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.

Streaming giant Netflix (NASDAQ: NFLX) recently hired a gaming-industry veteran as part of its plan to add a video game collection to its platform. Shortly after that hire, the company’s second-quarter shareholder letter revealed some detail about its strategy for this medium, but there are still questions left unanswered.

Analysts and reporters have had a field day sharing their theories on what Netflix games could look like. A senior analyst at Wedbush has already called Netflix’s foray into gaming “dead on arrival” in an interview with Yahoo! Finance. More hopeful fans and investors think the company will prove the doubters wrong by innovating where other tech giants have failed in the gaming industry.

Realistically, there are only a few paths the company can take based on the information Netflix leadership has provided. Here’s the likelihood of each path and what each of them would mean for the company.

Interactive experiences instead of games

There’s a case to be made that Netflix’s gaming ambitions could look less like traditional video games and more like a whole new genre of “interactive experiences” for its intellectual property. A search of recent job openings at Netflix reveals some fresh insight — a director-level job opening in the company’s new “Interactive initiative” refers to building “game-like experiences” as an opportunity for the role.

However, digging further into other postings reveals a totally separate initiative called “Game Studio” (or just “Games”). The separation of “Interactive” and “Games” departments in the company’s recruiting language implies two budding departments. Netflix seems to be developing more content like Black Mirror: Bandersnatch, which is a good, low-risk path for the company, but these efforts will likely be separate from its foray into gaming.

The company’s remarks in its recent shareholder letter and earnings call reinforce this separation with Netflix COO Greg Peters calling ad-free mobile gaming a “primary focus” — at least initially. In the long term, the company sees all Netflix-compatible devices, including your TV, as “candidates for some kind of game experience.”

Sticking to mobile-only gaming

If we look at the history of the IP-based mobile gaming space, we can find a few examples of companies that succeeded in growing out this medium. We can also find examples of failures. Walt Disney comes to mind as an example of both success and failure over the course of its history.

While Disney has developed some successful mobile games on its own, the company made a shift around 2016 toward a greater reliance on third-party development for its IP. This shift included the shutdown of multiple in-house projects in favor of seeking partnerships with outside parties.

That said, Disney’s decision to shut down in-house mobile games was based on their performance, and Netflix’s definition of a high-performing game will undoubtedly be different than Disney’s. Netflix will have a massive differentiator in free-to-play mobile gaming — not relying on ads and in-app purchases in a space where virtually all major competitors do. Because Netflix doesn’t need to directly monetize its mobile games, it can succeed where Disney failed. For this reason, the streaming company’s efforts are likely to be lower risk than what its peers attempted.

Licensing content from third parties

In Netflix’s second-quarter earnings call, COO Greg Peters claimed Netflix will also license games as part of its offerings. This brief comment has been overlooked in most discussions about the news so far, but it could have big implications for its success.

In addition to developing mobile games in-house, Netflix may license existing mobile games to build an attractive lineup before investing heavily in first-party content. If that strategy sounds familiar, it’s because that’s exactly how the company succeeded in streaming movies and TV series. Such a move would bolster the company’s initial video game offering, familiarize subscribers with its gaming platform, and offer lessons to support the roll-out of in-house titles.

Avoid console and PC games

The Netflix-compatible devices that the company sees as candidates for its gaming platform include consoles, smart TVs, and PCs. However, it’s no secret in the gaming industry that major tech companies fail often in their pursuit of the console and PC gaming markets.

For example, recall Amazon Game Studios’ inability to create a single hit game despite flashy industry hires. And don’t forget Alphabet, which hired hundreds of developers to support the growth of its Google Stadia gaming platform only to shut down in-house development soon after.

While these failures don’t necessarily doom Netflix, they don’t paint a picture of a promising opportunity in console and PC gaming. Netflix is more suited to develop less complex, lower-budget mobile games that can differentiate themselves from the competition.

Now what

Netflix subscribers could be playing games on the platform as soon as next year, according to Bloomberg. That aggressive timeline makes sense assuming the first games to roll out will be licensed or in-house mobile games.

