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

After suffering a bad case of the Mondays, shares in Facebook (NASDAQ: FB) stock bounced back in Tuesday trading, regaining 2.3% of the 4.9% that it lost. You may want to thank Piper Sandler for that.

So what

As you’ll recall, Facebook got hit by a double-whammy on Monday. First, it suffered a public relations blow when the whistleblower behind The Wall Street Journal‘s “The Facebook Files” reporting stepped out of the shadows and revealed herself to be a one-time member of Facebook’s own Civic Integrity Team.

This is the work team responsible for helping to stop the “spread [of] political falsehoods, [the stoking of] violence and [the abuse of Facebook] by malicious governments”.

Adding injury to insult, the social network suffered its worst services outage ever on Monday when unspecified “networking issues” caused Facebook and other apps it owns, including WhatsApp and Instagram, to go dark for six hours straight.

Now what

The outage is over now. And in what feels like a rare bit of good news, Piper Sandler just released a report (according to TheFly.com) confirming that for all its troubles, Facebook’s Instagram remains the “most used social app” among US teens, with 81% reporting using it.

Don’t get too excited though. While everyone still kinda uses Instagram, Piper noted that after surveying 10,000 American teens, its competitor Snap (NYSE: SNAP) is actually teens’ favorite social app. Asked to rank their favorites, 35% of respondents picked Snapchat over Instagram.

Worse news for Facebook, Snapchat scored higher in this survey than in the one Piper ran six months ago. As negative headlines continue to swirl around Facebook and Instagram, we’ll be even more interested in seeing how these numbers look six months from now. 

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

The post Why Facebook shares bounced back on Tuesday appeared first on The Motley Fool Australia.

More reading

• Why Facebook fell nearly 11% in September
• Facebook’s path into wearables will be an uphill climb

Rich Smith has no position in any of the stocks mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Facebook. The Motley Fool Australia has recommended Facebook. 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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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

After suffering a bad case of the Mondays (like just about every tech stock on the planet), shares of Amazon (NASDAQ: AMZN) are bouncing right back on Tuesday, and were up a solid 2% as of 1:30 p.m. EDT.

You can thank Wall Street for that.

So what

StreetInsider.com reports that investment bank Piper Sandler‘s (NYSE: PIPR) just-completed biannual “Taking Stock With Teens” survey found that Amazon remains the most popular and widely used retailer among teens, with 52% of youths surveyed saying they used it. This is important, Piper Sandler says, because it shows Amazon is still getting customers while they’re young, so as the teen cohort ages into adulthood, it will be likely to subscribe to Amazon Prime (as adult Amazon users tend to do). This, in turn, “should serve as a powerful tailwind [for Amazon’s profits] for many years to come,” the bank says.

Now what

You wouldn’t know this tailwind is there, to judge from Amazon’s stock price. Shares are flat, and even down a small fraction of a percent, since the year began. But according to a second analyst, the J.P. Morgan division of JPMorgan Chase (NYSE: JPM), this price weakness in Amazon stock creates a “compelling opportunity” to buy the shares.

Investors might be worried that Amazon isn’t growing as fast this year as it was in the depths of the pandemic, when much of the country was quarantined and locked down with nothing much to do but shop on the internet. Nevertheless, J.P. Morgan argues that multiple months of forced training in how to shop online has created a “significant secular shift” in American shopping patterns.

Amazon might not grow as fast as it did in 2020, but it will certainly grow. In fact, most analysts forecast 30% average annual earnings growth over the next five years.

Whether that’s fast enough to justify a 60 P/E on the stock is the only real question remaining. 

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

The post Why Amazon Stock Bounced Higher on Tuesday appeared first on The Motley Fool Australia.

More reading

• Here’s why Amazon needs retail stores right now
• Does your company love its customers?
• Here were the most popular US shares for ASX investors last week
• Leading broker unmasks 4 top traded international shares
• Leading broker reveals why these 10 big-name shares have been firing up its clients

Rich Smith 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. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on 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 Bruce Jackson.

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

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If you blinked, you may have missed it.

