Category: Stock Market

The Zip Co Ltd (ASX: ZIP) share price is pushing higher following the release of the company’s quarterly update.

At the time of writing, the buy now pay later (BNPL) provider’s shares are up 5% to 70 cents.

Zip share price higher on Q4 update

Here’s s summary of the company’s performance during the quarter:

• Group quarterly revenue up 27% to $160.1 million
• Revenue margin down 30 basis points quarter on quarter to 7.5%
• Customer numbers up 5.3% quarter on quarter to 12 million
• Quarterly transaction volume up 20% year on year to $2.2 billion
• Transaction numbers up 37% year on year to 19.4 million
• Cash transaction margin up 10 basis points quarter on quarter to 2.4%
• ANZ net bad debts up 42 basis points quarter on quarter to 3.82%

What happened during the quarter?

During the three months ended 30 June, Zip reported a 27% increase in quarterly revenue over the prior corresponding period to $160.1 million.

Management advised that this reflects strong results across its consumer operations in the United States, Australia, New Zealand and Rest of World despite growth being tempered by a deterioration in consumer sentiment and adjustments to risk settings.

Though, it is worth noting that quarter on quarter US revenue fell 2%, ANZ revenue rose a modest 2%, and Rest of the World revenue was flat at just $8.5 million.

This means that for the full-year, Zip delivered revenue of approximately $621.5 million. And while this is a healthy 54% increase year on year, it is short of what some analysts were expecting.

For example, a recent note out of Macquarie reveals that its analysts were expecting Zip to report a 59.9% increase in revenue to $644.24 million for FY 2022. So, the company has missed on the top line with this update.

Global review

Zip has revealed that it is taking steps to right size its global cost base and accelerate the company’s path to profitability. This includes closing down its Singapore business and looking at options for other Rest of the World businesses including the UK.

In addition, as part of the review, the company has looked at the goodwill against the Spotti, Twisto and Quadpay assets. It is now assessing the need to take an impairment charge against the carrying value of goodwill of these assets in its FY 2022 accounts.

Management also revealed that it will be closing down Zip Business and the Pocketbook app, as well putting its planned crypto and investment products on the back-burner.

Management commentary

Zip’s co-founder and global CEO, Larry Diamond, was pleased with the quarter. He said:

We are pleased to announce another solid set of results across our key operating metrics in Q4, demonstrating the continued strength of the Zip business. All this was done whilst balancing and implementing our updated financial strategy to fast-track profitability, by reducing our global cost base, and refocusing our capital and efforts on core products and core markets.

Diamond also commented on the decision to terminate the merger with Sezzle Inc (ASX: SZL), which he and the Zip board believe was in the best interests of shareholders. Particularly as management expects it to allow the company to reach profitability earlier than planned. He explained:

Given the significant and swift changes to the broader macro and capital environment since signing, Sezzle and Zip mutually agreed to terminate the proposed transaction, both businesses opting to focus on their core strategy. As Directors we saw this to be in the best interests of shareholders – we wish Charlie and the Sezzle team all the best in FY23.

This coupled with recent decisions made, as well as ongoing strategic initiatives, will see the group reach cash EBTDA profitability earlier than anticipated.

Zip’s global CEO remains optimistic on the future of the company despite the market’s bleak view on the BNPL industry. He concluded:

As we celebrate our 9th birthday, we reflect on the incredible growth, from start-up pioneering the role of BNPL, to a publicly listed, global business with over 12m customers. Our role as a financial services technology provider is becoming even more crucial in the current climate as we support our customers and merchant partners through this inflationary period. The resilience of Zip and its business model has us well placed to thrive through this next stage of the journey and even though we are nine years in, it genuinely feels like we are only getting started!

The post Zip share price up 5% following Q4 update appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• Why Iluka, JB Hi-Fi, Megaport, and Zip shares are racing higher
• Zip share price jumps 14% ahead of tomorrow’s update
• How to beat the market with ‘boring’ ASX shares: fundie
• Has the Zip share price finally hit rock bottom?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended 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 broker Macquarie has picked out two compelling S&P/ASX 200 Index (ASX: XJO) shares that could be solid buys at current levels.

