Category: Stock Market

Key points

• The benchmark index has started the year well after a choppy period these past few months
• The team at RBC Capital Markets reckon these three ASX shares are poised to deliver upside in 2022
• Analysts at the firm recently upgraded each company to outperform in updates today

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The S&P/ASX 200 Index (ASX: XJO) has started the day up and is now trading 0.24% in the green at 7,435 points.

With the new year now well underway, the team at RBC Capital Markets has tipped these 3 ASX shares to outperform in 2022. Interestingly, each company has exposure to COVID-19 testing in some way.

The broker believes this could benefit their clinical diagnostics segments. Let’s take a look.

Sonic Healthcare Ltd (ASX: SHL)

Sonic Healthcare came into the new year trading down, falling from closing highs of $46.70 on 30 December.

This drop has occurred in tandem with the broader S&P/ASX 200 Health Care Index (ASX: XHJ) which has plunged almost 7% since 2022.

Hence, in the absence of any price-sensitive information from the company, weakness in the sector appears to be impacting Sonic Healthcare’s share price.

Shares in the $19 billion company by market cap outperformed last year, benefitting from the earnings surprise in the company’s Q1 FY22 trading update.

However, support fell away in December with government policy shifting away from Sonic’s COVID-19 test offerings in favour of rapid antigen testing (RAT). This was a development analysts at Credit Suisse recently highlighted.

Despite these potential headwinds, RBC Capital Markets disagrees and is bullish on the direction of Sonic’s share price.

The broker initiated coverage of Sonic Healthcare with a ‘buy’ today and values the company at $47 per share, implying an upside potential of 15% at the time of writing.

The team at Morgan Stanley agrees with RBC and also raised its price target by around 4% to a valuation of $48.10 today.

Healius Ltd (ASX: HLS)

Shares in healthcare player Healius also took a beating during the transition into the new year. The company’s share price has plunged more than 15% since 29 December.

Healius was boosted by the demand for COVID-19 testing during the last 2 years. The company recently noted it was completing more than 40,000 tests a day. This helped it recognise a 179% year on year gain in after-tax profits.

However, as with Sonic Healthcare, new language from the government in pushing RATs is weighing on the outlook for Healius’ shares.

As such, the Helius share price has come off a high of $5.52 last year and is now trading sideways so far on Tuesday. At the time of writing, it is $4.705, a gain of 0.53% on yesterday’s close.

Nevertheless, the team at RBC Capital Markets has initiated coverage on the ASX share with a ‘sector perform’ recommendation. It values the company at $5 a share.

At the time of writing, this implies an approximate 6.2% upside potential should the broker’s forecast be correct.

Analysts at fellow brokers Morgan Stanley and Jefferies concur with this sentiment. Both raised their price targets — Morgan Stanley by 4% to $5.10 and Jefferies by 2.5% to $6.40 respectively.

Australian Clinical Labs Ltd (ASX: ACL)

Shares in Australian Clinical Labs gained considerable momentum in December and the pulse of investor buying has continued into 2022.

Over the last month, shares have climbed almost 14%, even after falling from an all-time closing high of $6.20 on the first trading day of 2022.

Underpinning ACL’s share price performance is the guidance upgrade released to the market last month. Management now forecasts net profit after tax (NPAT) of between $116.3-$128 million. That’s a 35-36% upward revision on previous guidance.

It now also expects revenue to rise by another 13-14% on top of previous estimates. It’s looking at $497-$517 million at the top versus its previous guidance of $437-$455 million.

Management notes the uptick in sales is underscored by strong COVID-19 testing demand.

Despite the move towards RAT, the company is optimistic around its COVID-19 testing, anticipating “heightened volumes of COVID-19 testing to continue during the remainder of FY22 due to the impact of new variants and outbreaks”.

RBC Capital Markets agrees and has given the company a $6.50 per share valuation, indicating its bullish stance.

At the time of writing, this price target signifies a 15% upside potential. Goldman Sachs also recently rated Australian Clinical Labs as a buy with a $6.60 price target.

The post Top broker just rated these 3 ASX shares as buys appeared first on The Motley Fool Australia.

