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.

What happened

Tesla (NASDAQ: TSLA) stock moved higher on Thursday afternoon, rising 3.6% through 2:25 p.m. ET — the stock’s third straight day of price gains.

That’s kind of strange, given that the big news on Tesla today isn’t exactly “good” news. 

So what

As Bloomberg reports, rising interest rates on debt offerings — which make it more expensive for companies to raise capital — caused Tesla to suspend a planned $1 billion sale of bonds secured by revenue from Tesla car leases as collateral.  

“A significant portion of the bonds” had already been placed through fund managers since the bond offering began on March 7, notes Bloomberg. But the sales were suddenly interrupted when “short-term interest rate benchmarks [moved] sharply higher.” This raises the prospect that Tesla won’t be able to get access to all $1 billion of the expected fund-raise, potentially disrupting its near-term financial plans.

Now what

That’s the bad news. Now here’s the good: Suspending the offering might also mean that Tesla doesn’t get surprised by high interest rates it must pay on the bonds.

What’s more, Tesla doesn’t necessarily need cash from these bonds right away. According to the latest data from S&P Global Market Intelligence, Tesla’s balance sheet boasts $17.7 billion in cash against only $8.9 billion in debt. And with strong free cash flows of $3.5 billion generated over the past year, the company really isn’t hurting for cash at all. Tesla’s entirely capable of self-financing.

Maybe the real story here really isn’t the obvious headline: “Tesla had to suspend its bond offering.” Maybe the real story is that Tesla’s balance sheet is so rock solid that it didn’t need to issue bonds in the first place — and that’s the good news that is driving Tesla stock higher. 

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

The post Why Tesla stock keeps driving higher appeared first on The Motley Fool Australia.

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• Why did Tesla stock pop today?
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• Why Tesla stock tanked today

Rich Smith has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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Insider buying is often regarded as a bullish indicator. This is because few people should know a company better than its own directors.

The theory is that if they have the confidence to buy shares, it could be a sign that things are going well and they expect them to appreciate in value.

Conversely, when directors sell shares, it is often regarded as a bearish signal. After all, you’d be unlikely to sell shares if you thought they were about to increase in value.

With that in mind, this morning Commonwealth Bank of Australia (ASX: CBA) revealed that an insider has been selling some of the banking giant’s shares.

What did CBA announce?

According to a change of director’s interest notice from this morning, CBA Chief Executive Officer (CEO), Matt Comyn, has been trimming down his holding this week.

The notice reveals that Mr Comyn sold a total of 13,520 shares through an on-market trade on Tuesday 15 March 2022. This represented 21.2% of Comyn’s direct interest in the bank, reducing his direct holding down to 50,003 shares.

The leader of Australia’s largest bank received an average of $103.40 per share, which equates to a total consideration of approximately $1.4 million.

Time to panic?

While the CBA share price has rallied hard and is trading within touching distance of its record high, it may be unwise to panic.

After all, Comyn still has a sizeable direct holding of CBA shares with a market value of ~$5.3 million. In addition, the CEO has a hefty indirect holding of 32,084 shares and countless performance rights that could vest in the coming years.

This, you could argue, means that the CEO’s interests remain firmly aligned with shareholders’ interests.

The post CBA (ASX:CBA) share price on watch as CEO sells $1.4m of shares appeared first on The Motley Fool Australia.

More reading

• ASX 200 shares open with a bang following US interest rate rise
• The CBA share price has soared 8% in a week. What’s happening?
• Why ASX 200 bank shares are storming higher today
• The CBA (ASX:CBA) share price has gone nowhere in 10 months… time to buy?
• Top brokers name 3 ASX shares to sell next week

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 Bruce Jackson.

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With the S&P/ASX 200 Health Care index down 11% since the start of the year, now could be an opportune time to look at the sector.

But which shares should investors consider buying? Two healthcare shares that brokers rate as buys are listed below. Here’s what you need to know about them:

Cochlear Limited (ASX: COH)

The first ASX 200 healthcare share to consider is Cochlear. It is a leading manufacturer and distributor of cochlear implantable devices for the hearing impaired. It has operations across over 30 countries distributing its Nucleus sound processors and Baha bone conduction implants.