There has been a lot of volatility in recent times, opening up opportunities for investors to find businesses at much lower prices.

Interestingly, both of these ASX 200 shares I’m about to refer to have exposure to mining.

Let’s have a look at two of the picks Macquarie just called a buy.

Deterra Royalties Ltd (ASX: DRR)

This business is a royalty revenue owner. It receives royalties, with a key asset being Mining Area C (MAC), an iron ore hub operated by BHP Group Ltd (ASX: BHP).

Deterra also pays out 100% of its net profit after tax (NPAT) as a dividend.

Looking ahead, Deterra expects BHP’s South Flank to grow its MAC volumes. Deterra says it will also be “patient and disciplined” with value-adding acquisitions.

The company has no direct exposure to project operating costs and there are no capital cost obligations.

Macquarie rates Deterra Royalties as a buy, with BHP’s recent update showing growth at South Flank.

The broker has a share price target of $5 on Deterra Royalties. This implies a possible rise of about 20%.

This ASX 200 share could offer a grossed-up dividend yield as high as 13.7%.

Lynas Rare Earths Ltd (ASX: LYC)

As the name suggests, Lynas is a rare earths miner. It mines minerals such as neodymium and praseodymium (NdPr).

The company is benefitting from elevated commodity prices. In a recent update, Lynas said that the NdPr price was 70% to 80% higher than at the same time last year.

Resource prices are key for miners. It costs a similar amount to extract materials out of the ground, no matter what the commodity price is doing. So any increase in the price can largely fall to the bottom line.

The average China domestic price for NdPr during the three months to 30 June was US$120 per kilo.

In that quarter, the company generated $294.5 million of sales revenue.

The company has been making progress on the construction of the Kalgoorlie rare earths processing facility. All five kiln sections have been lifted into position and assembled.

Lynas has also been awarded a US$120 follow-on contract by the United States Department of Defence to construct a heavy rare earths facility in the US.

Macquarie recently rated the Lynas share price as a buy with a price target of $12.50. This implies a possible rise of about 50%.

The broker says Lynas is valued at 10 times FY23 estimated earnings.

The post Here’s why Macquarie thinks these 2 ASX 200 shares can outperform appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• The Accent share price has already surged 18% in FY23. What’s next?
• Here are the top 10 ASX shares today
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• Here are the 3 most heavily traded ASX 200 shares on Wednesday

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 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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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 slated to report its second-quarter 2022 results after the market close on Thursday, July 28. An analyst conference call is scheduled for the same day at 5:30 p.m. ET. 

Investors will probably be approaching the e-commerce and technology behemoth’s report feeling somewhat cautious. Last quarter, the company’s earnings missed Wall Street’s expectation, while its revenue was in line with the consensus estimate. While investors were undoubtedly not pleased with the bottom-line result, they were likely more concerned about the company’s second-quarter revenue guidance. It came in significantly lower than what analysts had been projecting.

Investors are increasingly worried about the macroeconomic environment. So far, persistent high inflation hasn’t affected consumer spending, in general, all that much. However, this could change as more consumers become concerned that the U.S. economy could slip into a recession. If many consumers notably ratchet back their discretionary spending, Amazon’s e-commerce business results would be hurt.

That said, investors should keep the bigger picture in mind, as this is a company with what seems like countless current and potential avenues for long-term growth. 

Here’s what to watch in Amazon’s upcoming report. 

Amazon’s key numbers

Metric	Q2 2021 Result	Amazon’s Q2 2022 Guidance	Amazon’s Projected ChangeÂ	Wall Street’s Consensus Estimate	Wall Street’s Projected Change
Revenue	$113.1 billion	$116.0 billion to $121.0 billion	3% to 7%	$119.4 billion	5.6%
Earnings per share (EPS)	$0.76*	N/A	N/A	$0.16	(79%)

Data sources: Amazon and Yahoo! Finance. *Adjusted to reflect the 20-for-1 stock split in June 2022. Note: Amazon does not provide earnings guidance.

