Stock Pick

  • Will Amazon stock be worth more than Apple by 2025?

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

    amazon delivery

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

    Back in April 2020, Amazon‘s (NASDAQ: AMZN) market cap briefly eclipsed Apple‘s (NASDAQ: AAPL). At the time, both tech giants were worth about $1.2 trillion. But today Amazon is still worth $1.2 trillion, while Apple’s market cap has roughly doubled to $2.4 trillion. Let’s see why Apple pulled so far ahead of Amazon — and if Amazon can catch up again by 2025.

    Why did Amazon pull ahead of Apple?

    In early 2020, Amazon seemed like a more appealing investment than Apple. Amazon’s e-commerce and cloud businesses were both well-poised to grow throughout the pandemic as brick-and-mortar stores shut down, consumers stayed at home, and people accessed more cloud-based services and apps.    

    In 2020, Amazon’s revenue rose 38% to $386.1 billion, its net income increased 84% to $21.3 billion (even as it racked up billions of dollars in COVID-related expenses), and its earnings per share (EPS) grew 82%. The bullish thesis was simple: Amazon’s e-commerce business would continue to expand as it locked in more shoppers with Prime, while the growth of its higher-margin Amazon Web Services (AWS) cloud platform would subsidize the growth of its lower-margin retail businesses. 

    At the time, Apple was still selling 4G iPhones as new 5G Android devices hit the market. It was also losing ground in China to popular domestic smartphone brands like Xiaomi, Oppo, and Vivo. Its own first family of 5G devices, the iPhone 12, wouldn’t arrive until late 2020. The trade war also threatened to disrupt its production capabilities in China.

    As a result, Apple’s revenue only grew 6% to $274.5 billion in fiscal 2020 (which ended in September of that calendar year). Its net income rose 4% to $57.4 billion, while its EPS — boosted by buybacks — grew 10%. Those uninspiring numbers suggested that Apple’s high-growth days were over, so many investors seemed to favor Amazon over Apple.   

    Why did Apple pull ahead of Amazon again?

    But as the pandemic-related tailwinds faded away, Amazon’s growth cooled off against some tough year-over-year comparisons. Yet its revenue still rose 22% to $469.8 billion in 2021, while its net income increased 57% to $33.4 billion and its EPS grew 55%.

    Unfortunately, several macro challenges this year will exacerbate Amazon’s post-pandemic slowdown. Inflation will curb the spending power of its retail consumers while boosting its marketplace expenses, and macro headwinds will gradually reduce the enterprise market’s appetite for its cloud-based services. The resignation of founder and CEO Jeff Bezos last July also strongly indicated that Amazon’s growth and valuations had reached a near-term peak.

    For 2022, analysts expect Amazon’s revenue to rise just 11% as higher investments reduce its net income by a staggering 98%. That jarring slowdown spooked investors, and its stock tumbled 33% this year.

    As Amazon’s growth cooled, Apple’s growth accelerated as it launched the iPhone 12 and expanded its subscription-based services. In fiscal 2021, its revenue jumped 33% to $365.8 billion, its net income grew 65% to $94.7 billion, and its EPS increased 71%. As a result, Apple became an attractive growth stock again as pandemic-era plays burned out.

    Analysts expect Apple’s revenue and net income to grow 7% and 5%, respectively, in fiscal 2021 as it laps the launch of the iPhone 12. Those stable growth rates — and the inflation-resistant nature of its affluent customers — have arguably made it a more appealing stock than Amazon. That’s why its stock only dipped 15% this year.

    Will the tables turn again by 2025?

    Amazon’s growth should stabilize after the inflationary and supply chain headwinds dissipate, but investors shouldn’t expect it to grow as fast as it did during the pandemic. Between 2021 and 2024, analysts expect its revenue to grow at a compound annual growth rate (CAGR) of 14% as its EPS increases at a CAGR of 6%.