While demand for its devices was subdued during the worst of the pandemic, Cochlear has bounced back over the last 12 months with strong profit growth. Pleasingly, analysts at Morgans expect this positive form to continue in the coming years.

It 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, is all suggestive of an improving earnings profile.”

Morgans has an add rating and $233.20 price target on Cochlear’s shares.

ResMed Inc (ASX: RMD)

Another high quality ASX 200 healthcare share to consider is ResMed. It is a global leader in the development, manufacturing, distribution, and marketing of medical devices and cloud-based software applications that diagnose, treat, and manage respiratory disorders. These include sleep disordered breathing, chronic obstructive pulmonary disease (COPD), neuromuscular disease, and other chronic diseases.

ResMed has been growing at a solid rate for years and appears well-positioned to continue this trend long into the future. Especially given its world class product portfolio, high level of investment in R&D, the growing prevalence and education of sleep disorders, and a major product recall by one of its rivals.

Morgans is also positive on ResMed. It commented: “While we believe the next few quarters will likely be volatile, as Covid-related demand for ventilators continues to slow and core sleep apnoea volumes gradually lift, nothing changes our medium/longer term view that the company remains well-placed as it builds a unique, patient-centric, connected-care digital platform that addresses the main pinch points across the healthcare value chain.”

The broker has an add rating and $40.46 price target on the company’s shares.

The post Analysts name 2 ASX 200 healthcare shares to bring your portfolio back to life appeared first on The Motley Fool Australia.

More reading

• 3 quality blue chip ASX 200 shares analysts are tipping as buys
• Are Cochlear (ASX:COH) shares worth buying for dividends?
• 2 of the best ASX healthcare shares to buy now, according to analysts
• 3 more of Morgans’ best ASX share ideas for March
• You can’t pick the bottom, but these 4 ASX shares are already bargains: expert

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. owns and has recommended Cochlear Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Investors have experienced much volatility already in 2022, and many experts predict the rest of the year won’t be much smoother.

WAM Leaders Ltd (ASX: WLE) portfolio manager John Ayoub reckons portfolios are currently in “a game of 3D chess” at the moment.

“I say that because we are juggling rate movements, we are juggling coronavirus and now we are juggling more on Ukraine and Russia,” he told a conference call to clients this month.

“From that perspective, it makes it awfully difficult to get a clear and confident path as to the shape of the portfolio for the next month, let alone for the next 6 to 12 months.”

To combat the uncertainty, Ayoub is currently looking for very specific attributes in ASX shares he’ll purchase.

“Two clear characteristics that the portfolio is now demonstrating a lot more than previously [are] quality and defensive earnings attributes,” he said.

“That’s really where we see our safe haven within the portfolio to ride out this volatility over the next little while.”

The fab 5 to hold onto this year

Ayoub named 5 specific ASX shares that his fund has added recently that meet this “safe haven” definition:

• Brambles Limited (ASX: BXB)
• Endeavour Group Ltd (ASX: EDV)
• Tabcorp Holdings Limited (ASX: TAH)
• Wesfarmers Ltd (ASX: WES)
• Treasury Wine Estates Ltd (ASX: TWE)

The fund manager said his team has been taking advantage of a “dislocation in the market”.

“We see their earnings, their ability to withstand the volatility of global events, particularly in the short-to-medium-term, as key drivers within the portfolio.”

The 5 companies include merchants that provide staple products and those that will see a growth in activity and earnings regardless of interest rate rises.

“Staples [and] inflation beneficiaries are the areas of the portfolio which have become more present and more prominent,” he said.

“We are at the coalface daily and managing risk and adapting as we get new information. That is what we are really focused on right now.”

WAM Leaders itself has gained 2% this year so far to trade at $1.52 on Thursday afternoon. As of the end of February, the listed investment company was trading at a 3.4% premium to net tangible assets.

The post 5 ASX shares to ride out the 2022 volatility: expert appeared first on The Motley Fool Australia.

