Category: Stock Market

The QBE Insurance Group Ltd (ASX: QBE) share price is edging back into the green after a tough morning’s trade.

The insurers’ stock has rebounded amid dwindling concerns surrounding a magnitude 5.8 earthquake that affected Melbourne and much of Victoria this morning.

At the time of writing, the QBE share price has rebounded to $11.30, 0.27% higher than its previous close.

While QBE shares have recovered, other ASX-listed insurance providers’ stock isn’t faring so well.

The Suncorp Group Ltd (ASX: SUN) share price is currently 0.84% lower than its previous close. While that of Insurance Australia Group Ltd (ASX: IAG) is currently down 2.19%.

Let’s take a look at how the QBE share price has been performing in the wake of the earthquake.

QBE share price recovers as earthquake damage tallied

The QBE share price has bounced back from a poor start to today’s session.

Meanwhile, the damage caused by a 5.8 magnitude earthquake in Mansfield, Victoria has come to light.

The state’s acting premier, James Merlino, told a press conference no injuries were sustained as a result of the quake.

However, the government is aware of 46 reports of damage to buildings in Mansfield and suburbs of Melbourne.

Merlino also noted calls to 000 and call outs for assistance from the State Emergency Service spiked earlier today but are now back to normal levels.

The earthquake has shaken Melbourne & other parts of Victoria. Considerable damage in & around Chapel St. See the footage captured by a local trader nearby to my office. I want to thank police & firefighters who are on the scene & who I have spoken to. They're doing a great job. pic.twitter.com/gaPlJQfy3W

— David Davis MP (@DavidDavisMLC) September 22, 2021

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Tremors from the earthquake were felt as far away as Launceston and Sydney.

The state also experienced 3 aftershocks in the hour following the initial quake. They reached magnitudes of 5.5, 4.0, and 3.0.

Experts have noted today’s earthquake is the highest magnitude quake felt by eastern Australia in decades.

As a result, the market might have been expecting it to have caused more damage than it seemingly did, thereby affecting ASX-listed insurance companies.

The QBE share price dipped quickly upon open and has steadily regained its losses, reaching its intraday high just before noon.

The post Why the QBE (ASX:QBE) share price is on a rollercoaster today appeared first on The Motley Fool Australia.

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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 owns shares of and has recommended 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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Lithium and batteries have been hot trends on the ASX boards for a few years now. As a perceived ‘growth area’ for the world economy over the coming decades, investors have been very excited to try and find the renewable energy powerhouses of tomorrow and ride the wave to a new electric future. One ASX exchange-traded fund (ETF) that offers investors exposure to this space is the ETFS Battery Tech & Lithium ETF (ASX: ACDC).

This ETF has been listed on the ASX since 2018. Since that date, it has delivered some impressive results. ACDC has returned an average of 27.7% per annum since its inception. That includes an average of 27.5% per annum over the past 3 years, as well as an incredible 65.5% over just the past year alone.

So how does this ETF manage these impressive numbers? Well, let’s dig a little deeper into the kinds of companies that ACDC invests in.

According to ETFS’ latest data (as of 31 August), this ETF has a total of $370.48 million in funds under management. It is invested in a basket of 32 shares across various counties of the world. Its largest exposure is to the United States at 22.4%, followed by Japan at 21.7% and South Korea at 11.9%. Australia is in fourth place with 8.3%.

What is the ETFS Battery Tech & Lithium ETF invested in right now?

So let’s go through this ETF’s top 10 investments as of 31 August:

1. BYD Co Ltd with a portfolio weighting of 5.3%
2. Pilbara Minerals Ltd (ASX: PLS) with a weighting of 5.2%
3. Livent Corp (NYSE: LTHM) with a weighting of 4.1%
4. SolarEdge Technologies Inc (NASDAQ: SEDG) with a weighting of 3.9%
5. Samsung Electronics Co Ltd with a weighting of 3.5%
6. Bollore SE with a weighting of 3.4%
7. Eos Energy Enterprises Inc (NASDAQ: EOSE) with a weighting of 3.4%
8. Tesla Inc (NASDAQ: TSLA) with a weighting of 3.3%
9. ABB Ltd (NYSE: ABB) with a weighting of 3.3%
10. Minerals Resources Limited (ASX: MIN) with a weighting of 3.1%

So a very mixed bag there. You have electric vehicle and battery manufacturers like Tesla and BYD, raw lithium producers like Pilbara Minerals and Mineral Resources, and solar energy companies like SolarEdge.

