The TechnologyOne Ltd (ASX: TNE) share price is on the move on Tuesday morning.

At the time of writing, the enterprise software provider’s shares are up 2.5% to $15.71.

This follows the release of a half-year result, which has impressed the market.

TechnologyOne share price higher on half-year results

For the six months ended 31 March, here’s a summary of how Technology One performed:

• Revenue up 22% to $210.3 million
• Software-as-a-Service (SaaS) annual recurring revenue (ARR) up 40% to $316.3 million
• Profit before tax up 24% to $52.7 million
• Profit after tax up 24% to $41.28 million
• Interim dividend up 10% to 4.62 cents per share

What happened during the half?

Technology One reported strong top line growth during the first half thanks to its SaaS business. Management advised that it increased the number of large-scale enterprise SaaS customers by 27% to 903 during the period.

In addition, the company’s Net Revenue Retention (NRR), which is the net amount of new ARR won and retained from existing customers, was strong. It came in at 119% for the 12 months to 31 March, compared to 114% for the same period last year. Management highlights that this is an outstanding result given that best practice in the ERP market is between 115% and 120%.

Technology One is also having a lot of success over in the UK. The company’s UK business delivered almost the same amount of new ARR in the first half of FY 2023 as it did for the full year in FY 2022. This saw the UK business deliver profit before tax of $3 million for the half, which is a 29% increase year over year.

This ultimately led to Technology One reporting a 24% increase in both profit before tax and profit after tax to $52.7 million and $41.28 million, respectively.

How does this compare to expectations?

As you might have guessed from the Technology One share price reaction today, this result has come in ahead of expectations.

For example, according to a note out of Bell Potter, its analysts were expecting a 14% increase in revenue to $196.6 million and a 17% jump in profit before tax to $49.9 million. The company has beaten on both metrics.

Outlook

Management believes the company is well positioned to deliver continuing strong growth over the full year and is expecting net profit before tax growth of 10% to 15%.

Technology One CEO, Edward Chung, commented:

We expect to see our SaaS ARR continuing to grow strongly, circa 40% over the full year. As we continue to aggressively grow our SaaS business, we will also continue to reduce our legacy licence fee business, which will be down to approximately $2.0m over the full year (vs $10.0m pcp). While this has a significant immediate impact on our P&L over the full year, this is an integral part of our strategy to grow our SaaS business and the recurring revenue base.

Chung also spoke about the long-term and is confident the company will achieve its $500 million+ ARR target by FY 2026. He concludes:

Over the next few years, our SaaS and Continuing Business is expected to continue to grow strongly. We are on track to surpass Total ARR of $500m+ by FY26, from our current base of $350.6m. We continue our significant long-term investments in R&D to build platforms for growth to continue to double in size every 5 years. The economies of scale from our global SaaS ERP solution will also see continuing Profit Before Tax margin expansion to 35%+.

The post TechnologyOne share price charges higher amid strong half-year growth appeared first on The Motley Fool Australia.

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• Leading brokers name 3 ASX shares to buy today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Technology One. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re looking for options in the gold sector, then Capricorn Metals Ltd (ASX: CMM) shares could be worth considering.

That’s the view of analysts at Bell Potter which have just upgraded the ASX 200 gold share.

Why is this ASX 200 gold share a buy?

Bell Potter has been running the rule over Capricorn Metals and likes very much what it sees.

In fact, the broker highlights that Capricorn Metals is “a sector leading gold producer with strong balance sheet and a management team that has an excellent track record of operational delivery.”

Its analysts also note that its “costs are among the lowest in the sector and consistently generates strong cash margins.”

It is for this reason, as well as its attractive valuation, that the broker has upgraded its shares to a buy rating with a $4.90 price target this morning.

This implies potential upside of over 16% from where the ASX 200 gold share closed yesterday’s session.

What else did the broker say?