More reading

• Analysts name the best ASX 200 dividend shares to buy now
• Wesfarmers (ASX:WES) shares in focus as API deal looks all but sealed
• The Woolworths (ASX:WOW) share price has only added $4 in 8 years. Have the dividends been worth it?
• 2 compelling blue chip ASX shares to buy: top fund manager
• Own Wesfarmers (ASX:WES) shares? Here’s how the numbers are looking in the API takeover vote

Motley Fool contributor Tony Yoo 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 owns and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you’re looking for ASX 200 dividend shares to buy, then the two listed below could be worth considering. After all, these shares are among the best ideas list for one of Australia’s top brokers, Morgans.

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

Wesfarmers Ltd (ASX: WES)

Morgans is a fan of this conglomerate due to its belief that it owns some of the best retail brands Australia has to offer. The broker also feels recent share price weakness has created a buying opportunity and has put an add rating and $58.50 price target on its shares.

As for dividends, Morgans is forecasting fully franked dividends per share of $1.62 in FY 2022 and $1.81 in FY 2023. Based on the current Wesfarmers share price of $50.64, this will mean yields of 3.2% and 3.6%, respectively.

The broker commented: “WES possesses one of the highest quality retail portfolios in Australia with strong brands including Bunnings, Kmart, Target 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 recent pullback in the share price as a good entry point for longer term investors.”

Westpac Banking Corp (ASX: WBC)

The team at Morgans also rates this banking giant highly and has an add rating and $29.50 price target on its shares. The broker believes Westpac can achieve its cost cutting targets and is optimistic on its margin outlook.

In respect to dividends, the Morgans has pencilled in fully franked dividends per share of $1.19 in FY 2022 and $1.60 in FY 2023. Based on the latest Westpac share price of $23.68, this will mean yields of 5% and 6.75%, respectively.

Its analysts commented: “WBC is our preferred major bank. We believe WBC offers the most compelling valuation of the major banks. In terms of quality of overall risk profile, we believe WBC is a close second to CBA. On credit risk, we believe WBC is positioned relatively defensively due to its loan book being more skewed to Australian home lending.”

The post Analysts name the best ASX 200 dividend shares to buy now appeared first on The Motley Fool Australia.

More reading

• Wesfarmers (ASX:WES) shares in focus as API deal looks all but sealed
• What are the real benefits of ESG investing? Here’s what Westpac says
• 5 things to watch on the ASX 200 on Thursday
• Why has the Westpac share price rallied 8% in a week?
• Own Westpac shares? Here’s why change is afoot

Motley Fool contributor James Mickleboro owns 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 owns and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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With the resources sector performing very strongly in 2022 and its outlook becoming increasingly positive, investors may be looking for mining shares to buy.

If you are, then you might want to take a look at the two mining shares listed below which are highly rated by brokers. Here’s what you need to know about them:

Iluka Resources Limited (ASX: ILU)

The first ASX mining share that could be in the buy zone is Iluka. It is a mineral sands and rare earths producer with a number of quality operations across South Australia, Western Australia, and Sierra Leone.

Goldman Sachs is very positive on the company due to its attractive valuation and the favourable outlook for mineral sands and its exposure to rare earths.

The broker commented: “ILU is trading at a >50% discount to RE peers and >10% discount to min sands/pigment peers on an EV/EBITDA basis. Iluka recently released a larger-than-expected maiden resource on the Wimmera rare earth (RE) & zircon deposits in Victoria containing over c.1Mt of rare earth oxides (REO) and 10.6Mt of zircon. The Wimmera deposit is an important part of ILU’s rare earth growth strategy,” Goldman added.

Goldman Sachs currently has a conviction buy rating and $12.50 price target on Iluka’s shares. This compares favourably to the latest Iluka share price of $10.09.

Santos Ltd (ASX: STO)

Another mining share that could be in the buy zone is Santos. Although its shares have risen strongly in recent months, the team at Morgans still sees plenty of value in them. Particularly given its resilient growth profile and diversified earnings base.