Minerals Resources and Pilbara have gained roughly 86% and 500% in value over the past 12 months, respectively. Livent Corp has managed a return of 183% over the past year too. When we look at numbers like these, we can start to understand how this ETF has delivered such impressive returns over the past year and beyond.

BYD is up 334% over the past 5 years, and Tesla is up an incredible 1680% – no doubt helping ACDC’s longer-dated performance metrics.

The ETFS Battery Tech & Lithium ETF charges an annual management fee of 0.69%.

The post Own the ETFS Battery Tech & Lithium ETF (ASX:ACDC)? Here’s what you’re invested in appeared first on The Motley Fool Australia.

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• Here’s why investors can consider Netflix in the next market crash
• Why is the Liontown (ASX:LTR) share price sinking 6% today?
• Widgie Nickel (ASX:WIN) share price jumps 45% after IPO
• ASX 200 jumps as Evergrande confirms it will meet next interest repayment

Motley Fool contributor Sebastian Bowen owns shares of Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of 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.

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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.

Streaming content pioneer Netflix (NASDAQ: NFLX) is in a great position to thrive as more of the world chooses to stream their content instead of watching over linear TV. The company is gaining millions of new subscribers during the pandemic, and the scale is improving profit margins and cash flows. 

The downside for investors is that Netflix’s success is no secret to the market. The stock is performing well, rising 102% over the past two years and over 500% in five years. That said, during a stock market crash, Netflix’s stock may come down along with the broader market, allowing investors to buy this excellent performer at a lower entry point.

Subscriber growth is fueling profits

Netflix boasts 209 million paying subscribers worldwide, including 74 million in the U.S and Canada. While it may feel like Netflix has been around forever and has saturated the market for its services, there is plenty of room for growth. In the U.S. in particular, streaming made up just 27% of total viewing time compared with 63% for linear TV, according to Nielsen.

As Netflix continues building out its content library, getting to know its viewers better, and customizing experiences to suit their needs better, the company can take a more significant share of viewing hours. That should lead to more pricing power and the ability to raise monthly fees without losing subscribers. 

For now, results are already quite impressive. In its fiscal second quarter, Netflix’s 209 million viewers generated $7.3 billion in revenue. Annualized, that would amount to $29 billion, giving Netflix a robust content budget, which will help attract new subscribers and retain existing ones.

The company’s growing scale is also improving profit margins. Indeed, in the most recent quarter, Netflix’s operating profit margin was 25.2%, 310 basis points higher than the 22.1% it earned in the same quarter last year. Management feels these results are sufficient enough to sustain the company without tapping into capital markets for cash.

Reducing competitive risk

Another exciting development for Netflix during 2020 and 2021: It reduced the market’s perception of competitive risk. Several streaming competitors entered the space during that time, but it did not harm Netflix. Most notably, Disney‘s flagship service Disney+ attracted 116 million subscribers from November 2019 to July 2021 without taking them away from Netflix.

That raises credence to the argument that streaming competitors don’t hurt Netflix, and they may even be helping the streaming category as a whole. As more services enter the market, canceling linear TV services and switching to streaming is a more compelling proposition for customers. The overall costs are likely to be lower for them, and they have better control over the selection of content. 

A market crash could present an opportunity 

Netflix is trading at a price-to-earnings ratio of 61, the lowest it has sold for going back to 2015. On that basis, Netflix stock is inexpensive right now. However, a stock market crash could take Netflix stock down along with it — and such a drop could allow investors to buy it at an even more favorable entry point.

