Category: Stock Market

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, U Ethical chief investment officer Jon Fernie explains what he’d do with three ASX shares that have been ravaged this year.

Cut or keep?

The Motley Fool: Let’s take a look at three fallen stars — ASX shares that have taken a beating this year. 

First one is Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which has crashed more than 40% since September. What would you do with it?

Jon Fernie: This one’s probably a reasonably straightforward one for us. As an ethical investor, we exclude companies with material fossil fuel exposure. Soul Patts has a major stake in New Hope Corporation Limited (ASX: NHC) and so it’s not a stock that we would consider. 

I think investors also need to be cautious on investing in companies that have big exposure to potentially stranded assets.

MF: How about Fisher & Paykel Healthcare Corp Ltd (ASX: FPH), which has almost halved this year?

JF: We are currently invested in Resmed CDI (ASX: RMD), which is a competitor of FPH, so that would be our preference. 

We think that Fisher and Paykel face some near-term headwinds and Resmed looks better in terms of its earnings outlook and valuation. 

However, both companies will benefit from [a] product recall that we’ve seen from another competitor, Koninklijke Philips NV (AMS: PHIA). And I think, if you have a longer-term horizon, you may be willing to hold Fisher & Paykel and still expect that there’s a good, longer-term earnings growth opportunity for the company.

MF: Fair enough. And the last one is the mapping company Nearmap Ltd (ASX: NEA), which has lost a painful 55% since November.

JF: Nearmap’s one that we wouldn’t hold. We think the company’s small, but also I think it’s facing increased competition in that aerial mapping space. It continues to be a loss-making business. It’s going to require a lot of ongoing investment and they’re also facing some legal action from a competitor, so overall, not a stock that meets our investment criteria.

The post This is what I’d do with these 3 battered ASX shares: fund manager appeared first on The Motley Fool Australia.

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More reading

• Goldman names 2 ASX healthcare shares to buy
• 3 high-quality ASX 200 shares trading at 52-week lows right now
• 3 reasons why I think the Soul Pattinson share price is an excellent buy right now
• Why is the Fisher & Paykel share price heading south today?
• How to start investing in stocks: This ASX 200 share is where I’d begin

Motley Fool contributor Tony Yoo has positions in Fisher & Paykel Healthcare Corporation Limited, Nearmap Ltd., ResMed Inc., and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nearmap Ltd., ResMed Inc., and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has positions in and has recommended Nearmap Ltd., ResMed Inc., and Washington H. Soul Pattinson and Company 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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On Wednesday, the S&P/ASX 200 Index (ASX: XJO) gave back its early gains to end the day in the red. The benchmark index dropped 0.2% to 6,508.5 points.

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

ASX 200 expected to rise

The Australian share market is expected to rebound on Thursday following a better than feared night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 31 points or 0.5% higher this morning. On Wall Street, the Dow Jones was down 0.15%, the S&P 500 fell 0.1%, and the Nasdaq edged 0.15% lower.

Iron ore miners on watch

Mining giants BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG), and Rio Tinto Limited (ASX: FMG) could have a bad day on Thursday after the iron ore price continued its decline. According to Metal Bulletin, the benchmark iron ore price has fallen a further 5.5% to US$109.40 a tonne. This led to the NYSE listed BHP and Rio Tinto shares falling around 4% overnight.

Oil prices tumble

It could be a tough day for energy shares including Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) after oil prices tumbled overnight. According to Bloomberg, the WTI crude oil price is down 3.9% to US$105.25 a barrel and the Brent crude oil price is down 3.4% to US$110.72 a barrel. This was driven by fears that the US could fall into a recession and lessen demand for oil.

Gold price edges higher

Gold miners Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) will be on watch after the gold price edged higher overnight. According to CNBC, the spot gold price is up 0.05% to US$1,840 an ounce. The precious metal firmed amid growing recession fears.

ANZ-MYOB rumours intensify

Rumours that Australia and New Zealand Banking Group Ltd (ASX: ANZ) is planning to acquire accounting software company MYOB are growing louder. According to the AFR, the bank has appointed Macquarie and UBS to help it run the numbers. If a deal is struck, it is expected to be for several billion dollars.

