Stock Pick

  • Why is the AGL share price getting hammered this week?

    Oil miner holding a laptop and mobile phone looks at his phone and sees the falling oil price and falling Woodside share priceOil miner holding a laptop and mobile phone looks at his phone and sees the falling oil price and falling Woodside share price

    It’s been a rough week for the AGL Energy Limited (ASX: AGL) share price.

    Its struggles came amid expectations the company’s upcoming annual general meeting (AGM) – to be held on 15 November – could evolve into a showdown between it and its major shareholder.

    The AGL board, headed by chair Patricia McKenzie, has recommended shareholders appoint just one of the four potential directors nominated by Atlassian Corporation (NASDAQ: TEAM) billionaire Mike Cannon-Brookes.

    The AGL share price is $6.85 at the time of writing. That’s 2.09% higher than its previous close but 3.65% lower than it was at last Friday’s close.

    For comparison, the S&P/ASX 200 Index (ASX: XJO) is up 1.9% today and largely flat week-on-week. The energy retailer’s home sector, the S&P/ASX 200 Utilities Index (ASX: XUJ), has also dumped 2.6% in that time.

    Let’s take a look at what might’ve weighed on the 185-year-old company’s shares this week.

    AGL share price tumbles amid AGM latest

    A last-minute turn-around from the AGL share price hasn’t been enough to claw back its losses. The stock tumbled earlier this week as what could be a battle between the AGL board and Cannon-Brookes’ Grok Ventures appeared to heat up.

    McKenzie appeared at the Australian Financial Review‘s (AFR’s) Energy & Climate Summit on Monday with a clear message, the masthead reported:

    We have to continue to have an independent board that represents 100% of the shareholders, and 88% of those are not Grok.

    AGL chair Patricia McKenzie, courtesy of the AFR.

    The billionaire’s investment vehicle previously nominated four candidates for the company’s board. Of those, the company recommends shareholders vote to elect one; former Tesla Inc (NASDAQ: TSLA) director Mark Twidell.

    Meanwhile, it recommends investors vote against the appointment of Dr Kerry Schott, John Pollaers, and Christine Holman.

    “It’s a crucial vote coming up for the composition of the board to ensure that we have an independent board that is going to take that approach moving forward,” McKenzie reportedly said.

    Grok responded after the board rebuffed the majority of its candidates on Friday.

    It said Schott, Pollaers, Holman, and Twidell have no alignment with Grok. That is, other than their agreement that the energy transition needs to occur quickly with AGL among its leaders. The venture continued:

    It’s yet another poor decision that doesn’t seem to be rooted in logical business decisions and certainly ignores the threats and opportunities facing AGL.

    Grok will be engaging directly with AGL’s 150,000 shareholders in the lead up to the AGM to explain the merits of looking to fresh faces to provide a broader mix of skills and experience – as well as additional capabilities to undertake the monumental amount of work required by the board.

    McKenzie reportedly told the submit the company will also be approaching shareholders and proxy advisors ahead of the meeting.

    History repeating?

    Last Friday, McKenzie labelled Grok’s nomination of four candidates “unusual” for a non-controlling shareholder.

    The venture put together an 11.28% stake in the company earlier this year. It used that stake to steer its successful campaign against AGL’s planned demerger.

    Those invested in AGL shares will likely remember the price the company paid for the scrapped split. It came to the tune of $125 million, a CEO, and a chair.

    After this week’s buzz, there’s little doubt the focus will be on AGL – and its share price – next month.

    The post Why is the AGL share price getting hammered this week? appeared first on The Motley Fool Australia.

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    Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Atlassian and 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.

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  • Why is the Santos share price outperforming the ASX 200 today

    An oil miner with his thumbs up.An oil miner with his thumbs up.

    The Santos Ltd (ASX: STO) share price is having a top run on Friday.

    Santos shares are 4.62% in the green and currently trading at $7.815. For perspective, the S&P/ASX 200 (ASX: XJO) is up 1.88% today.

    Let’s take a look at why the Santos share price is rising today.