While Amazon doesn’t provide guidance for earnings, it does so for operating results. Management expects its operating result to fall between an operating loss of $1 billion and an operating income of $3 billion. In the year-ago quarter, the company posted operating income of $7.7 billion.

The company is facing tough comparables, as it had robust results in the year-ago period. One factor adding to the challenging comparables is the shifting of the annual Prime Day event from the second quarter of last year to the third quarter of this year. In addition, foreign exchange headwinds likely hurt the second-quarter’s revenue because the U.S. dollar has gained strength against other currencies over the last year.

For context, in the first quarter, Amazon’s revenue increased 7% year over year (and 9% in constant currency) to $116.4 billion. That result was on target with the $116.3 billion Wall Street had expected and near the high end of the company’s guidance range of $112 billion to $117 billion. By segment, sales in North America and Amazon Web Services rose 8% and 37%, respectively, while those in international fell 6%. 

Last quarter’s net loss was $3.8 billion, or $7.56 per share ($0.38 per share when adjusted for the 20-for-1 stock split in June). That compared with net income of $15.79 per share in the year-ago period. This result fell far short of the analyst consensus estimate of net income of $8.48 per share.

A sizable part of the shortfall was due to a pre-tax valuation loss of $7.6 billion from Amazon’s common stock investment in electric vehicle maker Rivian Automotive, which held its initial public offering (IPO) last November. Absent this item, Amazon would have recorded a net profit, rather than a loss. However, it still would have missed Wall Street’s expectation.

Third-quarter guidance

Amazon stock is likely to move if management’s third-quarter outlook comes in notably different than Wall Street’s expectations. 

The company provides guidance for revenue, but not earnings. However, its operating income outlook usually gives investors a ballpark idea as to what year-over-year percentage change management expects on the bottom line.

For Q3, analysts are currently modeling for Amazon’s revenue to increase 15% year over year to $127.8 billion and EPS to rise 16% to $0.36. Keep in mind that Q3 will get a boost from Prime Day being held in the quarter, versus in Q2 last year.  

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

The post Amazon earnings: What to watch on July 28 appeared first on The Motley Fool Australia.

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

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The Sonic Healthcare Limited (ASX: SHL) share price could be a leading opportunity right now, in my opinion.

Sonic Healthcare is one of the leading global pathology businesses, with operations in Australia, New Zealand, North America, and Europe.

Since the start of 2022, the Sonic Healthcare share price has dropped back by 27%. I think the business looks good value with what’s going on in the healthcare space.

Third wave of Omicron to lead to more testing?

Over the past two and a half years, COVID testing has helped the company’s revenue and net profit after tax (NPAT) significantly.

According to Sonic’s FY22 half-year result, its revenue increased 7% year over year to $4.76 billion. Net profit went up 22% to $828 million. But, the base revenue (which excludes COVID revenue) increased 4.3% year over year.

Over the FY22 first half, the Sonic Healthcare share price increased by 22.5%.

Sonic management is expecting ongoing growth of the base business, with “strong underlying drivers, including catch-up of testing postponed through pandemic”.

COVID-19 cases are now increasing, as are hospitalisations, as a third wave of Omicron sweeps across Australia.

The federal chief health officer, Paul Kelly, has warned this is the “start of this wave, not the end”, according to reporting by The Guardian.

Calls to get a PCR test despite a negative RAT

Concession card holders will now have continued access to free RAT tests through their local pharmacies. The program has been extended until 31 July.

Australian Medical Association vice president Dr Chris Moy said people who return a negative RAT test but continue to experience symptoms should have a PCR test.

Moy told ABC Radio Sydney:

A positive is a positive. The issue is you can’t rely on a negative if you continue to have symptoms… By the time [a RAT] may go positive, it may be too late to get these antivirals.

We need you to go out there straight away, get a PCR test. If you’re positive then we can get the ball rolling to give you these potentially life-saving treatments.

I think these different factors could lead to a resurgence of PCR testing, which would be a boost for Sonic’s earnings and therefore, potentially, the Sonic Healthcare share price.