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

The post Here’s why investors can consider Netflix in the next market crash appeared first on The Motley Fool Australia.

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Parkev Tatevosian owns shares of Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Netflix and Walt Disney. The Motley Fool Australia has recommended Netflix and Walt Disney. 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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The Liontown Resources Limited (ASX: LTR) share price is deep in the red today.

Shares in the mining exploration company plunged more than 6% in today’s session to an intraday low of $1.41. At the time of writing, they have clawed back some ground to be down 3.16% at $1.47 apiece.

Let’s take a look at why the Liontown share price is struggling.

What’s weighing down the Liontown share price?

The Liontown share price has been under pressure today despite the company not releasing any price-sensitive news.

However, there are multiple factors that could be weighing down its shares.

The first consideration is weakness in the broader market. In addition, sliding lithium spot prices could also be having an effect.

Another consideration is the company’s recent performance.

Since the start of September, shares in the mining exploration company have soared more than 57%.

As a result, many investors may be looking to lock in profits given the uncertainty in the broader market.

What’s Liontown been up to?

Shares in Liontown have had a miraculous run this month.

Investors have been bidding shares in the mining explorer higher as anticipation builds for the Initial Public Offering of its spinoff.

Last month, Liontown announced that it will be spinning off its non-lithium assets into Minerals 260 Limited.

In return, current Liontown shareholders will receive 1 share in Minerals 260 for every 11.91 Liontown shares they hold.

As part of the demerger, Minerals 260 will own the Moora Gold-Nickel-Copper-PGE Project.

In addition, the new company will also have an option interest in the Koojan Gold-Nickel-Copper-PGE Project and the Dingo Rocks Project.

Minerals 260 is poised to float on the ASX on 11 October.

In addition, the Liontown share price has also received a boost after the company was added to the ASX 300 Index as part of S&P Dow Jones Indices’ quarterly rebalance.

Snapshot of the Liontown share price

Liontown shares have been the beneficiary of increased mining exploration expenditure and a commodity price boom in 2021.

Liontown is best known for its Kathleen Valley Lithium project in Western Australia.

Since the start of the year, shares in the mining explorer have soared more than 338%. They are up more than 684% over the last 12 months.

The post Why is the Liontown (ASX:LTR) share price sinking 6% today? appeared first on The Motley Fool Australia.

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• ASX lithium shares are rallying across the board today. Here’s why.
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• Which ASX shares are the top movers in the ASX 300 today?
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Motley Fool contributor Nikhil Gangaram 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 Widgie Nickel Ltd (ASX: WIN) share price is having a fantastic debut on the ASX boards.

This afternoon the nickel explorer’s shares reached a high of 29 cents.

When the Widgie Nickel share price reached that level, it was up 45% from its listing price.

Widgie Nickel share price rises following IPO

Investors have been bidding the Widgie Nickel share price higher today following the successful completion of its initial public offering (IPO).

That IPO saw the company raise a total of $24 million before costs at an issue price of 20 cents per new share. This gave the company a market capitalisation of $50 million at listing.

Though, with the Widgie Nickel share price rising to 29 cents, its market capitalisation has now ballooned to $72 million.

What is Widgie Nickel?

Widgie Nickel is exploring the Mt Edwards Nickel Project in Kalgoorlie in Western Australia.

According to the company, the Mt Edwards Nickel Project is a unique consolidation of a vast ~240 square kilometre package of highly prospective nickel and new economy metal prospects. It has a large nickel sulphide resource base of 10.2Mt at 1.6% Ni for 162.6kt of contained nickel, in a globally significant nickel district.

In addition, the company notes that the Mt Edwards Nickel Project possesses exploration upside potential to underpin long-term shareholder value creation. It has material exploration campaigns planned for the post listing period.

Widgie Nickel’s Managing Director, Steve Norregaard, appears positive on the future.