Bell Potter notes that Capricorn Metals screens well and has been performing either in-line or ahead of expectations since first pouring gold. That’s quite an achievement in the current environment. It said:

CMM continues to screen as one of the top performing ASX-listed gold producers. Since pouring first gold in June 2021, it has successfully ramped up production at its 100%-owned KGP and delivered production and costs either in-line or ahead of guidance. CMM’s on target performance has positioned it as a sector leader in terms of cash generation. Since declaring commercial production in the September quarter 2021, we calculate total addition of cash and bullion to the balance sheet of A$109.2m for average cash build of A$520 per ounce produced.

The post Buy this ‘sector leading’ ASX 200 gold share: Bell Potter appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. does not own any shares mentioned. The Motley Fool Australia does not own any shares mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I was chatting to a family member on the weekend.

He was telling me about a mate of his who went to see a financial planner.

The mate had his Super invested through an industry fund, AustralianSuper.

And the planner’s advice?

“You should move it to a wealth platform. The fees will be higher, but at least we can keep an eye on it.”

At this point, I should acknowledge that perhaps the story got twisted and miscommunicated by the time I heard it.

And thankfully I don’t know who the advisor was, so it saves me getting into any legal trouble.

It also potentially protects the guilty.

Because, and I hope you’re with me, paying more ‘so I can keep an eye on it’ was almost certainly terrible advice.

And it’s unfortunately only too common.

I’ve written before – and I stand by this – there are some exceptionally good financial planners.

As I wrote yesterday, some people just need or want a financial coach. That’s important, and though potentially costly, can be less costly (and end up with more wealth overall) than not doing it, for those people, because it might save them from some terrible mistakes.

Some people need advice on the right structure for their investments, and to make sure they have appropriate insurances and have considered estate planning. Some expert advice on these areas can be really useful.

But… and you knew this was coming, didn’t you… there are some planners who seem to view their clients as meal tickets.

Now, it’s possible that the planner in question was misquoted. It’s possible that there are some good reasons that a planner would need to ‘keep an eye on’ the client’s Super.

I just can’t think of any.

So why would the advisor suggest a client pay more in fees?

I mean… I couldn’t possibly guess…

But if I was going to, I’d suggest that ‘keeping an eye on’ the money is probably the worst possible reason.

It’s not like AustralianSuper is some small, tinpot operation. It’s not like you can’t get regular reporting on the Super balance and alter the investment strategy, if deemed necessary.

Is it possible that the advisor was doing it for his own benefit? Because he stood to make more money, or to make his – the advisor’s – life easier, at the client’s expense?

I don’t know the answer.

I do know that the most controllable part of wealth creation is fees, and that too many people pay too much because they don’t know better or are actively misled.

Now, if a financial planner is important to you, and keeps you on the straight and narrow, it can still be money well-spent.

If not… then your planner will be enjoying a lovely holiday at your expense. A holiday that could have been yours.

It’s at this point some planners are hitting the ‘send angry email’ button on their iPhones. Some because they didn’t actually read what I wrote. Some because they’re angry at having their behaviour highlighted.

And, I’m not resiling from the criticism. If you’re taking advantage of someone based on information asymmetry – because you know more than them, and are profiting from shamelessly magnifying and exploiting that – then I’m more than happy to condemn you for it.

(If you’re currently thinking: “Hang on, doesn’t The Motley Fool charge for advice?”, you’re dead right. And as I’ve said, repeatedly, to our members, if we’re not delivering value, they shouldn’t renew their membership to our services, either. This is not about us… it’s about them.)

But, rest assured, I get more supportive emails from planners than angry ones. Because, as I said, the good ones get it, and deliver more value to their clients than they cost.

Still, I hope it’s a cautionary tale.

I hope you have a financial plan – either personally, or via a planner.

I hope it’s a plan that is going to help you achieve your goals.

I hope you’re paying what it’s worth. And not a dollar more.

And I certainly hope you’re not paying extra for someone just to ‘keep an eye on’ your investments!

Fool on!

