Category: Stock Market

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

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

Amazon (NASDAQ: AMZN) and Alibaba (NYSE: BABA) might initially look very similar. Both companies are e-commerce leaders that have built up massive cloud infrastructure platforms as their secondary businesses. Both have also expanded their sprawling ecosystems into adjacent markets such as video games, streaming media, and smart speakers.

But dig a little deeper and those superficial similarities quickly fade away. Today I’ll examine the key differences between Amazon and Alibaba, how they affect the market’s perceptions of both stocks, and if either tech giant is still worth investing in.

Don’t call Alibaba the “Amazon of China”

Alibaba is often referred to as the “Amazon of China,” but that casual comparison glosses over three key differences.

First, Alibaba actually generates all of its operating profits from its commerce (online and offline retail) businesses. Its cloud segment, Alibaba Cloud, continues to rack up operating losses and can only squeeze out a razor-thin profit on an adjusted earnings before interest, taxes, and amortization (EBITA) basis. That makes it the polar opposite of Amazon, which consistently generates most of its operating profits from Amazon Web Services (AWS), the largest cloud infrastructure platform in the world.

In other words, Alibaba at this point is still subsidizing the expansion of its cloud platform, which is the largest in China, with the growth of its retail marketplaces. Amazon subsidizes the expansion of its lower-margin retail business with its ongoing expansion of AWS.

Second, Alibaba still generates most of its revenue in China, but it’s been a top target of the country’s antitrust regulators. It was slapped with a record $2.8 billion fine last year, then forced to end its exclusive deals with top merchants and rein in its promotional deals. Those setbacks arguably made it easier for rivals like JD.com (NASDAQ: JD) and Pinduoduo (NASDAQ: PDD) to gain ground on Alibaba. Amazon also faces some regulatory challenges across the world, but its business is much better diversified, with more than a dozen region-specific marketplaces.

Lastly, the Securities and Exchange Commission has threatened to delist Alibaba and other Chinese stocks from U.S. stock markets as early as next year if they don’t comply with U.S. auditing standards. That unresolved threat could prevent most investors from buying Alibaba as a long-term investment. 

Alibaba faces a tougher slowdown than Amazon

Alibaba’s revenue rose by 19% to 853.1 billion yuan ($134.6 billion) in its fiscal 2022, which ended March 31. Its Chinese commerce revenue rose 18%, and its cloud revenue increased 23%.

But in its fiscal 2023, analysts expect its revenue to increase by just 9% as it grapples with macroeconomic and competitive headwinds for its e-commerce business, as well as a slowdown in cloud spending by large internet companies.

Amazon’s revenue rose 22% to $469.8 billion in 2021. Its North American sales grew by 18%, its international sales increased by 22%, and its AWS sales jumped by 37%.

However, Amazon expects its e-commerce growth to cool off in a post-lockdown world, with supply chain and inflationary headwinds exacerbating that pressure. As a result, analysts expect Amazon’s revenue to rise by only 12% this year. On the bright side, they expect AWS to continue growing at a healthy clip.

But Amazon faces a steeper earnings decline

Alibaba and Amazon both intend to ramp up their spending as their revenue growth slows down. Alibaba plans to pour more cash into its discount marketplaces (Taocaicai and Taobao Deals) to counter Pinduoduo and JD’s Jingxi in the lower-end market, and to continue increasing its mix of first-party sales — which will squeeze its margins, but will help it address the quality control and logistics issues across its third-party marketplaces. It will also continue expanding its lower-margin overseas marketplaces.

Analysts expect Alibaba’s net income to rise by 53% in its fiscal 2023, but that’s only because it’s lapping a very easy comparison to its 59% decline (which included its antitrust fine) in fiscal 2022.

Amazon is grappling with higher fuel and labor costs, as well as the ongoing pressure to allow its workers to unionize. At the same time, it’s increasing its investments in its digital ecosystem (videos, music, and games) to lock in its Prime subscribers. Analysts expect all those headwinds to reduce Amazon’s net income by 76% in 2022.

Which stock is the better buy?

Alibaba trades at less than 10 times this year’s adjusted earnings estimate, while Amazon has a much higher forward price-to-earnings ratio of 48. Both multiples have been slightly skewed by the companies’ elevated spending plans for their current fiscal years, but both stocks still look cheap relative to their top-line growth, trading at about 2 times this year’s sales. 

