Category: Stock Market

The IGO Ltd (ASX: IGO) share price is ratcheting higher today and currently trades 5.36% in the green at $15.035 apiece.

Investors are rallying the share today following an update from the diversified mining giant’s partner at the Mt Alexander Project, located in Western Australia.

Let’s check the latest.

What’s behind the IGO share price?

IGO has a stake in various tenements at the Mt Alexander site along with St George Mining Ltd (ASX: SGQ).

Today, St George announced updated results amid a lithium exploration program being conducted at the site.

The current program is concentrating on two tenements where “extensive pegmatite outcrops continue to be mapped”.

For IGO, the relevant claim is E29/638, 75% owned by St George with IGO holding the remaining 25%.

The announcement notes there are an increasing number of pegmatite outcrops, identified through field mapping studies at Mt Alexander.

All samples have been submitted for lab testing, following visual observation of potential spodumene and lepidolite minerals in the collected rock.

Speaking on the announcement, St George executive chair John Prineas said both parties are “delighted” with progress:

We are seeing thick pegmatite dykes spread over a zone more than 15km long in the same corridor parallel to the Copperfield Granite where major discoveries have been announced by Red Dirt Metals. We are increasingly excited by the potential that Mt Alexander may form part of the same pegmatite hosted lithium mineral system.

Meanwhile, the $11 billion company by market cap, IGO has retraced all of the gains it had given away in 2022 and is now trading back at its 52-week highs.

Helping push the IGO share price back to this level has been the price of lithium. The commodity has also recently pushed back to all-time highs.

This has certainly helped ASX lithium shares rally hard in the new financial year with companies such as IGO continuing to trade higher.

The company is trading at a price-to-earnings (P/E) ratio of 32.15 times with a trailing dividend yield of 0.71%.

As such, it trades at a premium to its peers in the diversified mining index, according to data from Refinitiv Eikon

With this most recent rally, IGO shares have now spiked to a 67% gain over the past 12 months.

The post Here’s why the IGO share price is firing 5% on Tuesday appeared first on The Motley Fool Australia.

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More reading

• 3 ASX lithium shares soaring on project updates
• ASX lithium mania: Is the ‘incredible amount of interest’ sustainable?
• Lithium mania: IGO share price lifts despite trading ex-dividend
• 5 things to watch on the ASX 200 on Thursday
• Hoping to dig into the next IGO dividend? Here’s what to do

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 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 Whitehaven Coal Ltd (ASX: WHC) share price is having yet another strong day.

In afternoon trade, the coal miner’s shares are up 3% to $8.56.

This means the Whitehaven Coal share price is now up over 200% since the start of the year.

Why is the Whitehaven Coal share price rising today?

The catalyst for the rise in the Whitehaven Coal share price on Tuesday has been the release of the full year results of one of its rivals.

This morning New Hope Corporation Limited (ASX: NHC) released its full year results and revealed a 143% increase in revenue to $2.55 billion and a whopping 1,139% jump in net profit after tax to $983 million.

This allowed the coal miner to declare a fully franked 31 cents per share final dividend and a 25 cents per share special dividend. Combined, this was a massive 700% year over year increase from FY 2021’s 7 cents per share final dividend.

The key driver of this impressive result was of course sky high coal prices. And with New Hope’s management team suggesting that high prices are here to stay for the foreseeable future, this bodes well for New Hope and Whitehaven Coal.

New Hope commented:

Robust market demand for high energy and lower emission thermal coal, strengthened by the Russia-Ukraine conflict which has further tightened supply. With global energy demand to remain flat to 2030, stronger longer-term pricing is expected to remain considering constrained supply.

It’s no wonder then that the team at Morgans is forecasting a $1.00 per share dividend from Whitehaven Coal in FY 2023.

This equates to a very generous 11.7% dividend yield even after the Whitehaven Coal share price heroics of 2022.

The post Why is the Whitehaven Coal share price having such a top run on Tuesday? appeared first on The Motley Fool Australia.

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More reading

• Analysts name 2 ASX dividend shares to buy this month
• 3 ASX energy stocks up more than 100% so far this year
• 5 ASX energy shares powering portfolios with the highest dividend yields
• Own Whitehaven shares? Here’s some good news on your dividends
• 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 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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Pilbara Minerals Ltd (ASX: PLS) investors are rejoicing once more on Tuesday, with the share price surpassing its record high for the ninth time this month.