The post Are you getting value for what you’re paying? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Guess which ASX 200 director has been stocking up on company shares before they trade ex-dividend tomorrow
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Scott Phillips 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 Scott Phillips.

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If you’re stuck for S&P/ASX 200 Index (ASX: XJO) investment ideas at the moment, you are not the only one.

The fact is that we are living in uncertain times. Inflation is still high, no matter what the bulls are telling you, and the high cost of mortgages and life in general could hit the economy hard over the next few months.

It’s no surprise stock selection is a tough game right now. So this could be an opportune time to take a lead from the professionals.

As an example, here’s a pair of ASX 200 dividend stock picks from Baker Young managed portfolio analyst Toby Grimm:

This bank can fight through current troubles

Banks are in the “too hard” basket for many investors currently, but Grimm is bullish on Westpac Banking Corp (ASX: WBC).

“This bank has underperformed its major peers by an average of 33% during the past five years,” Grimm told The Bull.

“Following a better-than-expected 2023 half year result, we see attractive relative value and dividend yield.”

Indeed the Westpac share price has plunged 9.6% over the past year, and almost 7% year to date.

That’s left it with a decent fully franked dividend yield of 6.3%.

Grimm acknowledged the bank has headwinds, but it’s under control.

“Cost pressures continue to be a major detractor, but they are a controllable factor.”

Other professionals are divided over the merits of Westpac shares.

According to CMC Markets, five out of 17 analysts rate the stock as a buy. Six reckon it’s a hold while another six are urging investors to sell.

This healthcare provider can fight through current troubles

Private hospital operator Ramsay Health Care Ltd (ASX: RHC) saw its share price fall off a cliff at the start of this month.

Grimm attributed this to investor disappointment with its third-quarter numbers.

“Like many other firms, Ramsay Health had experienced cost pressures, which had a negative impact.”

But he expects this headwind to be transitory.

“We expect cost pressures to ease as operating leverage resumes with a continuing recovery in post pandemic revenues, which was evident in the results.”

Ramsay Health shares have tumbled more than 24% over the past year, and now pay out a 1.6% fully franked dividend yield.

Grimm’s peers are also somewhat polarised about Ramsay shares.

CMC Markets currently shows six out of 19 analysts rating the stock as a buy, with 11 recommending a hold.

The post ‘Attractive value & dividend’: 2 alluring ASX 200 shares to buy now appeared first on The Motley Fool Australia.

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• Buy Westpac and this ASX 200 dividend stock for income: analysts
• 3 reasons to buy Westpac shares now: broker
• With interest rates rising, why have ASX 200 bank shares been pummelled in 2023?
• Could buying Westpac shares around $21 make me rich?
• These are the best ASX 200 bank shares to buy now: analysts

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 Scott Phillips.

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ASX hydrogen shares are getting plenty of attention with the promise of opening up a new industry while simultaneously helping the world with decarbonisation.

Starting a new industry from scratch is not easy, but several ASX companies are moving into the space. They include Fortescue Metals Group Ltd (ASX: FMG), Pure Hydrogen Corporation Ltd (ASX: PH2) and Hazer Group Ltd (ASX: HZR).

Different businesses have different plans for their hydrogen production.

Hazer wants to use a “low-emission hydrogen and graphitic carbon production process”. This involves converting natural gas (predominately methane) and similar feedstocks into hydrogen and “high-quality advanced carbon materials”. The process would use iron ore as a catalyst.

Meanwhile, Fortescue Future Industries (FFI) wants to make ‘green hydrogen’ through electrolysis using water and renewable energy.

What’s holding back hydrogen?

While many companies in Australia and worldwide want to be involved in the hydrogen sector, some experts have pointed to hurdles that need to be overcome. These were outlined recently at the Australian Petroleum Production and Exploration Association annual conference, according to reporting by The Australian.

The conference heard that the sectors faced challenges such as customer demand for the many proposed hydrogen projects around the world and how to safely and cost-efficiently transport the gas once produced.