Overall, this risky bet on gaming could pay off, and it makes sense as the streaming giant’s next step to take advantage of its valuable IP and massive subscriber base. As long as Netflix sticks to the three viable strategies outlined above — interactive experiences, mobile gaming, and third-party licensing — investors should be optimistic about this next chapter of the company’s growth story.

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

The post 3 ways Netflix can make gaming work –and 1 way it can’t appeared first on The Motley Fool Australia.

More reading

• Is Netflix’s move into gaming a sign its best days are over?
• Google (NASDAQ:GOOG) share price climbs on blockbuster earnings
• Why Netflix’s Q2 earnings suggest subscriber growth for Disney+
• Are Netflix’s growth days over?
• Why Netflix stock fell nearly 5% on Wednesday

Taylor Weldon 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. Suzanne Frey, an executive at Alphabet, 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 Alphabet (A shares), Alphabet (C shares), Amazon, Netflix, and Walt Disney. 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 Alphabet (A shares), Alphabet (C shares), Amazon, 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 Origin Energy Ltd (ASX: ORG) share price is crashing lower on Friday morning.

At the time of writing, the energy company’s shares are down 8% to $4.10.

Why is the Origin share price crashing?

The catalyst for the weakness in the Origin share price on Friday has been the release of an update this morning.

According to the release, Origin expects to recognise non-cash impairment charges of $2,247 million post-tax in FY 2021.

This comprises $1,578 million of post-tax charges relating to Energy Markets goodwill and generation assets, and a tax expense of $669 million relating to a deferred tax liability. The latter reflects the expectation of increased distributable free cash flow and future unfranked distributions from Australia Pacific LNG.

In respect to its Energy Markets and generation assets goodwill charge, management advised that this is largely to reflect a significant reduction in wholesale electricity prices. It also takes into account a contraction in near-term gas earnings as a result of higher procurement costs and subdued business customer demand.

Outlook

Given that these charges are non-cash, they won’t impact its FY 2021 Energy Markets underlying EBITDA guidance of $940 million to $1,020 million.

While that is positive, its outlook for the Energy Markets business in FY 2022 certainly isn’t. Origin expects FY 2022 underlying EBITDA for Energy Markets to fall materially to $450 million to $600 million. Management is optimistic some of this will be offset by increased earnings from Australia Pacific LNG.

A rebound is expected in FY 2023, with management guiding to Energy Markets underlying EBITDA of $600 million to $850 million. This is subject to current forward commodity prices continuing and a flow through into customer tariffs.

Origin’s CEO, Frank Calabria, said: “As previously outlined, the Energy Markets business faces significant headwinds in FY2022, though fortunately this is expected to be largely offset by higher earnings from Integrated Gas, demonstrating the benefits of Origin’s diversified business. Origin’s net cash flow from Australia Pacific LNG in FY2022 is expected to be more than $1 billion as it benefits from a higher realised oil price.”

“FY2022 presents challenges for the Energy Markets business, and we are responding by targeting significant capital and operating cost savings, including from the introduction of the Kraken platform and new low cost and more efficient retail operating model, with customer migrations to the new platform continuing to progress very well,” he added.

“The outlook for the business improves from next year, with Origin expecting to see a material rebound in Energy Markets earnings, based on the commodity price outlook and supported by disciplined cost management,” Mr Calabria concluded.

The Origin share price is down 27% over the last 12 months.

The post Origin (ASX:ORG) share price crashes 8% on $2.2bn charge and FY 2022 guidance appeared first on The Motley Fool Australia.

More reading

• Should you buy Origin Energy (ASX:ORG) shares in July 2021 for the 5% dividend yield?
• Why Magellan, Origin, Piedmont Lithium, & WiseTech Global are dropping

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 Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has moved higher over the past 5 years. This comes after the banking giant’s shares dropped to a decade-low caused by the economic fallout from COVID-19. Since then, along with the broader share market, ANZ shares have made a turnaround, recovering during mid-2020 and early 2021 to pre-pandemic levels.