More reading

• This top fund manager just called these leading ASX shares a buy
• Why BWX, PolyNovo, Sandfire, and Sonic shares are tumbling today
• ASX 200 (ASX:XJO) midday update: Crown jumps, miners rally, Sonic sinks
• These ASX dividend shares keep giving investors a payrise
• 2 ASX 200 shares benefitting from the surge in COVID tests

The author 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 recommended Australian Clinical Labs Limited and Sonic Healthcare 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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Key points

• The Beforepay share price is rebounding after tumbling 44% on its IPO yesterday
• Beforepay is a fintech pay-on-demand company offering users salary advances
• Right now, its stock is still trading at $2.11 – 38% lower than its prospectus’ offer price

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The Beforepay Group Ltd (ASX: B4P) share price seems to be getting back on the horse after crashing 44% on its float.

The pay-on-demand company debuted on the ASX at 11 am yesterday after offering its shares for $3.41 under its prospectus. Unfortunately, after finalising its initial public offering (IPO), its stock tumbled to close yesterday’s session at $1.905.

However, Tuesday seems to be a brighter day. At the time of writing, the Beforepay share price is $2.11, 11.02% higher than its previous close.

Let’s take a look at the ASX newbie’s rollercoaster start to its time on the market.

But first, what is Beforepay?

Beforepay is a financial tech company providing those who use it with advances on their salary.

According to Beforepay chair and former Westpac Banking Corp (ASX: WBC) managing director and CEO, Brian Hartzer, the company is filling a gap for on-demand access to credit.

Hartzer says that the company’s technology provides a “suite of budgeting tools”, delivered through formats including smartphone and online applications, custom budgeting tools, and a “pay-cycle detection algorithm”.

Additionally, between its launch in August 2020 and October 2021, Beforepay had a 25.3% compound monthly growth in active users and advanced $170.5 million of pay.

On its debut, the company released an operating update on its December quarter wherein it provided $77 million of pay advances – up 361% on the prior comparable period.

On top of that, its default rates had more than halved, reaching 3% in the quarter.

What sent the Beforepay share price tumbling after its IPO?

It’s hard to say what made the market turn its nose up at Beforepay’s stock’s float.

As part of its IPO, the company raised $35 million and was left with 46.4 million shares.

That saw it with an expected market capitalisation of $158 million. However, come yesterday’s close, the Beforepay share price saw the company with a valuation of around $88 million.

The proceeds of the offer will help the company acquire more customers, grow its Cash Outs, refine its products and models, explore overseas opportunities, and pay for the costs of the offer.

The post Beforepay (ASX:B4P) share price recovers 11% after disastrous IPO appeared first on The Motley Fool Australia.

More reading

• What will AGL (ASX:AGL)’s 2022 dividend yield look like?
• Can 2021’s best-performing FAANG stock do it gain in 2022?
• ASX 200 (ASX:XJO) midday update: Rio Tinto’s Q4 update, JB Hi-Fi rockets, Kogan sinks
• 2 ASX shares that could soar in 2022: experts
• Own Wesfarmers (ASX:WES) shares? Jefferies just lowered FY22 earnings forecasts

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

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Key points

• AGL has long been known as a dividned heavyweight
• This company had a dreadful year last year, losing 48% in 2021
• Is AGL’s 9% dividend too good to be true?

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Watchers of the AGL Energy Limited (ASX: AGL) share price over the past few years would know that this is a company that hasn’t exactly been a great investment during that time.

One of the largest energy generators and retailers in the country, AGL shares have been having an awful time of it lately. Since last peaking in 2017 at close to $28 a share, AGL has been in a steady decline ever since. 2021 saw this company lose 48% of its value alone, and saw the company reach a new 52-week low of just $5.10 a share back in November.

While that means, at today’s pricing of $7.33 a share (at the time of writing), AGL is now more than 40% above those lows, we still can’t forget that longer-term shareholders are likely down in a significant way on their investment. But 2022 is a new year, so let’s look forward and not back. So what might 2022 hold in store for AGL? Is the company’s near-9% trailing dividend yield really on the table?

Is AGL really offering a 9% dividend yield today?

