Category: Stock Market

S&P/ASX 200 Index (ASX: XJO) tech shares are enjoying a great run today.

While the ASX 200 is up a healthy 0.4% in late morning trade, the S&P/ASX All Technology Index (ASX: XTX) – which contains some smaller tech shares outside of the ASX 200 – is up an impressive 2.41%.

Australia’s big tech stocks are broadly charging higher following a strong lead from US technology companies yesterday (overnight Aussie time).

What happened with US tech stocks?

Yesterday saw some more strong earnings results from some of the biggest US tech stocks.

Moderna Inc (NASDAQ: MRNA) closed 16% higher on the back of its earnings report.

And PayPal Holdings Inc (NASDAQ: PYPL) leapt 9.3% on the back of its results.

Along with some other strong performers, this saw the tech-heavy NASDAQ 100 close up 2.7%, reaching its highest level since 4 May.

Commenting on the strength of the US reporting season, chief market strategist at B. Riley Wealth Art Hogan said (courtesy of Bloomberg), “Now that we’re 70% through the earnings reporting season, we can clearly say that it’s not the earnings Armageddon that many had feared. That’s important.”

And that strength looks to be offering some helpful tailwinds for ASX 200 tech shares today.

ASX 200 tech shares leaping higher

It’s a sea of green among the ASX 200 tech shares.

The Xero Ltd (ASX: XRO) price is up 1% at the time of writing, having earlier posted gains of 3.4%.

Shares in the online accounting and business services closed at $96.90 yesterday and are currently trading for $97.85.

WiseTech Global Ltd (ASX: WTC) is also enjoying a healthy boost today. Though like Xero, it’s given back much of its early morning gains.

After leaping 4.2% higher earlier today, shares in the global logistics software solutions provider are up 1.22% at the time of writing.

As for Nextdc Ltd (ASX: NXT), the data centre operator is up 1.69%.

The biggest gains among the ASX 200 tech shares today are being realised by Block Inc (ASX: SQ2), owner of Afterpay.

The Block share price is up a whopping 9.69% at the time of writing, currently trading for $127.00 per share.

This comes after a stellar run for Block’s US-listed shares, which closed up 11.4% on the NYSE yesterday.

The post Why are ASX 200 tech shares having such a stellar run today? appeared first on The Motley Fool Australia.

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More reading

• What’s the outlook for the gold price in FY23?
• 5 things to watch on the ASX 200 on Thursday
• Experts name 2 beaten down ASX shares that could be going cheap
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Wednesday

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 positions in and has recommended Block, Inc., PayPal Holdings, WiseTech Global, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Moderna Inc. The Motley Fool Australia has positions in and has recommended Block, Inc., WiseTech Global, and Xero. The Motley Fool Australia has recommended PayPal Holdings. 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 Megaport Ltd (ASX: MP1) share price is surging into the green early in the session on Thursday morning.

At the time of writing, the Megaport share price is 6% higher at $9.21 apiece, extending gains to 75% for the past month for shareholders.

In wide market moves, the S&P/ASX All Technology index (ASX: XTX) is also clicking higher on Thursday and trades 2% higher on the day.

What’s up with the Megaport share price?

Investors have bid up the Megaport share price today on no news. Noteworthy however is that tech shares have also caught a bid and are the leading sector on the ASX today.

The tech benchmark has curled up from yearly lows on 20 June and has pushed back 20% higher over the past month.

As seen on the chart below, both the tech index and the Megaport share price have tracked each other with striking similarity these past 3 months. It’s the same on all other time frames.

Hence, whilst there’s been nothing market sensitive out of Megaport’s camp today, with the sector climbing back past previous highs, it stands to reason this strength has carried over to individual names.

Brokers are also constructive on the share, with Goldman Sachs giving it a buy in a note last month. The firm said it “remain[s] positive on the product leadership of the company, and the rapidly growing NaaS/SD-WAN addressable markets”.

In the last 12 months, the Megaport share price has slipped more than 46% into the red, or 50% this year to date.