This time 5 years ago, on 30 July 2016, ANZ shares were trading at $25.25. At the time of writing, the ANZ share price is sitting at $27.75, around a 10% increase. While this may seem reasonable, other blue-chip shares such as Fortescue Metals Group Limited (ASX: FMG) and BHP Group Ltd (ASX: BHP) have considerably outperformed ANZ. They have risen 476% and 166%, respectively over the same 5-year period.

Furthermore, many investors consider their investment to have performed well if it delivers an average 10% per annum rate of return or more. And on that basis, some shareholders may be feeling disappointed with the returns of the ANZ share price over the past 5 years.

However, let’s take a look at what sort of returns an ANZ shareholder would have made over 5 years also factoring in the banking giant’s dividends.

ANZ dividend history

Below is a list of ANZ’s previous dividends paid out to shareholders over the past 5 years.

• December 2016 – 80 cents (30% franked)

• July 2017 – 80 cents (30% franked)

• December 2017 – 80 cents (30% franked)

• July 2018 – 80 cents (30% franked)

• December 2018 – 80 cents (30% franked)

• July 2019 – 80 cents (30% franked)

• December 2019 – 80 cents (70% franked at 30%)

• July 2020 – 25 cents (30% franked)

• December 2020 – 35 cents (30% franked)

• July 2021 – 70 cents (30% franked)

What sort of returns would an investor have made?

For argument’s sake, let’s say an investor bought $10,000 worth of ANZ shares 5 years ago. The investor would have received approximately 396 shares (at $25.25 per share). If we take those 396 ANZ shares and multiply them by the current ANZ share price ($27.75), the investor’s holding would be worth only $10,989.00 (396 shares x $27.75) today.

With a paper gain of just $989.00, let’s now factor in the accumulated dividends from July 2016.

When calculating the above dividends, our investor would have received a total of $6.90 for every ANZ share owned. Multiply this by the current holding of 396 shares, and this equates to $2,732.40.

Adding this to the $10,989.00 that is the present value, and the investor would have a total of $13,721.40 ($10,989.00 + $2,732.40).

In essence, this means the investor would actually be 37.2% ahead if they had invested in ANZ shares in July 2016. This figure also does not take into account the benefit of franking credits, which can serve to reduce the amount of tax an investor pays, thereby adding to their overall returns.

ANZ share price snapshot

Looking at a much shorter time frame, the ANZ share price has jumped in the past 12 months, up 50%. In 2021, the company’s shares are also in positive territory, up 22%.

ANZ has a market capitalisation of roughly $79 billion, making it the seventh-largest company on the ASX.

The post The ANZ (ASX:ANZ) share price has only gained 10% in 5 years. But have the dividends paid off? 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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With the Afterpay Ltd (ASX: APT) share price down 14% year-to-date, investors might be looking over at reporting season as the next catalyst for some meaningful price action.

Afterpay has yet to confirm the date of its full year FY21 results announcement.

In the past four years, the company has delivered its results in the last week of August.

What might drive Afterpay shares during reporting season

European expansion

Afterpay went live in Southern Europe on 16 March with merchants in France, Spain and Italy.

The long awaited European launch witnessed the Afterpay share price tip 3.12% higher on the day of the announcement to $111.71.

The company previously cited that these three countries have a combined addressable e-commerce market that exceeds 150 billion euros.

It will be interesting to see the growth trajectory of these new regions and if they can begin to make any meaningful contributions to Afterpay’s operating figures.

Afterpay’s European regulatory licence also enables it to operate in Germany and Portugal.

An update for Asia

Afterpay established an in-region team in Asia back in August 2020 via the acquisition of a Singapore-based company operating in Indonesia.

In its FY20 results presentation, the company cited that it would be “exploring opportunities to leverage Tencent’s network and relationships to expand into new regions in Asia”.

The last time we heard about Asia was in the company’s 1H21 results, where it was described as an “early-stage investment”.