    Oil prices storm higher

    Santos is a major oil and gas producer. The Woodside Energy Group Ltd (ASX: WDS) share price is also up 4% today, while Beach Energy Ltd (ASX: BPT) shares are soaring 5.76%. The S&P/ASX 200 Energy Index (ASX: XEJ) is 4% in the green.

    Energy shares including Santos are rising after oil prices lifted overnight.

    Brent crude oil jumped 2.29% to $94.57 a barrel. US Energy Information data revealed distillate stockpiles including heating oil fell by 4.9 million barrels a day in the week ending 7 October, Reuters reported. Price Futures Group analyst Phil Flynn, quoted by the publication, said:

    The most disturbing part of the (EIA) report is that distilling inventories are so far below average.

    The market is looking at the big picture, as opposed to the short-term demand numbers that were impacted by the storm.

    Meanwhile European natural gas swung widely overnight following a hoax threat to the Norwegian Ormen Lange natural gas field. However, benchmark futures dropped 4% after grid operator Shell Plc clarified there was no disruption to gas transport, Bloomberg reported. Oxford Institute for Energy Studies senior research fellow Katja Yafimava told the publication:

    Any incident — serious or not so serious — that could potentially result in disruption of either production or transport facilities used for supplies of non-Russian gas to Europe is bound to make the market more and more nervous.

    Volatility is the new normal.

    Santos share price snapshot

    The Santos share price has gained 6% in the past year, while it is soaring 24% year to date.

    For perspective, the ASX 200 has shed 7% in the past year.

    Santos has a market capitalisation of more than $26 billion based on the current share price.

    The post Why is the Santos share price outperforming the ASX 200 today appeared first on The Motley Fool Australia.

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    Motley Fool contributor Monica O’Shea 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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  • Is Pilbara Minerals the most profitable ASX lithium share?

    A beautiful ocean vista is shown with a woman whose back is to the camera holding her arms up in triumph as she stands at the top of a rock feeling thrilled that ASX 200 shares are reaching multi-year high prices todayA beautiful ocean vista is shown with a woman whose back is to the camera holding her arms up in triumph as she stands at the top of a rock feeling thrilled that ASX 200 shares are reaching multi-year high prices today

    Shares in Pilbara Minerals Ltd (ASX: PLS) are among a select few that have delivered handsome gains so far this year.

    Soaring lithium demand has helped push prices for the material to record levels. In turn, producing mining companies have enjoyed supersized earnings in the most recent financial year.

    Pilbara Minerals is one ASX-listed lithium share that has cashed in on the recent demand. However, is it the crème de la crème when it comes to profitability?

    Here’s a closer look at how this lithium heavyweight shapes up on the bottom line.

    Pitting Pilbara Minerals against its peers

    The importance of profitability is generally uncontested. Without it, companies fail to provide any form of return to shareholders.

    In fact, even the great Warren Buffett has been quoted as saying, “Look for companies with high-profit margins.”

    The illustrious investor believes the earnings margin indicates whether the company has a competitive advantage over its peers.

    For Pilbara Minerals shares, the numbers paint a rosy picture. For 12 months ending 30 June 2022, the company raked in $1.19 billion in revenue. This represented a 577% increase in Pilbara’s prior full-year revenue.

    Most of this substantial revenue increase was attributable to increased realised prices for its spodumene concentrate. That meant profits similarly swelled to record levels for the company, hitting $561.8 million during the period.

    To make this comparable to other ASX lithium shares, we need to determine the net profit margin.

    Fortunately, that is as simple as dividing the earnings by the revenue, which gives us 47.2%. In other words, for every dollar that Pilbara Minerals made in revenue, it retained 47.2 cents after expenses.

    It turns out this is the highest profit margin for a lithium producer on the ASX. Making an investment in Pilbara Minerals shares an investment in the most profitable name in the game.

    For reference, the next closest names are Allkem Ltd (ASX: AKE) and IGO Ltd (ASX: IGO) with profit margins of 39.7% and 36.7% respectively.