The BloombergNEF senior associate of hydrogen, Kathy Xitong Gao, said:

This is the real struggle for hydrogen right now, the slow pick-up from the demand side. The transportation of hydrogen is a big issue, and to liquefy hydrogen is still very, very expensive. It’s around $US5 to $US7 per kilogram, so it’s very expensive.

Deloitte partner Matthew Walden said that low-emission hydrogen was “emerging as a key element in the pathway to net zero”, but costs and regulatory issues remained. Walden said:

Important mechanisms to achieve this include the implementation of targets and mandates for low-emission hydrogen production and uptake.

What progress has been made?

Earlier in May, the Australian Government announced a $2 billion ‘hydrogen headstart’ initiative to help the “biggest green hydrogen projects to be built in Australia”. This funding will:

… provide revenue support for investment in renewable hydrogen production through competitive production contracts. Funding will cover the commercial gap between the cost of hydrogen production from renewables and its current market price.

It will support two to three flagship projects, though there hasn’t been any confirmation of which projects will be helped yet.

One ASX hydrogen share that’s making progress is Fortescue. Its FFI business was pleased to announce last year it had signed an agreement with E.ON to deliver up to 5 million tonnes of green hydrogen to Europe by 2030. However, not all of this green hydrogen may necessarily come from Australia.

FFI has also signed an agreement with JCB and Ryze Hydrogen to supply those two UK businesses with 10% of FFI’s global green hydrogen production. This was heralded as a “multi-billion pound deal”.

While FFI is working on a global portfolio of green hydrogen production projects, it has also revealed it’s working with energy infrastructure developer Tree Energy Solutions (TES) to develop the TES green energy hub in Wilhelmshaven, Germany. It aims to start receiving green hydrogen deliveries in 2026.

Time will tell how successful Australia, FFI and other ASX hydrogen shares are at producing low-emission hydrogen and transporting that to the world.

The post ‘The real struggle’: Can an ASX investment in hydrogen really pay off? appeared first on The Motley Fool Australia.

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• Could this ‘further strengthening’ boost the Fortescue share price moving forward?
• Could Fortescue be the next ASX 200 miner on the lithium M&A trail?
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• Is the Fortescue share price a buy for its 2024 dividend yield?
• Could the iron ore price slide below $100 US dollars in 2023?

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group. 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 Scott Phillips.

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Are you looking for ASX 200 dividend shares to buy?

If you are, then you may want to look at the two named below that have recently been tipped as buys.

Here’s why brokers rate these dividend shares highly right now:

Stockland Corporation Ltd (ASX: SGP)

Stockland could be an ASX 200 dividend share to buy. It is a residential and land lease developer and retail, logistics and office real estate property manager.

Citi is positive on Stockland. It feels the company’s shares are trading at attractive level, particularly given its belief that property prices won’t fall as much as feared. In addition, its analysts highlight “a recovering resi backdrop, and prefer SGP over MGR.”

The broker is also forecasting some big dividend yields. It expects dividends per share of 26.6 cents in FY 2023 and FY 2024. Based on the current Stockland share price of $4.39, this will mean yields of 6% in both financial years.

Citi has a buy rating and $4.70 price target on Stockland’s shares.

Wesfarmers Ltd (ASX: WES)

Another ASX 200 dividend share that has been named as a buy is Wesfarmers.

It is of course the conglomerate behind a wide range of high-quality businesses such as Bunnings, Covalent Lithium, Kmart, Officeworks, Priceline, and WesCEF.

Morgans is a fan of Wesfarmers and believes it could be well-placed to continue its solid performance in the near term. This is thanks to its highly regarded management team and focus on value. The broker notes that “Kmart is well-placed to benefit [from the cost of living crisis] with the average price of an item at around $6-7.”

As for dividends, its analysts are forecasting fully franked dividends per share of $1.79 in FY 2023 and $1.92 in FY 2023. Based on the current Wesfarmers share price of $50.85, this will mean yields of 3.5% and 3.8%, respectively.