The post Why is the Megaport share price lifting 6% on Thursday? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Here are 3 stellar ASX growth shares analysts are tipping as buys
• These were the best performing ASX 200 shares in July
• Here are the top 10 ASX 200 shares today
• ASX 200 midday update: Rio Tinto drops, tech shares jump, Macquarie impresses

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 MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. 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 Medical Developments International Ltd (ASX: MVP) share price is on ice today following a company requested trading halt.

The ASX granted the trading pause before market open. Prior to being put into the trading halt, the last bid for the Medical Developments share price was $2.40 apiece.

What was announced?

Medical Developments advised that it will complete a fully underwritten capital raising of $30 million.

This will be comprised of a $15 million placement and a $15 million pro rata accelerated non-renounceable entitlement offer.

It hopes to achieve a cash balance of $49 million post offer to fund three core areas. Per the announcement:

Post transaction MVP’s cash balance will be A$49m which will fund:

– continuing execution of the Company’s direct sales strategy in the large European
market

– expansion of the Australian business into the emergency sector and further growth in
the ambulance sector

– further investment in business capability to enable global growth

The 1 for 9.5 pro-rata accelerated non-renounceable entitlement offer seeks to raise $15 million. It comes with 1 attaching option to acquire 1 fully paid ordinary share for every 2.5 new shares
issued.

Whereas the placement is targeted towards sophisticated investors with 1 option for every 2.5 new shares issued.

Speaking on the announcement, chairman Gordon Naylor said the company was “pleased with [its] strong revenue growth in FY22and expect this to continue into FY23”.

“With a strong funding position following the capital raising, we look forward to investing to continue to deliver on our growth strategy.”

The Medical Developments share price is down more than 42% this year to date.

The post Medical Developments share price halted amid ‘significant near-term opportunities’ appeared first on The Motley Fool Australia.

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More reading

• Are Qantas shares worth buying ahead of this month’s earnings result?
• What’s the outlook for the gold price in FY23?
• What’s $1 billion between friends? Magellan share price shrugs off latest FUM figures
• Here is the RBA interest rate outlook according to ASX 200 banks
• Orica share price plummets 10% following successful cap raise

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 Medical Developments International Limited. The Motley Fool Australia has recommended Medical Developments International 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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Qantas Airways Limited (ASX: QAN) shares have climbed nearly 4% in the past month, but what is the outlook ahead of FY22 earnings?

Qantas shares are lifting 0.22% today and are currently trading at $4.61. For perspective, the S&P/ASX 200 Index (ASX: XJO) is up 0.57% today.

Let’s take a look at the outlook for the Qantas share price.

What’s the outlook for the Qantas share price?

Analysts at Citi have downgraded Qantas from neutral to sell, according to a Thomson Reuters report cited on NAB trade.

Citi is concerned about the impact of fuel costs and hiring more staff on the company’s profit margins. Analysts said:

We expect short term, higher fuel prices and over-staffing will put pressure on margins, decrease capacity and increase difficulty for management 

Analysts also noted Qantas has reduced flight capacity by 10% and hired 3% more staff. In a market update in late June, Qantas advised it has recruited 1,000 new operational team members and hundreds more call centre staff.

Citi is also predicting lower capacity growth and greater cost of available seat kilometres than the market expects, The Australian reported. Analyst Samuel Seow said:

Additionally given what we estimate as a slow start to FY23, we are cautious heading into results given what we expect might be more muted guidance.

Citi has cut the price target by 21% from $5.47 to $4.28.

Qantas has recently been hitting headlines amid flight cancellations and delays. Qantas is due to report FY22 earnings on 25 August.

Qantas share price snapshot

The Qantas share price has climbed 2% in the past year, but it has lost 8% in the year to date.

For perspective, the benchmark ASX 200 index has fallen nearly 7% in the past year.

Qantas has a market capitalisation of nearly $9 billion based on the current share price.

The post Are Qantas shares worth buying ahead of this month’s earnings result? appeared first on The Motley Fool Australia.