Alibaba might initially appear to be the better bargain, but its stock won’t command a higher premium until it stabilizes its e-commerce businesses and overcomes its regulatory headwinds in China and the U.S. As for Amazon, its stock could also remain in limbo until it reins in its spending again.

That said, I believe Amazon is still a better buy than Alibaba now because it’s growing faster, it’s better diversified, and it doesn’t face any delisting threats. 

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

The post Better buy: Amazon vs. Alibaba appeared first on The Motley Fool Australia.

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Leo Sun has positions in Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and JD.com. The Motley Fool Australia has recommended Amazon and JD.com. 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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Unfortunately for its shareholders, the Wesfarmers Ltd (ASX: WES) share price has been out of form in 2022.

Since the start of the year, the conglomerate’s shares have lost a disappointing 27% of their value.

Is the Wesfarmers share price weakness a buying opportunity for income investors?

According to a recent note out of Morgans, its analysts are positive on Wesfarmers and believe recent weakness has created a buying opportunity for investors. Particularly given the quality of its retail portfolio and strength of its management team.

Morgans currently has an add rating and $58.40 price target on the conglomerate’s shares.

So, with the Wesfarmers share price last trading at $43.67, the broker’s price target suggests potential upside of almost 34% for investors over the next 12 months.

Its analysts commented:

WES possesses one of the highest quality retail portfolios in Australia with strong brands including Bunnings, Kmart and Officeworks. The company is run by a highly regarded management team and the balance sheet is healthy. While COVID-related staff shortages are proving to be a challenge, the core Bunnings division (>60% of group EBIT) remains a solid performer as consumers continue to invest in their homes. We see the pullback in the share price as a good entry point for longer term investors.

What about Wesfarmers’ dividends?

Morgans is forecasting Wesfarmers to pay a fully franked dividend of $1.65 per share in FY 2022. It then expects the company to increase this to $1.81 per share in FY 2023.

Based on the current Wesfarmers share price, this equates to yields of 3.8% and 4.15%, respectively, over the next two financial years.

All in all, this stretches the total potential return on offer with the Bunnings owner’s shares to a very attractive 38%.

The post Should income investors buy Wesfarmers shares for the dividends? appeared first on The Motley Fool Australia.

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More reading

• How much further could the Wesfarmers share price fall? Here’s what the experts reckon
• Experts name 2 ASX dividend shares for income investors to buy now
• The Wesfarmers share price is trading at 2-year lows. Time to plough in?
• Belt tightening? 5 ASX 200 consumer shares slipping to new 52-week lows today
• ASX retail shares tumble following RBA rate rise

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 Wesfarmers 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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Are you interested in adding some more ASX shares to your portfolio when the market reopens?

Three ASX growth shares that could be worth considering are listed below. Here’s what you need to know about them:

Altium Limited (ASX: ALU)

The first ASX growth share to look at is Altium. It is an award-winning printed circuit board (PCB) design software provider. Thanks to its leadership position in a market growing rapidly, management has set itself some bold growth targets over the coming years. This includes more than doubling its revenue to US$500 million by 2026.

Bell Potter appears confident it will get there. As such, it has put a buy rating and $41.25 price target on its shares.

Aristocrat Leisure Limited (ASX: ALL)

Another ASX growth share to look at is Aristocrat Leisure. It is one of the world’s leading gaming technology companies. Aristocrat has emerged from the pandemic in an arguably stronger position than when it entered it. This is demonstrated by its continued market share gains since the reopening. Another positive is that its digital business, now called Pixel United, continues to grow strongly and generate significant recurring revenues. Combined with its share buyback and potential expansion into the real money gaming market, this bodes well for its earnings per share growth in the coming years.

Morgans is a fan of the company. It has an add rating and $43.00 price target on its shares.

TechnologyOne Ltd (ASX: TNE)

A final ASX growth share to look at is enterprise software provider TechnologyOne. It is currently transitioning to become a software-as-a-service (SaaS) focused business. Pleasingly, management has a lot of confidence in the transition. So much so, it is aiming to almost double its annual recurring revenue (ARR) to $500 million by FY 2026.

The team at Goldman Sachs is very positive on Technology One and have been pleased with its transition. The broker currently has a buy rating and $13.30 price target on its shares. Goldman believes the risks are to the upside for TechnologyOne’s ARR target.

The post Experts name 3 ASX growth shares to buy next week appeared first on The Motley Fool Australia.

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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 Altium. The Motley Fool Australia has recommended TechnologyOne 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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ASX 200 energy shares have been the best performing basket on the ASX this year to date, securing an aggregate 40% gain since trading resumed in January.