Morgans has an add rating and $55.60 price target on Wesfarmers’ shares.

The post 2 ASX 200 dividend shares to buy according to analysts appeared first on The Motley Fool Australia.

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James Mickleboro does not own any shares 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 positions in and has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In high inflation and economically uncertain times, ASX mining shares continue to hold their own.

However, after more than a year of outperformance, all the usual names are already pretty popular.

To get you thinking outside the square, here are two mining-related stocks with smaller market capitalisations that Argonaut associate dealer Harrison Massey rates as buys:

‘A big pipeline of work’

GR Engineering Services Ltd (ASX: GNG) is not a resources producer itself but provides construction and procurement subcontractor services to mining clients.

And it’s handing out a mouthwatering 9.64% dividend yield that’s 100% franked.

Massey told The Bull he would buy the stock now.

“The engineering services company has entered into a binding term sheet with a subsidiary of Hastings Technology Metals Ltd (ASX: HAS) involving the construction of a plant and associated infrastructure for the Yangibana Rare Earths project worth $210 million.”

He added that the outlook for GR Engineering was looking positive.

“The company continues to build a big pipeline of future work. The company’s fully franked dividend yield is also appealing.”

The GR Engineering share price is the same as 12 months ago.

According to CMC Markets, Euroz Securities also agrees with Massey that the stock is a strong buy.

22-bagger? Yes, please

Meteoric Resources NL (ASX: MEI) is an exploration company, for those investors comfortable with that phase.

According to Massey, the company has much potential.

“Meteoric recently announced a global mineral resource estimate of 409 million tonnes of rare earths at 2626 parts per million at its Caldeira project,” he said.

“The company has planned a further 100,000 metres of air core and diamond drilling to target high-grade areas within the current resource model.”

On top of this, Meteoric Resources is currently “acquiring further licences surrounding the deposit”. 

“Meteoric Resources is well capitalised, with $25 million in the bank.”

Believe it or not, Meteoric shares have lived up to its name by multiplying 22 times over the past 12 months.

Most of that rise has come since December, when information about the Caldeira site came to light.

The post 10% yield! 2 ASX shares to get rich from a mining boom appeared first on The Motley Fool Australia.

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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 Scott Phillips.

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While business fundamentals are important, momentum also has a role when investing in ASX shares.

Yes, the share price theoretically should reflect how well the company is going. But it’s also a reflection of how popular the stock is.

The underlying business could be super profitable with customers lining up, but if investors flee then the stock price will head down.

So let’s take a look at two S&P/ASX 200 Index (ASX: XJO) shares that have gone gangbusters so far this year, which one expert reckons has more to come:

‘Long and bullish’

Despite rising interest rates dampening the housing market, construction materials provider James Hardie Industries plc (ASX: JHX) has seen its shares rocket 44% year to date.

Shaw and Partners portfolio manager James Gerrish attributed this rise to “a positive interpretation of its results”.

“James Hardie is a manufacturer of fibre cement building products, with operations across North America, Europe and Asia-Pacific,” he said in Market Matters.

“We still see greater than 25% North America EBIT margin as the key upside from the FY23 result.”

Despite the steep run up in its valuation, his team continues to be “long and bullish” for James Hardie shares.

“We note the… chart pattern of a ‘recovery stock’. i.e. As we often say, the markets are like a jigsaw where you need to predict the final picture without all of the pieces,” Gerrish said.

“We are initially targeting ~$40 for JHX but believe surprises are likely to be on the upside.”

James Hardie shares closed Monday at $37.78.

Kicking goals on the other side of the world

Coincidentally, shares for travel agent Corporate Travel Management Ltd (ASX: CTD) are also 44% higher than where they started 2023.

According to Gerrish, the main driver of this was a massive contract win in the United Kingdom.

“[The deal] highlighted the strength of the UK business plus the way Corporate Travel is regarded by the UK government,” he said.