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More reading

• Why is Rex smashing the Qantas share price on Tuesday?
• Qantas share price lifts despite airport mayhem
• When will Qantas shares pay a dividend again?
• What’s happening to the Qantas share price today?
• ‘At tipping point’: Qantas share price slides as chaos continues

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.

from The Motley Fool Australia https://www.fool.com.au/2022/08/04/are-qantas-shares-worth-buying-ahead-of-this-months-earnings-result/

The gold price has pushed higher this week and now trades at US$1,763 per ounce. That’s around the same levels as it was in October 2021.

Pressure from an upswing in the US dollar and further interest rate hikes from central banks around the world have weighed the yellow metal down this year.

It fell from a peak of US$2,052/t oz in March and has been on a downward slope ever since, as illustrated below.

What’s projected for the gold price?

Many analysts have had a hard time forecasting the trajectory of gold’s price action this year. Traders have reversed trends with sharp recourse on several occasions over the past 12 months.

This week, US House of Representatives Speaker Nancy Pelosi embarked on a trip to Taiwan, the highest level US official to visit the island nation in 25 years.

As Reuters reported, this geopolitical event seemed to impact the price of gold.

“Gold prices advanced on Wednesday as the dollar fell and U.S.-China tensions rose,” it reported.

However, according to Kinesis Money analyst Rupert Rowling, the turbulence may be short-lived, as US Treasury yields and interest rates still dominate the talk of the town.

“Market focus will return to interest rates and the negative long-term impact that is likely to have on gold,” he said.

The impact of interest rates

On Tuesday, the Reserve Bank of Australia (RBA) met for its monthly policy meeting and lifted the cash rate by another 50 basis points to 1.85%.

The cash rate futures market is pricing a 65% probability of a rate increase to 2.35% in the RBA’s next meeting on 3 September, 2022.

The prospect of entering a world of rising interest rates takes some of the shine away from the yellow metal, as the opportunity cost of holding gold while yields are high increases. As the axiom goes, gold pays no interest.

So it becomes a rates story and, with further interest rate hikes likely, this could weigh down the gold price, according to Refinitiv Eikon analysis:

Gold prices rebounded last week after labour market data showed that U.S. jobless claims hit [a] fresh 8 months high, however, anticipation of further rate hikes by the Federal Reserve limited gains.

Gold may hit US$1,650/oz if the Federal Reserve hikes the interest rate as expected.

With that, analysis suggests that investors should pay attention to interest rates, inflation data, and potential geopolitical risks in addition to watching the gold price in FY23.

The post What’s the outlook for the gold price in FY23? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Up 10%, what’s going on with the Zip share price today?
• 5 things to watch on the ASX 200 on Wednesday

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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It is a decent day on the market on Thursday, but it is a volatile day for the Magellan Financial Group Ltd (ASX: MFG) share price.

Moments after the market kicked off, investors were flocking to the financial management company, lifting more than 3%. However, Magellan shares quickly inversed and are now down 1% at $14.49 at the time of writing. As a point of comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.5% this morning.

While it appears Magellan was still bleeding outflows throughout July, there are some positives. Let’s take a closer look.

What is boosting the Magellan share price?

It has been a challenging past year for Magellan, with the negative news cycle accelerated by the loss of its St James Place mandate back in December last year.

Today, the pain subsides as onlookers absorb a month of fund flows that could hint at a flattening.

According to the funds under management (FUM) update for July, the company’s total FUM stood at $60.2 billion at the end of the month. For context, FUM finished at $61.3 billion at the end of June, meaning Magellan experienced a further 1.8% deterioration in its managed funds.

On a positive note, the rate of the reduction has slowed compared to the prior month, which was a 5.7% decrease at the end of June. This could be one aspect of the update giving the Magellan share price a boost today.

Where the money flows

Taking a closer look at how the specific segments fared in July, FUM changes were as follows:

• Global equities FUM down 0.01% to $33 billion
• Infrastructure equities FUM down 6% to $18.9 billion; and
• Australian equities FUM up 13.7% to $8.3 billion

Investors might also be shifting their gaze toward the significant uptick in Australian equity funds. While it represents the smallest portion of the company’s FUM, it is a welcomed positive for the Magellan share price.

Despite today’s reprieve, Magellan shares remain roughly 23% lower compared to where they were at the beginning of the year.