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

• What’s the outlook for ASX 200 bank dividends?
• How has the BrainChip share price performed since joining the ASX 200?
• How ANZ plans to fend off competition from other ASX 200 bank shares with fresh tech
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Why ASX-listed property shares could be on the chopping block

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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Looking to boost your income with some dividend shares? Then you might want to look at the two listed below.

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

National Storage REIT (ASX: NSR)

The first dividend share to look at is leading self-storage operator, National Storage. Through its portfolio of over 200 centres, the company provides tailored storage solutions to around 100,000 residential and commercial customers.

And while this sounds like a large network, management still sees plenty of room to grow in the future. It notes that the self storage industry remains highly fragmented, giving it plenty of high-quality acquisition opportunities. This bodes well for its income and distribution growth over the long term.

Ord Minnett is a fan of National Storage. The broker currently has a buy rating and $2.60 price target on its shares.

As for dividends, its analysts are forecasting dividends per share of 10 cents in FY 2022 and FY 2023. Based on the current National Storage share price, this equates to yields of 4.5%.

Rural Funds Group (ASX: RFF)

Another ASX dividend share for income investors to look at is this agricultural focused real estate investment trust (REIT). It 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.

Rural Funds’ properties are leased on long term contracts to major players in the industry such as Australia’s largest meat processor, JBS Australia and wine giant Treasury Wine Estates Ltd (ASX: TWE). Together with its built in periodic rental increases, this provides Rural Funds with great visibility on its future earnings and distributions.

Speaking of which, in FY 2022, the company intends to increase its dividend by its annual target rate of 4% to 11.73 cents per share. After which, it is planning to do the same in FY 2023, lifting it to 12.2 cents per share. Based on the current Rural Funds share price, this represents yields of 4.5% and 4.65%, respectively.

The post Here are 2 ASX dividend shares with 4%+ yields appeared first on The Motley Fool Australia.

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More reading

• Here are 2 ASX dividend shares with 4%+ yields
• 2 ASX shares I want to buy more of for my portfolio
• 3 quality ASX 300 shares with dividend reinvestment plans
• Free cash flow: Here are 3 ASX All Ords shares that have it in spades
• Is it reasonable to expect share price growth AND reliable dividends from ASX shares?

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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If you’re looking for exposure to the healthcare sector, then the two shares listed below could be top options.

Here’s why analysts at Goldman Sachs believe they are well-placed for growth in the future:

Integral Diagnostics Ltd (ASX: IDX)

The first healthcare share to look at is diagnostic imaging services provider, Integral Diagnostics.

Goldman highlights that the recovery in imaging volumes from the COVID-19 pandemic is underway. Combined with easing cost pressures in FY 2023, the broker expects this to allow Integral Diagnostics to deliver strong earnings growth. The broker explained:

Looking forward, we expect the cost pressures to taper in FY23E (+7%), albeit with upside if management achieves their target of low-single-digit growth which, on our numbers, would result in favorable EBITDA growth of +23% in FY23E.

Goldman Sachs has a buy rating and $4.20 price target.

ResMed Inc (ASX: RMD)

Another ASX healthcare share that Goldman rates highly is ResMed.

Its analysts believe that ResMed is well-placed for growth thanks to a huge backlog of new patients waiting to be diagnosed. And while it acknowledges that there is a risk that these patients try alternative therapies, it doesn’t expect any shifts to substitutes to be material. The broker commented:

There is a 12-18 month backlog of new patients waiting to be diagnosed. While there is a risk these prospective patients may switch to alternative therapies (e.g. dental sleep, neurostimulation), the degree of movement towards these substitutes has been relatively minor against the size of the CPAP market. Instead, we believe the backlog of new patients may add upside risk to our estimates if there is a material realisation of incremental devices/masks sales to new patients in FY23/24 (supply chain pressures permitting).

Goldman currently has a buy rating and $34.40 price target on ResMed’s shares.

The post Goldman names 2 ASX healthcare shares to buy appeared first on The Motley Fool Australia.

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More reading

• 2 ASX shares to benefit from strong US dollar: expert
• Why I would invest $10,000 in these 3 ASX shares
• ASX 200 midday update: ResMed’s US$1bn acquisition, tech shares continue to sink
• ResMed share price drops despite US$1bn Medifox Dan acquisition
• Broker tips ResMed share price to jump 19%

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 ResMed Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed Inc. The Motley Fool Australia has recommended Cochlear Ltd. and Integral Diagnostics 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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Are you interested in adding some ASX 200 shares to your portfolio following the market crash? If you are, you may want to look at the two listed below that have recently been named as buys.