Even after this wave, I think Sonic’s previous comments about expectations of ongoing COVID testing are almost as relevant now as they were with the FY22 half-year result:

[We] expect a sustainable level of COVID testing into the future, including routine COVID testing, screening programs, variant testing, whole genome sequencing, antibody tests.

Profit can be used to boost shareholder returns

I like that Sonic Healthcare has been using some of its elevated cash flow to make acquisitions to boost long-term growth.

For example, over the past 12 months it has bought ProPath in Dallas. ProPath makes US$110 million in revenue. It’s also bought Canberra Imaging Group in Australia, which makes $60 million in revenue.

It could continue to make earnings-boosting acquisitions, too.

Sonic Healthcare has a progressive dividend policy. It has also launched a $500 million on-market share buyback.

Foolish takeaway

I think that the Sonic Healthcare share price is attractive because of the ongoing growth of its base business, the ageing demographic tailwinds, continuing COVID-19 testing, a growing dividend, and the ability for the business to keep putting excess cash to good use with acquisitions and share buybacks.

The post Here’s why I think the Sonic Healthcare share price could jump higher appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX shares today
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• Own Sonic Healthcare shares? Here’s a look at the state of its balance sheet
• Here are the top 10 ASX shares today
• What was the Sonic Healthcare share price when it first listed on the ASX?

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 recommended Sonic Healthcare 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 Megaport Ltd (ASX: MP1) share price was an exceptionally strong performer on Wednesday.

The elastic Interconnection services provider’s shares ended the day a massive 23% higher at $7.96.

Investors were bidding the Megaport share price higher following a rebound in the tech sector and the release of a strong quarterly update.

Can the Megaport share price keep rising?

The good news is that one leading broker believes the Megaport share price can still climb meaningfully from here even after yesterday’s stellar gain.

According to a note out of Goldman Sachs, its analysts have reiterated their buy rating and lifted their price target slightly to $9.60.

Based on the current Megaport share price, this implies potential upside of 20% over the next 12 months.

What did the broker say?

Goldman was very pleased with Megaport’s performance during the fourth quarter and notes that the “improvement in the sales cadence of core products (ex MVE) across both direct/indirect channels was the key highlight of the result.” It added:

[We] see this as a net improvement for the sales trajectory, particularly given uncertainty following recent MP1 mgmt. changes and slowing US enterprise IT spending (GS tracker). We now forecast FY23/24/25E revenue growth of +39/35/30%, with the partner channel and MVE products remaining key medium term drivers.

Another huge positive from the update was Megaport’s achievement of its first quarterly EBITDA profit. Goldman believes this de-risks funding concerns and should provide valuation support. It said:

EBITDA Breakeven de-risks funding concerns: with MP1 showing the underlying operating leverage within the business to reach EBITDA breakeven for the first time in 4Q22, which we believe is a key catalyst (noting the valuation gap between unprofitable/profitable tech). We now forecast FCF breakeven by FY24, driven primarily by operating leverage from revenue growth (assuming ongoing capex of A$30mn), noting current cash burn rate implies 13-14 quarters of funding capacity (vs. 5-6 in 3Q22).

All in all, the broker remains very positive on the Megaport share price. Particularly given “the product leadership of the company, and the rapidly growing NaaS/SD-WAN addressable markets.”

The post Brokers says the Megaport share price can keep charging higher appeared first on The Motley Fool Australia.

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More reading

• Why Iluka, JB Hi-Fi, Megaport, and Zip shares are racing higher
• 3 ASX tech shares rocketing by over 15% today
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• Megaport share price explodes 38% on June quarter profit
• What’s in store for the Megaport share price this earnings season?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended 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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Investors are currently in a situation where they may have to withstand an economic downturn.

Fortunately there are still some ASX shares one can buy that could prove resilient through such times.

Healthcare, some experts say, is one such sector.

After all, people still have to treat their injuries and illnesses even if the economy is not humming.

And luckily, on the ASX, the health sector has already been found to be one that is experiencing a resurgence after trending down until last month.

“I think the healthcare sector is going to do pretty well,” Switzer Financial Group director Paul Rickard told Switzer TV Investing last week.