    Can it continue?

    As noted above, Pilbara Minerals’ profit margin is heavily dependent on where the lithium price goes from here.

    Given the company operates in what is referred to as a ‘price takers’ industry, as opposed to a ‘price maker’, there is a risk the succulent profits will incentivise more operators to get in on the action. All else equal, this would put downward pressure on the price of lithium due to supply and demand dynamics.

    Yet, analysts at Citi suspect elevated lithium prices are here to stay. The team there is projecting demand to double every two to three years over the ensuing decade.

    Whichever way it pans out, future Pilbara Minerals share price returns will likely depend on whether the company’s projects hold a competitive advantage to maintain those juicy margins.

    The company currently trades on a price-to-earnings (P/E) ratio of 28 times.

    The post Is Pilbara Minerals the most profitable ASX lithium share? appeared first on The Motley Fool Australia.

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    Motley Fool contributor Mitchell Lawler 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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  • Guess which ASX All Ordinaries share is rocketing 30% this week?

    A young woman holds her hand to her mouth in surprise as she reads something on her laptop.

    A young woman holds her hand to her mouth in surprise as she reads something on her laptop.The Cettire Ltd (ASX: CTT) share price has continued its strong run and is racing higher again on Friday.

    In afternoon trade, the online luxury fashion retailer’s shares are up 12% to $1.18.

    This means the Cettire share price is now up 30% this week despite a sizeable decline on Monday.

    Why is the Cettire share price rocketing higher this week?

    There have been a couple of catalysts for the impressive rise by the Cettire share price this week.

    The first is the rebounding All Ordinaries index after investor sentiment improved greatly. This has seen a number of beaten down All Ords shares pushing higher this week.

    But the main catalyst has been the release of the company’s first quarter update earlier this week.

    That update showed that rising living costs and global recession concerns haven’t impacted the sale of luxury goods on Cettire’s online platform.

    How is Cettire performing?

    According to the release, Cettire’s first quarter gross revenue increased 62% over the prior corresponding period to $84.4 million.

    This was underpinned by the year over year doubling of its active customers to 287,626 and improvements in repeat customer spending.

    Also getting investors excited was news that the company was profitable at an operating level during the quarter. Cettire reported adjusted EBITDA of $5.5 million, on a delivered margin greater than 20%. This was supported by a reduction in its marketing investment as a percentage of sales revenue to low double-digits.

    Looking ahead, the company’s CEO, Dean Mintz, stated that the “demand environment remains health.” In light of this, he revealed that he has “confidence in our Q2 outlook.”

    Judging by the Cettire share price reaction, it appears as though investors share this confidence. Though, time will tell what happens in this uncertain economic environment.

    The post Guess which ASX All Ordinaries share is rocketing 30% this week? 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 recommended Cettire 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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  • Expert forecast: Here’s where UBS says the ASX 200 will finish the year

    A woman looks quizzical as she looks at a graph of the share market.

    A woman looks quizzical as she looks at a graph of the share market.The S&P/ASX 200 Index (ASX: XJO) is soaring on Friday, up 1.8% in early afternoon trade to 6,760 points.

    The strong run higher on the ASX 200 today follows in the footsteps of the US market. The S&P 500 Index (SP: .INX) finished yesterday (overnight Aussie time) up 2.6%.

    This came despite a hot US September inflation print, as bearishly positioned options traders, caught on the wrong side of the trend, scrambled to cover their short positions.

    That’s today’s price action.

    So, what can ASX 200 investors expect by the end of 2022?

    Here’s where UBS says the ASX 200 will finish the year

    Despite today’s sizeable gains, the ASX 200 remains down 10.9% so far in 2022.

    But in potentially good news for investors, broker UBS believes the worst of the sell-off is over. UBS analysts believe the benchmark index will end the year higher from here, with an Aussie recession looking unlikely.