He commented: “The successful entitlement offer has ideally positioned Widgie to methodically work towards unlocking the significant latent potential the Mt Edwards Nickel Project possesses, which was evidenced by the promising drilling results at Munda we released to the market today.”

“Widgie intends to commence an ongoing drilling campaign within the next month to continue to unlock this value,” Mr Norregaard concluded.

The post Widgie Nickel (ASX:WIN) share price jumps 45% after IPO appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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 S&P/ASX 200 Index (ASX: XJO) was off to a weak start on Wednesday, sliding 0.78% to a 3-month low of 7,241.8.

But the broader market suddenly picked up before noon, rallying more than 1.2% from intraday lows to 7,330 at the time of writing.

The uptick is likely in response to some positive news out of China’s embattled Evergrande Group.

ASX 200 jumps on Evergrande repayment announcement

According to Reuters, Evergrande Group’s main unit, Hengda Real Estate Group Co Ltd, said that it will make a bond interest repayment on Thursday, 23 September.

The coupon payment is said to be worth US$83 million with an initial issue size of around US$2 billion, according to CNBC.

Despite the small win, Evergrande will continue to face stress tests with another 7-year dollar bond due next Wednesday, 29 September.

The real estate conglomerate has seen its liabilities balloon to over US$300 billion and has already fallen behind in payments to stakeholders including banks, building suppliers and holders of investment products.

On 7 September, Fitch Ratings downgraded Evergrande’s credit rating from ‘CCC+’ to ‘CC’, suggesting “a default of some kind as probable.”

Energy and materials bounce back

ASX 200 energy and materials shares were the most hard hit when Evergrande headlines sparked panic across global equity markets at the beginning of the week.

The S&P/ASX 200 Materials (INDEXASX: XMJ) and S&P/ASX Energy (INDEXASX: XEJ) index tumbled 3.74% and 2.99% respectively on Monday.

Both sectors are bouncing back strongly on Wednesday, up around 2.5%.

The energy sector is largely green across the board, led by gains from heavyweights Woodside Petroleum Limited (ASX: WPL), Santos Ltd (ASX: STO) and Oil Search Ltd (ASX: OSH).

ASX 200 iron ore miners are finally welcoming some buying activity after iron ore prices slumped below US$100 a tonne for the first time in 14 months on Monday.

The BHP Group Ltd (ASX: BHP), Fortescue Metals Group Ltd (ASX: FMG) and Rio Tinto Limited (ASX: RIO) share prices are up between 2.58% and 5.63%.

The post ASX 200 jumps as Evergrande confirms it will meet next interest repayment appeared first on The Motley Fool Australia.

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• Woodside (ASX:WPL) share price rallies 3% as oil weighs in on Evergrande collapse
• Iron ore price may fall further as experts warn of China trade risk
• September has been a terrible month so far for the Rio Tinto (ASX:RIO) share price
• 5 things to watch on the ASX 200 on Wednesday
• What the Evergrande crisis could mean for ASX 200 iron ore shares

Motley Fool contributor Kerry Sun 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 Insurance Australia Group Ltd (ASX: IAG) share price has slipped into the red during afternoon trade on Wednesday, in line with the broader insurance sector.

IAG’s decline has led to a fall in the broader ASX insurance sector, with the S&P/ASX 200 Insurance Index also sliding 1.3% across the day.

Conversely, the S&P/ASX 200 index (ASX: XJO) has climbed 0.7% into the green today.

What’s up with the IAG share price today?

IAG shares are on the move after the insurance giant braces for an influx of claims from the magnitude 6.0 earthquake that hit the southeast coast of Australia this morning.

The earthquake struck major metropolitan areas in Victoria, NSW, Tasmania and the ACT, and even reached regional areas in Victoria and NSW.

One resident from the regional town of Griffith, NSW said “to be honest, it (the earthquake) was a bit scary. My son didn’t feel it as he was on the massage chair”. Griffith is around 400km north of Melbourne, and 600km south-east of Sydney.