Shares in the S&P/ASX 200 Index (ASX: XJO) lithium favourite launched 4.6% to $4.97 shortly after the market opened this morning.

It has since retreated to trade at $4.84, 1.8% higher than its previous close.

Meanwhile, the ASX 200 is trading in the green. The index has lifted 1.2% following recent suffering that saw it tumble 4.1% over the four sessions prior.

So, what’s been going so right for the Pilbara Minerals share price in September?

Let’s take a look.

Pilbara Minerals share price leaps to another record high

Pilbara Minerals has been riding a wave of market enthusiasm for lithium this month.

Its gains come amid warnings from experts claiming the supply of the ‘white gold’ battery-making material will likely get to a crunch point over the coming years.

Analysts at JP Morgan echoed such expectations earlier this month, upping their lithium price targets by as much as 25%, as my Fool colleague Tristan reports.

The experts also slapped Pilbara Minerals shares with a buy rating and a $4.10 price target.

At the same time, the stock finally surpassed the record $3.89 it reached in January, surging to $3.97 on 6 September.

Likely to investors’ surprise, Pilbara Minerals surpassed that record high in every session over the following week.

After backing off for a hot second, it’s back up to its old tricks today.

Of course, it’s not just Pilbara Minerals that’s been on a roll lately. Other ASX lithium shares have also performed well.

Pilbara announced its maiden profit last month.

Its revenue lifted to $1.2 billion in financial year 2022, sending its after-tax profit into the green for the first time, coming in at $561.8 million.

The Pilbara Minerals share price is currently 52% higher than it was this time last month. It has also gained 37% year-to-date and 134% over the past 12 months.

The post Pilbara Minerals share price racks up ninth all-time high for September appeared first on The Motley Fool Australia.

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More reading

• Up 50% in a month, does the Pilbara Minerals share price ‘reflect too much optimism’?
• Here are the top 10 ASX 200 shares today
• Why Lake Resources, Life360, Pilbara Minerals, and PolyNovo shares are storming higher
• Here are the 3 most heavily traded ASX 200 shares on Monday
• 3 ASX lithium shares smashing new, all-time highs on Monday

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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 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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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.

On Friday, the European Central Bank (ECB) announced that it had selected e-commerce giant Amazon.com, Inc. (NASDAQ: AMZN) and four other entities to develop user interface prototypes for a possible digital version of the euro.

A digital version of the euro — or of any other major central bank digital currency (CBDC), such as the U.S. dollar — would likely have investing implications throughout the financial sector. This includes implications for cryptocurrencies, digital currencies that fall outside the domain of central banks or any centralized authorities. 

The focus of this article is on what this development could mean for Amazon.

The Digital Euro Project’s prototyping phase

Along with Amazon, the ECB selected CaixaBank, Worldline, the European Payments Initiative (EPI), and Nexi to help it develop potential user interfaces for a digital euro. It selected them from a pool of 54 applicants because it believes they can best address the “specific capabilities” required for an assigned use case for a digital euro. They will not be financially compensated for their prototyping work.

The non-Amazon names are probably new to many U.S. investors. They’re all based in Europe, and none are listed on a major U.S. stock exchange. Indeed, it seems a telling indication of Amazon’s global e-commerce dominance that it’s the only one of the five chosen entities based outside the eurozone. 

According to a press release by the ECB, the aim of the prototyping stage of the Digital Euro Project is “to test how well the technology behind a digital euro integrates with prototypes developed by companies. Simulated transactions will be initiated using the front-end prototypes developed by the five companies and processed through the Eurosystem’s interface and back-end infrastructure.” (The Eurosystem is comprised of the ECB and the national central banks of the eurozone.) 

Amazon’s focus, of course, will be on e-commerce payments. Spain-based CaixaBank, France’s Worldline, and Italy’s Nexi will concentrate on peer-to-peer online payments, peer-to-peer offline payments, and point-of-sale (POS) payments initiated by the payee, respectively. EPI, comprised primarily of numerous banks and credit institutions across Europe, will focus on POS payments initiated by the payer.

The Digital Euro Project’s timeline

The ECB expects the user-interface prototyping phase of the Digital Euro Project, which launched in July 2021, to be completed by the first quarter of 2023. It plans to publish its findings in that quarter.

After the two-year investigation phase of the project ends in October 2023, the ECB will decide whether to start developing a digital version of the euro. The implementation phase, if applicable, is expected to last about three years. So a digital euro could arrive in the fall of 2026 or thereabouts.

