The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price has seen plenty of volatility over the past few weeks and months. But, a director saw an opportunity with the S&P/ASX 200 Index (ASX: XJO) share.

In 2022 to date, the Domino’s share price has dropped by around 50%. This has been a painful period for shareholders.

Not only is the business being affected by the widespread concern about high inflation and rising interest rates, but it’s also losing the boost it received from lockdowns when more people were ordering home delivery.

What’s happening with Domino’s shares now?

In the first three trading days of November, the Domino’s share price fell by more than 16%.

On 2 November 2022, the food business held its annual general meeting (AGM).

The company reminded its shareholders that in FY22, network sales increased 4.6% to $3.92 billion and underlying earnings before interest and tax (EBIT) dropped 10.5% to $262.9 million.

In FY22, it organically added 294 new stores, which was a 10% increase in the network. It also acquired 156 stores and expanded into its tenth market, Taiwan.

However, investors may have been troubled by the FY23 trading update. Domino’s said that in the financial year to date, network sales were down 1.8%, with same-store-sales down 1%. However, in October, same-store-sales were up 1.6%.

Domino’s said that after a challenging first quarter, as expected, sales have improved in October. It is forecast to end FY22 within the medium-term outlook of 3% to 6%.

It has added 41 more stores in FY23 so far.

However, inflation will challenge earnings. Management expects to deliver net profit after tax (NPAT) growth in FY23.

The company intends to set a new record for network expansion in FY23, aiming to beat the FY16 record of 484 stores.

Director investment

Yesterday, it was announced that director Tony Peake’s superannuation fund had added 1,600 Domino’s shares through an on-market trade.

The cost of those 1,600 shares was $53.71 per share, meaning the total cost was around $86,000.

Keep in mind that prior to this investment, his wife held 1,400 shares and the superannuation fund owned 1,000 shares. So, the investment increased the family’s position by quite a lot.

I think it’s worthwhile taking note when directors buy shares of their business. Because it can indicate that they believe the Domino’s share price is good value and that the company has a compelling future.

Foolish takeaway

After the heavy fall in the valuation of the ASX 200 share, the Domino’s share price is valued at 31x FY23’s estimated earnings and 24x FY24’s estimated earnings, according to CommSec. This price might be much more digestible for investors, particularly if the business can continue to grow its same-store-sales and store network.

The post This ASX 200 share dumped 16% in the first 3 days of November, and a director went thrift shopping appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today 
• Here are the 10 most shorted ASX shares
• Brokers name 3 ASX shares to buy today
• Why Bravura, Domino’s, Lendlease, and Woolworths shares are sinking
• Why is the Domino’s share price down 13% in two days?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. 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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The National Australia Bank Ltd (ASX: NAB) share price has come under pressure on Wednesday.

In morning trade, the banking giant’s shares are down 3% to $31.02.

Why is the NAB share price falling?

Investors have been selling down the NAB share price this morning after the bank’s full year results disappointed the market.

According to the release, for the 12 months ended 30 September, NAB reported cash earnings growth of 8.3% to $7,104 million.

This was driven largely by strong earnings growth from its Business & Private Banking and Corporate & Institutional Banking businesses, which offset an earnings decline from the Personal Banking business.

NAB’s board declared a fully franked final dividend of 78 cents per share, which brought the bank’s full year dividend to 151 cents per share. This represents an increase of 18.9% year over year.

What has the reaction been?

Analysts at Goldman Sachs were a little underwhelmed with the result, which may explain some of the weakness in the NAB share price today. It commented:

NAB reported FY22 cash earnings (company basis) from continued operations of A$7,104 mn, which was up 8.3% on pcp and -1.5% below GSe, driven by higher-than-expected BDDs.

NAB’s 2H22 NIM was up 4 bp hoh to 1.67% (up 8 bp to 1.71% ex Markets and Treasury impacts), which was 2 bp below our expectations (GSe 1.69%) and we note that NAB’s 4Q22 NIM was 1.72% (up 10 bp on 3Q).

Goldman also points out that NAB has highlighted some headwinds facing the business in FY 2023. It explained:

Looking forward, NAB highlighted additional headwinds into FY23, noting: i) higher inflationary pressure on wages and vendor costs, ii) higher depreciation & amortisation of c.A$140 mn, iii) targeting productivity savings of c.A$400 mn, iv) overall Cost to Income ratio expected to trend lower, and v) investment spend expected to be c.A$1.5 bn.