The post What’s $1 billion between friends? Magellan share price shrugs off latest FUM figures  appeared first on The Motley Fool Australia.

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More reading

• Is the Magellan share price a buy for its big dividend yield?
• Morgan Stanley forecasts Magellan share price will sink 35%
• Why has the Magellan share price leapt 21% in a week?
• Here are the top 10 ASX shares today
• What market prediction sent the Magellan share price spiking 9% today?

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 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 lead economists of the S&P/ASX 200 Index (ASX: XJO) banks have run their slide rules over the latest 0.50% interest rate increase from the Reserve Bank of Australia (RBA). Tuesday’s hike brought the official cash rate to 1.85%.

ASX bank shares gained on Tuesday in the wake of the RBA’s announcement and retraced yesterday alongside a broader market pullback.

Now the top economic thinkers at the ASX 200 banks have dusted off their crystal balls and offered their forecasts on what investors can expect from the RBA over the rest of the year.

First, up Gareth Aird, head of Australian economics at Commonwealth Bank of Australia (ASX: CBA).

Top economist of biggest ASX 200 bank says keep an eye on wages growth

Aird expects the cash rate will reach 2.60% this year but says any weakness in wages growth could see the RBA reduce its tightening pace.

According to Aird (quoted by The Australian Financial Review):

Despite forecasts for below trend economic growth in 2023 and 2024 we do not expect the RBA to take the policy rate above their estimate of neutral provided they pause for a few months after reaching approximately 2.60%.

We expect the cash rate to be 2.60% by November. Our base case is a further 50 basis point hike in September and a 25 basis point hike in November, but the RBA could shift to ‘business as usual’ 25 basis point monthly increments from here if the upcoming data makes the case (particularly if the Q2 22 Wage Price Index, due 17 August, indicates wages pressures are below expectations). On that basis we would expect three consecutive 25 basis point rate hikes (ie. September, October, November) to still arrive at the same terminal rate of 2.60% in November.

Aird also pointed out that much of the data the RBA and financial analysts work with stems from the previous months, with the coming months likely looking significantly different. He added:

Note that there is a significant dichotomy in the domestic economic data at present and this will continue over coming months. Backward looking labour market data will remain robust, wages growth will accelerate and inflation will remain elevated. But forward looking data has deteriorated and further weakness is expected. This includes consumer sentiment, home prices, housing lending and building approvals.

RBA’s language takes a modest dovish turn

David Plan, head of Australian economics at ASX 200 bank Australia and New Zealand Banking Group Ltd (ASX: ANZ), noted the moderately dovish shift in the RBA’s language.

“The RBA tightened by 50 basis points at its August meeting. The key change from July is that there is no longer any reference to the withdrawal of extraordinary monetary support,” he said.

According to Plan (courtesy of the AFR):

This could be a signal that the RBA Board may be thinking about reducing the size of the monthly increases to 25 basis points in September. We think a 50 basis point increase is still the most likely choice.

The RBA’s updated forecasts have inflation peaking at 7.75% and only dropping to ‘around’ 3% through 2024. This is despite growth slowing below 2% in 2023 and 2024. We will be very interested to see what interest rate assumption is part of that forecast mix.

ASX 200 bank forecasts ‘slightly restrictive monetary policy setting’

Ivan Colhoun, chief economist at ASX 200 listed National Australia Bank Ltd (ASX: NAB) said the RBA will need somewhat restrictive policies to get the inflation genie back inside the bottle.

“NAB’s view is that seeking a return to 2-3% inflation will likely require at least a slightly restrictive monetary policy setting, which we suggest is in the 2.60% to 2.85% cash rate range,” he said.

Colhoun continued (quoted by the AFR):

NAB remains comfortable with its 2.85% cash rate forecast for end 2022 but continues to see a step down in the size of rate increases after this next meeting and a likely pause before the year end. The ‘not on a pre-set’ path is likely to see significant debate about whether the Bank might even step down the pace of rate increases at the September Board meeting, while continuing to tighten.