How could Amazon benefit from its involvement in the Digital Euro Project?

It’s too early to do more than just broadly speculate as to how Amazon could benefit from its involvement in the ECB’s exploration of the development of a digital euro. That said, being involved in the early stages of a groundbreaking project definitely has potential upside for the company’s business.

Should a digital euro come to fruition, Amazon might have an edge on its competitors in that its internal systems would be ready to handle digital euro transactions. And the company might be able to leverage what it learns from its digital euro work to help improve its current products and services or expand into new arenas.

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

The post Move over, cryptocurrencies: a digital euro could be coming with help from Amazon appeared first on The Motley Fool Australia.

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More reading

• Which of these Warren Buffett stocks is the better buy?
• Amazon, Microsoft, and Alphabet have partnered with this US cloud stock. Is it a buy?
• Why Amazon and Apple stocks slumped Tuesday
• Why Amazon stock stumbled today
• If you like Amazon, you’ll love these 3 stocks

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Beth McKenna 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. 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 CSL Limited (ASX: CSL) share price is trading marginally lower, down 0.41% to $281.83 at the time of writing.

Over the past month, the ASX biotech share is down 4.15% and in the year to date, it’s fallen 4.55%.

The company hasn’t announced any price-sensitive news since its FY22 results on 17 August.

What do the experts think of the CSL share price?

In an article on Livewire, Vince Pezzullo of Perpetual Asset Management says the CSL share price is elevated.

Pezzullo wrote: “We regard CSL as a high-quality stock, but it is trading at a price well above its value.”  

According to research published on the Westpac trading platform, CSL is trading at a price-to-earnings (P/E) ratio of 38.76.

This is more than twice the market average of 14.47 and well above the sector average of 26.88.

But analysts at Macquarie see further growth ahead for the CSL share price.

As my Foolish colleague James reported yesterday, Macquarie has retained its outperform rating on the stock. It has a share price target of $329.50 on CSL shares. That’s a potential 16% upside.

The broker highlighted CSL’s successful recent phase 3 trial of garadacimab, which brings the hereditary angioedema treatment closer to approval.

According to CSL, the company “aims to begin filing with global health authorities at the end of the current fiscal year for full approval”.

If regulators give the go-ahead, Macquarie reckons it could command almost half of the market in the coming years.

In a company poll, Macquarie asked its experts to pick the best ASX 100 defensive shares to buy today.

CSL was among them due to its multiple growth drivers, as my colleague Brendan reported yesterday.

The post The CSL share price has been struggling of late. Is this because it’s fully valued? appeared first on The Motley Fool Australia.

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More reading

• Leading brokers name 3 ASX shares to buy today
• These are the top ASX 100 buy ideas from Macquarie
• 2 blue chip ASX 200 shares to boost your portfolio: experts
• The CSL share price has gone backwards in 2022. Could a turnaround be ‘just starting to happen’?
• ASX 200 better buy: Cochlear or CSL shares?

Motley Fool contributor Bronwyn Allen has positions in CSL Ltd. and Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. The Motley Fool Australia has recommended Macquarie 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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The S&P/ASX 200 Materials Index (ASX: XMJ) is lifting 2% today, but three ASX lithium shares are soaring far higher.

The Ragusa Minerals Ltd (ASX: RAS), Lord Resources Ltd (ASX: LRD) and ST George Mining Ltd (ASX: SGQ) share prices are rising today.

Let’s take a look at why these ASX lithium shares are having a good day.

ST George Mining

The ST George Mining share price is soaring 13% today. The company announced “significant positive results” from lithium exploration at the Mt Alexander Project. This is located in the north-eastern Goldfields in Western Australia.

Rock chip sampling of pegmatite outcrop showed a “geochemistry indicative of lithium, caesium and tantalum (LCT) fertile pegmatites”. Assays also returned high levels of rubidium. Field mapping and rock chip sampling is ongoing.

Commenting on the news, executive chairman John Prineas said:

Our field work is the first lithium focused exploration conducted at Mt Alexander and we very pleased with the pace at which the evidence for the lithium potential is building.

Ragusa Minerals

Ragusa Minerals shares are rising 14% today. The company advised a six-year project tenement has been granted for the company’s EL33150 tenement. This is located within the company’s Northern Territory Lithium Project.

Historical geological mapping works show the project area is potentially prospective for lithium. Five tenements have now been granted at the project. Drilling will start soon.