Here’s what you need to know about these ASX 200 shares:

Cochlear Limited (ASX: COH)

The first ASX 200 share for investors to look at is Cochlear. It is one of the world’s leading hearing solutions companies with a portfolio of industry-leading implantable hearing devices.

Analysts at Morgans are very positive on the company, particularly given its improving earnings profile. The broker explained commented:

Cochlear maintains a dominant position in the implantable hearing solutions segment. While we continue to believe a full recovery from Covid-based disruptions still has time to play out, improving demand and strong pipeline, coupled with management’s increasing confidence, suggests an improving earnings profile.

The broker currently has an add rating and $244.50 price target on Cochlear’s shares.

Webjet Limited (ASX: WEB)

Another ASX 200 share for investors to look at is online travel agent, Webjet.

The team at Goldman Sachs is very positive on the company. The broker believes Webjet is well-placed for growth in the coming years as the travel market recovers from the pandemic. It explained:

We forecast WEB to report +11.9% CAGR growth in EBITDA over FY19-24e taking a through COVID view, driven by 1/ a fundamentally stronger Bedbanks business driven by cost outs and stronger market share growth, 2/ Opportunities for market share growth in the B2C business and 3/ A strong balance sheet with a Net cash balance of c. A$108mn as at end of FY22.

Goldman currently has a buy rating and $6.90 price target on Webjet’s shares.

The post Analysts name 2 top ASX 200 shares to buy today appeared first on The Motley Fool Australia.

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More reading

• ASX 200 travel shares take off again on Tuesday. Here’s why
• Down 20% in a year, is the Cochlear share price a bargain buy?
• Why are ASX 200 travel shares lifting off on Monday?
• Experts rate these ASX 200 blue chip shares as buys
• How did ASX 200 travel shares perform amid today’s sell-off?

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 Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The ASX 200 big four bank shares are known to be great dividend payers. They’re a favourite among retiree investors because they typically dish out greater dividend yields than most ASX shares.

Wait, wait. Yes, it’s true that the ASX mining shares and ASX energy shares may pay stupendous dividends this year, and possibly next year, due to the current commodities boom. But that’s a cyclical thing.

When it comes to regular, reliable, and strong dividends over the long term you’d be … um, Foolish to ignore the big banks.

What dividend yields are the ASX bank shares paying now?

As my Foolish colleague Sebastian reported yesterday, the dividend yields of the big four ASX bank shares currently range from about 4.2% to 6.6%.

At the top is Australia and New Zealand Banking Group Ltd (ASX: ANZ). ANZ pays a dividend yield of about 6.6% at current share price levels.

Next is Westpac Banking Corp (ASX: WBC) which pays about 6.2% in dividends.

Then there’s the business banking specialist National Australia Bank Ltd (ASX: NAB). Its dividend yield sits at about 5.2% at current share price levels.

Last but not least is Commonwealth Bank of Australia (ASX: CBA) at about 4.2%.

All of the big four ASX bank shares pay fully franked dividends. That means you get the maximum tax break possible when you do your tax return.

Retiree investors also love fully-franked dividends because they get paid in cash if their taxable income is beneath the taxable threshold. Bonus!

What about Macquarie dividends?

Should we look at Macquarie dividends too? Seems relevant given the company is often referred to as the ‘fifth bank’ amongst the big four?

According to Seb’s calculations, Macquarie pays 3.8% with 40% franking at the moment. That’s pretty good for a banking share that trades at almost twice the price of Australia’s largest banking business, CBA.

Remember, the dividend yield is calculated as a percentage of the share price. This week Macquarie is trading in the early $160s. (Fun fact: It was trading above $200 in January before the market correction began.)

So, what’s the outlook for ASX 200 bank dividends?

Well, to pay a strong dividend, any ASX business has to make a strong profit. That’s how dividend payouts are funded. And some experts believe there are revenue and cost headwinds for the banks.