The S&P/ASX 200 Energy Index (ASX: XEJ), the benchmark of the sector, has climbed another 8% in the last month of trading as well.

The question now becomes if shares within the basket have the legs to run even higher.

Can ASX 200 energy shares continue their ascent?

Providing a bullish underweight to the case is the current breakout in the price of oil. Brent Crude, the world’s benchmark for oil pricing, has broken out to new highs in recent weeks and now trades at US$122 per barrel.

Meanwhile, US natural gas futures have surged more than 173% year on year to US$8.99/MMbtu.

In fact, checking a list of energy-based commodities on Trading Economics, it’s an all green affair for all energy markets on a yearly basis.

JP Morgan’s Annual Energy Paper 2022 also submits that energy players are set to continue realising upside into the coming periods, based on a myriad of factors.

“[G]lobal gas and coal consumption in 2021 were already above pre-COVID levels, and global oil
consumption should surpass pre-COVID levels sometime next year,” it wrote.

“Looking further out, some forecasts of oil demand in 2030 and 2040 are not that different from today.

“With energy demand still in excess of supply, [we] believe the MSCI Global Energy Composite will outperform both renewable energy stocks and the broad equity market again over the next year.”

Coal is also set to remain top-heavy, the energy paper says, reminding us that “coal is still widely relied upon in many developing countries, and also Japan”.

This language appears to provide a robust case for ASX-listed energy giants such as Santos Ltd (ASX: STO), Beach Energy Ltd (ASX: BPT) and Whitehaven Coal Ltd (ASX: WHC).

Each are up a respective 12.5%, 48% and 104% this year at the close on Friday. These returns are plotted on the chart below. Each instrument has tracked the other closely during that time.

As to what’s next for the sector, the market – and likely, geopolitics – will ultimately decide.

The post ASX 200 energy shares are up 40% so far this year. Can they run further? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Friday
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• ASX 200 midday update: Magellan rebounds, Crown’s takeover boost

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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If you’re an income investor, then the Commonwealth Bank of Australia (ASX: CBA) dividend has probably caught your eye over the years.

And with Australia’s largest bank’s shares recently taking an almighty tumble, it may once again be catching eyes.

In light of the recent weakness in the banking sector, let’s take a look to see what analysts are expecting from the CBA dividend in the coming years.

What are analysts forecasting for the CBA dividend in the next few years?

According to a note out of Goldman Sachs, its analysts are expecting the CBA dividend to provide investors with attractive yields through to FY 2024.

In FY 2021, the banking giant rewarded its shareholders with a fully franked $3.50 per share dividend.

Goldman expects this to be increased to $3.75 per share in FY 2022. Based on the current CBA share price of $93.78, this will mean a fully franked 4% yield for investors.

The broker is then forecasting a 20 cents per share increase to $3.95 per share in FY 2023. This equates to a 4.2% yield at today’s share price.

Finally, in FY 2024, Goldman is expecting an even bigger jump from the CBA dividend to a fully franked $4.33 per share. This represents an attractive 4.6% dividend yield for investors.

Is the CBA share price good value?

Unfortunately, the team at Goldman Sachs believe the CBA share price is still overvalued despite its recent pullback.

According to the note, the broker currently has a sell rating and $89.86 price target on its shares. This implies potential downside of 4.2% for its shares over the next 12 months.

Goldman sees more value on offer with other bank shares.

The post Here’s the CBA dividend forecast through to 2024 appeared first on The Motley Fool Australia.

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• Why has the CBA share price cratered 4% 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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Cryptos haven’t had the best of years so far.

Last month alone, the total market cap of the global crypto market fell 28%.

Hammered by rising interest rates, few tokens have been spared from the sharp sell-off over the past seven months.

Bitcoin (CRYPTO: BTC), the world’s original digital token and still the biggest by market cap, has lost 37% of its value this year. On Friday afternoon it was trading for US$30,108 (AU$42,372). The 2022 losses now put the Bitcoin price down 56% from its 10 November all-time high of US$68,790.

The Ethereum (CRYPTO: ETH) price has fared even worse. The world’s second-biggest token, which runs the biggest blockchain, is down 52% this calendar year. At Friday’s price of US$1,792, Ethereum has lost 63% since hitting its own record high of US$4,892 on 16 November.

Similar or even larger losses have impacted the majority of top cryptos.