That’s right, the first quarter of the 2022 financial year (Q1 FY22) has come and gone.

We know it’s been a bit of a tough march for the S&P/ASX 200 Index (ASX: XJO), which largely gained for the first half of the quarter only to give most of those gains back in the second half.

As of 30 September, the ASX 200 was up 0.3% since the closing bell on 30 June.

That’s the share market snapshot. But how did cryptos perform over the quarter?

Below we look at 3 of the most recognised names in the crypto world and what investors would have made or lost during Q1 FY22.

First up…

Dogecoin (CRYPTO: DOGE)

Dogecoin is perhaps best known for its Shiba Inu dog logo.

The token was created as somewhat of a joke back in 2013. But its rise in popularity and price more recently, and some helpful tweets from Elon Musk, has raised its profile well beyond joke status.

So how did Dogecoin perform over the past financial quarter?

Not very well.

On 1 June the token was trading for 37 US cents. On 30 September it was worth 20 US cents. Or a loss of 46%

Next up…

The world’s number 2 crypto by market cap

Ethereum (CRYPTO: ETH), the world’s number 2 crypto by market cap, has been gaining popularity due to its functionality in real-world cases. It can be used to execute smart contracts on the blockchain and serves as a platform for a number of other cryptos.

Ether has been around since 2014. But how did it perform in the financial quarter just past?

Quite well!

Ether was trading for US$2,663 on 1 June. By 30 September it was worth US$3,001. Or a gain of 13%.

Which brings us to…

Bitcoin (CRYTPO: BTC)

Bitcoin is the world’s first and still dominant crypto, with a current market cap of US$967 million.

It was launched way back in 2009 by someone (or a group of someones) going by the name of Satoshi Nakamoto. Unlike Ether, Bitcoin mainly serves as an alternative to fiat currencies. Users can spend it or save it in hopes it goes up in price.

So, did it go up in price in Q1 FY22?

It did.

On 1 June Bitcoin was worth US$36,684. By 30 September it was trading at US$43,790. Or a gain of 19%.

Foolish takeaway

Crypto price movements remain notoriously volatile. While Bitcoin and Ether both posted gains over Q1 FY22, and Dogecoin lost, all 3 tokens are still trading well below their record highs.

Whether they return to beat those highs or fall sharply in the future remains the subject of much debate.

The post How these top 3 cryptos performed in the first quarter of FY22 appeared first on The Motley Fool Australia.

More reading

• What’s driving the Bitcoin price surge?
• Why the Ethereum (CRYPTO:ETH) price is trouncing Bitcoin’s gains
• Why inflation angst is driving more Aussie investors to Bitcoin
• Will Ethereum overtake Bitcoin?
• China brings the hammer down on Bitcoin and all other crypto transactions

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin and Ethereum. 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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The Race Oncology Ltd (ASX: RAC) share price has been a positive performer on Wednesday.

In morning trade, the precision oncology company’s shares are up 3.5% to $3.30.

Why is the Race Oncology share price rising today?

Investors have been bidding the Race Oncology share price higher this morning following the release of a positive announcement.

According to the release, the company has been issued a new patent (US 11,135,201) from the United States Patent and Trademarks Office (USPTO) for its cancer drug, Zantrene (bisantrene dihydrochloride).

The company notes that this is Race’s fifth patent for Zantrene in the United States.

Race’s CEO & Managing Director, Phillip Lynch, commented: “This latest US patent provides Race with additional protection around the use, formulation and compositions of Zantrene (and related chemical structures) that improve the therapeutic benefit of Zantrene.”

It builds on the company’s existing Zantrene patents granted in the USA, further strengthening its IP position for the product.

The company also notes that the patent expands Race’s IP portfolio in the therapeutic utility of Zantrene (and related chemical structures). This is particularly for methods, formulations, and compositions that improve the therapeutic efficacy of Zantrene and reduce side effects.

What is Zantrene?

Zantrene is a potent inhibitor of the Fatso/Fat mass and obesity associated (FTO) protein.