According to a report in the Australian Financial Review (AFR), analysts have attributed the recent sell-off in ASX bank shares to “fears that sharp interest rate increases will cause an economic slowdown that flows through to the property market and hurts the banks’ customers”.

Furthermore, this would “potentially bring an end to years of bumper growth in lenders’ mortgage portfolios, fuelled by record low interest rates and a booming housing market”.

What do the brokers think?

The article quotes fund manager T. Rowe Price, which is “significantly underweight” on the Australian banks.

The manager “believes their earnings could weaken sharply in the next six to 12 months as slowing growth sparks an increase in non-performing loans”.

T. Rowe went even further in its gloomy outlook, saying it “would not be surprised if CBA and NAB suspended their most recent buybacks in light of developing macroeconomic conditions”.

Equity analyst Nick Vidale said:

As for the outlook for dividends, we think a good outcome for the banks in the coming years would be if they were able to hold dividends flat.

However, Plato Investment Management says ASX bank shares will remain good income stocks in the short term.

Plato’s managing director Don Hamson said:

We don’t expect dividend cuts in the near future … However, we are less bullish on the potential for further bank buybacks given increased market uncertainty, and the fact that all the big four bought back capital either on or off-market in the past year.

Concerns about rising loss provisions are way overdone. Similarly, we think speculation about a potential recession is way too premature.

Australia has very high employment rates and people with a job usually pay their mortgage.

Given ASX bank shares have been sold off, Plato reckons their dividend yields look even more attractive.

Broker UBS says the major Australian banks are in a good position to handle rising interest rates.

This is largely because the big banks are carrying $15 billion in collective provisions.

Head of Australian bank research at UBS John Storey, said:

There would need to be a substantial blow-up in credit provisions to derail the Australian banks earnings story.

The post What’s the outlook for ASX 200 bank dividends? appeared first on The Motley Fool Australia.

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More reading

• Is the NAB share price about to hit the comeback trail?
• How ANZ plans to fend off competition from other ASX 200 bank shares with fresh tech
• What’s going on with the Westpac share price this week?
• ‘Price makers’: 3 ASX 200 shares that can pass on rising costs in an inflationary environment
• Worried about a US recession? Here’s what the ASX 200 banks are forecasting

Motley Fool contributor Bronwyn Allen has positions in Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, Macquarie Group Limited, and Westpac Banking Corporation. 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 and Westpac Banking Corporation. 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 CSL Limited (ASX: CSL) share price finished higher today despite the S&P/ASX 200 Index (ASX: XJO) closing in the red.

At Wednesday’s market close, the global biotech’s shares rose 0.68% to $261.76 apiece.

By comparison, the benchmark ASX 200 index shed 0.20% to 6,508.5 points.

What drove CSL shares higher today?

With no announcements from the company, investors rallied the CSL share price throughout the day.

A rebound on the S&P/ASX 200 Health Care Index (ASX: XHJ) helped support this move after falling almost 2% in the past week.

Investors appeared to have focused on performing sectors as most of the market headed for another day of losses.

The recent volatility across the ASX has been impacted by the talk surrounding more possible rate hikes to combat inflation.

During the March quarter, inflation rose by 5.1% which was the highest level seen in many years.

And with the United States possibly facing a recession in 2023, this has sent investors packing.

Nonetheless, CSL shares continue to trade at attractive levels with many brokers believing its undervalued.

In particular, Citi remains positive on CSL shares due to its high-growth and defensive qualities.

As such, the broker has a buy rating and price target of $335. This represents an upside of roughly 28% based on the current share price.

On the other hand, Morgan Stanley has an overweight rating with a price target of $302 per share. While not as bullish as Citi, this still implies an upside of about 15% from where CSL trades today.

CSL share price summary

Since the start of 2022, the CSL share price has fallen by roughly 10%.

However, when looking further back, its shares are down almost 13% in the past 12 months.

CSL is the third largest company on the ASX with a market capitalisation of approximately $126.17 billion.

The post Why did the CSL share price beat the ASX 200 on Wednesday? appeared first on The Motley Fool Australia.

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More reading

• Broker names 2 of the best ASX 200 shares to buy now
• CSL share price ‘will be significantly bigger from this point’: fundie
• Top brokers name 3 ASX shares to buy next week
• Why I would invest $10,000 in these 3 ASX shares
• Brokers name 3 ASX shares to buy today

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 positions in and has recommended CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The National Australia Bank Ltd (ASX: NAB) share price traded rangebound today, closing 0.22% in the red at $26.99.