Now IAG is gearing up for a wave of insurance claims to flow in from these regions, as most insurance policies place a 2–7 day window on which a “damage from earthquake” claim can be lodged.

This is to prevent a lengthy tail of even potentially fraudulent claims to be made after the actual earthquake itself.

And it appears that earthquake-related repairs can rumble the bank accounts of insurance companies too.

According to a report from today’s The Australian, a previous earthquake in 1989 that rocked Newcastle and measured 5.8 in magnitude cost insurers $3.2 billion. In today’s values, that figure amounts to over $7 billion.

That kind of widespread damage would ultimately hit the pockets of Australian insurers, especially given the current inflation of manufacturing as well as raw materials’ pricing.

Most analysis points to a strong data backed conclusion that the damage could enter into the billions from today’s event.

Investors appear to be pricing this risk into the IAG share price today, as it sits in negative territory from yesterday’s close.

There will no doubt be more to come from this saga as more data about the extent of the damage is revealed.

IAG share price snapshot

The IAG share price has had an incredibly difficult year to date, marred by controversy and headwinds. It now trades 5% in the green since January 1.

Despite this, it is still up 11% over the past year but has lagged the broad index’s return of around 25% in this time.

The post IAG (ASX:IAG) share price slumps 2% amid earthquake payout concerns appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• IAG (ASX:IAG) share price gains after Chief Risk Officer resignation
• Here’s what has been moving the IAG (ASX:IAG) share price in September 2021
• Why this broker sees the IAG (ASX:IAG) share price gaining 12%
• The next ASX 200 shares that could undertake a big capital return

The author Zach Bristow 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 shares of and has recommended 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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The Macquarie Group Ltd (ASX: MQG) share price is in the green today amid reports it’s a top contender for VicRoads’ registration, licensing, and custom plates services.

Expressions of interest for the registry segment of VicRoads – part of Victoria’s Department of Transport – opened last week and, rumour has it, Macquarie has put its hat in the ring.

Right now, the Macquarie share price is $172.56, 0.37% higher than its previous close.

Let’s take a closer look at today’s news of the banking, advisory, and investment management company.

Is Macquarie bidding for VicRoads?

The Victorian Government announced its plans to integrate a joint venture model into VicRoads in March.

The joint venture would see a private company taking over the body’s registration, licensing, and custom plates services.

The Macquarie share price is gaining as reports swirl that it has a good chance of winning VicRoads’ registry segment.

According to the Victorian Government, the privatisation of the registry segment would provide a more user-friendly and cost-effective service. It will also allow the government to continue to control prices, road access, and safety without affecting jobs at VicRoads.

The state’s government will also keep ownership of motorists’ data and protect their privacy. It noted it is looking for a joint venture partner that is “an established, mature and trusted provider”.

On that end, The Australian has reported some circles expect Macquarie Infrastructure and Real Assets to win the bid.

Macquarie’s major competitor for the contract is said to be asset manager Morrison & Co.

The publication also claims VicRoad’s new partner will be paying $2 billion for the privilege and the successful bidder won’t be decided upon until 2022.

Expressions of interest for VicRoad’s registry division will close on 18 October. The sale is being overseen by Morgan Stanley.

Macquarie share price snapshot

The Macquarie share price has gained 23% year to date.

It is also 44% higher than it was this time last year.

The company has a market capitalisation of around $63.4 billion.

The post Macquarie (ASX:MQG) share price lifts amid reports bidding for Vicroads heats up appeared first on The Motley Fool Australia.

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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 owns shares of and 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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The Pepinnini Minerals Ltd (ASX: PNN) share price has soared 40% into the green during this morning’s trade and now trades at 40 cents a share.

Pepinnini shares are on the move after the battery metals and gold company announced a key update from its operations in Chile.

At one point following the update this morning, Pepinnini shares were changing hands at 46.5 cents apiece. This is about the midpoint of its 52-week range.

Let’s take a look.

What did Pepinnini announce?

In what has transferred to gains for the Pepinnini share price, the battery metals miner announced “very strong interim results” from its “lithium brine blending study” in Chile.