Cryptos up with the easy money, down with the tightening

Commenting on the struggles facing the digital asset sector over the past seven months, Kara Murphy, CIO of Kestra Holdings, said (quoted by Bloomberg):

It feels very much to me like crypto is also subject to a lot of the monetary cycle that’s been hitting the more traditional asset classes. Looking at the rapid increase in crypto prices, it seems clear that they really benefited from easy-money policies, and now that the money is coming out of the system, that’s a good part of the reason why crypto is declining more recently.

Taking Bitcoin as our proxy for the broader crypto market, investors who bought the token prior to November 2020 will still be sitting on comfortable gains. In October 2020, Bitcoin was still trading for US$10,200.

The same can’t be said for the majority of investors who bought Bitcoin or most altcoins in January 2021 or beyond.

With losses racking up, could we be about to see a wave of selling?

Institutional investors may be the weak hand

According to digital asset broker Bequant, only 51% of anonymous Bitcoin addresses are in the green. That means almost half bought their Bitcoin at prices higher than they can sell them for today.

Now we’re unlikely to see a wave of selling from those crypto investors who bought at far cheaper prices a few years ago, said Wilfred Daye, chief executive officer of Securitize Capital.

But we may be looking at a scenario where it’s the institutional investors who could be the first to cut and run.

According to Daye (quoted by Bloomberg):

There may be capitulation because larger institutional players, guys who got in during the current cycle, they’re at risk of selling their assets and liquidating their assets. This particular cycle that started late 2020, you had a lot of institutional folks getting in at a higher price, so I think it’s more institutional capitulation.

We’re already seeing a surge in Bitcoin miners moving their holdings to public exchanges, where they could be sold.

As the Motley Fool reported on Monday, Bitcoin miners, under pressure from rising costs and falling prices, transferred US$6.3 billion in Bitcoin to exchanges in May.

Of course, this doesn’t mean a wave of institutional crypto selling is imminent. In the fast-moving world of digital assets, any number of factors could turn sentiment around.

The post Could cryptos be facing an upcoming wave of institutional selling? appeared first on The Motley Fool Australia.

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• What crypto winter? It’s always sunny with Solana
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• ‘Wherever there’s smoke there’s probably crypto,’ warns Dogecoin founder

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Ethereum. The Motley Fool Australia has positions in and has recommended Bitcoin and Ethereum. 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 Index (ASX: XJO) was out of form and dropped deep into the red last week. The benchmark index fell 4.2% to end the period at 6,932 points.

While a good number of shares dropped with the market, some fell more than most. Here’s why these were the worst performing ASX 200 shares:

Zip Co Ltd (ASX: ZIP)

The Zip share price was the worst performer on the ASX 200 last week with a 20.3% decline. Investors were selling Zip and other buy now pay later (BNPL) shares after tech giant Apple announced the launch of its BNPL service. Apple Pay Later will allow users to split the cost of an Apple Pay purchase into four equal payments with no interest. The service works with any merchant that already supports Apple Pay and does not require a new payments terminal. This means that merchants don’t even need to offer BNPL for consumers to transact with them with this payment method.

Magellan Financial Group Ltd (ASX: MFG)

The Magellan share price wasn’t far behind and tumbled 17.8% lower during the period. There were a couple of catalysts for this weakness. The first was the release of another disappointing monthly update which revealed a further sizeable decline in funds under management. The other catalyst was news that the company has been dumped from the ASX 100 index.

PointsBet Holdings Ltd (ASX: PBH)

The PointsBet share price was out of form and dropped 16.5% over the five days. Investors were selling the sports betting company’s shares amid weakness in the tech sector. This led to the S&P ASX All Technology index losing 5.2% of its value last week. Loss-making tech shares like PointsBet were hardest hit.

Chalice Mining Ltd (ASX: CHN)

The Chalice Mining share price was a poor performer and tumbled 16.3% last week. Broad market weakness appears to have been weighing on this mineral exploration company’s shares. Not even the company’s appearance at the Resources Rising Stars Conference or some insider buying could stop its shares from falling.

The post These were the worst performing ASX 200 shares last week appeared first on The Motley Fool Australia.

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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 Pointsbet Holdings Ltd and ZIPCOLTD FPO. The Motley Fool Australia has recommended Pointsbet Holdings 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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As we move throughout the month of June, a number of ASX shares have their ex-dividend date coming up.

An explanation for the ex-dividend date is when investors must have purchased a company’s shares. Let’s say you buy XYZ shares on or after the ex-dividend date, then the upcoming dividend will go to the seller.

Below, we take a look at the three small-cap shares that are trading ex-dividend next week.