Well, let’s start by uncovering where that yield figure comes from. So AGL paid out three dividends last year. The first was an interim payment of 31 cents a share that was doled out in March. That was supplemented by an additional 10 cents per share special dividend, paid out at the same time. Then, the company distributed its final dividend of 34 cents per share back in September. None of these payouts came with franking credits.

Those ordinary dividends combine to give AGL a trailing yield of 8.88% on current pricing. Factoring in the special dividend as well, and the trailing yield hits 10.25%.

But we shouldn’t really factor in the special dividend, as it was part of AGL’s since-wound-up ‘special dividend program’ that was supplanted by the company’s demerger plans. This program aimed to temporarily bump up AGL’s underlying profits after tax payout ratio policy from the current 75% to 100% over FY2021 and FY2022.

So AGL is still committed to this 75% payout ratio policy. Thus, its dividends over 2022 (until at least the demerger goes through) should be contingent on what kind of profits AGL can pull in. Unfortunately, that picture isn’t looking too bright, going off what the company itself has said. 

2022 could see the dividend belt tighten…

So FY2021 resulted in AGL reporting $537 million in underlying profits after tax. But in the release of its full-year results for FY21 last year, AGL also issued guidance for FY2022. And this revealed that the company is only expecting to pull in between $220 and $340 million in profits after tax. That represents a 36.7%-59% drop in underlying profits year on year. Thus, if these predictions prove accurate and AGL keeps its dividend payout policy consistent, investors can arguably expect a 36.7%-59% drop in their dividends for FY22.

A 59% drop in AGL’s dividend would roughly equate to an annual payout of 26.5 cents per share. That would give AGL shares a hypothetical forward yield of approximately 3.62% on current pricing. That’s not objectively a terrible yield, but it is certainly nothing close to the near-9% trailing yield currently on display.

No doubt shareholders will be hoping that the company can pull a rabbit or two out of its hat and put up something better. But we’ll have to wait and see what happens.

At the current AGL Energy share price, this company has a market capitalisation of $4.82 billion.

The post What will AGL (ASX:AGL)’s 2022 dividend yield look like? appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy next week
• These were the best performing ASX 200 shares last week
• Why has the AGL (ASX:AGL) Energy share price climbed 18% in a week?
• 3 reasons the AGL Energy (ASX:AGL) share price failed to illuminate in 2021
• Dividend beasts: 5 ASX 200 shares with the highest dividend yield

Motley Fool contributor Sebastian Bowen 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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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.

If you had invested in any one of the FAANG stocks 10 years ago, you’d be pleased. On average, FAANG stocks have returned an astounding 1782% over the last 10 years versus the market’s 325%. Each has changed the world in a different way, and all are continuing to do it.  These companies have become engrained in daily life and in many investment portfolios. The stocks making up the FAANG acronym are large tech companies that have dominated the market recently. These stocks are:

• F-Meta Platforms (NASDAQ: FB) (Formerly known as Facebook, thus the “F”)
• A-Amazon (NASDAQ: AMZN)
• A-Apple (NASDAQ: AAPL)
• N-Netflix (NASDAQ: NFLX)
• G-Alphabet (NASDAQ: GOOG) (Formerly known as Google, thus the “G”)

Three of the five lost to the market during 2021, but one stood out above the rest.

FB data by YCharts

 

After more than doubling the growth of the market in 2021 , Alphabet seems primed to outperform the rest again.

Two dominant segments, one laggard

Alphabet’s dominance in its primary businesses is astounding. The Google search engine has a 92% worldwide market share. It makes almost no sense for businesses to spend search engine optimization (SEO) advertising dollars anywhere besides Google. With nearly every business having an online presence, advertising on Google is necessary so that the website isn’t buried beneath others. This segment accounts for over half of total revenue, making it the most important for Alphabet.

YouTube — the popular video-sharing platform — also falls under the Alphabet umbrella. Once again, it holds a significant online video platforms market share at 76%. Additonally 74% of U.S. adults accessed YouTube in 2020, more than any other social media site including second-place Facebook (68%). While video ads may be annoying, they represent a significant targeted advertising opportunity. For example, someone looking up home improvement videos may see tool or material supply ads. Because the advertisers aren’t broadcasting to a wide audience — like on TV or a billboard — Alphabet can ensure the ads reach the intended viewer.