The broker also notes that NAB stated that “housing lending competitive pressures [are] likely to intensify” and the “deposit mix headwind [is] accelerating, further increase in funding costs.”

Should you buy the dip?

Goldman has a buy rating and $34.81 price target on the company’s shares. Based on the current NAB share price, this implies potential upside of 12%.

Though, it is worth remembering that the broker could amend its recommendation and price target once it has adjusted its financial model to reflect today’s result.

The post Why is the NAB share price sinking today? appeared first on The Motley Fool Australia.

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More reading

• NAB share price on watch following FY22 earnings miss
• 5 things to watch on the ASX 200 on Wednesday
• Are ASX 200 bank shares a no-brainer buy in an inflationary environment?
• Are NAB shares a buy ahead of this week’s results?
• Brokers name 2 ASX 200 dividend shares to buy

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 Scott Phillips.

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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

On Monday, Tesla (NASDAQ: TSLA) stock hit its lowest level in about 18 months, and the shares continued to move further below the notable $200 level Tuesday. As of 1:53 p.m. ET, the stock was trading down by 1.5% after having touched a new 52-week low of about $187 per share. 

So what

The catalyst for Tuesday’s decline may have been a new vehicle recall. According to the National Highway Traffic Safety Administration, the recall involves just over 40,000 2017-2021 Model S and Model X electric vehicles (EVs). The issue is the potential for the EVs to lose power-steering assistance under certain road conditions such as bumps and potholes. Tesla began to send out over-the-air software updates on Oct. 11 to recalibrate the vehicles’ systems. But after receiving alerts related to the calibration values, Tesla decided to voluntarily recall the affected vehicles. 

Now what

As of the start of November, the problem had been addressed in almost all involved vehicles, so the direct impact to Tesla’s business should be minimal. But it’s another blow to the brand. CEO Elon Musk has repeatedly been in the news surrounding his recent takeover of Twitter. Since that deal closed, Musk has made numerous public comments via the social media platform that may not be helping Tesla’s brand. 

On Tuesday, a senior Barron’s writer published a column in which he warned that Musk’s dealings at Twitter may be negatively impacting Tesla shares. Whether his ownership of the social media platform distracts Musk from his duties as Tesla’s CEO may not be the issue. As Tesla has grown, he has managed to also run SpaceX and his other businesses. But Musk did take on debt to close his Twitter purchase, and it’s conceivable that the cash flow from the business alone won’t cover those debt obligations. If he is forced to liquidate more Tesla stock, it could have the short-term effect of driving down the price, and leading others to sell the stock, too.  

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

The post Why Tesla hit a new 52-week low today appeared first on The Motley Fool Australia.

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More reading

• Why Tesla shares dropped below $200 on Monday
• Forget Dogecoin, this crypto could be the even bigger winner from Elon Musk’s Twitter takeover
• Tesla sees a China slowdown, but this Nasdaq stock is faring much worse
• Why Tesla shares dropped Wednesday
• Could ‘no deal’ with Tesla actually be good news for Core Lithium shares?

Howard Smith has positions in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in 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 Scott Phillips.

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

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The Medibank Private Ltd (ASX: MPL) share price is rising in early Wednesday trade after hackers published the data of hundreds of the insurer’s customers to the dark web overnight.

The data includes names, addresses, birth dates, contact information, Medicare numbers, and in some cases passport numbers and health claims data.

The company warned of such a possibility yesterday. CEO David Koczkar once again apologised and encouraged impacted Australians to “remain vigilant” on Tuesday.

The Medibank share price is trading at $2.805 right now, 0.9% higher than its previous close.

It has fallen 21% since the S&P/ASX 200 Index (ASX: XJO) health insurer first revealed the ‘cyber incident’ in mid-October.

Medibank share price rises as hackers publish data

The Medibank share price is gaining on Wednesday despite cybercriminals having published stolen customer data to the dark web after the company refused to pay a ransom.

Medibank previously said the data of nearly 10 million current and former customers had been accessed as part of last month’s attack.

The files released overnight appear to be a sample of the data the company previously confirmed was accessed by the criminal.

It expects the criminals to continue publishing customer information on the dark web.

The hackers are now working to fashion the data into a more understandable format than their initial ‘data dump’, according to various media reports.

They also appear to have published ransom-related discussions with Medibank representatives. The Australian Financial Review quoted them as having told the company yesterday:

Data will be published in 24 hours. PS I recommend sell medibank stocks.