    According to UBS equity strategist, Richard Schellbach (quoted by The Australian):

    Domestic cyclicals have been notable underperformers, with sectors exposed to the local consumer or housing down about 30% year to date. Given we do not expect a recession to play out in Australia, these moves seem overly pessimistic, and present an opportunity to buy into some high quality businesses with solid medium-term prospects.

    Schellbach pointed to strong demand for the products produced by ASX 200 and smaller listed companies as likely to support the market in the months ahead.

    “Despite gloomy press headlines, and continued challenges from supply chain constraints, input cost pressures, and more recently labour market shortages, the reality is that the end-demand which ASX business are seeing is firm,” he said.

    UBS has a year-end target of 7,000 points for the ASX 200. That implies a lift of 3.5% from the current level.

    Of course, not all stocks are created equal. Should the benchmark gain 3.5% by the end of 2022, some shares will see a much larger lift while some will see their share prices slide.

    Happy investing!

    The post Expert forecast: Here’s where UBS says the ASX 200 will finish the year appeared first on The Motley Fool Australia.

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    Motley Fool contributor Bernd Struben 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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  • Own Coles shares? Here’s what to expect from the supermarket giant’s Q1 update

    A young boy pushing his friend in a shopping trolley race along the road.

    A young boy pushing his friend in a shopping trolley race along the road.

    The Coles Group Ltd (ASX: COL) share price is having a strong finish to the week.

    In afternoon trade, the supermarket giant’s shares are up 2% to $16.57.

    Can the Coles share price keep rising?

    Whether or not the Coles share price keeps rising from here could depend on a couple of things.

    One is the performance of the ASX 200 index and the other is the company’s first quarter update later this month.

    In respect to the latter, let’s take a look to see what the market is expecting from Coles during the quarter.

    What is expected from Coles during the first quarter?

    According to a note out of Goldman Sachs, its analysts expect a decent update from Coles this month.

    However, it has warned that there are signs that cost of living pressures have led to consumers shifting to value options. This could have an impact on Coles, which has the biggest customer cross-over with discounters such as Aldi.

    Goldman explained:

    Our recent conversations with industry suppliers suggest that volumes are still holding up strongly (a positive surprise) and trading into Christmas will likely be resilient. However, there are increasing signs in value shift (as an example canned foods are having a strong growth YoY) and it is expected that it will become increasingly obvious in FY2H23 as consumers feel the increasing pinch of higher cost of living. Interestingly, cross-shopping data between the different supermarkets suggest that COL has the highest cross-shopping with discounters such as Aldi.

    Nevertheless, the broker is still expecting Coles to report Supermarket same store sales growth of 2.5% for the first quarter and then 4.3% for the first half. This is then expected to ease to 3.4% in the second half and 3.8% for FY 2023.

    The company’s Liquor operations aren’t expected to fare as well, with Goldman forecasting a 1% decline in same store sales during the first quarter. It then expects an improvement to flat same store sales for the first half and 0.5% growth for FY 2023.

    The post Own Coles shares? Here’s what to expect from the supermarket giant’s Q1 update 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 positions in and has recommended COLESGROUP DEF SET. 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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  • Stock markets are starting to reflect that ‘inflation is now under control’: economist

    A businessman keeps calm in the face of inflation

    A businessman keeps calm in the face of inflation

    Stock markets the world over haven’t reacted well to the sudden re-emergence of inflation in 2022.

    That’s because fast-rising consumer and producer prices have seen central banks resort to aggressive interest rate hikes.

    The Reserve Bank of Australia has hiked rates from an all-time low of 0.10% to the current 2.60%. While the US Federal Reserve has been even more hawkish, raising rates to the current 3.25%.

    How have stock markets reacted to the inflation-busting rate rises?

    As we said, not well.

    The S&P/ASX 200 Index (ASX: XJO) is down 11.1% year-to-date, following a strong run in 2021.

    And in the US, the S&P 500 Index (INDEXSP: .INX) has tumbled 23.5%.

    But something strange just happened.

    What’s happening with the ASX 200 and US markets?

    As we reported here, the S&P 500 closed up 2.6% yesterday, surging 5.1% higher after opening sharply lower.