The broker explained: “We expect the resilience of STO’s growth profile and diversified earnings base see it best placed to outperform against a backdrop of a broader sector recovery. While pre-FEED, we see Dorado as likely to provide attractive growth for STO, while its recent acquisition increasing its stake in Darwin LNG has increased our confidence in Barossa’s development.”

Morgans has an add rating and $9.00 price target on its shares. This compares to the latest Santos share price of $7.40.

The post Why brokers love these ASX mining shares appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• Why Chalice Mining, Santos, Yancoal, and Zip shares are dropping
• Why is the crude oil price tumbling and which ASX 200 shares are being impacted?
• 5 things to watch on the ASX 200 on Tuesday

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 Bruce Jackson.

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With the US Federal Reserve this week lifting its cash rate, many experts feel it’s inevitable Australia will follow in the coming months.

The fact is that even if the Reserve Bank of Australia disagrees, Australia’s rate can’t diverge too far off the US’. This is because the Australian dollar could otherwise skyrocket in value, causing our exports to collapse.

Considering this ominous situation, WAM Leaders Ltd (ASX: WLE) analyst Anna Milne had three ASX shares in mind that would be prudent buys right now.

Australians still have to eat

Milne said her team has analysed past cycles of high inflation, rate hikes, and the post-hike market.

“In all of these situations, consumer staples outperform the market,” she told a conference call to clients this month.

“Within consumer staples, we like the supermarkets. It makes sense that when inflation is high, consumer balance sheets and budgets are stretched — and people eat out less.”

Among the supermarket ASX shares, she favours Coles Group Ltd (ASX: COL) after a “really good” results season when it reported “extreme cost discipline” over a “challenging period” of Omicron and Christmas.

“Previously, Coles has not been as good as Woolworths Group Ltd (ASX: WOW) at managing its costs and that’s one of the reasons why there is a valuation differential between the two,” she said.

“However, delivering the result it just did, it brings a differential into question, which is one of the reasons why we prefer Coles over Woolworths currently.”

Coles shares closed Thursday at $17.78, down 1.28%.

Healthcare giant ready to take off again

The share price for CSL Limited (ASX: CSL) hasn’t really gone anywhere since the ASX share’s big acquisition of Swiss company Vifor Pharma in December.

But Milne reckons the market is underestimating the healthcare giant.

“Going into January, into the start of February, we saw a few green shoots across the business,” she said.

“We have since met with management and have even more confidence in the medium-term outlook for the business.”

Milne listed rising plasma collections, new plasma devices and the influenza vaccine as some of the tailwinds about to push CSL stocks upwards.

“I think, more importantly than that, it is one of the most high-quality names on the ASX, with a great management team. So it remains a core holding of ours.”

CSL shares are down 8% for the year so far. They closed Thursday at $270.59, up 0.77% on the day.

Insurance stock pick that’s not QBE for once

While it is generally acknowledged insurance companies would benefit from higher interest rates, most analysts seem to pick QBE Insurance Group Ltd (ASX: QBE) as their favourite.

Not Milne though.

“Insurance Australia Group Ltd (ASX: IAG) reported a really good February result,” she said.

“We have since met with the management team and we are confident that the legacy issues are behind them and they are now focused entirely on the future of the company, earnings growth and the outlook.”

IAG is already cashing in on “strong rates in the insurance cycle”.

“They benefit from rising rates in the financial market. They have a cost-out program and capital management on the way,” Milne said.

“We don’t think any of this is reflected in the share price, so that is another core holding of ours.”

QBE shares finished Thursday at $10.91, up 0.46%.

WAM Leaders shares closed at $1.53 on Thursday afternoon, which is up 2% this year. The listed investment company was trading at a 3.4% premium to net tangible assets as of 28 February.

The post Why expert says this supermarket ASX share is a better bet than Woolworths (ASX:WOW) appeared first on The Motley Fool Australia.

More reading

• 2 ASX dividend shares to buy for this year and beyond: experts
• Top brokers name 3 ASX shares to sell today
• Do ASX biotech shares offer ‘good buying’ after the sell-off? Experts weigh in
• The Woolworths (ASX:WOW) share price has only added $4 in 8 years. Have the dividends been worth it?
• Is the CSL share price heading back over $300 in 2022?