The hackers are reportedly linked to Russian ransomware group, REvil. The group appears to be slowly leaking customers’ data, potentially in an attempt to continue extorting the company.

Medibank is still working with the Australian Government, including the Australian Cyber Security Centre, and the Australian Federal Police. Koczkar today said:

This is a criminal act designed to harm our customers and cause distress.

We take seriously our responsibility to safeguard our customers and we stand ready to support them.

The post Medibank share price lifts despite hackers leaking data appeared first on The Motley Fool Australia.

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More reading

• Medibank share price slides following latest blows from hackers and customers
• Medibank share price on watch amid class action and new data threat
• Medibank share price lifts on cyberattack ransom update
• Here are the top 10 ASX 200 shares today
• ‘Close to bottom’: Expert names 3 bargain ASX shares to buy right now

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

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The REA Group Limited (ASX: REA) share price is trading lower on Wednesday morning.

At the time of writing, the real estate listings company’s shares are down 4% to $114.75.

Why is the REA share price falling?

Investors have been selling down the REA share price on Wednesday following the release of the company’s first quarter update.

According to the release, REA delivered a 16% increase in revenue to $305 million and an 11% lift in operating EBITDA to $131 million.

This was supported by a 5% increase in national listings during the period and the leadership position of the flagship realestate.com.au website. The latter delivered an average monthly audience of 12.4 million during the quarter, representing 61% of Australia’s adult population.

This led to 121.9 million average monthly visits during the period, which is 3.3 times more visits than the nearest competitor.

So why are investors selling?

While this would appear to be a solid quarter, it is worth remembering that REA has been targeting “positive jaws” in FY 2023 with mid to high-single digit operating cost growth.

Positive jaws is when your revenue grows quicker than your costs, leading to margin expansion and earnings growth.

However, first quarter operating costs grew 22% over the prior corresponding period, well ahead of its revenue growth for the period. This was driven by higher employee costs from its continued investment to deliver strategic initiatives, increased marketing, and travel costs.

Though, it is worth noting that management continues to target positive jaws in FY 2023. It commented:

The Group continues to target full year positive operating jaws for Australia in FY23. Australian operating cost growth is expected to be mid to high single-digits, with growth rates varying between quarters given operating expenses in the prior year were more heavily weighted to the second half.

Outlook

Management advised that national residential listings were down 18% in October. But thanks to price increases, the impact of Premiere Plus, and continued growth in depth penetration, management remains positive on its outlook.

REA CEO, Owen Wilson, commented:

We’ve seen the heat come out of the property market in recent months and while positive underlying fundamentals remain, we expect this moderation to persist as interest rates rise. REA is well positioned in this environment, and we will continue to invest in the growth of our platforms and adjacent businesses to further increase the value we provide to our customers and consumers.

Broker response

Goldman Sachs has responded to the update. Here’s what it had to say:

We note full year REA opex guidance has been reduced to high single to low double digit growth vs. low double digit growth previously (GSe +11%) – suggesting REA is more cautious on FY23 listings outlook than previous (forecasted mid single digit declines, noting 1Q23 +5%, with October -18%). Compositionally core Australia revenues was marginally stronger than GSe (+14% despite Finance declines), with India growth also higher than expected (+47% vs. GSe +40%).

The post REA share price tumbles despite 16% revenue boost appeared first on The Motley Fool Australia.

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More reading

• How I’d find ASX growth shares to buy today to double my money
• 5 ASX shares to buy for the Christmas rally: expert
• How I’d build a portfolio by investing in top ASX shares now
• Which ASX 200 shares could benefit from the federal budget?
• Experts say these top ASX 200 shares are buys

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 recommended REA Group Limited. 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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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 

Cryptocurrencies didn’t just wake up on the wrong side of the bed this morning; they had a terrible night. At 9:45 p.m. ET on Monday, the bottom fell out of the FTX Token (CRYPTO: FTT) and the race was on to sell everything in crypto. 

The worst of the decline was reserved for smaller cryptocurrencies, but as of 9:40 a.m. ET, Bitcoin (CRYPTO: BTC) has fallen 5.8% in the last 24 hours, Ethereum (CRYPTO: ETH) is down 7.5%, and Aptos (CRYPTO: APT) has dropped 13.3%. 

So what 

Drama has been building in the crypto space for about a week after CoinDesk reported that Sam Bankman-Fried’s trading arm, Alameda Research, has $14.6 billion in assets and $8 billion in liabilities. That’s not a problem in itself, but CoinDesk also said that $5.8 billion of the assets were the FTX Token, FTT. It’s notable that Bankman-Fried also founded the FTX exchange, which is one of the top exchanges in cryptocurrencies.