Commenting on the news, chair Jerko Zuvela said:

This is another very positive milestone that puts Ragusa in a strong position to rapidly accelerate the development of our project within a proven high-quality lithium district.

Lord Resources

Lord Resources shares are jumping 7% today following the granting of an exploration licence for the Horse Rocks Project. This is located in Western Australia. In earlier trade, Lord Resources shares soared 23% before retreating.

The company said “high impact exploration” is imminent. Field work will begin immediately including geological mapping and rock chip sampling.

Commenting on the news, managing director Barnaby Egerton-Warburton said:

Located in one of the best lithium exploration provinces globally, the company is excited to get
to work of demonstrating the potential of Horse Rocks and hopefully making a discovery that will add to the regions already impressive lithium inventor.

The post 3 ASX lithium shares soaring on project updates appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX lithium stock just rocketed 36% on ‘another very positive milestone’
• 3 ASX mining shares that soared over 25% on Thursday
• Guess which obscure ASX lithium share has gained 293% so far in August

Motley Fool contributor Monica O’Shea 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 Tabcorp Holdings Limited (ASX: TAH) share price is edging higher today following the sale of the company’s eBet business.

At the time of writing, the gambling company’s shares are up 1.54% to 99 cents.

Also heading north is the benchmark S&P/ASX 200 Index (ASX: XJO) which is 0.92% higher after Wall Street snapped its two-day losing streak.

Tabcorp divests eBet business

Investors are bidding up the Tabcorp share price after the company provided a gaming services strategic update today.

According to its release, Tabcorp advised it has entered into an agreement to sell eBet to Venue Digital Technology.

Under the deal, Tabcorp will receive $62 million in cash less working capital and other minor adjustments.

eBet provides loyalty and tracking systems for gaming venues across Victoria and New South Wales. In the financial year ending 30 June, the group generated an EBITDA of $4.4 million and an EBIT loss of $2 million.

Tabcorp said that the sale is expected to be completed by the end of the first half of FY 2023, subject to the usual customary conditions.

Once the sale is finalised, this will result in a pre-tax gain of approximately $39 million.

In addition, Tabcorp confirmed the details of a new exclusive Tasmanian Monitoring Operator Licence awarded to Max Regulatory Services (MRS).

This will monitor all electronic gaming machines in hotels and licensed clubs in Tasmania.

The licence is for a 20-year period commencing 1 July 2023.

Tabcorp managing director and CEO, Adam Rytenskild commented:

The transactions announced today allows us to simplify our Gaming Services business as we pivot to an integrity services model.

This continues the urgent implementation of Tabcorp’s transformation strategy. We have strong momentum and bold ambitions to grow both our Wagering & Media and Gaming Services businesses.

The potential sale of eBet was disclosed at the release of our FY22 results and we are pleased to have entered into the agreement swiftly and in line with our new strategic direction.

Tabcorp share price snapshot

Extreme market volatility has led the Tabcorp share price on a rollercoaster over the past 12 months. Its shares are up 8%.

For context, the S&P/ASX 200 Consumer Discretionary (ASX: XDJ) sector is down 18% over the same time period.

Tabcorp commands a market capitalisation of about $2.17 billion

The post Tabcorp share price lifts following $62m eBet sale appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• 3 ASX 200 shares defying Friday’s sell-off to surge higher
• 3 blue-chip ASX 200 shares touting the highest dividend yield in September
• Why DGL, PointsBet, Tabcorp, and Woodside shares are dropping today
• Why is the Tabcorp share price diving 6% on Wednesday?

Motley Fool contributor Aaron Teboneras 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 Webjet Limited (ASX: WEB) share price is hitting blue skies today, reaching an intraday high of $5.48 — up 5.2% on its previous close. It is currently trading at $5.39, up 3.46%.

Fellow ASX travel shares are also in the green, with the Flight Centre Travel Group Ltd (ASX: FLT) share price up 1.18% to $16.24, and the Qantas Airways Limited (ASX: QAN) share price up 0.76% to $5.29.

These ASX travel companies haven’t announced any price-sensitive news today.

Why is the Webjet share price up?

The broader market is up today, with the S&P/ASX 200 Index (ASX: XJO) rising 1.17%.

Overnight, several international stocks traded strongly, which might be having a positive bearing on the Webjet share price today.