    And the ASX 200 is following suit today, up 1.7% during the lunch hour.

    Why is that strange?

    Because the September inflation figures released out of the US yesterday still revealed prices in the world’s largest economy were rising at the fastest rate in 40 years. That, in turn, would indicate investors can expect more aggressive rate rises from the US Fed, which has classically been a headwind for stock markets.

    Some analysts suggest yesterday’s rally in US stock markets and the big boost on the ASX 200 could be due to over-leveraged, bearish options traders getting caught on the wrong side of the trend and forced to cover their shorts.

    But economist Peter Esho, co-founder of Wealthi, has a different take.

    Are stock markets starting to indicate inflation is under control?

    Commenting on the stock market rally in the face of inflation, Esho said (courtesy of The Australian Financial Review):

    We think that there is a growing consensus in markets that inflation is now under control and as recent interest rates start to flow through into the economy over the next year, inflation will be brought back under control.

    Inflation was in line with expectations, but that’s not to say there weren’t positive glimpses in there. Composition is very important and we know from past history that it takes time for prices to stop rising.

    Esho said higher interest rates don’t have an immediate impact on inflation.

    “Monetary policy and rising rates have a 12-18 month lag, so we will only start to see rate rises take effect in the next few months before their full force being felt next year,” he said.

    In potentially good news for stock markets, he added, “Bottom line: We think the RBA read things perfectly when they raised by only 25 basis points in October, balancing inflationary pressure with the need to maintain financial stability.”

    The post Stock markets are starting to reflect that ‘inflation is now under control’: economist appeared first on The Motley Fool Australia.

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    Motley Fool contributor Bernd Struben 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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  • CSL shares ‘still not fully appreciated’: Wilsons

    a doctor in a white coat makes a heart shape with his hands and holds it over his chest where his heart is placed.a doctor in a white coat makes a heart shape with his hands and holds it over his chest where his heart is placed.

    The CSL Limited (ASX: CSL) share price is trading 1.27% higher on Friday at $279.93.

    It’s a positive day for the market overall, with the S&P/ASX 200 Index (ASX: XJO) up 1.68%.

    CSL has been a market darling of the ASX 200 for many years. But CSL shares were smashed during the pandemic when lockdowns made the blood plasma collections that the biotech relies on very difficult.

    Just before the pandemic, the CSL share price was trading at a record high of $336.40. Then came the COVID-19 market crash, when CSL shares hit an initial low of $270.88 in March 2020.

    CSL has been rangebound ever since between the mid-$200s and about $315. The CSL share price hasn’t been above $300 since December 2021.

    One broker reckons that won’t last long.

    CSL to be a ‘reopening’ winner, says Wilsons

    As reported in The Australian, Wilsons Advisory says CSL is among the next “reopening” stocks likely to take flight due to surging demand.

    Wilsons reckons CSL shares will receive a boost alongside Qantas Airways Limited (ASX: QAN), Tabcorp Holdings Limited (ASX: TAH), and Aristocrat Leisure Limited (ASX: ALL) shares.

    Wilsons analysts Rob Crookston and David Cassidy said:

    Even though the ASX 200 hit its COVID trough more than two years ago, many post-COVID recovery stocks have yet to reach their full potential. We think this creates a significant opportunity that is still not fully appreciated.

    This year’s market sell-off has led to a further discounting of these reopening stocks. To date, the CSL share price is down 5.5% in 2022.

    What else is happening with the CSL share price?

    CSL conducted its annual general meeting on Wednesday.

    As my Fool colleague James reported, CSL CEO and managing director, Paul Perreault, summarised the company’s performance to date in FY23.

    Perreault said:

    In terms of guidance for Financial Year 23, I am pleased to reaffirm that: Revenue growth to be in the range of 7 to 11% over Financial Year 22 at constant currency, with net profit after tax expected to be approximately in the range of US$2.4 to US$2.5 billion at constant currency. On a like for like basis, this represents a growth of between 10 – 14%.