One race Alphabet isn’t winning is cloud computing. This is a competitive market with juggernauts like Amazon Web Services and Microsoft‘s(NASDAQ: MSFT) Azure leading Google Cloud.

Cloud Infrastructure Market Share
Amazon Web Services	Microsoft Azure	Google Cloud
32%	19%	7%

Data source: ParkMyCloud.

The cloud computing market is valued at $455.3 billion but is expected to grow to $947.3 billion by 2026. This is a gigantic industry where many winners can succeed. However, Google will need to step up its game if it hopes to close the gap Amazon and Microsoft have created. During the third-quarter conference call, management noted they are aggressively hiring in its cloud division to better complete. One differentiator that might elevate Google Cloud is its minimal carbon footprint. Alphabet claims it is the world’s “cleanest cloud” with two-thirds of the energy consumed by data centers coming from carbon-free sources and plans to go completely carbon-free by 2030. While this isn’t a technological advantage, it is an attractive bullet point when attempting to win a contract. 

Alphabet generates massive piles of cash and is stockpiling it too

As an almost $2 trillion company, sheer size makes it difficult to grow quickly. However, Alphabet’s growth numbers buck this trend. Its Q3 revenue increased 41% to $65.1 billion. 29% of revenue was converted to net income, giving Alphabet plenty of financial resources.

Its balance sheet has an astounding $142 billion in cash, equivalents, and marketable securities and only $14.2 billion in debt. With a snap of a finger, Alphabet could scoop up several sizable companies. However, Alphabet has been in the federal government’s crosshairs for some time for antitrust behavior.

A group of states — led by Texas — is suing Google for antitrust behaviors in its advertising business. This comes after the company paid a $2.8 billion fine to the European Union for prioritizing its price comparison service over competitors. Multiple other lawsuits are pending against Alphabet for similar behavior, but with the cash it generates, Alphabet can continue paying the fines. Investors must decide if they can live with owning a company that consistently violates standards governments set or if they want to look somewhere else.

Channeling the cash pile into buybacks

Besides outright growth, Alphabet is reducing its share count by repurchasing stock. It approved an additional $50 billion buyback program in April, augmenting an already ongoing one. Over the last nine months, Alphabet has retired $36.8 billion in shares, or about 2% of its current market cap. Alphabet has been repurchasing shares for a few years and will probably continue that practice, as regulators will likely shut down any acquisitions, leaving few options for management. Plus, Alphabet generated more than $65 billion in free cash flow over the last 12 months, so it can easily finance continued buyback operations.

GOOG Shares Outstanding data by YCharts

After reducing the outstanding share count, each existing share owns a larger slice of Alphabet, making them more valuable.

The cloud computing market is far from mature and represents a huge opportunity. Once a company begins using the service, the recurring revenue model generates more revenue as the customer stays on the platform. Alphabet needs to step up its game to catch the other two, but this will still be a revenue-huge segment even if it isn’t the leader.

The valuation is also reasonable compared to the others when assessed from a price-to-earnings (PE) standpoint.

FB PE Ratio data by YCharts

With only Meta Platforms valued lower, I believe the valuation risk is minimized. Even retailers like Costco (NASDAQ: COST) and Walmart (NYSE: WMT) both have a PE multiple around 50, yet Alphabet’s margin profile is much stronger than the other two. Alphabet is undervalued, and multiple expansions could push the stock price higher.

At the end of the day, Alphabet has the two most visited websites in the U.S. Ads are not going away, and both Google and YouTube have a successful model in place to monetize them. Alphabet will continue to grow rapidly in both these areas, driving more revenue, and it will use that cash flow to repurchase stock. I believe this mechanism will drive Alphabet to outperform the other FAANG stocks, not only this year but over the next five as well. Alphabet is a great cornerstone stock in a portfolio, and investors would be wise to add it to theirs. 

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

The post Can 2021’s best-performing FAANG stock do it gain in 2022? appeared first on The Motley Fool Australia.