NAB shares started the year well before sliding off the cliff face in June. Investors have dragged the stock from a high of $31.55 on 1 June, bringing losses to 13% in a month.

In broad market moves, the S&P/ASX 200 Financials Index (ASX: XFJ) closed down 40 basis points on Wednesday.

Is the NAB share price about to hit back?

ASX bank shares have been beaten down in 2022 amid concerns over the sector’s exposure to mortgages, rising interest rates, and the Australian property market.

Analysts at JP Morgan recently updated their modelling following NAB’s completion of the Citi Australian consumer business acquisition on 1 June.

“This has driven a [less than] 1% increase to FY22E cash NPAT [net profit after tax] and ~2% increase to FY23/24 cash NPAT,” the JP Morgan team said.

It has an overweight rating on the bank and prices the share at $34.50 apiece, providing around $7 upside at the time of writing. JP Morgan notes:

We have an [overweight] recommendation on NAB reflecting stronger-than-peer revenue growth prospects, likely sound cost control, leverage to rising rates, and ongoing capital management.

The stronger revenue profile reflects NAB’s tilt towards small business banking, which should insulate it from ROE [return on equity] pressures in retail banking, as well as strong execution in its market leading SME [small to medium enterprise] franchise where it continues to take market share.

The broker also sees NAB’s pre-provision profit growth outshining its peers, and its valuation reflects the present value of the bank’s dividend stream plus a multiple of its tangible book value.

Meanwhile, 46.7% of brokers each have NAB rated as a buy and hold respectively, according to Bloomberg data. The remaining ~7% say to sell.

The consensus price target from this list is $32.23, meaning there’s still room for NAB to grow should this play out.

In the last 12 months, the NAB share price has held onto a 0.97% gain, despite sliding 6.4% into the red this year to date.

The post Is the NAB share price about to hit the comeback trail? appeared first on The Motley Fool Australia.

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More reading

• ‘Price makers’: 3 ASX 200 shares that can pass on rising costs in an inflationary environment
• Worried about a US recession? Here’s what the ASX 200 banks are forecasting
• How does the Macquarie dividend stack up against the ASX big four banks?
• 2 excellent ASX dividend shares that experts rate as buys this week
• Why are ASX 200 bank shares having such a cracking start to the week?

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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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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)’s stock split has come and passed, and the company is now trading on a split-adjusted basis. Given the newly lowered share price, it is an excellent time to consider the bear and bull case for investing in Amazon’s stock. 

The bear case will center on its rapidly rising costs amid decelerating revenue growth. Meanwhile, the bull case will focus on higher-profit segments taking a more meaningful share of the revenue, making the stock arguably cheap. Let’s dive deeper. 

Bear case: Slowing revenue and rising costs is a poor combination

Amazon came through in the clutch for hundreds of millions of households when the coronavirus pandemic forced non-essential businesses to close their doors to in-person shoppers. Sales surged for Amazon as it became a prominent alternative for folks looking to avoid shopping at bricks-and-mortar stores. Indeed, revenue jumped $106 billion higher in 2020 from 2019.

Fulfilling an increase of that magnitude is no easy task. It required Amazon to double the size of its fulfilment network in 24 months.

AMZN Total Operating Expenses (Quarterly) data by YCharts.

Those investments in capacity are now weighing on profits as revenue growth is decelerating from pandemic highs. In its most recent quarter ended on March 31, revenue increased by 7%, or less than $8 billion from the same quarter in the year prior — its slowest rate of growth in several years. Meanwhile, total operating expenses rose by over $13 billion.

Unfortunately, management projects this trend to continue while it works to balance capacity with sales. Amazon forecasts revenue to grow by an even lower 5% in its second quarter. Worse yet, it expects operating income to fall to $1 billion, down from $7.7 billion in the same quarter last year. The estimates are midpoints.

There is no telling how far revenue growth will decelerate as economic reopening gains momentum, which will continue weighing on operating income in the near term. 