Income margins could pressure the Afterpay share price

The Afterpay share price was under heavy selling pressure the day PayPal revealed that it will not charge any late payment fees for its BNPL service.

In addition, PayPal would offer merchants a lower transaction fee.

The Australian Financial Review (AFR) reported that PayPal will launch its “Pay in 4” service in Australia “at a lower price for merchants than the average 3.9 per cent fee plus 30¢ charged by Afterpay. PayPal’s fee will be 2.6 per cent of the cost of the goods plus 30¢.”

By undercutting Afterpay’s fees, analysts believe this could “put some pressure on Afterpay margins”, according to the AFR.

UK growth

Afterpay’s third quarter update highlighted the UK as its fastest growing region with a 246% increase in underlying sales to $0.5 billion and a 132% increase in active customers to 1.8 million.

In Q3 FY21, UK contributed to approximately 8.77% of the group’s $5.7 billion in underlying sales, up from 3.85% a year ago.

The post Own Afterpay (ASX:APT) shares? Here’s what to look for during reporting season appeared first on The Motley Fool Australia.

More reading

• Why the Afterpay (ASX:APT) share price is in the green today
• PayPal (NASDAQ:PYPL) share price falls on profit decline
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• The Afterpay (ASX:APT) share price is down 16% in a month. Here’s why
• World’s largest fund manager says ASX volatility a great buying opportunity

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. owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. 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 Bubs Australia Ltd (ASX: BUB) share price will be one to watch when trading resumes this morning. That’s after the company released a trading update for the June quarter.

At market close yesterday, shares in the dairy producer were trading for 46 cents – up 4.55%.

Let’s take a closer look at today’s news.

Why the Bubs share price will be one to watch

In a statement to the ASX, Bubs Australia gave an update on its cash position and activities during the last quarter. Overall, the company experienced a cash outflow of approximately $8.5 million for a total cash position of $27.8 million.

The main contributor to this position was a $3.4 million loss in operating activities and a $5 million investment in the business.

Despite operations producing a net outflow, revenue for the quarter was up 8% on the previous quarter to $12.8 million. It was down 4% on the prior corresponding period (pcp), however. Customer receipts for the quarter was $9 million. Total revenue for FY21 was $46.8 million – a 24% downturn on the pcp.

There are also signs the Chinese market is picking up again. Sales to this customer base were heavily disrupted by the impacts of COVID-19. However, e-commerce sales to China are up 10% on the pcp, including a 15% uptick for infant formula specifically.

Sales to the corporate daigou channel (CDC) are up 166% across the group. Infant formula sales to the CDC are 17 times higher on the pcp.

Total international sales are up 224% on the pcp and 48% on the previous quarter. Bubs Australia previously announced it was moving into the US market. The Bubs share price rocketed 17% on the day of that announcement.

Management commentary

Bubs Australia CEO Kristy Carr said:

Bubs Australia continues to make solid progress on its COVID-19 recovery journey despite what has been a difficult year, reflecting our agility in responding to dynamic market conditions and the strength of our brand promise, delivering increased half-on-half revenue growth, as foreshadowed at our interim results.

The company closed the fiscal year comfortably with continued quarter-on-quarter growth momentum. Domestic sales increased 9 per cent on prior quarter and further market share increases were achieved.

It should be noted while domestic sales were 9% higher on the previous quarter, they were also down 29% on the pcp.

Bubs share price snapshot

Over the past 12 months, the Bubs share price has plummeted 49.5%. The S&P/ASX 200 Index (ASX: XJO) is up 23.4% over the same time. Year-to-date, Bubs shares are down about 23%.

Bubs Australia has a market capitalisation of around $282 million.

The post Bubs (ASX:BUB) share price on watch after releasing quarterly update appeared first on The Motley Fool Australia.

More reading

• Here’s why the Bubs (ASX:BUB) share price is down 4% on Monday
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• Why the Bubs (ASX:BUB) share price has gained 28% in a month

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. 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 Commonwealth Bank of Australia (ASX: CBA) share price has travelled higher throughout 2021, reflecting stable gains for investors.