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• 5 unstoppable trends to invest $5,000 in for 2022

Keithen Drury owns Alphabet (C shares) and Costco Wholesale. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. 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. owns and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Costco Wholesale, Meta Platforms, Inc., Microsoft, and Netflix. Motley Fool Holdings Inc. recommends the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Meta Platforms, Inc., and Netflix. 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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At lunch on Tuesday, the S&P/ASX 200 Index (ASX: XJO) is on course to record another again. The benchmark index is currently up 0.3% to 7,438.3 points.

Here’s what is happening on the ASX 200 today:

Rio Tinto quarterly update

The Rio Tinto Limited (ASX: RIO) share price has bounced back from a poor start and is edging higher at lunch. This follows a mixed reaction to its fourth quarter update this morning. For the three months ended 31 December, Rio Tinto reported a 5% decline in Pilbara iron ore shipments to 84.1Mt. Goldman Sachs was expecting iron ore shipments of 88.9Mt. However, its guidance for FY 2022 shipments of 320Mt to 335Mt was broadly in line with the broker’s estimate of 330Mt.

Kogan shares tumble

The Kogan.com Ltd (ASX: KGN) share price is falling again on Tuesday following another update from an ecommerce peer. On Monday, a disappointing update on the Wesfarmers Ltd (ASX: WES) owned Catch business weighed on Kogan’s shares. Today it is a very disappointing update from Redbubble Ltd (ASX: RBL). It reported an 88% decline in EBITDA during the first half amid increasing competition and higher customer acquisition costs.

JB Hi-Fi update impresses

The JB Hi-Fi Limited (ASX: JBH) share price is charging higher following a better than expected trading update. According to the release, the retail giant recorded modest sales growth over the prior corresponding period during the second quarter. This led to sales falling just 1.6% during the first half despite cycling a very strong period. On the bottom line, its first half net profit of $287.9 million was down 9.4% year on year but 12.4% ahead of the consensus estimate.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Tuesday has been the JB Hi-Fi share price with a 7% gain following its update. Going the other way, the worst performer has been the Kogan share price with a 5% decline in response to Redbubble’s update.

The post ASX 200 (ASX:XJO) midday update: Rio Tinto’s Q4 update, JB Hi-Fi rockets, Kogan sinks appeared first on The Motley Fool Australia.

More reading

• Own Wesfarmers (ASX:WES) shares? Jefferies just lowered FY22 earnings forecasts
• This is how much the average Aussie needs to feel ‘rich’
• JB Hi-Fi (ASX:JBH) share price shoots 7% higher on ‘strong sales’
• Here’s why the Redbubble (ASX:RBL) share price is crashing 20% today
• Rio Tinto (ASX:RIO) share price on watch after Q4 update: How did it perform compared to expectations?

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 Kogan.com ltd. The Motley Fool Australia owns and has recommended Kogan.com ltd and Wesfarmers 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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Key points

• Experts think that both BWX and Bubs have strong return potential in 2022
• Natural beauty stock BWX has several attractive brands that have impressive international growth potential
• Bubs, the goat infant formula business, is seeing daigou demand return and international sales soar

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This year could be a strong year for some of the ASX shares that are growing strongly but have seen share price declines.

Companies that are growing revenue at a fast pace give themselves a good chance of growing profit margins due to operating leverage and delivering net profit growth over the longer-term.

Lower share prices could mean better valuations. Analysts have rated the following two ASX shares as opportunities, which are growing globally:

BWX Ltd (ASX: BWX)

BWX is one of the world leaders when it comes to natural beauty products. It now has a number of brands that offer different products serving various markets including: Sukin, Andalou Naturals, USPA, Mineral Fusion and Go-To Skincare. BWX also owns two e-commerce platforms – Nourished Life and Flora & Fauna.

The BWX share price recently took a dive after announcing that the current managing director and CEO Dave Fenlon would be stepping down from being the leader. Chief operating officer (COO) Rory Gration will become the new boss.

UBS thinks that BWX is a buy, with a price target of $5.50. That’s a potential upside this year of almost 50% for the ASX share, if the broker is right. The broker’s confidence in the business is partly shown by the ability of the company to win over big retailers like Chemist Warehouse and Walmart.

BWX is excited by the potential of Go-To Skincare after buying 50.1% of it for around $89 million. On FY21 pro forma numbers, including around $3 million of potential synergies, it adds at least 10% to earnings per share (EPS).