“We estimate a potential upside of 10% to 13% from the contract which has been reflected by the share price.”

Perhaps this one is a bit closer to its peak than James Hardie, which makes Gerrish’s team wait for $2 to $3 pullbacks before buying.

Regardless, he said the stock is “looking well positioned through 2023”.

“The company differentiates itself from competitors through its superior technology offering and its return on investment focus, which aims to reduce clients’ overall travel spend.”

The post Up 44% this year: 2 ASX 200 ‘recovery’ shares starting to rocket appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today

Motley Fool contributor Tony Yoo has positions in Corporate Travel Management. 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 Corporate Travel Management. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Monday, the S&P/ASX 200 Index (ASX: XJO) started the week with a small decline. The benchmark index fell 0.2% to 7,263.3 points.

Will the market be able to bounce back from this on Tuesday? Here are five things to watch:

ASX 200 expected to edge higher

The Australian share market looks set to edge higher this morning following a reasonably positive start to the week on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 6 points or 0.1% higher. In the United States, the Dow Jones was down 0.4%, but the S&P 500 was up slightly and the NASDAQ rose 0.5%.

Oil prices higher

Energy shares Beach Energy Ltd (ASX: BPT) and Karoon Energy Ltd (ASX: KAR) could have a good session after oil prices pushed higher. According to Bloomberg, the WTI crude oil price is up 0.35% to US$71.81 a barrel and the Brent crude oil price is up 0.55% to US$75.99 a barrel. Oil prices rose on news of lower supplies from Canada and OPEC+ producers.

TechnologyOne half-year results

The TechnologyOne Ltd (ASX: TNE) share price will be in focus today when the enterprise software company releases its half-year results. According to a note out of Bell Potter, its analysts are expecting a 14% increase in revenue to $196.6 million and a 17% jump in profit before tax to $49.9 million. Keep an eye on the company’s guidance. Bell Potter suspects that a medium term guidance upgrade could be coming in the near future.

Gold price falls

Gold miners Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) will be on watch after the gold price fell overnight. According to CNBC, the spot gold price is down 0.4% to US$1,974.3 an ounce. Hawkish comments out of the US Fed put pressure on the gold price.

Capricorn Metals upgraded to buy rating

Another ASX 200 gold share that will be in focus is Capricorn Metals Ltd (ASX: CMM). This morning, analysts at Bell Potter have upgraded its shares to a buy rating with a $4.90 price target. The broker said: “CMM is a sector leading gold producer with strong balance sheet and a management team that has an excellent track record of operational delivery. Its costs are among the lowest in the sector and consistently generates strong cash margins.”

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

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Technology One. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It’s little wonder why so many Aussies are fans of Core Lithium Ltd (ASX: CXO) shares.

The S&P/ASX 200 Index (ASX: XJO) stock has been a true market success story, surging more than 2,000% over the last five years. During that time, it hit a minuscule low of around 2 cents and an eye-popping high of $1.87. Core Lithium shares were trading at $1.08 at the close on Monday.

But is the party over for the newly turned lithium producer, or has it only just started?

We posed this question to two of our team, each with opposing views on the future of the lithium favourite. Keep reading to uncover the duo’s bull and bear cases for Core Lithium shares.

A great ASX 200 option to ride the resurgent lithium boom

By Bernd Struben: Core Lithium shares look particularly well-positioned to ride the resurgent lithium boom.

From a charting perspective, the technicals for the stock look good, with a series of higher highs and higher lows since 23 March. That’s seen CXO gain 42.37% in just two months. And while you should expect plenty of volatility, I believe there are more outsized gains to come.

Core Lithium attracted a lot of short-sellers after lithium prices began to nosedive in November, dropping more than 70% before bottoming in April. But the price of the battery-critical metal has since leapt 20% as electric vehicle (EV) sales once again pick up pace in China. And last year’s oversupply of batteries is fast turning into an undersupply.