Over the weekend, Binance CEO Changpeng Zhao announced that he would be selling nearly $500 million in FTX Tokens, causing speculation that their value would plummet. That’s exactly what happened on Monday night, whether it was because of Binance’s selling or traders anticipating the sale.

At the same time, customers are pulling money off of FTX’s exchange, which could cause a “run on the bank”. Nansen reported that FTX has had $1.2 billion worth of Ethereum and ERC-20 tokens withdrawn in the last 24 hours compared to $540 million in deposits. CryptoQuant says FTX’s Bitcoin reserves were zero at one point.

Banks and exchanges typically don’t keep enough reserves to pay all customers their money if they withdraw all at once, which is known as a run on the bank. This can cause panic selling and leave a company insolvent relatively quickly. 

Now what 

This is reminiscent of the summer collapse of Three Arrows Capital, which brought down Celsius Network and Voyager with it. Leverage that investors didn’t know about on the balance sheet suddenly became problematic when crypto values fell and loans were called back. 

We’re not sure this is what’s happening at Alameda with the FTX Token, but given the price action and money moving out of FTX, investors are taking a cautious approach. 

It’s not clear what happens next. FTX is still one of the largest exchanges, and if it fails, the impacts on crypto could be enormous. I wouldn’t be surprised if this isn’t the end of the decline in crypto prices, although that means a buying opportunity for long-term investors, because an exchange can go bankrupt, but a token can’t.

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

The post Why Bitcoin and Ethereum were down big on Tuesday morning appeared first on The Motley Fool Australia.

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More reading

• This one trend could send Bitcoin even higher
• Ethereum and Bitcoin price crash spells the end for these Aussie crypto ETFs
• Up 18% in a month, could it still be worth buying Ethereum at its current price?
• The Bitcoin price leapt 10% in October. Here’s why
• Why one of the smartest investors bought Bitcoin and thinks you should too

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

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

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The Novonix Ltd (ASX: NVX) share price is on the move on Wednesday morning.

At the time of writing, the battery materials and technology company’s shares are up over 2% to $2.52.

Why is the Novonix share price rising?

Investors have been bidding the Novonix share price higher today after the company released an announcement.

According to the release, the company has opened its new pilot production facility in Nova Scotia, Canada, which aims to position Novonix as an industry leader in cathode technology.

Management notes that the program will be housed in a newly opened, 35,000-square-foot facility and leverage Novonix’s all-dry cathode synthesis technology to pilot its patent-pending technology for material production with the target of servicing the rapidly expanding electric vehicle (EV) and energy storage sectors.

It also highlights that the pilot scale facility will allow the company to demonstrate the feasibility of large-scale production, with the production target of up to 10 tonnes per annum.

This could be great timing. With over 50% of all new car sales predicted to be EV by fiscal 2030, according to BloombergNEF, millions of tonnes of anode and cathode material will be needed.

Novonix founder and CEO, Chris Burns, commented:

Launching our cathode pilot facility is another significant step in NOVONIX’s efforts to pioneer a North American battery supply chain and revolutionize the sector with high quality materials and more efficient production methods. NOVONIX is committed to enhancing the production of cathode material through its proprietary process while providing scalable solutions that address skyrocketing battery materials demand.

Darcy MacDougald, president of Novonix Battery Technology Solutions, added:

We’re expecting to have the pilot line operational shortly after opening. Our goal is to demonstrate our technology at scale in the first year. NOVONIX continues to innovate, and the launch of this pilot line will help us drive the shift to EV battery and energy storage forward.

The post What’s boosting the Novonix share price on Wednesday? appeared first on The Motley Fool Australia.

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More reading

• Why are Novonix shares listed on the Nasdaq as well as the ASX?
• Why did the Novonix share price jump 50% in October?
• Why is the Novonix share price gaining today?
• Why is the Novonix share price tanking 5% today?
• A major shareholder sold off most of its Novonix shares last week. What’s happening?

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 Scott Phillips.

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The CSL Limited (ASX: CSL) share price has been largely flat over most of 2022. However, it is actually down by around 5% in 2022, which isn’t bad considering the S&P/ASX 200 Index (ASX: XJO) is down 8%.

At the time of writing, the Betashares Nasdaq 100 ETF (ASX: NDQ) has fallen 28% in 2022. So, compared to a group of US-listed shares with global addressable markets, CSL has done well.