Go-To founder Zoe Foster Blake will remain as a strategic shareholder, chief creative officer and board director.

On UBS predictions, the BWX share price is valued at 19x FY23’s estimated earnings.

Bubs Australia Ltd (ASX: BUB)

Bubs is a leading infant formula and nutrition business. It has a leading goat infant formula brand as well as adult goat milk dairy products. Plus, it has an organic, grass-fed cow infant formula range, and a vitamins and minerals range.

The Bubs share price has fallen around 35% from 28 January 2021.

This business is seeing a strong recovery with Chinese demand and daigou customers, whilst non-China international growth continues to power ahead.

Investors will get an insight into the FY22 second quarter and first half performance soon enough, but the first quarter showed a lot of growth. Total gross revenue grew 96% to $18.5 million year on year and 45% quarter on quarter.

The ASX share was the fastest growing infant formula manufacturer across Australian domestic grocery and pharmacy retailers with Bubs infant formula scan sales up 35% in the last quarter. Daigou sales increased 648% year on year and 265% quarter on quarter.

International (excluding China) revenue rose 489% year on year, contributing 24% of quarterly sales. Export sales of Bubs infant formula sales to markets outside of China soared 154%.

It is also utilising its manufacturing facility’s capacity and expertise, creating Deloraine Dairy Solutions which saw its revenue contribute 17% of first quarter gross revenue. It’s doing industrial dairy ingredient sales, contract manufacturing and end-to-end product development for global customers.

Bubs is expecting to be able to sustain continued growth momentum.

It’s currently rated as a buy by the broker Citi, with a price target of $0.63.

The post 2 ASX shares that could soar in 2022: experts appeared first on The Motley Fool Australia.

More reading

• Why Afterpay, BWX, Pendal, and Temple & Webster shares are sinking
• Why BWX, PolyNovo, Sandfire, and Sonic shares are tumbling today
• BWX (ASX:BWX) share price sinks 14% on leadership news
• Can the Bubs (ASX:BUB) share price bounce back in 2022?
• Are these 2 impressive ASX shares buys for 2022?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BUBS AUST FPO and BWX 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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Key points

• Wesfrarmers shares are back in the spotlight after the comany reported its first half results last week
• Shares fell off a high of $60.02 on 4 January, dropping until today’s session
• Jefferies notes the results were better than expected, yet lowered its FY22 earnings estimates
• In the last 12 months, the Wesfarmers share price has gained more than 10%.

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The Wesfarmers Limited (ASX: WES) share price opened in the green today and is up 0.49% to $55.65 a share at the time of writing.

Despite a rough trot these past few weeks, investors have bought in at these 3-month lows, particularly after the company’s first-half performance update.

What’s up with the Wesfarmers share price lately?

Wesfarmers outlined that overall group net profit after tax (NPAT) is forecast to come in at $1.18-$1.24 billion, a 12.5%-16.5% year on year decline.

The bulk of sales volume was derived from its Bunnings and Wesfarmers Chemicals, Energy & Fertilisers segments, offsetting weakness in the Kmart Group and Officeworks divisions.

Kmart was a particularly underwhelming component for Wesfarmers in the first half, with sales significantly impacted by COVID-19 lockdowns.

As such, management anticipates group earnings before interest and taxes (EBIT) to slide more than 50% from $487 million to between $170 million-$180 million.

Despite the downgrade, the market appeared to have priced in these risks and investors have sent the Wesfarmers share price flying off a 3-month low of $54 so far this week.

What’s Jefferies saying about Wesfarmers shares?

The team at Jefferies note that Wesfarmers’ first-half results were better than its own internal estimates for the conglomerate.

Not only that, but Wesfarmers’ forecast 1H NPAT ranges were approximately 2% higher than what Jefferies was expecting. They’re also 3% above the median consensus estimate.

Even though this is a “13% decline on the prior corresponding period”, Jeffries says, it is “in line with 1H of FY 2020 (pre-COVID)”.

The broker reckons that Wesfarmers has the capacity to continue its growth trajectory in Bunnings and Wesfarmers Chemicals, Energy & Fertilisers, offsetting the weaker Kmart and Officeworks businesses.