    Meanwhile, Apple is widely expected to launch new AR devices over the next few years to diversify its top line away from the iPhone, iPad, and Mac. It’s also expected to launch an electric vehicle sometime in the future. It already ended its latest quarter with over 860 million paid subscriptions across its services ecosystem, and that massive walled garden should drive the launches of its future products and services. That roadmap is still murky, but analysts expect Apple’s revenue to grow at CAGR of 6% between fiscal 2021 and 2024, while its EPS increases at a CAGR of 8%.

    Amazon might generate stronger revenue growth than Apple, but its earnings growth should remain weaker because it operates at much lower margins and spends less cash on buybacks. And at around $120 per share, Amazon actually trades at more than 30 times its projected earnings for 2024. At around $150, Apple trades at just 22 times its 2024 estimate.

    Therefore, Amazon’s higher multiple could cool off as investors brace for several more years of single-digit earnings growth. Apple’s multiple could hold steady — or even rise — as it launches new products and services.

    I’m not sure exactly where Apple and Amazon will end up by 2025. But based on these facts, it seems highly unlikely that Amazon’s market cap will eclipse Apple’s within the next three years. 

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

    The post Will Amazon stock be worth more than Apple by 2025? appeared first on The Motley Fool Australia.

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    Leo Sun has positions in Amazon and Apple. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Amazon and Apple. 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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  • Why were so many CBA shareholders cashing out in September?

    Four investors stand in a line holding cash fanned in their hands with thoughtful looks on their faces.Four investors stand in a line holding cash fanned in their hands with thoughtful looks on their faces.

    The Commonwealth Bank of Australia (ASX: CBA) share price went downhill in September. It fell by 7%. That compares to the S&P/ASX 200 Index (ASX: XJO) falling by 7.3%.

    This means that the ASX 200 bank share slightly outperformed the ASX share market last month.

    While 0.3% outperformance isn’t that much in the grand scheme of things, every little bit helps. Particularly when we’re talking about such a large business on the ASX. At the time of writing, CBA has a market capitalisation of $154 billion.

    What happened to the CBA share price last month?

    There is plenty of volatility going on in the ASX share market and the global share market.

    Investors are having to deal with factors like elevated inflation and higher interest rates.

    At the end of the month, CBA announced it had met its enforceable undertaking obligations, which released the remaining operational risk capital overlay of $500 million. This represents an increase in the common equity tier 1 (CET1) capital of 15 basis points.

    In early September, the Reserve Bank of Australia (RBA) decided to increase the cash rate target by 50 basis points (0.50%) to 2.35%.

    Interest rate intervention

    The RBA said that it’s committed to returning inflation to a range of between 2% to 3% over time. It pointed out that the outlook for global economic growth has deteriorated due to “pressures on real incomes from high inflation, the tightening of monetary policy in most countries, Russia’s invasion of Ukraine, and the COVID containment measures and other policy challenges in China.”

    Inflation is expected to be above 4% in 2023 and then around 3% in 2024. In other words, it could take more than 12 months for inflation to get close to its target range. How long it takes to get inflation under control could be a key factor for the CBA share price.

    The labour market is one of the main things that the RBA said it’s keeping an eye on. The labour market is “very tight and many firms are having difficulty hiring workers. Wage growth has also picked up from the low rates of recent years.”

    Households are in a mixed position – mortgage interest rates are rising, but many households have also “built up large financial buffers and the saving rate remains higher than it was before the pandemic”.

    Is the RBA done increasing? It seems highly unlikely. The RBA’s latest monthly statement included this section:

    Price stability is a prerequisite for a strong economy and a sustained period of full employment. The Board expects to increase interest rates further over the months ahead, but it is not on a pre-set path… The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.

    Why does this matter?

    Most of CBA’s business is about lending, so what is happening with interest rates could be key for the business and the CBA share price.

    While plenty of analysts recognise that a higher RBA interest rate is likely to be helpful for ASX 200 bank share profitability, some of them are also cautious about what higher interest rates could mean for the resilience of their loan books.

    CBA lends many billions to households, so an increase in loan arrears could be painful for the big bank.

    Australian households are among the most indebted in the world. Higher interest rates – with no sign yet of central banks stopping – could have a knock-on effect on CBA.