Which ASX shares are going ex-dividend?

KMD Brands Ltd (ASX: KMD) shares will trade ex-dividend next Tuesday for the adventure retailer’s NZ$0.03 cents (A$0.027) per share fully franked dividend. This will be paid to eligible shareholders on 30 June. The KMD Brands share price closed down 3.67% at $1.05 on Friday.

Plato Income Maximiser Ltd (ASX: PL8) shares are set to trade without the rights to the investment company’s $0.0055 cent per share fully franked dividend on Wednesday. Shareholders will have to wait until 30 June for their paycheck. Plato shares closed 1.25% higher on Friday at $1.215.

Tower Ltd (ASX: TWR) shares will also trade ex-dividend next Wednesday for the New Zealand-based insurer’s NZ$0.025 cents (AS0.023) per share unfranked interim dividend. Eligible Tower shareholders can expect to be paid this dividend on 30 June. The Tower share price closed in the green on Friday, up 1.67% to 61 cents.

It is worth noting that, commonly, the share price of a company drops on the ex-dividend date by the amount of the dividend that is paid to shareholders. 

Foolish Takeaway

To qualify for any of these dividends you need to make sure you are on the share registry before the ex-dividend date. Again, this is either Tuesday or Wednesday, depending on which ASX share you buy.

It’s worth noting that if you sell on or after the ex-dividend date, you will still qualify for the dividend.

The post 3 ASX shares going ex-dividend next week appeared first on The Motley Fool Australia.

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More reading

• 3 ASX tech shares that could pop when the mood turns
• Apple stock: The bull and bear cases today
• These were the best performing ASX 200 shares last week
• Brokers name 2 ASX 200 dividend shares to buy with big fully franked yields
• ASX 200 has its worst week in two years

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 year 2022 has been brutal on ASX technology shares.

The S&P/ASX All Technology Index (ASX: XTX) has declined by around 35% so far this year, and there is no relief in sight.

But long-term investors will already know the tide will turn sooner or later.

Shaw and Partners portfolio manager James Gerrish said that the ride will be bumpy at least for the rest of 2022.

“It’s going to [be] a volatile and unforgiving year for stocks that are not making money and trading on very high multiples of revenue that have any type of slip-up.”

So for now, his team is just sticking to ASX tech shares names that are profitable.

‘Highest risk and greatest potential reward’

But of course, with risk comes reward.

Gerrish admits that once the sentiment turns back in favour of high-growth stocks, some pre-profit tech companies may have far more upside.

“If sentiment changes in the space, that is where the highest risk and greatest potential reward will be found.”

Out of those, he named three ASX tech shares in particular that are best placed for a return to glory.

“We like Dubber Corp Ltd (ASX: DUB) and see deep value there — however, the share price has been terrible,” he said in a Market Matters Q&A.

“Life360 Inc (ASX: 360) is another worth consideration given its sharp recent declines versus its growth profile, while some value is starting to show in Megaport Ltd (ASX: MP1).”

What do these 3 ASX tech shares do?

Melbourne-headquartered Dubber develops cloud communications software. Its shares have been beaten down by 73% year-to-date.

It’s one that The Motley Fool chief investment officer Scott Phillips picked as the “strike bowler” in his “ASX XI” back in January.

“Takes three-for-none or bowls a brace of wides and goes wicketless,” he said.

“But you wouldn’t be without them, especially in test cricket over a long series.”

Dubber certainly has bowled a few down legside this year. Here’s hoping it can take a five-for soon.

Life360 shares have fared just as worse this year, dropping a painful 69% so far.

Bell Potter loves the family app maker though, setting a price target that’s more than double the ASX tech share’s current price.

“Bell Potter is positive on the company and believes it has ample cash to fund it through to cash flow breakeven,” reported The Motley Fool last week.

“The broker has a buy rating and $7.50 price target on its shares.”

Megaport, despite plunging 67% in value this year, has plenty of fans.

The virtual network provider also has a stock price target that exceeds double the current level, this time with Goldman Sachs.

“The company is tipped to expand rapidly in the future as public cloud adoption and multi-cloud usage increase,” reported The Motley Fool last week.

“Goldman sees networking-as-a-service as a key driver of the company’s growth in the future.”

The post 3 ASX tech shares that could pop when the mood turns appeared first on The Motley Fool Australia.