The company notes that over-expression of FTO has been shown to be the genetic driver of a diverse range of cancers.

As such, Race is exploring the use of Zantrene as a new therapy for melanoma and clear cell renal cell carcinoma, which are both frequent FTO over-expressing cancers.

The company also highlights that it has compelling clinical data for the use of Bisantrene as a chemotherapeutic agent with reduced cardiotoxicity in Acute Myeloid Leukaemia (AML), breast and ovarian cancers and is investigating its use in these areas.

The Race Oncology share price is now up 77% since the start of the year.

The post Why the Race Oncology (ASX:RAC) share price is storming higher today appeared first on The Motley Fool Australia.

More reading

• Why the Race Oncology (ASX:RAC) share price surged 7% today
• Why is the Race Oncology (ASX:RAC) share price up 18% in a month?

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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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

Shares of Netflix (NASDAQ: NFLX) were up 4.8% as of 1:14 p.m EDT on Tuesday. The streaming media veteran saw a bullish earnings preview from analyst firm Cowen & Co., which included rosy results from Cowen’s proprietary media viewership survey.

So what

In a third-quarter survey of 2,500 U.S. consumers, Cowen asked which media platform has the best video content right now. Netflix led the pack with 28% of the vote, far ahead of YouTube’s second-place tally of 15% and basic cable’s third-place showing at 10%. The “other” category, which includes social networks and various smaller video publishing platforms, added up to 13% of the vote.

Netflix was also found to be the leading service that consumers use most often for viewing videos, ahead of “other” platforms and basic cable. This figure rose to 33% when zooming in on the important age group of 18- to 34-year-olds.

All of these figures were nearly unchanged from Cowen’s second-quarter survey, but many investors appreciated the stability amid rising competition.

Now what

Based on the results of this survey, Cowen expects Netflix to report low subscriber churn and high net additions in the third quarter. The firm predicts paid global net additions of roughly 3.6 million subscribers, just above the 3.5 million official guidance target. Cowen analyst John Blackledge reiterated his buy rating and $650 price target on Netflix shares.

The stock reached another all-time high on Tuesday, having posted a market-beating gain of 11% in the last three months. Whether Netflix meets or misses Wall Street’s expectations on Oct. 19, the stock is primed to make a big move on the news. Either way, Netflix remains one of my favorite stocks in the digital media space. 

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

The post Why Netflix stock was soaring on Tuesday appeared first on The Motley Fool Australia.

More reading

• 3 great reasons to buy Netflix
• Here’s why investors can consider Netflix in the next market crash
• Here’s why Netflix is more recession-proof than disney

Anders Bylund owns shares of Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Netflix. The Motley Fool Australia has recommended 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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As the S&P/ASX 200 Index (ASX: XJO) sinks ever closer to correction territory, many investors are wondering what the best defensive plays are.

It’s no wonder, with the benchmark losing 3.8% over the past month, or 5% since its 13 August peak.

One prominent fund presented this week that it’s taking a 3-pronged approach to identifying the most resilient ASX shares for such troubled times.

According to Pengana Australian Equities Fund analyst Mark Christensen, his team is aiming for ASX stocks that meet one of these criteria:

• Inflation protection through pricing power and long-term contracts
• ‘Forecasting errors’ for the post-lockdown and post-COVID performance
• Resilience to supply chain and inventory disruptions

Perhaps the easiest one to immediately identify is the first criteria. Which ASX companies have enough market power to set their own prices?

“We look for business models that have an element of inflation protection built into them, and which have pricing power,” Christensen said.

If you can raise prices, you’ve got it made

Australia’s largest telecommunications company is a “good example” of this, according to Christensen.

“Telstra Corporation Ltd (ASX: TLS) has 25% of their valuation is effectively tied up in a long-term bond with the government essentially — it’s with the NBN,” he said.

“[The agreement] has a step-up linked to inflation… So if inflation does run away, Telstra benefits by having that income stream also accelerate.”

Telstra shares are up more than 29% on the year.