    Time will tell whether the pessimism around the CBA share price is justified.

    The post Why were so many CBA shareholders cashing out in September? appeared first on The Motley Fool Australia.

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    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 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 Sayona Mining share price having such a rocky start to the week?

    A man jumps over a river, bouncing from one rock to another.A man jumps over a river, bouncing from one rock to another.

    The Sayona Mining Ltd (ASX: SYA) share price is off to a bad start to the month. Its shares are down 4.26% in late afternoon trade today.

    Shares in the lithium producer currently trade for 22.5 cents, but earlier touched an intraday low down 8.5%.

    While there’s no news today from the company to explain the sell-off, there’s some evidence to suggest it’s falling lower along with most of the market. Let’s investigate.

    Rising interest rates pose a threat

    We’re in uncertain times, and the market can’t seem to decide if it wants to trend up or down, thus leading to volatility in individual share prices. The market could be feeling antsy amid United States jobless claims numbers coming in lower than expected last week. It’s feared this will help the Federal Reserve to continue attempts to hammer down inflation through aggressive interest rate hikes.

    A knock-on effect of rising interest rates in the US is a stronger US dollar and more attractive yields from treasury bills, thus giving people another viable alternative to investing in shares.

    The other side to this is that as the US dollar becomes stronger, other countries may be tempted to hike their own interest rates to help keep their currencies competitive, which could spiral their economies into recession, as reported by Reuters.

    ASX shares and indices fall

    This uncertainty could be reflected in the behaviour of ASX shares on Monday.

    The S&P/ASX 200 Materials Index (ASX: XMJ) is almost flat this afternoon at just a 0.13% gain. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is also flatlining at a 0.13% loss.

    It’s worth mentioning that the ASX 200 hit a low of 6,411 a few minutes before midday. That’s a 0.97% loss from the index’s opening of 6,474, which suggests significant volatility.

    Some of Sayona Mining’s peers are also struggling on Monday. This includes Core Lithium Ltd (ASX: CXO) and Pilbara Minerals Ltd (ASX: PLS). These companies are down 3.62% and 0.66%, respectively.

    Sayona Mining share price snapshot

    The Sayona Mining share price is up around 75% year to date. Meanwhile, the ASX 200 is struggling at a 13% loss over the same period.

    The company’s market capitalisation is $1.95 billion.

    The post Why is the Sayona Mining share price having such a rocky start to the week? appeared first on The Motley Fool Australia.

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    Motley Fool contributor Matthew Farley 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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  • Here’s how ASX tech shares fared in September

    A young woman with glasses holds a pencil to her lips as she is surrounded by the reflection of data as though she is being photographed through a glass screen project with digital data.A young woman with glasses holds a pencil to her lips as she is surrounded by the reflection of data as though she is being photographed through a glass screen project with digital data.

    It was another lousy month for the S&P/ASX 200 Index (ASX: XJO) as the benchmark index shed 7.3% to finish at 6,474 points.

    But as concerns over rising interest rates and inflation linger, it was no surprise to see ASX tech shares at the centre of the sell-off.

    The S&P/ASX All Technology Index (ASX: XTX) suffered a steep 11.5% fall, extending its loss to 35% in the year to date.

    Some ASX tech shares defied the weakness to punch higher while others languished at 52-week lows.

    Let’s check out the top risers and fallers from the ASX All Tech index in September.

    ASX tech share gainers

    The CogState Limited (ASX: CGS) share price went into overdrive in September, leaving other ASX tech shares in the dust. CogState shares rocketed 34.2% after one of the company’s partners announced positive clinical trial results for an experimental drug to treat Alzheimer’s disease.

    The next best performer was the Megaport Ltd (ASX: MP1) share price, which racked up a monthly gain of 7.3%. Curiously, the last piece of market-sensitive news from Megaport came on 9 August when the company released its FY22 results. However, Megaport could be benefitting from bullish broker sentiment from the likes of Macquarie and Goldman Sachs.

