brainer platform for brands that want to elevate their online presence. 

Peloton (NASDAQ: PTON) is set to join that club, announcing this morning that a range of its products and merchandise items are now available on Amazon’s U.S. website. It’s the latest in a string of drastic moves by the maker of at-home exercise equipment, to arrest rapidly slowing sales and expanding financial losses.

The partnership is a win for Peloton, but it’s likely a bigger win for Amazon. Here’s why. 

Peloton is retooling for a world beyond pandemic restrictions

Peloton was one of the best-performing companies during the worst of the pandemic. Gyms were closed, workers were attending their jobs remotely, and society was enduring varying degrees of lockdowns. That left few opportunities for people to get their exercise fix, so a range of interactive at-home equipment that brought the workout – and the classes — into the home was a proverbial home run. 

But as pandemic restrictions eased thanks to widespread vaccinations, Peloton’s business quickly deteriorated. The company will report its financial results for the fiscal 2022 full year this week, and it’s expecting that revenue will come in at around $3.5 billion, which would be a sizable drop from the $4 billion it generated in fiscal 2021. 

The drop in sales is underscored by a steep drop in engagement, measured by the average number of monthly workouts in the most recent fiscal third quarter which fell 28% year over year. Put simply, gyms are open, people are free, and they’re using their Pelotons far less often. 

The company installed a new CEO at the beginning of 2022 and tasked him with righting the ship. So far, sweeping changes have been made which include staff layoffs and broad cost cutting, a trial of a new subscription-based sales model for its equipment, and moving production to external manufacturers. 

Now, for the first time in its history, Peloton will deviate from its direct-to-consumer sales model and offer the Peloton Bike, Peloton Guide, accessories, and apparel outside of its showrooms and its website, on Amazon.com. 

Why this partnership is a big win for Amazon

Earlier this year, Wall Street was abuzz with the news that Amazon was interested in buying Peloton. The move would have been well within Amazon’s wheelhouse because it’s no stranger to acquisitions — and Peloton would’ve been a relatively small one given the company is worth just $4 billion as of this writing, thanks to a 92% drop in its stock price from its all-time high.

It ultimately never happened, but with this new partnership in place, Amazon gets the benefit of selling Peloton’s products on its website and earning revenue without the baggage of absorbing a business that has lost a whopping $1.8 billion over the last four quarters. Additionally, Peloton’s financial situation is rather grim with just $879 million in cash on hand which is mostly a result of taking on $750 million in debt in May. 

Peloton’s Chief Financial Officer has commented that customers initiate 500,000 Peloton product searches every month on Amazon.com, reinforcing the positive impact this deal could have for his company. But it might be just as beneficial for Amazon, because every time a customer can’t find what they’re looking for on Amazon.com, it increases the likelihood that they will navigate to another website which costs the company more than just that one potential sale. 

When a customer can find what they’re looking for, Amazon not only wins the sale, but its artificial intelligence algorithms gain an opportunity to push other products into their view and potentially generate further revenue. It’s estimated that these recommendation engines are responsible for 35% of Amazon’s online sales, so being able to satisfy that monthly search volume for Peloton products will be a win for Amazon overall. 

Amazon stock is a buy now

Amazon is fresh off a strong, but mixed, second quarter of 2022. It suffered a net loss mainly as a result of its stake in electric vehicle maker Rivian Automotive (NASDAQ: RIVN), because shares in that company have fallen sharply recently. 

But that speaks to Amazon’s operational diversity. It offers investors a cross-section of the digital economy and it continues to drive innovation. Having multiple revenue streams insulates the company from external shocks like high inflation, which is currently putting pressure on consumers and, therefore, Amazon’s e-commerce segment. But its cloud segment, driven by Amazon Web Services, still managed to grow by 33% year over year during the quarter. 

Additionally, its relatively new advertising segment has delivered $33.9 billion in revenue over the last four quarters and remains an exciting opportunity going forward thanks to the company’s valuable media assets, like the rights to the NFL’s Thursday Night Football. 

While the Peloton deal is exciting, Amazon is more than just an e-commerce company now and there’s no shortage of reasons to own the stock. 

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

The post Does this make Amazon stock a buy? appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anthony Di Pizio 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 Amazon and Peloton Interactive. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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The Qantas Airways Limited (ASX: QAN) share price is taking off today, up 7.9%.

Qantas shares closed yesterday trading for $4.54 each and are currently at $4.90.

Investors are bidding up shares of the flying kangaroo after the airline released its full-year results this morning for the 12 months ending 30 June (FY22).

While those results reflected another difficult year, with a statutory loss after tax of $860 million, that loss was down 49% from the prior year.

Also likely providing some tailwinds for the Qantas share price was its announcement of an on-market share buyback.

What share buyback did the airline announce?

Management stated they have approved an on-market share buyback of up to $400 million “as the benefits of the recovery materialise”.

“This is the first return to shareholders since 2019 and follows $1.4 billion of equity raised at the start of the pandemic,” the airline said

With today’s big leap in the Qantas share price factored in, the airline has a market capitalisation of $9.2 billion. That means the share buyback represents more than 4% of its market cap.

Investors may also have picked up on some bullish words by CEO Alan Joyce.

“We always knew travel demand would recover strongly but the speed and scale of that recovery has been exceptional,” he said.

“We’re even more confident in the future than we were six months ago, so today we’re announcing more investment in our people and our customers, including a major boost to staff travel benefits, new routes and new lounges.”

There were no dividends again this year. Qantas last paid a dividend on 23 September 2019, when the world had yet to hear of COVID, let alone experience global lockdowns.

But Joyce addressed the $400 million share buyback, saying, “We’re also announcing the first capital return for shareholders since they provided us $1.4 billion at the start of the pandemic to support our Recovery Plan.”

Qantas share price snapshot

With today’s big lift factored in, the Qantas share price has again climbed into positive territory for the past 12 months, up a slender 1.4%.

Still, that handily beats the 6% full-year loss posted by the S&P/ASX 200 Index (ASX: XJO).

The post The Qantas share price just flew 8% higher on $400 million share buyback appeared first on The Motley Fool Australia.

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

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