What’s going on with CSL?

The CSL share price has likely been impacted by the ongoing volatility with inflation and higher interest rates.

But, share prices often follow profit over time. Let’s have a look at what CSL is expecting to achieve in FY23.

CSL has said that it’s expecting the CSL revenue growth to be in the range of 7% to 11% compared to FY22, at constant currency.

CSL’s net profit after tax (NPAT) is expected to be approximately in the range of US$2.4 billion to US$2.5 billion, in constant currency terms. On a like-for-like basis, this would represent growth of between 10% and 14%.

CSL said that NPAT from Vifor, a business that the company recently acquired, is going to be between US$300 million and US$330 million.

Adding those two elements together, CSL is expecting its total underlying net profit to be between US$2.7 billion and US$2.8 billion.

The company recently outlined its research and development pipeline which could deliver further earnings for the business. In FY22 it spent over US$1.1 billion on R&D.

What do brokers think of the CSL share price?

Brokers are largely optimistic that the ASX healthcare share can deliver a double-digit return over the next year.

Morgans currently has an add rating on the business, with a price target of $312.50. That implies a rise of just over 11%. It noted the promising outlook for a number of CSL’s developments.

Morgan Stanley is another broker with a positive rating. It has an overweight rating on CSL, with a price target of $327. That implies a rise of around 16%.

Ord Minnett has a positive outlook on the business, not only does it think that the CSL share price can rise by 17% to $330, but it thinks there is optimism surrounding demand for CSL’s products and that plasma collection is improving.

One of the most optimistic brokers is Citi, with a price target of $340 and a buy rating. That implies a possible rise of just over 20%. On Citi’s numbers, CSL shares are valued at 36x FY23’s estimated earnings and 29x FY24’s estimated earnings.

Foolish takeaway

Not every broker is bullish, for example, Credit Suisse is only neutral on the ASX healthcare share. Even so, the price target of $305 implies a rise of almost 10%.

Most brokers seem positive on the business, though they aren’t expecting huge returns from here over the next 12 months.

The post Are CSL shares a good buy right now? appeared first on The Motley Fool Australia.

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More reading

• 2 big name ASX companies ready for a ‘share price recovery’: experts
• Leading brokers name 3 ASX shares to buy today
• Own CSL shares? Here’s what brokers are saying about its R&D pipeline
• Why I’m seriously considering investing $10,000 in these ASX 200 shares
• 5 things to watch on the ASX 200 on Friday

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended BETANASDAQ ETF UNITS and CSL Ltd. The Motley Fool Australia has positions in and has recommended BETANASDAQ ETF UNITS. 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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There are plenty of problems going on in the world right now. Inflation, higher interest rates, a war, and so on. It’s not surprising that some investors may be worried about investing in ASX shares.

How are investors to know what to do?

For starters, it may be worthwhile remembering that the world has survived these sorts of things before. There was very strong inflation in the 1980s, with extremely high interest rates as well. A war regularly occurs somewhere in the world, sadly.

Higher interest rates and more costs can have an impact on how profitable a business is. So, let’s learn some of the things to look out for from Motley Fool expert Scott Phillips, who was recently talking to NABTrade on a webinar.

Pricing power

How much control does a business have over its prices? Costs are only one side of the equation when it comes to generating profit. Phillips said:

Number one is simply, pricing power. Does your company have the ability to pass on any cost increases you may incur? if you’re a miner — mining a global commodity like iron, or gold or coal or copper or something else — your ability to pass on those higher costs with higher prices is exactly zero.

Think about brands, think about contracts, think about businesses that are so institutionalised in terms of being inside a business — so a business-to-business software package, for example — very hard to change out if the price goes up. If they’re a mission-critical piece of software, for example. So anything that locks you in, or gives you the ability to pass on prices.

… That allows you to make sure your margins don’t get crushed with that higher inflation.

For example, ASX shares like Coles Group Ltd (ASX: COL), Telstra Corporation Ltd (ASX: TLS) and Xero Limited (ASX: XRO) have been increasing prices for customers.

Debt could be an issue

When interest rates were virtually zero, businesses were able to take on a lot of cheap debt, if they wanted to. But now interest rates have shot up, it’s a very different picture for some ASX shares.

What was Phillip’s view on debt? He said:

Be very careful of companies with significant levels of debt. Not because they’re necessarily going to go broke, but because higher debt with higher interest costs, higher interest costs means lower profits. So even if you don’t go broke with higher rates, your company profits can be materially impacted.