Even still, there are several headwinds that the market might need to price in. These are causing the broker to remain on the sidelines for now.

As such, Jefferies lowered its FY22 earnings forecasts in these divisions, whilst retaining its neutral rating on the stock and valuing the company at $55 per share.

JP Morgan, Jarden, and Morgans see things a bit differently. The brokers are each overweight on the stock, valuing it at $60.60, $59.60 and $60.80 respectively.

In the last 12 months, the Wesfarmers share price has climbed almost 11% but is bathing in a sea of red across all other time frames.

Despite these recent strengths, the Wesfarmers share price is still down more than 5% over the past month.

The post Own Wesfarmers (ASX:WES) shares? Jefferies just lowered FY22 earnings forecasts appeared first on The Motley Fool Australia.

More reading

• Is Wesfarmers (ASX:WES) about to buy Greencross?
• Why Adbri, Australian Ethical, JB Hi-Fi, and Wesfarmers shares are racing higher
• ASX 200 (ASX:XJO) midday update: Wesfarmers’ update, energy shares rise
• Wesfarmers (ASX:WES) share price higher despite guiding to first half profit decline
• An ASX XI to take on the world

The author has no positions 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 has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• Appen shares are rated as a buy by Citi
• Broker sees potential upside of 43% from current levels
• Citi suspects that no trading update means Appen will hit its guidance in FY 2021

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The Appen Ltd (ASX: APX) share price has been a strong performer on Tuesday.

In morning trade, the artificial intelligence data services company’s shares are up 5% to $10.32.

Why is the Appen share price pushing higher today?

The catalyst for the rise in the Appen share price on Tuesday has been a broker note out of Citi.

According to the note, the broker has retained its buy rating on the company’s shares and added them to its positive catalyst watch.

And although the broker has cut its price target by over 13% to $14.80, this still suggests material upside of 43% over the next 12 months based on the current Appen share price.

Why is the broker positive?

Today’s recommendation essentially comes down to the proverb: “No news is good news.”

Citi notes that Appen has not released a trading update in relation to its performance during FY 2021, which ended on 31 December.

Given that it has provided guidance for earnings before interest, tax, depreciation and amortisation (EBITDA) to be at the low end of $81 million to $88 million in FY 2021, the lack of update appears to be an indication that it has performed in line with expectations.

After all, the company would be obliged to update the market if it found that its results differed materially to its guidance. This is exactly what it did in the middle of December 2020 when it realised that its FY 2020 results were going to fall short of guidance.

All in all, Citi suspects there could be upside risk to consensus estimates.

What now?

Unless Appen surprises with a trading update in the second half of January, the next time we’ll hear from the company is on 24 February when it releases its eagerly anticipated full year results.

Though, arguably it will be what management says about FY 2022 that could have the greatest impact on the Appen share price. Especially with some brokers speculating that big tech companies are bypassing Appen and taking their data annotation services in-house.

The post Is no news good news for the Appen (ASX:APX) share price? appeared first on The Motley Fool Australia.

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• Why Afterpay, Appen, Liontown, and Nickel Mines shares are surging higher

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 Appen Ltd. The Motley Fool Australia owns and has recommended Appen Ltd. 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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Key Points

• Data#3 share price hits 52-week high of $6.54 during morning trade
• Net profit before tax is expected to be above previous guidance
• Continued demand for Data#3 products

The Data#3 Limited (ASX: DTL) share price is on the move today following a positive update regarding its financial performance.

At the time of writing, the business technology solutions company’s shares are fetching for $6.44, up 10.84%.

Data#3 anticipates strong earnings growth

Investors are pushing Data#3 shares higher on Tuesday morning after digesting the company’s latest announcement.

According to its release, Data#3 advised it expects to report a record performance for the half-year result for FY22.

Consolidated net profit before tax (NPBT) is forecasted to be slightly ahead of the top end guidance previously reported.

In October, Data#3 informed investors at its annual general meeting (AGM) that it was predicting a NPBT of $15 million to $18 million.

If this is achieved, NPBT for the H1 FY22 period along with earning per share would represent around a 30% increase than H1 FY21 levels.