However, most ‘mum and dad investors’ put their money towards CBA shares, not for share price growth, but for its dividends.

As the largest company on the ASX, CBA shares are seen as a safe haven to park your spare cash and reap the rewards. Even during the midst of COVID-19, the bank still managed to pay a dividend of 98 cents to shareholders in September 2020.

In fact, CBA increased its dividend payout by over 50% to $1.50 per share earlier this year. This reflected the bank’s optimism in quickly returning to pre-COVID levels following Australia’s economic rebound.

What to expect for the CBA’s upcoming dividend?

CBA’s hotly anticipated full-year financial results aren’t due for another 2 weeks (11 August 2021).

According to Bell Potter, investor expectations are running high with analysts forecasting the bank’s cash net profit to increase. Traditionally, this means that the company’s dividend will also receive a boost when compared against the previous dividend payout.

As such, the final dividend for FY21 is projected to come in at a fully-franked $1.84 per share. When combining this with the fully-franked interim dividend of $1.50 per share, this equates to $3.34 per share for the entire FY 2021 year.

When factoring in the current CBA share price of $99.45, this gives a dividend yield of 3.34% ($3.34 / $99.45).

How is the CBA share price valued?

Two recent broker notes came earlier this month with varying price points ahead of the upcoming company’s FY21 result.

Australia’s largest investment house, Morgans raised its 12-month price target for CBA by 4.1% to $76. Following suit, Bell Potter also increased their outlook on the company’s shares, adding 17% to $105. However, the firm downgraded the bank from “buy” to “hold” based on current valuations.

CBA share price snapshot

Over the past 12 months, CBA shares have accelerated to more than 30%, with year-to-date up 20%. The company’s share price reached a record high of $106.57 last month before some profit-taking took place.

Based on valuation grounds, CBA commands a market capitalisation of roughly $176.4 billion, with over 1.7 billion shares outstanding.

The post Should you buy CBA (ASX:CBA) shares in July 2021 for the dividend yield? appeared first on The Motley Fool Australia.

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• CBA (ASX:CBA) share price wobbles amid regulatory confusion over Apple
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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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The AMP Ltd (ASX: AMP) share price will be in focus on Friday morning after the Australian Securities and Investments Commission revealed it has started legal action against the finance giant.

The corporate regulator announced that 6 AMP businesses are accused of charging advice fees to 1,540 clients even though it knew they were no longer able to access such advice.

The customers formerly had employer-sponsored superannuation with AMP but had already departed those accounts when the fees were charged.

As well as the fees themselves, ASIC is alleging AMP failed to have a system in place that detected such erroneous charges.

The regulator also accuses AMP of breaching its Australian financial services licence obligations to act “efficiently, honestly and fairly”.

ASIC, through a civil case in the Federal Court, is seeking declarations, penalties and adverse publicity orders.

The AMP share price closed Thursday at $1.06. The stock has dropped more than 80% in just over 3 years.

Customers have been paid out, says AMP

AMP acknowledged the case to the ASX on Friday morning, saying it became aware of the issue in 2018.

“AMP took action to rectify the issue, self-reported it to ASIC, and commenced a remediation process,” the statement read.

“The remediation was completed in November 2019, with approximately 2,500 customers being remediated a total sum of approximately $900,000 covering fees charged and lost earnings.”

The 6 AMP businesses facing the allegations are:

• AMP Superannuation Limited
• AMP Life Limited (which is now owned by Resolution Life NZ)
• AMP Financial Planning Proprietary Limited
• AMP Services Limited
• Charter Financial Planning Limited
• Hillross Financial Services Limited

The Federal Court is yet to set a date for a case management hearing.

The latest case against AMP follows ASIC’s legal action in May that accused the financial services provider of charging life insurance premiums and advice fees to more than 2,000 deceased clients.

That issue is due for a further case management hearing on 12 October.

The post AMP (ASX:AMP) share price on watch as ASIC starts legal action appeared first on The Motley Fool Australia.