“In fact, it’s been doing well in the last four to six weeks.”

Two experts this week picked out two of the best healthcare stocks that they would buy at the moment:

‘A great record of positive surprises’

Fairmont Equities managing director Michael Gable likes the look of CSL Limited (ASX: CSL) at the moment.

He noted that ever since the stock price hit a trough in February, it has been inching upwards despite the rest of the market plunging.

“Healthcare stocks have recently found solid buying support because of reliable earnings,” Gable told The Bull.

“The share price of this blood products company recently pushed through a major resistance level near $280. Consequently, we expect the price to rally towards last year’s peak near $320.”

CSL shares closed Wednesday at $291.23.

Rickard reminded investors that CSL has, in the past, enjoyed decent investor support during earnings seasons.

“Healthcare companies have traditionally done really well in reporting season,” he said last week.

“Companies like CSL have a great record of positive surprises.”

‘Quality defensive exposure’

Baker young managed portfolio analyst Toby Grimm is a fan of Ramsay Health Care Limited (ASX: RHC).

“The private hospital operator offers quality defensive exposure to ageing populations and expanding healthcare services,” he said.

“While still working through pandemic headwinds, we see strong recovery potential ahead, as suggested by a non-binding, conditional takeover bid from a consortium of investors led by US private equity giant KKR at $88 a share.”

The share price has cooled off since that offer in April, to now trade around the $70 mark.

Other analysts are somewhat divided over Ramsay.

According to CMC Markets, five out of 12 professional investors rate the stock as a buy. Five recommend a hold while two reckon it’s time to sell.

The post 2 ASX shares in healthcare ripe to buy right now: experts appeared first on The Motley Fool Australia.

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More reading

• 3 blue chip ASX 200 shares experts say are buys
• Own CSL shares? Here’s a look at the biotech’s balance sheet
• 2 top ASX 200 shares brokers rate as buys
• Here’s how much $20k invested in these ASX shares 10 years ago is worth today
• CSL shares ‘well-positioned to deliver double-digit earnings growth’: expert

Motley Fool contributor Tony Yoo has positions in CSL Ltd. 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 Ramsay Health Care 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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If you are looking to boost your income with some dividend shares, then two listed below could be worth considering.

Both of these dividend shares are expected to provide investors with good yields in the near term. Here’s what you need to know about them:

National Storage REIT (ASX: NSR)

The first ASX dividend share for income investors to look at is National Storage.

It is a leading self-storage operator with a network of over 200 centres that provide tailored storage solutions to ~100,000 residential and commercial customers.

But management isn’t settling for that. It continues to develop and acquire centres in the highly fragmented industry. Combined with rental growth, this bodes well for its income and distributions over the coming years.

Ord Minnett is a fan of National Storage. Last week the broker reiterated its buy rating and lifted the price target on its shares to $2.70.

As for dividends, its analysts are now forecasting dividends per share of 10 cents in FY 2022 and 11 cents in FY 2023. Based on the current National Storage share price of $2.28, this equates to yields of 4.4% and 4.8%, respectively.

Rural Funds Group (ASX: RFF)

Another ASX dividend share that income investors might want to look at is Rural Funds.

It is an agricultural focused real estate investment trust (REIT) that owns a high quality portfolio of assets across a range of agricultural industries.

These include almond and macadamia orchards, premium vineyards, water entitlements, cropping and cattle farms, which are all leased to major industry players on long term contracts.

Together with periodic rental increases, this position Rural Funds perfectly for sustainable long term earnings growth.

In respect to dividends, the company plans to increase its dividend by its annual target rate of 4% again in FY 2022 and FY 2023. This will mean a dividend of 11.73 cents per share in FY 2022 and then 12.2 cents in FY 2023. Based on the current Rural Funds share price of $2.66, this represents yields of 4.4% and 4.6%, respectively.