American Airlines Group Inc (NASDAQ: AAL) shares went up 3.35%. United Airlines Holdings Inc (NASDAQ: UAL) and Southwest Airlines Co (NYSE: LUV) shares finished up 3.3%.

What do the experts think about Webjet?

As my Fool colleague James reported yesterday, Morgans thinks Webjet is a buy in September. The broker likes Webjet shares at this price level, based on its earnings estimate for the recovery year of FY24.

Morgans has an add rating on Webjet with a share price target of $6.40. That’s a potential 18.7% upside over the next 12 months.

The broker commented:

Based on our forecasts, WEB is trading on an FY24 recovery year PE which is at a discount to its five-year average PE (pre-COVID). Its WebBeds (B2B) business is highly leveraged to the northern hemisphere summer holiday season which is forecast to be strong. Webjet OTA is leveraged to ANZ domestic and international travel.

My Foolish friend Cathryn also reports that Macquarie has slapped an outperform rating on the stock. The broker did so after Webjet’s annual general meeting on 31 August.

Macquarie has a 12-month price target of $6.15 for Webjet shares — a potential 14% upside.

Explaining its upgraded rating, Macquarie said:

Despite some macro risks on the horizon, the medium-term growth outlook is favourable and underpinned by market share gains, ongoing tech investment, and a full recovery in travel markets. 

The post Why is the Webjet share price heading 5% skywards on Tuesday? appeared first on The Motley Fool Australia.

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More reading

• Broker names 2 of the best ASX shares to buy now
• What are Webjet shares really worth in September?
• Why is the Webjet share price having a lousy start to the week?
• Brokers name 3 ASX shares to buy today
• Broker tips 23% upside for Webjet share price and the return of dividends

Motley Fool contributor Bronwyn Allen has positions in Macquarie Group Limited and Webjet Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Southwest Airlines. The Motley Fool Australia has recommended Macquarie Group Limited and Webjet Ltd. 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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By now, most investors would be aware of just how brutal 2022 has been for ASX shares and the share market. Since the start of the year, the S&P/ASX 200 Index (ASX: XJO) has lost a nasty 10.55%. But many ASX shares have lost more than that. So in these dark days, what better time to turn to the teachings of one of the greatest investors of all time: Warren Buffett.

Warren Buffett, of Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) fame, may be in his 90s but his investing philosophy is still undeniably and timelessly potent. So let’s discuss three pieces of Buffett wisdom that I think can help investors steer the ship through the rough seas of 2022.

3 doses of Warren Buffett wisdom that we all need right now

Take advantage of volatility

Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get’. Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.

Buffett often speaks of his bafflement that investors seem to panic when shares are cheap, rather than treating a selloff like the Boxing Day sales. At the end of the day, the cheaper you can buy a quality company’s shares, the greater your returns will be.

Many of Buffett’s most lucrative buys have been executed during market crashes. If you are happy buying a quality company for $100 a share when investors are in an optimistic mood, then you should be overjoyed if a market crash sends that same company down 50%.

Obviously, there are caveats to this. We should be far warier if investors are sending a company down for a very good reason, for example. But remember that Buffett’s favourite time to buy is when everyone else is selling.

Buffett buys the company, not the trend

The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.

I see this time and time again in the share market. Investors can make the assumption that if a company is part of a successful industry or emerging trend, then its shares are somehow automatically destined for greatness.

We all saw this play out, for example, in the buy now, pay later (BNPL) space in recent years. Yes, we all know that BNPL grew phenomenally as a preferred payment method. And yet, it seems investors were convinced for a while there that all BNPL shares were worthy of massive share price appreciation.

The sector has now come back to earth. And, arguably, exposed this fad for what it was in the process. It turns out that most BNPL shares didn’t have anything close to what Buffett would call a competitive advantage.

Fads come and go all the time in the world of investing. So it might pay off to make sure any company you buy adheres to this piece of Buffett wisdom.

Forget the crowd

The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.

We can all be guilty of obsessing over the day-to-day gyrations of the share market: the ASX 200 is up 1% one day, down 0.5% the next. But all we are doing here is reporting on what the ‘crowd’ is doing. Buffett is famous for not worrying about the daily moves of shares.

Instead, he is always focused on what he can buy for a bargain. Following the crowd will, at best, get you a market return and, at worst, woeful underperformance. If we instead focus on what the crowd is missing, only then can we hope to beat it.

The post 3 doses of Warren Buffett wisdom I think all ASX investors need right now appeared first on The Motley Fool Australia.