    The Tyro Payments Ltd (ASX: TYR) share price also made it onto the podium with a 6.6% rise across the month to finish at $1.30. It was a busy month for Tyro as it rejected a takeover offer at $1.27 per share, an offer that the board believes “significantly undervalues” the company. During the month, Tyro also named its new CEO. Jon Davey has been internally promoted to the top job, which he will start today.

    ASX tech share fallers

    While the bright spots were few and far between, it wasn’t hard to find major detractors in the ASX tech sector in September.

    Amongst the ASX All Tech index, the biggest laggard was the Link Administration Holdings Ltd (ASX: LNK) share price. Link shares were crunched by 33.5% across the month as the company’s $2.5 billion takeover deal with Dye & Durham finally collapsed.

    The Novonix Ltd (ASX: NVX) share price also had another month to forget, tumbling by 27.3% to finish at $1.76. This takes the company’s year-to-date fall to a harrowing 81%.

    There wasn’t any news from Novonix in September but as an early-stage, loss-making business, it’s more vulnerable to concerns around rising interest rates. The battery materials company handed in its FY22 results at the end of August, delivering revenue of $8.4 million and a net loss of $71.4 million.

    Finally, the Silex Systems Ltd (ASX: SLX) share price took a breather in September, retreating by 27.1%. With no real news from the company, it appears investors were taking profits off the table. Silex has been one of the standout performers on the ASX this year, doubling its share price amid the global energy crisis.

    The post Here’s how ASX tech shares fared in September appeared first on The Motley Fool Australia.

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    Motley Fool contributor Cathryn Goh has positions in Tyro Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CogState Limited, Link Administration Holdings Ltd, MEGAPORT FPO, and Tyro Payments. The Motley Fool Australia has positions in and has recommended CogState Limited. The Motley Fool Australia has recommended MEGAPORT FPO and Tyro Payments. 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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  • Can Shiba Inu reach $1?

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

    a cute young shiba inu dog smiles at the camera in a park setting.

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

    After a monster return in 2021, dog-inspired cryptocurrency Shiba Inu (CRYPTO: SHIB) has come crashing back to Earth. In 2022, SHIB, the native token, has lost 68% of its value (as of this writing). General weakness in the overall crypto market, coupled with more realistic expectations about this specific digital asset, are the reasons for the price drop. 

    After all this, Shiba Inu is still the 14th most valuable cryptocurrency, with a market value of $6.1 billion. But can it one day reach $1 per token from today’s $0.000011? Continue reading to find out if Shiba Inu can make its biggest supporters rich along the way. 

    What is Shiba Inu? 

    Seeing limitations in how Dogecoin was structured, the anonymous founder of Shiba Inu wanted to add greater functionality, so it was built on top of the Ethereum network. This makes it compatible with the Ethereum ecosystem, a strategy that was designed to draw more interest from developers and users in the crypto world. 

    Shiba Inu’s initial supply of 1 quadrillion tokens (that’s 15 zeroes) is absolutely mind-boggling. Half of this amount was sent to Ethereum co-founder Vitalik Buterin, who sold $1 billion worth to donate to India’s pandemic relief fund. Buterin then burned, or sent to a dead wallet, another 40% of the tokens. These moves helped bring Shiba Inu into the spotlight. 

    However, Shiba Inu has no real competitive advantage in the world of cryptocurrencies, and there are more promising projects like Ethereum and Cardano when it comes to use cases like decentralized finance and non-fungible tokens. These blockchains also have attracted much greater interest from speculators, users, and developers. This makes the possibility of Shiba Inu ever reaching $1 very unlikely. 

    Why a $1 price target is unlikely 

    There are three specific developments that could help push up SHIB’s price. Continuing to burn tokens, as Vitalik Buterin did, is one of these catalysts. The premise of this tactic is that reduced supply, coupled with higher demand, will boost SHIB’s price. I see this as nothing more than financial engineering. And with such a gargantuan supply of tokens, 549 trillion to be exact, a lot of burning would need to happen. 