    This guidance excludes Vifor earnings and acquisition costs, as well as non-recurring COVID-19 vaccine contributions. CSL will give a fuller update later this month.

    Looking further ahead, Perreault is confident:

    To close, I am absolutely certain that the fundamentals of our business are strong and the diversity of our pipeline is rich. This really sets up CSL to build on our track record of sustainable growth for years to come.

    Yesterday, Medallion Financial managing director Michael Wayne said CSL “offers good long-term appeal for a lot of investors”.

    Wayne said CSL was a great earner and a beneficiary of a weaker Aussie currency:

    It’s a large company but still delivering double-digit revenue and earnings growth. We expect that to continue to deliver over the years to come …

    … they are a US dollar earner so they generate their revenues and a lot of their earnings in US dollars and you convert that back to an Aussie dollar share price, it’s a tailwind, particularly when you see the Aussie dollar come back as much as it has.

    The post CSL shares ‘still not fully appreciated’: Wilsons appeared first on The Motley Fool Australia.

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    Motley Fool contributor Bronwyn Allen has positions in CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. 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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  • Here’s why I just bought Amazon stock

    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.

    If you’ve been investing for any decent amount of time, you likely have a story of “the one that got away.” I have several of them, but these stocks never fall off my radar.

    Instead, I keep them on a list, and I open a position when the valuation is correct. I may not have the same great returns I would if I had purchased it years ago, but if the business still has room to run, it can still be a great investment.

    One stock that I recently initiated a position in is Amazon (NASDAQ: AMZN). I whiffed on buying this stock when the market crashed because of the COVID-19 pandemic, and I watched it run all the way up in 2020 and 2021.

    However, Amazon’s stock is now about where it was in May 2020, despite growing its revenue by 64% since the first quarter of 2020.

    This decline isn’t the only reason I opened an Amazon position. Let’s dig into the rest.

    My primary investment catalyst

    While Amazon may be known for its e-commerce business, I’m more interested in Amazon Web Services (AWS).

    This cloud computing business provides the infrastructure for its clients to run apps and websites or process computations through its data centers.

    Cloud computing is a massive market, and Precedence Research projects it will grow by 17.4% annually through 2030 to $1.6 trillion.

    AWS is currently the cloud computing market leader and commands a 34% market share. Cloud infrastructure makes up about half of that cloud computing market share, so if AWS can maintain its 34% market size, then it should generate about $272 billion in annual revenue in 2030.

    For reference, AWS brought in $19.7 billion in the second quarter of this year, and Amazon as a whole generated $470 billion in 2021.

    The massive potential for cloud computing is my top reason to own the stock. However, there’s another reason why I thought now was a prime opportunity.

    A reasonable valuation

    On a price-to-sales (P/S) basis, Amazon is the cheapest it has been in some time.

    AMZN PS Ratio Chart

    AMZN PS Ratio data by YCharts

    The last time it reached this level, AWS didn’t make much money, so Amazon was valued solely as an e-commerce business. Plus, Amazon also has a robust advertising business today to consider.

    So, now that the stock has returned to this level, it may be smart to value Amazon’s business by segment, as each is vastly different.

    First, let’s look at the revenue these businesses generated over the past 12 months.

    SegmentRevenue (TTM)
    Commerce$379.9 billion
    Advertising$33.9 billion
    AWS$72.0 billion

    Data source: Amazon. TTM = trailing 12 months.

    Now, let’s assign a business to compare these segments to and see what we learn. For commerce, I’ll choose Walmart, arguably Amazon’s biggest commerce competitor.

    Walmart stock trades at a P/S ratio of 0.6, but I’ll give Amazon a 33% premium to that because of its much smaller physical footprint and millions of Prime subscribers — which is a high-margin business.

    Advertising is a bit trickier as there isn’t a great comparison. I’ve selected Alphabet because 80% of its revenue is derived from advertisements.

    These ads are placed on Alphabet’s platforms (such as YouTube and Google), much like how Amazon’s ads are placed on its platforms. I’ll use Alphabet’s P/S ratio of 4.7 without any premium because these are similarly strong businesses.