NAB expects a further 50 basis point increase in the cash rate in September. With the cash rate then at 2.35% and approaching more neutral levels, we expect the Bank to step down to 25 basis point increases in October and November, to achieve a mildly restrictive 2.85 basis point cash rate in early November. A pause for some time is likely as the RBA assess the impact of recent moves.

There you have it.

If the top economists at these three ASX 200 banks have it right, we can expect the RBA to hike rates to between 2.60% and 2.85% by the end of 2022.

After that, we’re likely to see some smaller and more gradual increases to bring inflation back into the central bank’s 2% to 3% target range.

The post Here is the RBA interest rate outlook according to ASX 200 banks appeared first on The Motley Fool Australia.

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More reading

• Is the NAB share price a buy ahead of next week’s quarterly update?
• Guess how much ANZ shares have paid in dividends over the last 5 years
• ANZ share price best of bad bunch after pocketing extra $2.3b
• How are ASX 200 bank shares responding to the RBA rate increase?
• Up 10% in a month, is the CBA share price now fully valued?

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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The Orica Ltd (ASX: ORI) share price is plummeting after the company successfully raised $650 million to partly fund a major acquisition.

The explosives company is acquiring geospatial tools manufacturer Axis Mining Technology in a deal worth up to $350 million.

The Orica share price has broken its single-session trading halt this morning with a 9.88% fall at the time of writing. Shares in the company are currently swapping hands for $15.50 apiece.

Let’s take a closer look at what’s going on with the S&P/ASX 200 Index (ASX: XJO) commercial blasting systems provider.

Orica share price plunges 10% after successful placement

The Orica share price is tumbling after being removed from the freezer following a successful $650 million capital raise.

The placement saw around 40.6 million new shares offered to institutional investors for $16 apiece. That represents a 7% discount on Monday’s close.

Its proceeds will go towards the acquisition of Axis. The business will cost the ASX 200 company $260 million in cash upfront.

Orica could also end up forking out up to $90 million in earn-out payments. Such payments are subject to financial performance and other conditions.

The raised money will also help the company fund incremental trade working capital requirements arising from global supply chain dislocations and strengthen its balance sheet.

Commenting on the successful placement, Orica managing director and CEO Sanjeev Gandhi said:

We are extremely pleased and thankful for the support we have received from new and existing institutional investors who recognise the compelling strategic benefits of our acquisition of Axis and support our goal of establishing a leading Digital Solutions platform.

And it’s not all over yet. A $75 million share purchase plan will open next week.

It will see shareholders able to grab up to $30,000 worth of new Orica shares for the lower of $16 per share or a 2% discount to the stock’s five-day volume average weighted price.

The share purchase plan will close on 26 August.

The post Orica share price plummets 10% following successful cap raise appeared first on The Motley Fool Australia.

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More reading

• Orica share price in the freezer amid acquisition and $650m cap raise
• 3 ASX 200 shares rocking new, multi-year highs on Tuesday

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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Woodside Energy Group Ltd (ASX: WDS) shares seem like a better pick compared to Santos Ltd (ASX: STO) in my opinion.

Both are ASX oil and gas share giants.

Woodside has a market capitalisation of $61.7 billion according to the ASX. Santos has a market capitalisation of $23.8 billion.

I’m not picking Woodside because of its size, but scale does come with some economic advantages that can help with profit margins. That was one of the reasons for the merger with the oil and gas division of BHP Group Ltd (ASX: BHP).

While I’m not the world’s biggest fan of oil and gas businesses, I think Woodside shares can make the better pick because of these two factors:

Dividends

Woodside has typically paid investors a solid dividend, but thanks to the help of higher energy prices, Woodside is expected to pay a large dividend in the next couple of financial years.

First, let’s look at the expected dividends from Santos.

According to CMC Markets, Santos is expected to pay an annual dividend of 37.7 cents per share in 2022 and 40.5 cents per share in 2023. Using those projections (and a franking rate of 70% as per the last dividend paid by Santos), Santos is estimated to pay a grossed-up dividend yield of 6.8% for FY22 and 7.3% in FY23.