The analyst cited supermarket giant Woolworths Group Ltd (ASX: WOW) as one business that had strong consumer pricing power.

“At both ends really. It has the pricing power to push back on inflation impacts from its suppliers, and pass on any pricing [rises] it feels it needs to its customers,” said Christensen.

“If you’re able to increase the value of each box you sell, but sell the same number of boxes, then that’s a good equation for your bottom line.”

Woolworths shares have lost 3.6% over the past month, but have gained almost 16% this year.

National Australia Bank Ltd. (ASX: NAB) would benefit simply from the nature of the industry it is in.

“The banks in general do well in a rising interest rate environment.”

The NAB stock price has lost more than 4% in the past month but is still 20.7% up for the year so far.

The Pengana Australian Equities Fund currently holds all 3 of these ASX shares. In fact, 5 of its top 7 holdings meet one of the above “defensive” criteria.

“[We’re] making sure we’ve got companies that, at the very least, will not lose in an interest rate or inflationary environment. But more than that, if we can find winners — those that benefit.”

The post 3 ASX shares protected from rising inflation and interest rates appeared first on The Motley Fool Australia.

More reading

• Here’s what happened to the Telstra (ASX:TLS) share price in September
• 5 defensive ASX shares to guide you through the market correction
• Why the ANZ (ASX:ANZ) share price has lagged the ASX 200
• When was the worst ever day on the Telstra (ASX:TLS) share price chart?
• Why this broker sees 30% upside for the AGL (ASX:AGL) share price

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 shares of and has recommended Telstra Corporation 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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The Volpara Health Technologies Ltd (ASX: VHT) share price is on the move on Wednesday morning.

At the time of writing, the healthcare technology company’s shares are up 3% to $1.17.

Why is the Volpara share price rising?

Investors have been bidding the Volpara share price higher today after the release of second quarter business update.

According to the release, the company was on form during the three months and delivered record quarterly growth in net new annual recurring revenue (ARR). Volpara added US$1.2 million during what is traditionally its slowest quarter.

This means that Volpara’s ARR has now reached ~US$20.4 million (~NZ$29.0 million), which is up ~10% since the end of FY 2021.

In respect to market share, the company estimates that it now has at least one software product contracted to be used in the breast cancer screening of approximately 34% of US women. This equates to approximately 13.4 million women and is up from 33% at the end of the first quarter.

Also heading in the right direction is its Average Revenue per User (ARPU). It was US$2.04 for the quarter and is now US$1.46 over the entire installed base. This is up from US$1.42 in the first quarter.

The company also notes that it has just announced its largest contract to date. It estimates that it will deliver US$2.15 million in revenue over five years, which represents US$430,000 in ARR.

Management notes that its result and new contract reflects its customers’ desire to facilitate personalised breast cancer care with tightly integrated breast density, cancer risk, and patient reporting.

Management commentary

Volpara’s CEO, Dr Ralph Highnam, commented: “Volpara has had a tremendously strong quarter despite the continuing challenges of the COVID-19 pandemic. The Volpara Health Breast Platform is gaining momentum as clinics begin to understand the power of a fully integrated patient tracking, risk, and density offering.”

“We also saw a number of large Analytics deals signed and are pleased with the continually improving ARPU as we land new customers with our larger suite of products or expand with existing customers continuing to grow with us. Promisingly, we enter Q3 with a strong pipeline and look forward to showing off our outstanding product platform at RSNA, the world’s largest radiology trade show, in early December,” he added.

The Volpara share price is down 17.5% in 2021.

The post Volpara (ASX:VHT) share price charges higher on Q2 update appeared first on The Motley Fool Australia.

More reading

• Volpara (ASX:VHT) share price edges lower despite biggest contract win
• 2 ASX tech shares that might be buys in October 2021
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• Broker names 2 small cap ASX shares to buy
• Volpara (ASX:VHT) share price under spotlight on lung screening expansion

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 shares of and has recommended VOLPARA FPO NZ. The Motley Fool Australia owns shares of and has recommended VOLPARA FPO NZ. 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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Along with electric vehicles, hydrogen fuel is touted by many experts and manufacturers as the next big solution to help us move beyond environmentally destructive petrol.