The post Here are top 2 ASX dividend shares with great yields appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX shares today
• Why Ardent Leisure, Michael Hill, National Storage, and WiseTech shares are rising
• Best ASX shares to buy in July 2022
• 4 ASX dividend shares to buy that aren’t banks or miners: expert
• This is the latest ASX 200 sector to be hit by downgrades

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 positions in and has recommended RURALFUNDS STAPLED. 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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S&P/ASX 200 Index (ASX: XJO) energy shares are in the spotlight as European nations face major gas shortages amid Russia’s ongoing war in Ukraine.

The looming gas crunch has been on investor radars since Russian forces began to mass on their neighbour’s border back in January. But things are coming to a head as fears grow Russia may forgo its lucrative gas revenues and shut off its gas exports to Europe.

Russia is among the world’s top oil producers, trailing only the United States and Saudi Arabia.

When it comes to liquified natural gas (LNG) exports, however, Australia leads the global charge.

Which begs the question, can leading ASX 200 energy shares like Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) help fill the energy void as Europe weans itself – whether voluntarily or involuntarily – off Russian gas?

We’ll get back to that possibility in a tick.

First, here’s the latest call to arms from the executive director of the International Energy Agency (IEA), Fatih Birol.

First true global energy crisis in history

Soaring gas prices may be good news for the profit margins of ASX 200 energy shares. But they also may be a harbinger of difficult times ahead for many people across the globe.

In a report released on Monday, Birol said, “After many months of warning signs, Russia’s latest moves to squeeze natural gas flows are a red alert for the EU.”

According to Birol:

The world is experiencing the first truly global energy crisis in history. And as the International Energy Agency has been warning for many months, the situation is especially perilous in Europe, which is at the epicentre of the energy market turmoil. I’m particularly concerned about the months ahead.

The gas crisis in Europe has been building for a while, and Russia’s role in it has been clear from the beginning…

After Russia invaded Ukraine on 24 February, nobody in Europe or elsewhere could be under any illusions about the risks around Russian energy supplies.

Shortly after Russia’s military invaded Ukraine, the IEA released a 10-point plan for the EU to cut its reliance on Russian gas.

The report “stressed the need to maximise gas supplies from other sources; accelerate the deployment of solar and wind; make the most of existing low emissions energy sources, such as renewables and nuclear; ramp up energy efficiency measures in homes and businesses; and take steps to save energy by turning down the thermostat”.

With the IEA emphasising the need for Europe to source gas supplies from sources outside of Russia, could this bolster ASX 200 energy shares?

ASX 200 energy shares eyeing the longer game

ASX 200 energy shares like Santos and Woodside aren’t immediately in a position to replace Russian gas exports into the EU, with most of their mid-term supplies already locked into existing sales contracts.

Ramping up LNG production also isn’t something that can be accomplished overnight.

But that doesn’t rule out a bigger role for ASX 200 energy shares in European markets inside the next few years.

In a report released in March, just weeks after the Russian invasion, EnergyQuest said (courtesy of The Australian Financial Review):

With the European crisis, the demand for Australian LNG is likely now to be even greater, which is an opportunity to win more contracts for current new projects. Woodside should be able to contract more of Scarborough and Santos more of Barossa.

The second priority would be to keep existing plants full, particularly the North West Shelf in the face of its looming decline.

ASX 200 energy shares are certainly interested in taking a slice of the European gas market out of Russian hands.

In late March, Santos strategic adviser external affairs Tracey Winters said (quoted by The West Australian), “The really important lesson out of Russia’s interference in western democracies is that we need to reduce not increase the west’s reliance on Russian oil and gas supplies.”

Citing the IEA’s 10-point plan she pointed out that, “Number two on that list is increasing supply from other sources.”

“There’s a lot of evidence that Russia has sought to maximise the west’s reliance on oil and gas from Russia, which in the case of Europe is a massive problem,” Winters said. “Natural gas will continue to play an important role in serving the energy needs of Australia and the world for at least the next two decades.”

Earlier this month, deputy head of equities at Perpetual Vince Pezzullo cited the EU gas crisis as one of the reasons Perpetual thinks ASX 200 energy share Santos is “a compelling opportunity”.