Motley Fool contributor Tony Yoo owns CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. The Motley Fool Australia owns and has recommended COLESGROUP DEF SET and Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Experts have named some leading ASX dividend shares as buys.

A business isn’t necessarily rated as a buy just because it pays a dividend. Analysts are judging whether they think the current valuation is attractive.

COVID-19 has shown that share prices can be very volatile. However, dividends are decided by the boards of companies, so they can be more consistent than share prices.

Here are two buy-rated ASX dividend shares that are expected to pay solid yields:

Coles Group Ltd (ASX: COL)

Coles is one of the biggest supermarket businesses in Australia, along with Woolworths Group Ltd (ASX: WOW).

It’s currently rated as a buy by multiple brokers, including Morgans. The broker currently has a price target on the business of $19.70. That suggests a possible rise of the Coles share price of around 10% over the next year.

According to Morgans, in terms of the potential dividend, Coles has a forecast grossed-up dividend yield of 4.9% in FY22 and 5.1% in FY23.

Morgans expects Coles to generate 75 cents of earnings per share (EPS) in FY22. That means the Coles share price is valued at 24x FY22’s estimated earnings.

In terms of the most recent trading update, Coles said that it experienced elevated supermarket sales in early January as the Omicron COVID-19 variant spread through the community. However, sales moderated later in the month.

The ASX dividend share is investing in a store renewal program, as well as continued investments in e-commerce and the Witron and Ocado transformation projects with its distribution centres.

Centuria Industrial REIT (ASX: CIP)

This is a real estate investment trust (REIT) focused on high-quality industrial properties.

It’s currently rated as a buy by the broker Morgan Stanley with a price target of $4.35. That’s around 10% higher than today’s valuation.

The business has around 80 properties worth approximately $4 billion. About 90% of its portfolio is located on Australia’s eastern seaboard.

Centuria Industrial REIT’s property portfolio has a weighted average lease expiry (WALE) of 8.9 years, providing the business with long-term income visibility. Its portfolio occupancy was 99.2% on 31 December 2021.

It’s experiencing a high level of income growth. In the first half of FY22, its average rental growth was 10% higher than prior passing rents.

The ASX dividend share has provided guidance of a distribution of 17.3 cents per unit for FY22. At the current Centuria Industrial REIT share price, that represents a distribution yield of 4.4%.

Centuria Industrial REIT is expecting to see further rental growth, the REIT’s manager Jesse Curtis has recently said:

With demand for industrial space expected to remain elevated, thanks to customer shifts to e-commerce plus onshoring to maintain supply chain resilience, and with limited supply within urban infill markets, we expect to see industrial rents continue to rise.

The post 2 ASX dividend shares to buy for this year and beyond: experts appeared first on The Motley Fool Australia.

More reading

• Why expert says this supermarket ASX share is a better bet than Woolworths (ASX:WOW)
• Brokers name 2 excellent ASX dividend shares with big yields to buy
• Why has the Coles (ASX:COL) share price rallied 7% in a month?
• 2 excellent ASX dividend shares analysts rate as buys
• The Coles (ASX:COL) dividend beats Woolworths. Does that make it a better income share?

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 owns and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Thursday, the S&P/ASX 200 Index (ASX: XJO) was a strong performer for a second day in a row. The benchmark index rose 1.05% to 7,250.8 points.

Will the market be able to build on this on Friday and end the week on a high? Here are five things to watch:

ASX 200 expected to rise

The Australian share market looks set to end the week on a positive note following a decent night of trade on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 38 points or 0.5% higher this morning. In late trade in the US, the Dow Jones is up 0.65%, the S&P 500 is up 0.7%, and the Nasdaq is up 0.7%.

Oil prices jump

Energy producers including Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) could have a strong finish to the week after oil prices jumped. According to Bloomberg, the WTI crude oil price is up 9.2% to US$103.77 a barrel and the Brent crude oil price is up 9.4% to US$107.34 a barrel. This comes amid warnings from the IEA that supply is expected to fall more than demand.