But as an ASX shares investor, how do you identify which companies are involved in the hydrogen industry?

Fortunately, this week ETF Securities will provide an easy answer to that question.

The fund provider’s latest product, ETFS Hydrogen ETF (ASX: HGEN), will commence trading on the ASX on Thursday.

According to the company, the portfolio will comprise 30 stocks from the developed world with “a heavy exposure” to hydrogen.

ETF Securities has not revealed the specific stocks at the time of writing.

Is this like the internet in the 1990s?

ETF Securities head of distribution Kanish Chugh said that the “hydrogen economy” is still in an early stage.

“However, its potential applications are limitless – from making fertiliser to powering the world’s transport systems.”

He equated the current state of the hydrogen industry to the internet in the 1990s or semiconductors in the 1970s.

“In these instances, disruptive technologies reached tipping points and saw exponential uptake. Their uptake was driven by megatrends – which are one-off structural shifts in the economy and society.”

ETF Securities’ hydrogen ETF is understood to be the first exchange-traded fund on the ASX that solely focuses on hydrogen.

There are several of these funds already trading in overseas share markets.

Governments are subsidising hydrogen

To encourage cleaner fuels, governments around the globe are subsidising the development of hydrogen products, according to ETF Securities.

“Much of the current technology in the hydrogen industry is based around fossil fuel-based hydrogen,” the fund provider stated.

“However, new technology threatens to disrupt this old market, promising to bring the costs of green hydrogen down and production volumes up.”

While many mining companies are involved in extracting hydrogen, the new ETF reportedly will not invest in stocks that don’t meet ESG criteria.

“An ESG filter, using data from Minerva Analytics, [that] excludes companies involved in controversial weapons, small arms, gambling, tobacco and fossil fuels, or which are non-compliant with the United Nations Global Compact.”

“The fund also removes oil, gas and coal companies.”

The post Want to buy ASX shares in hydrogen? Here’s how appeared first on The Motley Fool Australia.

More reading

• The Magellan (ASX:MFG) share price is in focus on $1.5 billion FUM outflow
• Why this broker just upgraded the Baby Bunting (ASX:BBN) share price to buy
• ASX futures point to rebound today after US stock market lifts
• What’s driving oil prices higher and which ASX shares are benefitting?
• Why did the CSL (ASX:CSL) share price have such a lousy month in September?

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 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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The Magellan Financial Group Ltd (ASX: MFG) share price is in focus today after the fund manager announced its quarterly funds under management (FUM) update.

Investors may notice that Magellan experienced FUM outflows during the three months to 30 September 2021.

Magellan’s FUM decline

The fund manager reported that its total FUM was $113.3 billion at the end of September 2021. This was a decline of around $4.7 billion from August 2021. It was also a decline of around $600 million from June 2021.

Magellan said that for the three months to September 2021, the fund manager experienced net outflows of $1.53 billion, which represented approximately 1.3% of average FUM over the quarter. This decline was made up of net retail outflows of $617 million and net institutional outflows of $910 million.

What happened?

The fund manager did try to explain what happened during the quarter. FUM changes can have a sizeable impact on investor thoughts on the Magellan share price.

Regarding the net institutional outflows, $1 billion of outflows were the result of three clients rebalancing their portfolios across global equities ($410 million), infrastructure equities ($410 million) and Australian equities ($180 million). Magellan looked to reassure investors by saying that all three clients were retained, each with a mandate of more than $2 billion with Magellan at 30 September 2021.

The fund manager also said that no institutional mandates were lost during the quarter and its global sustainable strategy secured its first two mandates during the quarter.

Turning to the retail outflows. Magellan explained that approximately 23% of net retail outflows related to redemptions from the Magellan High Conviction Trust after the decision to open the fund as an active exchange-traded fund (ETF). The Magellan High Conviction Trust had total FUM of approximately $889 million at 30 September 2021.

How has the Magellan share price performed recently?