According to Pezzullo:

Europe is also looking to diversify its sources of gas to decrease their heavy reliance on Russia. One of the ways it is looking to do this is through increasing LNG imports and Santos is a key global producer through its stake in the PNG LNG, Gladstone LNG, and Darwin LNG assets.

The post ‘Not enough’: Could Europe’s gas woes bolster ASX 200 energy shares? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• Why this fundie believes Woodside shares are still an ‘attractive investment’
• 5 things to watch on the ASX 200 on Wednesday
• Why JB Hi-Fi, Mesoblast, Pendal, and Woodside shares are pushing higher
• Why is the Santos share price on such a tear today?

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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Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Cyan Investment Management portfolio manager Dean Fergie reveals what he would do with three ASX shares that have lost half their value in 2022.

Cut or keep?

The Motley Fool: Now let’s talk about three ASX shares that have seen their prices plummet in recent times.

What would you do with Playside Studios Ltd (ASX: PLY), which you’ve previously discussed with us. How do you feel about it these days? The share price has halved this year.

Dean Fergie: Look, Playside, I think it got pretty hyped up. They did a game called Dumb Ways to Die and released a bunch of NFTs on the back of it. So the characters within the game are called Beans, and they released 2,000 Beans. And they made, within a month, something like $7 or $8 million by selling the NFTs. Now, I don’t have to tell anyone that the whole cryptocurrency and NFTs are not the flavour of the month anymore. So I think some of the hype that was in Playside has dissipated. 

However, in the last month they’ve signed an extended agreement with Facebook and Meta Platforms Inc (NASDAQ: META) to do more gaming development for them. They’ve got a couple of big games that they’re about to release. So, for us, we think it’s an A-grade gaming developer on a global stage, which is a small company based in Australia. 

And we think there’s clearly been quite a bit of corporate activity in terms of Microsoft Corporation (NASDAQ: MSFT) buying Activision Blizzard last year. So for us a business like Playside, that’s doing its own IP [intellectual property] in terms of gaming but also gaming development for some of the biggest gaming companies around the globe, is a great long-term investment.

MF: And for such a small company, it’s profitable, isn’t it? That’s handy.

DF: That’s right. Really, really strong growing revenues, but a nice blend of its own IP in terms of games, but also work for hire for some of the really, really big companies around town. So we think it’s a great medium-term story.

MF: Great. So it sounds like you still have your holdings and are happy to hold onto them.

DF: Yeah. What’s been really interesting about all of our holdings that have fallen pretty substantially over the last six months is that the news they’ve released has been, by and large, really, really positive. 

It’s not like they’ve come out with strong earnings downgrades, that they’ve had debt covenants flow and all these things, haven’t lost customers. Across the board, the news flow has been really positive, which has been in stark contrast to the movement in share prices.

MF: The next one is one that I don’t think your fund has ever held — a software company called Whispir Ltd (ASX: WSP), which has also halved so far this year.

DF: This was one of these businesses that when it IPOed, we probably thought it was a little bit toppy in terms of its valuation. Maybe we were correct for a while. I think it maybe floated at around $1.50 and then went up to $4, and it’s come back to a dollar or so.

This is one of these businesses that has got a really, really strong corporate client base, which is positive, [and] really, really strong growth in revenues. But, unfortunately, it’s still running a pretty high cost base. So it still isn’t profitable. Even though, from my memory, they said at the IPO they would be profitable in the next year, which they haven’t been. And I would say right now, if any business should be cutting costs, it would be right now.

I think it’s got a market cap of around $130 million and something like $30 million on its balance sheet. I think this is one of these businesses, it’s probably worth investors having a closer look at, because they’ve got a good commercialised messaging product with Bluetooth clients, a strong balance sheet, growing revenues. They just need to dial back their costs and it could actually be quite a good business.

MF: So next month’s results season will be pretty interesting for Whispir, won’t it?

DF: Yeah. I think these businesses they’ve just got to stop burning cash. This is not a market where you can raise money easily, or if you want to raise money, it’s going to be expensive because your share prices are so trash. 

So it’s certainly one that if they start making the right noises, then I’d consider adding it to my portfolio.