More reading

• Own AMP shares? Here’s what to look for during reporting season
• The AMP share price is down 80% over 5 years. But have the dividends paid off?
• ASX 200 midday update: Lynas jumps, GPT withdraws guidance
• How does the dividend for AMP (ASX:AMP) shares compare to the financial services sector?
• Why the AMP (ASX:AMP) share price will be one to watch today

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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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 Tesla Inc (NASDAQ: TSLA), the electric car kingpin, soared 5% through 11:30 am EDT Thursday, bouncing back from a post-earnings sell-off in the share price.

I see a couple of reasons why that might be happening.

So what

Beginning with the obvious (and least interesting) reason: This morning, StreetInsider.com reports that analysts at Germany’s DZ Bank have upgraded Tesla shares from sell to buy, and more than doubled their price target on the stock, to $750 a share.

That’s a pretty impressive number — about 11% higher than where Tesla shares trade today. But there are few details available on why DZ upgraded. Moreover, DZ Bank isn’t quite a household name here in the U.S., so I’m not sure investors would be inclined to give this upgrade much weight.

More interesting than DZ’s upgrade are some comments made by Morgan Stanley analyst Adam Jonas this morning. In the course of reiterating his overweight rating and $900 price target on Tesla shares (that’s $150 more than DZ predicted), Jonas pointed to Tesla’s just-reported 21% profit margin for adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA), and termed it “too high.”

Now what

In Jonas’ view, Tesla is making too much money selling cars — but that’s a nice problem to have, because it means Tesla now has the option of lowering the prices of its cars to “expand the availability of lower priced Tesla vehicles to as many people as possible” — potentially even bringing to market a $20,000 electric vehicle by 2030.

Needless to say, in a market where EVs regularly sell for $40,000, $50,000 — or even $100,000 and beyond — a move such as Jonas is describing would be a “very big deal” for Tesla, and for the automotive industry as a whole. At a time when rival EV manufacturers are just to emerge and eat into Tesla’s market share, it could enable Tesla to undercut essentially all of its competitors on price, and grow to control even more market share than Tesla already does.

Ultimately, the fact that Tesla is “too profitable” today could result in the company becoming even more profitable tomorrow.

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

The post Why the Tesla share price jumped 5% on Thursday appeared first on The Motley Fool Australia.

More reading

• Here are the US shares ASX investors were buying last week
• Why Tesla stock fell on Tuesday
• Tesla (NASDAQ:TSLA) share price climbs on record revenue and profits
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• Zip share price falls, Pilbara Minerals flies. And the BHP share price gets a Tesla bounce. Scott Phillips on Nine’s Late News

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

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

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All eyes will be on the National Australia Bank Ltd (ASX: NAB) share price this morning.

This follows the announcement of a major capital return by the banking giant.

Why is the NAB share price on watch?

This morning NAB announced that it intends to buy back up to $2.5 billion of its ordinary shares on-market. The bank advised that this is part of its plan to progressively manage its Common Equity Tier 1 (CET1) ratio towards its target range of 10.75% to 11.25%.

According to the release, subject to market conditions, NAB expects to commence the buy-back in mid to late August.

NAB’s Group Chief Executive Officer, Ross McEwan, commented: “Through the pandemic, NAB has continued to build its financial strength while providing significant support to our customers and colleagues.”

“Our support for customers and colleagues continues through ongoing lockdowns and as the COVID19 situation evolves. At the same time, NAB’s strong financial performance, combined with the divestment of MLC Wealth, has created an opportunity for NAB to reduce our surplus capital while retaining a strong balance sheet during these uncertain times,” he added.

Why buy back shares?

Mr McEwan revealed that NAB believes the buy-back is the most appropriate way to return funds to shareholders.

He explained: “Our target CET1 range reflects a balance between retaining a strong balance sheet through the cycle, supporting growth and recognising the importance of capital discipline to improve shareholder returns. We consider the on-market buy-back to be the most appropriate mechanism to achieve our previously stated bias towards reducing share count, which will help drive sustainable ROE benefits.”