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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 Novonix Ltd (ASX: NVX) share price is continuing its long slide into the red this year, currently trading at near record lows.

Shares in the battery materials and technology company are fetching $2.09 apiece at the time of writing, the same as yesterday’s closing price.

After reaching highs of $12.15 per share back in December 2021, Novonix shares have seen a dramatic fall.

Investors have continued the selling pressure amid a weaker macroeconomic outlook and a shift in capital flows away from unprofitable, growth-type names to more profitable companies.

Concerns for Novonix’s cash flows

Last month, the company posted its annual report to shareholders.

In what was a record year for the price of lithium, and the global electric vehicle/lithium-ion battery industry as a whole, Novonix printed a substantial loss after tax of $71 million, coupled with around a $40 million net outflow in cash from operations.

Just for the record, in 2021, Novonix recognised a net loss of $18 million and cash outflow of $8.17 million. The company reported revenue of $8.4 million in FY22, up from $5 million year on year.

In light of this, the company’s auditors, PriceWaterhouseCoopers (PWC), noted a “material uncertainty” related to Novonix as a going concern.

Specifically, the auditor says that it “draw[s] attention to Note 1 in the financial report, which indicates that the group incurred a net loss of $71.4 million and net operating cash outflows of $40.35 million during the year ended 30 June 2022”.

Alas, Novonix “remains dependent upon raising additional funding to finance its ongoing expansionary activities”, PWC says.

These conditions, along with other matters set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Where did this stem from?

Digging a little deeper, it’s abundantly clear where the cash was spent in 2022.

Firstly, Novonix bought securities in US battery tech company KORE Power, Inc. in January, acquiring around 5% of the company for a $35.1 million cash and scrip consideration.

However, the company booked a ‘fair value’ loss of around $11 million on this position on its income statement, despite no cash actually leaving its bank account for the ‘expense’.

In addition, Novonix also increased its compensation to key management personnel by 224% year on year to $21.45 million, up from $6.6 million.

It could be seen as a curious move considering the company’s substantially wider net loss last financial year.

Indeed, the share-based compensation expense (and the increased payment to managers) and fair value loss are the largest expense items on Novonix’s FY22 income statement.

Combined, $31.15 million of shareholder capital was spent on these two items that, on face value, have little relation to the company’s operations. That’s not to mention the $35 million Novonix spent in acquiring the KORE position in the first place.

As well, of the $40 million net loss in cash from operations, the company booked $9 million in cash receipts from its customers but paid out $52.8 million in cash payments to suppliers and employees.

What’s the prognosis?

It’s certainly not uncommon for growth companies to churn through capital as they expand and reinvest heavily back into their operations.

Novonix has a plan to reach a production capacity of 40,000 tonnes of battery materials by FY25. To get there, significant capital investment and expenditure will be needed to finance the growth — certainly more than the company’s current cash balance.

Plus, with no profitability reaching the bottom line and cash payments outpacing receipts, the company can only proceed so far before it needs to raise additional cash.

That’s been the story of the past decade in equities. However, as we’ve seen in 2022, the tides are shifting.

Investors are no longer focused on rewarding revenue and sales growth but are instead constructive on bottom-line fundamentals such as earnings, cash receipts, and free cash flow.

So, with Novonix awarding its key managers an additional $16 million amid the net loss blowout of more than $53 million, plus the $31.5 million KORE investment that, after the 11% fair value drop, would now be marked at $28.4 million, it does start to raise questions on management’s budgeting strategy.

Thankfully, the company has a strong track record of raising cash. Its top 20 shareholders on the register are largely comprised of institutional investors and investment banks.

With Novonix now “dependant” on raising additional capital, so PWC says, this could risk additional growth ventures and hamper the company’s ability to build out operations.

As we’ve seen this year, investors will only put up with unprofitable growth stories for so long until factors impacting the wider economy become too big to ignore.

Meanwhile, the Novonix share price has slipped more than 66% into the red these past 12 months, losing more than 77% in 2022 alone.

The post Could this be a red flag or false alarm for Novonix shares? appeared first on The Motley Fool Australia.

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More reading

• Novonix share price sinks 7% amid Wall Street walloping
• Here are the top 10 ASX 200 shares today
• Why is the Novonix share price soaring 7% on Tuesday?
• Who owns shares in ASX tech company Novonix right now?
• Here are the top 10 ASX 200 shares today

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 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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