Before the share price reaction today, over the last month the Magellan share price had fallen 22%. In the 2021 calendar year to date, it had dropped by 36%.

Since the released of the FY21 result, Magellan’s shares have declined by 34%.

Magellan reported that adjusted net profit before tax increased 3% to $587.7 million. However, including its share of the profits and losses of investments/associates (like Barrenjoey), adjusted net profit after tax declined 6%.

Including the $154.1 million of transaction costs relating to strategic initiatives (after tax), Magellan’s net profit after tax fell 33% to $265.2 million.

Looking at the underlying performance of the funds management business, average funds under management (FUM) grew 9% to $103.7 billion and the profit before tax and before performance fees rose 10% to $526.6 million.

Valuation

Using the Commsec earnings forecast, the Magellan share price is valued at 13x FY22’s estimated earnings at the pre-open price.

The post The Magellan (ASX:MFG) share price is in focus on $1.5 billion FUM outflow appeared first on The Motley Fool Australia.

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• 2 ASX shares that could be buys in October 2021
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• Magellan (ASX:MFG) share price falls 2% after investor warning
• 2 ASX 200 blue chip shares that might be the best to buy
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The Baby Bunting Group Ltd (ASX: BBN) share price could get a boost this morning on the back of a broker upgrade.

Shares in the baby products retailer slipped 1.6% to $5.43 yesterday when the S&P/ASX 200 Index (Index:^AXJO) fell 0.4%.

The drop in the Baby Bunting share price came after management provided an update at its annual general meeting.

Improving trends to lift Baby Bunting share price

While investors weren’t impressed, Morgans upgraded the shares to “add” from “hold”. The broker described the AGM update as an “upbeat assessment” of current sales and margin trends.

The ongoing COVID-19 delta lockdowns caused like-for-like (LFL) sales to dip 1.3% in the 14 weeks to 3 October. But that’s an improvement over the previous period and LFL sales would have jumped 4.7% if you excluded NSW and the ACT.

What’s more, online sales continued to grow strongly. Sales from this channel jumped 37.7% year-on-year even as it faced a tough comparable period when sales surged 126%.

Defying margins

But sales growth isn’t the only reason for Morgans’ bullish view on the Baby Bunting share price. The retailer’s margins are expanding at a time when cost pressures are rising.

“The gross profit margin was up 120 bp to 38.7% YTD. This was due to increased penetration of private label and exclusive products, sales mix and efficiencies in the supply chain,” said Morgans.

“We have also increased our LFL sales forecast slightly from 3.0% to 3.2%. This, combined with our higher gross margin assumptions, take our forecast NPAT up by 3.6% to $29.0m in FY22 and 3.8% to $36.1m in FY23.”

The increased forecasts prompted the broker to lift its 12-month price target on the Baby Bunting share price to $6.20 from $6 a share.

Other tailwinds lifting the Baby Bunting share price

There’s also room for Baby Bunting to grow. As the only national specialty maternity and baby goods retailer in Australia, it only has under 20% of the $2.5 billion domestic market.

Morgans believes it is well placed to take market share from non-specialist retailers, such as department stores.

There is also a new growth opportunity from New Zealand. The retailer will open its first stores across the ditch before the end of the year. If the offshore expansion is successful, Baby Bunting could use that as a springboard into other countries.

Not all good news

But Morgans warns that the Baby Bunting share price isn’t without risks despite these tailwinds.

“The company is busy on several fronts. Its transformation programme adds additional opex and capex,” said Morgans.

“Secondly, the launch of babybunting.co.nz appears to have been a success, but entering any new market brings risk and we will be following the sales data from the new stores in New Zealand very closely later this year.”

The post Why this broker just upgraded the Baby Bunting (ASX:BBN) share price to buy appeared first on The Motley Fool Australia.

More reading

• ASX futures point to rebound today after US stock market lifts
• Here’s what happened to the Wesfarmers (ASX:WES) share price in September
• 5 defensive ASX shares to guide you through the market correction
• 5 things to watch on the ASX 200 on Wednesday
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