More buybacks to come?

The good news for shareholders and the NAB share price, is that this may not be the last buy-back.

The bank notes that it continues to operate well above APRA’s Unquestionably Strong benchmark of 10.50%. Its CET1 capital ratio stood at 12.37% at Level 2 and 12.40% at Level 1 as of 31 March 2021.

This $2.5 billion on-market buy-back will reduce the CET1 capital ratio at Level 2 by around 60 basis points. However, after accounting for the buy-back, the sale of MLC Wealth to IOOF Limited (ASX: IFL), and other previously announced items, NAB’s pro forma March 2021 Level 2 CET1 ratio is 12.15%.

This is well above the high end of its target range of 10.75% to 11.25%, giving it at least 90 basis points of slack. This works out to be ~$3.75 billion of surplus capital that could potentially be returned to investors down the line, by my calculations.

Though, NAB has warned that any future capital returns will be dependent upon market conditions and its capital outlook.

The NAB share price is up 42% over the last 12 months.

The post NAB (ASX:NAB) share price on watch after announcing $2.5bn buy-back 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 Telstra Corporation Ltd (ASX: TLS) share price is on watch after some NBN news.

NBN credits

According to reporting by the Australian Financial Review, the NBN Co is going to give retail internet providers like Telstra, Optus and TPG Telecom Ltd (ASX: TPG) a combined $5.2 million of credit to offset excess capacity fees with a surge of data demand by households during these latest lockdowns.

It was also reported that more credit could be given in the next few weeks and months ahead if demand continues to be much higher than expected.  

The AFR quoted NBN executive Ken Wallis, who said:

The credit payment…is designed to reduce retailers’ additional wholesale data coverage costs brought on by the incremental increase in usage during the peak evening entertainment hours and to help to ensure they do not fall short of their customers’ data demands.

However, executives from Telstra, TPG, Optus and Vocus were all displeased by what NBN had decided. The telcos said it wasn’t enough.

The Aussie Broadband Ltd (ASX: ABB) managing director Philip Britt was less critical. The AFR quoted him saying:

Given that NSW is going to be in lockdown for at least another four weeks, we welcome NBN Co’s continuing relief for as long as the lockdowns continue. We will continue to monitor usage closely, and will advocate for more relief if required.

How is Telstra’s share price and earnings going?

Telstra reported its half-year result on 11 February 2021. It has risen almost 20% since reporting.

When Telstra reported, it said that after a decade of disruption following the creation of the NBN, and with its rollout now declared complete, it can see a path to underlying growth ahead.

The company’s half-year underlying earnings before interest, tax, depreciation and amortisation (EBITDA) decreased 14.2% to $3.3 billion. Within that, there was an in-year NBN headwind of $370 million and an estimated $170 million impact from COVID-19.

On a reported basis, total income fell 10.4% to $12 billion and net profit after tax (NPAT)

The company continues to add subscribers, but its margins have been falling because of the NBN and rising competition.

Telstra is expecting an in-year NBN headwind of approximately $700 million in FY21.

The telco has been working on reducing its cost base, improving efficiencies and selling assets to maximise its value for shareholders.

Is the Telstra share price good value?

One of the latest brokers to have their say on Telstra is Ord Minnett. The business thinks that Telstra is a buy with a price target of $4.25. The cost savings are an important part of the equation for the broker.

The broker thinks that Telstra is going to pay a fully franked dividend of $0.16 per share in FY21 and FY22, which translates to a grossed-up dividend yield of 6%.

The post Telstra (ASX:TLS) share price on watch after NBN news appeared first on The Motley Fool Australia.

More reading

• Here are 3 of the most heavily traded ASX 200 shares this Thursday
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• These ASX 200 shares were flying around the share market today
• Here’s why the Telstra (ASX:TLS) share price just hit a new 52-week high

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. owns shares of and has recommended Aussie Broadband Limited. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended Aussie Broadband 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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