Businesses such as real estate investment trusts (REITs) and buy now, pay later are typically ones that have higher debt levels.

Capital needs

Some ASX shares are able to fund their growth organically. Whereas others may have needed to tap investors for more cash to accelerate their growth plans, or perhaps make an acquisition.

What’s the expert view on this situation? Phillips said:

The last point is, think about capital. If you’re a business that needs more money – think about small biotechs or technology businesses, miners – and you’re hoping to raise more capital from the market. That’s getting harder and harder to come by as rates go up.

Companies sometimes see their share prices fall in anticipation of a capital raising because investors can see that the business is going to need more cash, so those investors are looking for a discount. It might be fairly easy to work out which businesses are going to do a capital raising if they are burning through their cash pile.

Some ASX shares are now focusing on cash flow breakeven so they don’t run out of cash and a capital raising isn’t necessary.

Foolish takeaway

I think it’s worthwhile that investors pay attention to Phillips’ advice, to avoid some of the pitfalls of the current economic situation.

The post Nervous about buying ASX shares right now? Here are some top tips from Scott Phillips appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Woolworths shares are ‘fully valued’ and investors should buy Coles instead: broker
• Why is the Telstra share price trailing the ASX 200 on Monday?
• How I’d find ASX growth shares to buy today to double my money
• Analysts name the ASX growth shares to buy

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET, Telstra Corporation Limited, and Xero. 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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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 

The cryptocurrency market went into free fall overnight after Binance CEO Changpeng Zhao and FTX and Alameda Research founder Sam Bankman-Fried escalated their feud. The fallout has been widespread but there were some key moves among certain digital currencies.

As of 7:30 a.m. ET, FTX Token has fallen 22.7% in the last 24 hours, Solana (CRYPTO: SOL) is down 10.2% and hit a low of $25.51, and Dogecoin (CRYPTO: DOGE) has dropped 13%. The one token that hasn’t lost a significant amount of value is BNB (CRYPTO: BNB), which is off 1.8% in the past day.

So what 

Over the last week, a feud between Bankman-Fried and Zhao has erupted. The exact origins aren’t clear, but the two have been publicly sparring on Twitter in recent days. A final straw for the market was when Binance said it would sell the $500 million in FTX tokens that it owns. 

Alameda’s CEO offered to buy the tokens back for $22 apiece in an over-the-counter deal, but that doesn’t appear to have been completed. Late Monday night, the bottom fell out of FTT’s price and it appears Bankman-Fried is selling tokens like Solana to buy back FTT and Binance is selling FTT and buying BNB. We don’t know exactly whether these trades are being completed by Zhao and Bankman-Fried, but the market is reacting to them even if they aren’t. 

Where this gets dangerous for the crypto market broadly is the collateral positions FTX and/or Alameda might have. According to a report from CoinDesk, Alameda has $8 billion in liabilities and much of that may be backed by $5.8 billion in FTT tokens (the value CoinDesk reported before last night’s drop). It’s not clear the terms of the debt or what the exact collateral is and when positions might be liquidated, but investors are certainly worried. If FTT is used as collateral in a meaningful way and gets liquidated, it could fuel continued selling pressure on the token and send a shockwave across the crypto market. 

The worry about contagion or any insolvency is largely tied to Alameda Research’s trading, but FTX is at least tied to the trades because of the FTT token the company owns. It’s not clear if FTX has provided any loans to Alameda Research.

Now what 

We only have to look back to the summer of 2022 to see how quickly a leveraged trading firm can cripple the crypto market. The insolvency of Three Arrows Capital eventually cost investors millions and brought down Celsius Networks and Voyager with it.

The big move in FTT tokens is understandable today, but we don’t know exactly what Bankman-Fried may be forced to sell if Alameda is indeed in trouble. Alameda had a large position in Solana, which is why that token is down today, but there could be others.

Not only is Alameda a big player in crypto trading, but FTX is a widely used crypto exchange, so there have been a lot of traders moving off the exchange. That could make the declines even worse, which is something for everyone in crypto to watch over the next few days.

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

The post Why cryptocurrencies went into free fall overnight appeared first on The Motley Fool Australia.

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More reading

• Forget Dogecoin, this crypto could be the even bigger winner from Elon Musk’s Twitter takeover
• How Elon Musk caused Dogecoin, Shiba Inu, and BNB to spike again on Monday

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

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

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