    Another catalyst is the development of the network. A Layer-2 solution, known as Shibarium, is supposedly in the pipeline as a way to increase the functionality of the network while lowering transaction fees. Additionally, ShibaSwap 2.0, an upgraded decentralized exchange, and a Shiba Inu metaverse are in the works. The overarching goal is to bring on more users, which would support demand for SHIB and drive up its price. But again, these updates can’t compete with Ethereum’s dominance. 

    And lastly, like many meme-inspired cryptocurrencies, Shiba Inu’s price could receive a boost by way of another huge hype cycle on social media. This has propelled other cryptos, most notably Dogecoin, to prominence. But it isn’t something to bank one’s hard-earned savings on. Trying to predict a specific cryptocurrency’s price moves based on how much buzz it might get on the internet seems like an impossible task. 

    If Shiba Inu were ever to reach $1 per token, this would mean that the cryptocurrency network’s entire market value would be a whopping $549 trillion. That’s more than the amount of total global wealth, as estimated by consulting firm McKinsey & Co. Clearly, this aspirational price target is all but impossible.  

    Buying SHIB today would be akin to gambling, and therefore, it’s best for investors to stay away from this token. 

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

    The post Can Shiba Inu reach $1? appeared first on The Motley Fool Australia.

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    Neil Patel has positions in Ethereum. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Ethereum. The Motley Fool Australia owns amnnd has recommended 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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  • Here were the 3 worst performing ASX lithium shares in September

    A man in a business suit hangs in mid air facing the floor as he plunges to the ground.A man in a business suit hangs in mid air facing the floor as he plunges to the ground.

    While some ASX lithium shares performed strongly in September, most of those with a market capitalisation of more than $100 million ended in the red.

    Out of the 28 lithium shares we compared to create this list, only six of them reported positive movements in their share prices, with the rest either recording a loss or a neutral price movement.

    As could be expected, some companies reported greater losses than others.

    So let’s cover September’s biggest losers in the lithium space.

    Nova Minerals Ltd (ASX: NVA)

    The biggest loser for the month of September was Nova Minerals, which recorded a 31.38% decline in its share. While primarily a gold explorer, Nova Minerals also has a 37% stake in Snow Lake Resources Ltd (NASDAQ: LITM), a company that’s exploring lithium at the Thompson Brothers Lithium Project in Manitoba, Canada.

    Shares opened for 94 cents on 1 September and closed for 65 cents at the end of the month.

    This may surprise those who follow the company, as Nova Minerals reported largely positive results in its annual report for FY22 on 20 September. One highlight for the financial year is that its total comprehensive income grew to $38.09 million, which is up from a $4.3 million loss in the previous corresponding period.

    The company also posted a positive update for its lithium business to the market on 16 September. A resource upgrade was issued for Snow Lake Resources amid drilling of 20,000 additional metres. This drilling effort reportedly “accelerates Snow Lake’s path towards commercial production”.

    Snow Lake is pursuing plans to make its lithium extraction site the world’s first renewable energy-powered electric mine.

    Lepidico Ltd (ASX: LPD)

    Shares of Lepidico also had an atrocious month in September as they lost 26.66% of their value. The Lepidico share price opened at 0.03 cents on 1 September. It closed at 0.022 cents at the end of the month.

    The miner’s shares were sold off following the company reporting a total comprehensive loss of $7.78 million for FY22 on 23 September.

    Other updates for the company included drill results from its Helikon 4 pegmatite at its Karibib project in Namibia. Assay results from the drilling effort uncovered high yields of lithium oxide.

    The release also stated that front-end engineering and design (FEED) for its Phase 1 chemical plant is due to complete in November 2022.

    Lake Resources N.L. (ASX: LKE)

    Finally, the Lake Resources share price dropped 21.49% in September. Shares opened for $1.14 on 1 September and closed at 90 cents each at month close.

    A large part of the sell-off unfolded over the course of a week. The company lost 17% during this time.

    The miner has been contending with interest from short sellers. Its short interest ratio shot up to 9.9% on 26 September.

    As the Fool reported earlier, J Capital believes that its lithium extraction technology is unproven and could generate toxic waste as part of the production process. Lake Resources denies these claims. Though this commentary by J Capital has seemingly done nothing to improve the sentiment around Lake Resources’ shares.