Bull case: More profitable segments are growing faster 

Amazon’s revenue growth is slowing after the surge at the pandemic’s onset. Internally, however, Amazon’s more profitable segments are taking more importance. Its Amazon web services segment accelerated growth to 37% in its most recent quarter, up from 32% in the prior year. That segment boasted an operating profit margin of 35% in Q1. Amazon is a leading force in the cloud services industry, which is estimated to reach $495 billion in spending in 2022.

Moreover, Amazon has developed a burgeoning advertising business. Revenue in this segment grew by 25% in Q1 to reach $7.9 billion. Marketers spent $763 billion globally in 2021, and it is reasonable to expect Amazon can take a more meaningful share of this market. Hundreds of millions of shoppers visit Amazon’s website, looking to spend money. Advertisers would love the opportunity to influence those decisions.

AMZN PE Ratio data by YCharts.

The rise of these more profitable revenue sources has improved Amazon’s operating profit margin from 0.2% in 2014 to 5.3% in 2021. Finally, to make the case more compelling, Amazon’s stock is as cheap as it’s been in a long time. At a price-to-earnings ratio of 51, it’s near the lowest in the previous five years.

Bulls win out 

Overall, the bull case is stronger than the bear. The temporary imbalance between capacity and sales will eventually balance. On the side of the bulls, the growth in Amazon’s web services and ad businesses will likely last long term. Couple that with an inexpensive valuation, and it makes Amazon stock an excellent buy right now.

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

The post Amazon stock post-split: Bear vs. bull appeared first on The Motley Fool Australia.

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Parkev Tatevosian has no position in any of the stocks mentioned. 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. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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The Zip Co Ltd (ASX: ZIP) share price continued to sink to multi-year lows today.

For the first time since 2016, the buy-now pay-later (BNPL) company’s shares closed at less than 50 cents apiece.

To be precise, Zip shares lost 11.43% today to finish at 46.5 cents each, just marginally up on their intraday low of 46 cents apiece.

Why is there no end in sight for Zip shares?

With the S&P/ASX 200 Financials (ASX: XFJ) index also recording a 0.42% loss today, Zip shares seemed to bear the brunt.

It appears fears surrounding more interest rate hikes from the Reserve Bank of Australia (RBA) are weighing down investor confidence.

In the March quarter, inflation rose 5.1% which was the highest rate in many years.

Ultimately, this impacts consumer spending on discretionary items as the cost of debt increases on such expenses as mortgages and credit cards.

Some economists are predicting the RBA will further lift the official cash rate up to 2.5% by mid-2023. This is considerably higher than the current 0.85% interest rate that’s on offer for now.

Similarly, other shares in BNPL companies finished in the red today.

The Block Inc CDI (ASX: SQ2) share price finished 4% off its all-time low, closing at $84.63, down 1.59%.

As well, shares in Splitit Payments Ltd (ASX: SPT) and Humm Group Ltd (ASX: HUM) ended the day down 12.5% and 3.81%, respectively.

Zip provides business update

In a late afternoon release to the market, Zip provided more clarity on how it is tracking in the current trading environment.

Management noted that the company’s underlying business remains strong, with new onboard merchants as well as growth in customers and transaction volumes.

Importantly, the company said it is focusing on driving its credit losses below the 2% threshold of total transaction volumes (TTV).

Furthermore, Zip said that it is well placed to weather the current storm of rising interest rates with a number of initiatives underway. These include consumer fee increases, merchant repricing, increased customer repayment velocity, and more.

As of 31 March, Zip had $303 million available in cash and liquidity.

Zip share price snapshot

Over the past 12 months, the Zip share price has plummeted by 94%, with year-to-date down more than 89%.

In February 2021, the company’s shares reached their all-time high of $14.53 each.

Zip currently presides a market capitalisation of around $319 million.

The post Zip share price dives 11%, closing below 50c for first time in 6 years appeared first on The Motley Fool Australia.

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More reading

• Why Blackmores, Lake Resources, St Barbara, and Zip shares are dropping
• ASX 200 midday update: St Barbara and Zip drop to multi-year lows
• The Zip share price is down 90% in 2022. Why I won’t be buying
• Zip share price falling again as market experts argue for UK and US exit
• Why A2 Milk, Bubs, Evolution, and Zip shares are rising despite the selloff

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 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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