Let’s compare that to Woodside. The CMC Markets estimate for the 2022 dividend is $3.60 per share and $2.72 for 2023. That translates into a grossed-up dividend yield of 15.8% in FY22 and 12% in FY23 at the current Woodside share price.

While dividends aren’t everything, I think the bigger dividend yield from Woodside can help provide stronger returns.

$5 billion investment target

Woodside has a plan to invest billions in green energy. I think this is an important part of the company’s plan to future-proof itself.

There’s H2Perth, which has a flexible design for hydrogen or ammonia. The initial phase is targeting around 110,000 tonnes per annum of hydrogen production, including a 250MW electrolysis component. It has a future capacity of up to 550,000 tonnes per annum of hydrogen for export.

H2TAS is targeting 200,000 tonnes per annum of ammonia and a 300MW electrolysis. It has completed studies with potential customers for ammonia export to Japan.

H2OK is targeting around 33,000 tonnes per annum of liquid hydrogen including a 290MW electrolysis component.

Heliogen is another project, which is described as “breakthrough solar technology”. The initial phase is targeting 5MW. It’s a concentrated solar energy system with a power supply that could work nearly all day and all night. It’s targeting construction to begin in 2022. It’s working towards a joint marketing arrangement for technology in the US and Australia.

It’s also working on a large-scale solar farm with an initial phase targeting up to 100MW capacity. This will deliver electricity through the North West Interconnected System in WA. The maximum capacity will be up to 500MW.

Foolish takeaway

Woodside shares are paying investors more in the short-term and the company is starting to invest in green energy for the long-term as well. While I wouldn’t call it a great buy today, I think it could be a better long-term pick than Santos.

The post 2 reasons why I’d pick Woodside shares over Santos appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• Why is the Santos share price lagging the ASX 200 on Tuesday?
• Why Appen, Credit Corp, Fortescue, and Santos shares are dropping
• Looking to buy Woodside shares? Here’s why the energy giant faces a fresh legal battle from climate activists

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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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

Tesla (NASDAQ: TSLA) will hold its annual shareholder meeting Thursday, when investors will find out if the company’s proposed 3-for-1 stock split has been approved. Anticipation of that had Tesla shares trading 2.2% higher as of 2 p.m. ET Wednesday. 

So what

Wednesday’s gains came despite escalating tensions between the U.S. and China that potentially could directly impact the businesses of U.S. electric vehicle (EV) manufacturers. But investors seemed more focused on Tesla’s annual meeting, which will be the final chance for shareholders to vote on the proposed stock split. 

Now what

The company has offered two main reasons to support the stock split.

“We believe the stock split would help reset the market price of our common stock so that our employees will have more flexibility in managing their equity,” management said. “…[T]he stock split will also make our common stock more accessible to our retail shareholders.”

Tesla last split its shares in a 5-for-1 transaction in August 2020. The stock is up about 80% since that time. While stock splits don’t change anything about a business or its valuation, a lower per share price can make a stock more accessible for some retail investors and options traders. 

Shareholders also hope the meeting will provide more details on how the company plans to meet its battery needs as it continues to rapidly increase production volumes. Tensions between the U.S. and China have been on the increase with U.S. House Speaker Nancy Pelosi visiting Taiwan this week. Chinese EV battery maker CATL was rumored to be postponing its plans to expand its manufacturing to North America. But Reuters subsequently reported that the world’s largest battery maker will move forward with those plans.

Given that it has a major manufacturing facility in Shanghai, Tesla would benefit from stability between the two countries. Both China and the U.S. want to expand the use of electric vehicles, and investors seem to be seeing good news on that front, beyond their optimism about the upcoming stock split vote.

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

The post Why Tesla shares bounced ahead of its stock-split vote appeared first on The Motley Fool Australia.

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More reading

• Why the Tesla share price jumped on Monday
• Tesla Q2 earnings call: 3 must-see quotes from Elon Musk
• Tesla beats earnings estimates and sells Bitcoin — Is the stock a buy?
• Why is the Vulcan Energy share price leaping 7% on Thursday?
• Tesla sells 75% of Bitcoin holdings. Here’s why Elon Musk is unloading

Howard Smith 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 Tesla. 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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