    Finally, AWS can be compared to DigitalOcean, a pure-play cloud computing company. However, AWS is growing faster than DigitalOcean, has a larger addressable market, and is profitable, so I’ll increase its valuation by 25% from DigitalOcean’s P/S ratio of 7.8.

    From this, I can derive a valuation for Amazon’s stock by multiplying its trailing 12-month revenue by an adjusted P/S ratio to get a business value.

    SegmentRevenue (TTM)Comparison Company P/S Ratio

     

    + Estimated Premium

    		Segment Valuation
    Commerce$379.9 billion0.8$303.9 billion
    Advertising$33.9 billion4.7$159.3 billion
    AWS$72.0 billion9.8$705.6 billion

    Data source: Amazon and Y! Charts.

    Altogether, that equates to Amazon being fairly valued at $1.17 trillion (at least according to my valuation technique) — it currently trades at $1.15 trillion.

    While that’s not a massive discount, it at least informs me that I’m not overpaying for Amazon, something I was concerned about when Amazon traded for $1.6 trillion or more from July 2020 to June 2022.

    By summing all the parts of Amazon’s business together, investors can realize what the most valuable portions of Amazon’s business are. Additionally, it can be used to assess the fair value of a business with many segments (like Amazon).

    With the market opportunity of AWS and Amazon trading for a reasonable valuation, I was finally able to open up a position.

    Just because you miss a stock once doesn’t mean you’ve missed it forever. With many stocks in the market reaching lows not seen for many years, now could be a great time to check up on some of the stocks you missed and see if the companies behind them are still worth buying.

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

    The post Here’s why I just bought Amazon stock appeared first on The Motley Fool Australia.

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    Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Alphabet (C shares) and Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, DigitalOcean Holdings, Inc., and Walmart Inc. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and DigitalOcean Holdings, Inc. 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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  • 3 ASX All Ords shares smashing multi-year highs on Friday

    Three businesspeople leap high with the CBD in the background.Three businesspeople leap high with the CBD in the background.

    It’s a good day on the All Ordinaries Index (ASX: XAO) as it’s bolstered by three shares soaring to long-forgotten – or, in some cases, never-before-seen – heights.

    Right now, the index is up 1.79% at 6,956 points. That’s around 0.3% lower than it was at last Friday’s close.

    So, what’s helping to boost these All Ords shares to multi-year highs today? Keep reading to find out.

    3 All Ords shares hitting long-forgotten highs

    These three All Ords shares are launching to multi-year, or even record, highs on Friday afternoon.

    First off, is the share price of S&P/ASX 200 Index (ASX: XJO) constituent IGO Ltd (ASX: IGO). It lifted 3.8% to hit an all-time high of $15.97 earlier today.

    It’s been a good week for the mineral explorer, with its joint venture (JV) partner announcing high-grade lithium assays at the Mt Alexander project on Wednesday.

    That was followed up by two more announcements from the company’s other JV partners yesterday. One updated the market on more rare earth finds at the Burracoppin project, while another announced high-priority anomalies at the Narryer nickel-copper-platinum group elements project.

    Another ASX All Ords share leaping to a multi-year high on Friday is Monadelphous Group Limited (ASX: MND). The stock surged to $14.05 earlier today, marking a 2.1% jump to its highest point since early 2021.

    Interestingly, the market hasn’t heard any news from the engineering group for more than three weeks.

    And finally, ASX 200 and All Ords share New Hope Corporation Limited (ASX: NHC) took off to hit an all-time high of $6.95 on Friday. That marks a 3.4% gain.

    The company has been quiet over the last few weeks. However, its shares appear to be gaining amid surging coal prices, which will help bolster its bottom line.

    Indeed, the coal producer posted a 1,139% year-on-year increase in after-tax profits for the 12 months ended 31 July last month.

    The post 3 ASX All Ords shares smashing multi-year highs on Friday appeared first on The Motley Fool Australia.

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    Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia 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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