The study used “salar brine” from the company’s leases in Argentinian salt flats, which are thought to contain enormous deposits of lithium beneath them.

In fact, the nearby Salar de Uyuni salt flat in Bolivia is estimated to contain the world’s largest lithium resource. So claim that it holds half or more of the world’s resource.

The process was to take 2,000 litres of “brine collected from each salar” then transport it to testing facilities in Chile.

Then it was allowed to “evaporate and concentrate,” where three brine tests were conducted on the compound.

Results showed that the “blended brine” test produced a lithium ion concentrate of 8,500mg/kg. This is a “level 14 times” and “seven times” that of the other two tests, respectively.

Pepinnini made comparisons to Orocobre Limited (ASX: ORE), which produces 7,000mg/kg at its Olaroz project, as per the release.

Testing has another month to complete, but preliminary results “suggest that the brine blending process is viable and highly effective.”

The main advantage, according to Pepinnini, is that the brine blending process “avoids the precipitation of lithium sulphate and reduces the calcium content.”

As such, it understands this process can “obtain a higher concentration of lithium in the brine at a lower cost.”

Investors are buying the news and continue sending Pepinnini shares higher today.

Pepininni Minerals share price snapshot

The Pepinnini Minerals share price has been on a bumpy ride this year to date. However, it is still up around 10% since 1 January.

Despite this, Pepinnini shares are almost 200% in the green over the past 12 months. That’s well ahead of the S&P/ASX 200 Index (ASX: XJO) gain of around 25% over the last year.

The post Pepinnini Minerals (ASX:PNN) share price rockets 40% on lithium update appeared first on The Motley Fool Australia.

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The author Zach Bristow 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 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 Champion Iron Ltd (ASX: CIA) share price has been a strong performer on Wednesday.

In afternoon trade, the iron ore producer’s shares are up 7% to $5.00.

Why is the Champion Iron share price rising?

There have been a couple of catalysts for the rise in the Champion Iron share price today.

One has been news that embattled Chinese property giant Evergrande will live to fight another day after revealing that it will make a bond repayment tomorrow.

This has given the whole market, but particularly iron ore miners, a big boost.

For example, the BHP Group Ltd (ASX: BHP) share price is up 3% and the Fortescue Metals Group Limited (ASX: FMG) share price is up 5.5% at the time of writing.

What else is lifting its shares?

Also giving the Champion Iron share price a lift is a broker note out of Citi this morning.

According to the note, the broker has upgraded the company’s shares to a buy rating with a price target of $6.40.

Based on the current Champion Iron share price, this implies potential upside of 28% over the next 12 months before dividends. This increases to ~34% if you include the 29 cents per share dividend Citi is forecasting in FY 2022.

What did the broker say?

Citi made the move on valuation grounds following a sharp pullback in the Champion Iron share price.

It explained: “While we acknowledge significant near-term risk to iron ore price forecasts, CY22/23 iron ore at $125/$80 per tonne provides a much greater level of confidence for earnings forecasts, particularly as China lead indicators stabilise.”

“Further, longer dated market concerns re large-scale iron ore exports from Guinea now look much less certain. Iron ore may hold at +$100 levels for longer than the market expects. We revisit our depreciation assumptions for CIA and expect $/t depreciation to increase from current $4.5/t to $6/t by CIA FY23 (March YE) on the back of Bloom Lake Phase II expansion.”

“We also roll our valuation year to FY24 (at 4.5x multiples) when we expect normalised US$80/t benchmark iron ore pricing plus expanded production. While this reduces our target price to A$6.4/shr, recent share underperformance presents enough upside to upgrade CIA to Buy from Neutral,” the broker concluded.

The post Champion Iron (ASX:CIA) share price up 7% but could still go 28% higher appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Evergrande news boosts market, Zip’s Indian investment
• Which ASX 300 shares are the biggest winners and losers on Tuesday?
• ASX 200 rebounds into positive territory led by energy and materials shares
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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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