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More reading

• Analysts are tipping these ASX growth shares as buys
• 3 ASX All Ordinaries shares that defied Thursday’s slump to leap higher
• 3 fantastic ASX shares that analysts reckon have huge upside potential
• 10 ASX All Ords shares that could be stung by tax-loss selling
• Megaport share price hits multi-year low: Is this a buying opportunity?

Motley Fool contributor Tony Yoo has positions in Dubber Corporation, Life360, Inc., and MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Dubber Corporation, Life360, Inc., and MEGAPORT FPO. The Motley Fool Australia has positions in and has recommended Dubber Corporation. 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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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.

The stock market is having a very lackluster 2022 so far. The S&P 500 has contracted 13% since the start of the year, and the Nasdaq Composite, which is heavy with technology stocks, which can be more speculative, has toppled 23% in the same time frame. Equities continue to battle an unfavorable economic and geopolitical environment that includes 40-year high inflation, higher interest rates, and concerns about the war between Russia and Ukraine. 

Even some of the world’s star companies, like Apple (NASDAQ: AAPL), have been wounded by the current macro climate. The iPhone maker’s business has held up very nicely compared to other big tech companies like FAANG counterparts Netflix and Meta Platforms, yet the stock has been punished, sinking 18% year to date.

Let’s discuss Apple’s bull and bear case to help investors decide if they should add the stock to their portfolios now.

What’s looking good?

Unlike many of its technology peers, Apple’s business hasn’t seemed to suffer from the macro headwinds. In its second quarter of 2022, which ended on March 26, the company beat analysts’ estimates for both revenue and earnings. Both total sales and diluted earnings per share grew 8.6% year over year in the quarter. The tech giant’s products segment, which represented 80% of total revenue, had a very strong outing during the quarter, as each product category, excluding iPad, experienced sales growth year over year. The products segment includes iPhone, Mac, iPad, and wearables, Home, and accessories.

Apple’s services segment, which includes the App Store, Apple Music, Apple TV+, iCloud, and other subscription businesses, expanded at a rapid clip once again in the most recent quarter. Its total sales were nearly $20 billion, equal to 17.3% growth year over year, and the segment’s gross margin expanded 254 basis points to 72.6%. Steady expansion from its products segment is a plus, but the company’s growth trajectory is highly dependent on its services category. Fortunately for Apple and its shareholders, the company’s $28.1 billion in cash and cash equivalents provides more than enough funding to develop this business further.

The latest sell-off has also soothed the tech leader’s valuation. At the start of the year, the company was trading around 30 times earnings, which is notably higher than its five-year mean price-to-earnings (P/E) multiple of 23.1. Today, however, the stock has a P/E of 24.1, which represents a much more reasonable valuation. 

What’s keeping investors away?

Boasting a market capitalization of $2.4 trillion, Apple is an enormous company, which in turn limits its ability to grow like it once did. Analysts expect the tech juggernaut’s top line to reach $394 billion in fiscal year 2022, indicating 7.7% growth year over year, and its bottom line to increase 9.4% to $6.14 per share. In 2023, Wall Street projects total revenue to climb just 5.6% to $416.2 billion and earnings per share to ascend 6.8% to $6.56. 

While the stock’s P/E has dropped to around 24, one could argue that there are more attractively priced stocks out there when considering growth rates. For instance, its fellow FAANG peer Alphabet is currently trading at 21.2 times earnings while projected to grow its bottom line by 18.7% in 2023, according to Wall Street analysts. With expectations that growth will continue to slow for Apple moving forward, it’s not unreasonable to assume that certain investors will eventually fall out of love with the stock. And provided its subpar dividend yield of only 0.60%, the company may not be able to attract dividend and value investors, either.   

I believe in the long-term picture

In today’s sagging market, Apple extends investors a valid buying opportunity. Its resilient business model, extraordinary balance sheet, and lower P/E serve as compelling reasons to buy the stock right now. Despite its slowing growth, I believe the company will continue to deliver market-beating returns in the long run. It’s time to take advantage of the stock market’s shortsightedness by accumulating shares of this tech giant today. 

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

The post Apple stock: The bull and bear cases today appeared first on The Motley Fool Australia.

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More reading

• Apple Pay Later just crushed Affirm’s dreams, but it’s a nice win for 2 fintech giants
• Representing 40% of Warren Buffett’s portfolio, here is why Apple is a great stock to own today
• Why did ASX 200 tech shares fall today?
• Is Apple an excellent dividend stock to buy?
• Why Apple escaped Tuesday’s Nasdaq meltdown

Luke Meindl has positions in Apple. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Apple, and Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Apple, and Netflix. 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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