    On a greater level, ASX lithium shares could be feeling the pinch of rising interest rates, which has led to more volatility than usual in the market over the past couple of weeks.

    The post Here were the 3 worst performing ASX lithium shares in September appeared first on The Motley Fool Australia.

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    Motley Fool contributor Matthew Farley 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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  • 3 ASX All Ordinaries shares defying today’s sell-off to surge higher

    A graphic showing a businessman running up a white upwards rising arrow symbolising the soaring Magellan share price todayA graphic showing a businessman running up a white upwards rising arrow symbolising the soaring Magellan share price today

    The All Ordinaries Index (ASX: XAO) is 0.48% in the red today, but three ASX All Ordinaries shares are surging higher.

    Energy Resources of Australia Limited (ASX: ERA), Unibail-Rodamco-Westfield (ASX: URW) and Beacon Lighting Group Ltd (ASX: BLX) shares are all in the green.

    Let’s take a look at why these three shares are rising.

    Unibail-Rodamco-Westfield

    Unibail shares are soaring nearly 6% today. The company advised it has appointed Audrey Arnoux as Group Director of Investor Relations. Arnoux will work with the company and local teams to develop and expand relationships with investors and financial analysts.

    Commenting on the news, Chief financial officer Fabrice Mouchel said:

    I am excited to welcome Audrey to lead our Investor Relations function. Her significant capital markets and investor relations experience will be a tremendous asset for URW and I look forward to working with her to further strengthen our relationships with the financial
    community

    Energy Resources

    Energy Resources shares are surging 7% today. The company produces uranium from the Ranger Mine in the Northern Territory. Energy Resources advised that chairman Peter Mansell and independent non-executive directors Paul Dowd and Shane Charles are intending to resign from the board of the company.

    Rio Tinto had called for Mansell to resign to allow for board renewal. Rio Tinto is the majority shareholder of Energy Resources.

    Energy Resources also provided a table responding to recent media reporting.

    Beacon Lighting

    Beacon Lighting shares are lifting 5.7% today. This is despite no news out of the company. Meanwhile, the S&P/ASX 200 Consumer Discretionary is down 0.19% today.

    Beacon is an ASX consumer share selling lighting, globes and ceiling fans. Beacon’s gross profit margin lifted to 69.1% in FY22. The company recorded record sales of $304.3 million and a record EBITDA of $92.7 million. Beacon is planning to open five new stores in FY23.

    Sales in the USA lifted 51.9% in FY22. In recent news, data from the USA shows spending increased 0.4% in the month of August in the USA, CNBC reported.

    The post 3 ASX All Ordinaries shares defying today’s sell-off to surge higher appeared first on The Motley Fool Australia.

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  • Is now the time to buy Ethereum after The Merge?

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

    Two people in business attire jump high above a city as if to join hands and merge.

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

    The Federal Reserve’s aggressive monetary stance in 2022 has caused investors to reassess their appetite for risk, leading to a plunge in the most speculative assets out there, a category that cryptocurrencies undoubtedly belong in. 

    Even the second-biggest cryptocurrency by market cap, Ethereum (CRYPTO: ETH), hasn’t been immune to the general market’s weakness. The popular crypto is down 64% this year (as of this writing), but a recent catalyst could drive investor interest to new heights. 

    With The Merge now complete, is this a good time to buy Ethereum? Let’s take a closer look. 

    Changing the consensus mechanism 

    For its entire history (up until a couple of weeks ago), Ethereum operated what is called a proof-of-work (PoW) system. This requires so-called miners to use massive amounts of electricity to power computers to solve complex math problems, earning the right to validate new transactions on the blockchain. Bitcoin, the world’s most valuable cryptocurrency, operates with PoW. 

    Detractors point to the fact that PoW is energy-intensive and not really scalable. Bitcoin uses the same amount of energy as a small country. Furthermore, it can only process three transactions per second (TPS). 