As for the broader outlook for EVs, this chart from the International Energy Agency showing the growth through to 2021 speaks 1,000 words.

Source: International Energy Agency

Project ‘well placed’

I think Core Lithium is particularly well placed with its Finniss Lithium Project located close to Port Darwin.

And the timing of the project couldn’t be better.

Finniss achieved first spodumene concentrate production in February. The miner’s maiden 3,500-tonne spodumene concentrate parcel was transported to Darwin in March and early April.

On completion, Finniss will produce an average of 160,000 tonnes of battery-grade lithium concentrate per year over an initial 12-year mine life.

Now, Core Lithium does have a smaller resource than some of its peers. However, on 18 April, it announced the Finniss Mineral Resource had increased by 62%.

Other positives

The miner is also spending up on exploration, announcing a record $25 million drilling program targeting life-of-mine extensions and testing expansion potential.

Core owns a wide range of other projects (lithium and uranium) in the Northern Territory and South Australia, many situated close to major infrastructure. So, I’m not overly concerned with its current lithium resource.

As for the balance sheet, Core looks to be sufficiently funded to see it through to scaled-up production, holding $98 million in cash as at 31 March.

A trio of bearish arguments

By Brooke Cooper: While there are plenty of arguments for buying Core Lithium shares, I have three glaring reasons to avoid the stock. The first is the space the company operates in.

Demand for lithium will likely soar over the coming years amid continued growth in the adoption of electric vehicles and the decarbonisation movement.

However, some experts – looking at you, Goldman Sachs – also forecast supply will grow alongside demand, perhaps even outpacing it.

That means there’s a reasonable risk the battery-making material’s value could stagnate, or even fall, over the long term, taking the earnings of producers with it.

That might be particularly impactful for companies like Core Lithium. It’s still predominantly an explorer and developer.

Its current production is coming from its Finniss Lithium Project’s Grant Pit mine. The mine’s mineral resource estimate dropped 2% last year to 2.91 million tonnes at 1.47% lithium oxide due to mining depletion.

The company is currently looking to develop its BP33 deposit and is forking out $25 million on exploration this year.

Thus, my preferred exposure to lithium is through established and proven lithium producers such as Pilbara Minerals Ltd (ASX: PLS) and Allkem Ltd (ASX: AKE).

Too expensive

That leads to my second point. Core Lithium is considered to be more expensive than many of its peers.

Goldman Sachs rated the stock a sell late last month, noting its valuation sits at 1.4 times its net asset value, compared to an average of around 1.1 times among its peers.

The broker also flagged that Core Lithium is pricing in at around US$1,600 per tonne of spodumene. This compares to an average of US$1,100 a tonne among its peers.

And I’m not alone in my scepticism of Core Lithium shares.

Short impact

The final reason I remain bearish is the company’s whopping short interest.

While short-sellers don’t have a direct impact on a company or its stock, the cynicism they represent can reflect market sentiment, thereby creating a risk of its own.

Take a look at how the short interest in Core Lithium shares has grown over the last six months, according to data from Australian Securities & Investments Commission (ASIC):

The measure peaked at 10.17% in February and again in March. It has since dropped to a still-significant 8.7% at last count – making the stock the market’s fourth most shorted share.

All in all, while I think it’s possible, and even potentially likely, that Core Lithium shares could appreciate from here, I would rather invest my hard-earned cash elsewhere. Perhaps in more established lithium miners.

The post Is it time to be a bull or a bear on Core Lithium shares? appeared first on The Motley Fool Australia.

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More reading

• Core Lithium share price could be a long-term winner as critical metals steal the spotlight at G7 summit
• ASX 200 lithium shares could be winners as Biden calls critical clean energy metals the ‘third pillar of the Australia-US alliance’
• Here are the 10 most shorted ASX shares
• 5 things to watch on the ASX 200 on Monday
• Could another lithium price boom be around the corner? Experts weigh in

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 Scott Phillips.

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