MF: And the third one is Maggie Beer Holdings Ltd (ASX: MBH), which has halved since February. It’s another one that you’ve discussed in the past. I wonder how you feel about it at this moment?

DF: Yeah… we’ve recently sold it. Their dairy assets, they’re trying to sell them, but they haven’t sold them yet. I think there’s some challenges in terms of getting a decent price for them. 

But Maggie Beer products I think are selling quite well. The Hampers Emporium business, the online business that they bought a couple of years ago, is a good business, but I think it was a real COVID play.

You’ve seen it across the board with Adore Beauty Group Ltd (ASX: ABY), Temple & Webster Group Ltd (ASX: TPW), Kogan.com Ltd (ASX: KGN), and the like, all these online businesses had a great [few years]. 

As everyone gets back to normal, they’re more likely to spend money going on an overseas holiday or interstate rather than sending a hamper to their friends. So I think there’s some pressure there. 

Plus, on the cost side, in terms of packaging, logistics, transport, and the like, these businesses, their margins are going to come under pressure. And when you don’t have an enthusiastic client base, I think their margins are going to continue to get squeezed in the medium term.

MF: Did you end up selling at a loss or a gain?

DF: We held it for quite a long period of time. Let me just have a look. We might have been close to square. Maybe a moderate profit. 

We would have done really nice if we’d sold at 50 or 60 cents, but we sold it in the high 30s, low 40s, having bought it a couple of years previously. So it wasn’t as good as we thought it would have been. 

The post ‘Great long-term investment’: Expert names small-cap ASX share to buy for cheap appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX All Ords shares are serving up 15% gains today

Motley Fool contributor Tony Yoo has positions in Microsoft, Temple & Webster Group Ltd, and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Activision Blizzard, Kogan.com ltd, Microsoft, Temple & Webster Group Ltd, and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia has positions in and has recommended Kogan.com ltd. The Motley Fool Australia has recommended Activision Blizzard, Adore Beauty Group Limited, Temple & Webster Group Ltd, and Whispir 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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On Wednesday, the S&P/ASX 200 Index (ASX: XJO) had one of its best days of the year. The benchmark index rose a massive 1.65% to 6,759.2 points.

Will the market be able to build on this on Thursday? Here are five things to watch:

ASX 200 expected to fall

The Australian share market is expected to fall on Thursday despite another solid night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 28 points or 0.4% lower this morning. On Wall Street, the Dow Jones was up 0.15%, the S&P 500 rose 0.6%, and the NASDAQ stormed 1.6% higher.

ANZ shares to return

The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is scheduled to return to trade this morning. This follows the completion of the institutional component of the banking giant’s capital raising. ANZ is raising $3.5 billion at a 12.7% discount of $18.90 to fund the acquisition of the banking operations of Suncorp Group Ltd (ASX: SUN) for $4.9 billion. The bank’s plan has received a relatively mixed reaction from the market.

Oil prices tumble

Energy shares including Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) could have a tough day after a poor night of trade for oil prices. According to Bloomberg, the WTI crude oil price is down 1.5% to US$102.61 a barrel and the Brent crude oil price is down 0.5% to US$106.77 a barrel. Softening US gasoline demand weighed on prices.

Gold price sinks

Gold miners Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) could have a poor day after the gold price sank overnight. According to CNBC, the spot gold price is down 1% to US$1,693.4 an ounce. Improving risk sentiment and a strong US dollar put pressure on the safe haven asset.

Zip Q4 update

The Zip Co (ASX: ZIP) share price will be one to watch this morning when the buy now pay later (BNPL) provider releases its fourth quarter and full year update. According to a note out of Macquarie, its analysts are expecting Zip to report a 59.9% increase in revenue to $644.24 million for FY 2022.

The post 5 things to watch on the ASX 200 on Thursday appeared first on The Motley Fool Australia.

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More reading

• The Accent share price has already surged 18% in FY23. What’s next?
• Here are the top 10 ASX shares today
• After a horror year, will FY23 see the VAS ETF bounce back?
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Why this fundie believes Woodside shares are still an ‘attractive investment’

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended 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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