    As a result of these perceived limitations, developers have transitioned Ethereum to run on a proof-of-stake (PoS) consensus mechanism. PoS allows token owners to lock up, or stake, their ether tokens to help validate new transactions and secure the network. Moving to proof-of-stake was seven years in the making, so its long-awaited completion demonstrates exactly how complex and groundbreaking the move was. 

    According to its official website, Ethereum’s energy use has now been cut by 99.95%, a statistic that is sure to please environmentalists in both the government and the crypto community. Additionally, moving to PoS paves the way for Ethereum’s network to implement sharding in 2023, an update that will split and distribute the network load across side blockchains. Think of it like adding more lanes to a highway. The result is a huge potential increase in throughput to the tune of 100,000 TPS. 

    However, a valid argument can now be made that PoS makes Ethereum’s network more centralized, as it is estimated that 43% of all staked Ethereum is held by two entities right now — crypto exchange Coinbase and Lido DAO, a decentralized staking solution designed for Ethereum. This could lead to problems down the road that are at odds with the core tenet of decentralization that blockchain technology promises. For example, Coinbase and Lido could have undue influence over Ethereum in the future, affecting things like transaction approvals and governance strategies. 

    Nonetheless, Ethereum is now in a position to scale better thanks to its switch to PoS. And this could lead to even greater adoption with the continued popularity of decentralized applications such as decentralized finance (DeFi) protocols and non-fungible tokens. 

    Investors should weigh the options 

    Of the cryptocurrency networks out there that incorporate smart contracts, Ethereum is the most attractive for investors because of its deep developer ecosystem. According to venture capital firm Electric Capital, Ethereum had the most developers working on it at the start of the year. And with sharding on the horizon in 2023, it’s not hard to see even more developers flocking to work on advancing Ethereum. 

    Other popular cryptos that have already been operating a PoS system are Cardano and Solana. Both of these have their own special characteristics that investors could find appealing. Cardano is known for having a deliberate, calculated, and research-based development process. And Solana, with the theoretical capacity to process 50,000 TPS, could disrupt the payments industry. 

    Therefore, investors are presented with the option of buying a basket of these interesting cryptocurrencies, all with their own unique attributes and potential use cases, or perhaps putting their entire crypto allocation into Ethereum. Experts believe that it’s too early to tell what the exact implications of The Merge will be, but it certainly could prove to be a long-term catalyst that drives the price of Ethereum higher over time. 

    With Ethereum’s price down 25% over the past couple of weeks, investors who have been on the sidelines might want to jump in and buy some of this top cryptocurrency. 

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

    The post Is now the time to buy Ethereum after The Merge? appeared first on The Motley Fool Australia.

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    Neil Patel has positions in Coinbase Global, Inc. and Ethereum.  The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin, Coinbase Global, Inc., Ethereum, Lido DAO, and Solana. The Motley Fool Australia has positions in and has recommended Bitcoin, Coinbase Global, Inc., Ethereum and 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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  • Why is the Vanguard Australian Shares Index ETF lagging the market on Monday?

    A woman puts up her hands and looks confused while sitting at her computer.A woman puts up her hands and looks confused while sitting at her computer.

    The S&P/ASX 200 Index (ASX: XJO) is see-sawing today in what’s been a rather quiet day on the ASX as many states enjoy a public holiday.

    After climbing by as much as 0.5% in morning trade, the ASX 200 has since given back these gains. At the time of writing, the ASX 200 has slipped 0.12% to sit at 6,466 points.

    The S&P/ASX 300 Index (ASX: XKO) is more or less mirroring its larger index counterpart with a 0.17% fall.

    But the same can’t be said for the Vanguard Australian Shares Index ETF (ASX: VAS). The VAS ETF aims to track the ASX 300 index, but it’s currently sporting a 1.5% decline.

    Why is the Vanguard Australian ETF sliding today?

    This underperformance can be explained by VAS going ex-dividend today.

    Just like many ASX shares, the VAS ETF pays out dividends (also known as distributions) to investors.