A global computer chip shortage was experienced throughout 2021 when demand has spiked earlier than anticipated. Consequently, Data#3 has encountered a larger product backlog order for the year’s end. This led to a profit of around $3 million to be realised in FY22.

Data#3 revealed its audited full-year results for the 2021 financial year will be released on 17 February. In addition, management noted that it will announce its interim dividend to shareholders.

About the Data#3 share price

Over the last 12 months, Data#3 shares have climbed around 10% higher, but are remain flat for 2022. The company’s shares reached a 52-week high of $6.54 today before slightly treading lower.

At today’s price, Data#3 has a market capitalisation of roughly $896.77 million, with approximately 154.35 million shares on its registry.

The post Why the Data#3 (ASX:DTL) share price is rocketing 10% today? appeared first on The Motley Fool Australia.

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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 Bruce Jackson.

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Key points

• The ASX 200 had a great 20221, but CBA shares did even better
• This bank rose 23% last year, plus dividends and franking
• But opinion is divided for what 2022 holds in store…

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As most of us would remember rather fondly, 2021 was a pretty great year for ASX shares, all things considered. In the year just passed, the S&P/ASX 200 Index (ASX: XJO) managed to rise around 13% from top to bottom. Add in the benefits of dividends and franking and the returns get even better. But even the performance of the ASX 200 has to play second fiddle to the Commonwealth Bank of Australia (ASX: CBA) share price last year.

2021 was an incredible year for CBA shares. This ASX banking kingpin started the year at $82.11, but ended up at $101 a share by New Year’s Eve. That’s a very healthy rise of 23%. Factoring in CBA’s healthy dividends and franking, and we can add another 3-5% to those returns. As it stands today, CBA shares haven’t done too much in the new year. They’re currently asking $100.90 each at the time of writing, down 0.26%.

So now that we’ve well and truly kicked off 2022, many investors might be wondering if this company can pull another rabbit out of its hat, and give investors an additional 23% gain in 2022? Let’s see what the ASX’s expert investors reckon about that.

So one ASX broker who isn’t too keen on CBA shares for 2022 is investment bank, Goldman Sachs. Last month, Goldman rated CBA shares as a ‘sell’. It slapped a 12-month share price target of $82.57 on the bank, implying a potential downside of roughly 18.2% over the next year. Goldman simply thinks CBA shares trade too richly compared to the bank’s underlying fundamentals, and are predicting that CBA’s valuation premium could shrink to align more with the other ASX banks.

CBA shares: Buy, sell or hold?

But Goldman isn’t the only broker negative on CBA shares right now. As my Fool colleague James covered earlier this month, fellow broker Credit Suisse has also given CBA shares an ‘underperform’ rating. Credit Suisse isn’t as bearish as Goldman though, anticipating that CBA will fall to $92.50 a share over the next 12 months. That implies a potential downside of around 8.5%. Like Goldman though, this broker also has valuation concerns with CBA shares at their current level.

But it’s not all doom and gloom for CBA shareholders. As we also covered earlier this month, Bell Potter is a broker that is more fond of Commonwealth Bank today. Bell Potter still rated CBA as a ‘buy’, with a 12-month share price target of $111. If accurate, that would result in an upside of 9.9% over this year. This broker likes CBA due to its leadership position in the ASX banking industry and home loan markets, as well as its scale and branding power. It’s also anticipating hefty dividend rises from the bank across both FY2022 and FY23, with an expectation of $4.15 in dividends per share by FY23.

So there you have it, what a few expert ASX investors reckon lies in store for the CBA share price in 2022. Unfortunately, no one here seems to be anticipating another 23% year for CBA shares. But experts have been wrong before, so who knows what 2022 will end up looking like for CBA.

At the current Commonwealth Bank of Australia share price, this ASX bank share has a market capitalisation of $172.6 billion, with a price-to-earnings (P/E) ratio of 21.4 and a trailing dividend yield of 3.47%. 

The post Will the CBA (ASX:CBA) share price climb another 23% in 2022? appeared first on The Motley Fool Australia.

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• Could this impact the performance of ASX 200 banks more than interest rates in 2022?
• These were the top 5 ASX 200 bank shares in 2021
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Motley Fool contributor Sebastian Bowen 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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