Megaport selldown

The Megaport Ltd (ASX: MP1) share price will be on watch today following reports that a major shareholder is selling down their holding. According to the AFR, company founder and chairman Bevan Slattery is rumoured to have sold 3 million shares at a discount of $13.05 per share. This valued the stake at $40 million. The Megaport share price was fetching $14.14 at the close of play yesterday.

Gold price rebounds

Gold miners Newcrest Mining Ltd (ASX: NCM) and St Barbara Ltd (ASX: SBM) could have a good finish to the week after the gold price rebounded. According to CNBC, the spot gold price is up 1.7% to US$1,941.10 an ounce. Demand for safe haven assets boosted the precious metal.

Carsales goes ex-dividend

The Carsales.Com Ltd (ASX: CAR) share price could end the week in the red. That’s because this morning the auto listings company’s shares are trading ex-dividend for its fully franked 25.5 cents per share interim dividend. This dividend will then be paid to eligible shareholders next month on 19 April. Hub24 Ltd (ASX: HUB) shares are also trading ex-dividend today.

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

More reading

• These 3 ASX 200 shares are topping the volume charts this Thursday
• Why is the Woodside (ASX:WPL) share price missing out on all the fun today?
• ASX 200 (ASX:XJO) midday update: Block and Zip shoot higher, Ampol’s acquisition boost
• Is the party over for ASX 200 gold shares?
• Want to secure the biggest ever dividend from this ASX 200 share? Here’s why you need to buy 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. owns and has recommended Hub24 Ltd and MEGAPORT FPO. The Motley Fool Australia owns and has recommended Hub24 Ltd. The Motley Fool Australia has recommended MEGAPORT FPO and carsales.com Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Transurban Group (ASX: TCL) maybe a road toll operator, but will rising fuel prices impact the share price?

Transurban shares climbed 2% on Thursday to finish the day at $13.22.  For perspective, the S&P/ASX 200 Index (ASX: XJO) lifted 1.05%.

Let’s take a look at what is likely at play for the company.

Could rising petrol prices impact toll road revenue?

Transurban builds and operates toll roads in Sydney, Melbourne and Brisbane.

Oil prices have recently hit 13-year highs amid the Russian invasion of Ukraine. Brent crude oil prices reached nearly US$140 per barrel in early March. The international benchmark Brent Crude is priced at US$99.65 per barrel at the time of writing, according to Bloomberg.

However, broker Macquarie believes there is scant evidence fuel price increases will impact the road toll operator.

Macquarie has placed a $14.96 price target on the company’s shares. This is 13% higher than Thursday’s close.

Macquarie, quoted in the Financial Review, said:

Transurban has always remarked, in their experience, there is a very weak relationship to fuel price movements. This appears to be supported by academic research which cites elasticity of negative 0.04.

In October 2007, when fuel increased 18 per cent, M4 and M5 (Sydney motorways) traffic was either stable or higher. In theory, it should have fallen 0.7 per cent assuming the elasticity holds.

The team at Morgans also recently placed an add rating and $14.29 price target on the company’s shares, my Foolish colleague James reported. The company said:

We think TCL will continue to be attractive to investors given its market cap weighting (important for passive index tracking flows), the high quality of its assets, management team, balance sheet, and growth prospects. 

Transurban share price snapshot

The Transurban share price has lifted just 1% in the past 12 months, while it has lost 4% year to date.

In the past month, Transurban shares have gained nearly 3%, while they have soared nearly 6% in the past week

Transurban has a market capitalisation of about $40.6 billion based on its current share price.

The post Worried about how rising petrol prices might impact the Transurban (ASX:TCL) share price? Read this appeared first on The Motley Fool Australia.

More reading

• The Transurban (ASX:TCL) share price has gained under 2% in 3 years. Have the dividends been worth the wait?
• Why this broker says the Transurban (ASX:TCL) share price can drive 14% higher
• Top brokers name 3 ASX shares to buy next week
• Why brokers rate these ASX 200 dividend shares as buys
• Which new investments are predicted to help the AFIC (ASX:AFI) share price and dividends?

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 Bruce Jackson.

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