    After all, the VAS ETF provides exposure to companies in the ASX 300 index, and many of these companies pay dividends. So, the fund collects these dividends on behalf of investors and returns them on a quarterly basis.

    Last week, Vanguard announced estimated distributions for its various ASX ETFs for the September quarter.

    The cut-off date for these distributions is today, so any investors buying units in the VAS ETF won’t be eligible for the upcoming payments.

    As a result, the VAS ETF is falling disproportionately to the market today as the value of the distribution leaves its unit price.

    What’s the latest on the VAS ETF dividend?

    This morning, Vanguard announced updated estimated distribution amounts for its funds.

    As it stands, the VAS ETF is set to pay a distribution of 145.0577 cents to investors on 18 October. Investors wishing to participate in Vanguard’s distribution reinvestment plan (DRP) must elect to do so by 5pm tomorrow.

    This latest distribution is slightly higher than VAS’ payment in last year’s September quarter, which came in at 140.7340 cents.

    Including this latest distribution, the VAS ETF has declared total distributions of roughly $6.30 over the last 12 months. 

    With units in VAS last changing hands at $80.40, this represents a trailing dividend yield of 7.8%. 

    However, it’s important to note that this yield reflects what’s happened in the past. And as we’re often reminded, past performance is not a reliable indicator of future performance.

    Dividends from ASX shares can swing wildly in any given year. And since the VAS ETF is exposed to around 300 of these shares, the swings in its distributions tend to be more pronounced. 

    The VAS ETF has backpedalled by 16.14% in the year to date. In comparison, the ASX 300 index is showing a 13.53% fall.

    The post Why is the Vanguard Australian Shares Index ETF lagging the market on Monday? appeared first on The Motley Fool Australia.

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    Motley Fool contributor Cathryn Goh 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 it possible the Pilbara Minerals share price has topped out?

    A kid stretches up to reach the top of the ruler drawn on the wall behind.A kid stretches up to reach the top of the ruler drawn on the wall behind.

    The Pilbara Minerals Ltd (ASX: PLS) share price has been running hot over some important timeframes, including beating the S&P/ASX 200 Materials Index (ASX: XMJ) by a significant margin over the past year.

    Shares of the company are up:

    • 38.75% year to date
    • 128.87% over the past year, and
    • 124.94% versus the materials sector over the past year

    When shares rise quickly like this, some investors fear that they could be overvalued. This can cause some hesitancy for investors to buy them over the short term.

    The Jefferies Group investment bank has taken a stab recently to answer the question of whether Pilbara’s shares have topped out in an article posted by the Australian Financial Review (AFR) last Thursday.

    Let’s cover what the broker said.

    Pilbara could have additional upside

    Pilbara’s shares were rated as hold by Jefferies Group. Contrary to what some believe, a hold rating doesn’t necessarily mean that its shares are expected to flatline for the projected period. Instead, a hold rating generally means a company’s shares are expected to perform in step with companies in its peer universe. And with ASX lithium shares expected to rise across the board, Pilbara’s shares are also expected to lift higher.

    This is further reflected in the fact that Jefferies gave Pilbara’s shares a price target of $4.75 each. That’s an appreciable upside of 7.4% at the time of writing.

    Earlier this month, Macquarie gave Pilbara’s shares a price target of $5.60, representing a sizable upside of 26.6%. My Fool colleague James notes that analysts were impressed with its most recent battery material exchange auction results, receiving its highest ever bid of US$6,988 per dmt in September.

    So with these recent ratings in mind, it appears that Pilbara’s shares could continue to rally to new heights, and might not have hit their ceiling just yet.

    Pilbara share price snapshot

    The Pilbara share price is down 2.96% this Monday afternoon.

    Shares of the lithium producer currently trade for $4.43. Earlier today, shares made an intraday high of $4.59 and a low of $4.37.

    The Pilbara share price is up 38.28% year to date.

    Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is down 13.05% over the same period

    The company’s market capitalisation is around 13.61 billion.

    The post Is it possible the Pilbara Minerals share price has topped out? appeared first on The Motley Fool Australia.

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    Motley Fool contributor Matthew Farley 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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