It has been a tough year for small cap investors, with the S&P/ASX Small Ordinaries Index (ASX: XSO) down 23% over the past 12 months.

That fall, as painful as it is, has been cushioned by the epic performance of a handful of large  commodity stocks, including the Core Lithium Ltd (ASX: CXO) share price surging 177% higher, the New Hope Corporation Limited (ASX: NHC) share price roaring 157% higher, and the Lake Resources N.L. (ASX: LKE) share price jumping 89% higher in the past year.

How New Hope shares – with its $5.7 billion market capitalisation – are included in the Small Ordinaries Index and are one of life’s mysteries. Also a constituent of the S&P/ASX 200 Index (ASX: XJO), New Hope is around the 80th largest ASX-quoted company in the country.

Moving on…

Writing in its September monthly update, the Cyan C3G Fund notes the ongoing severe volatility in global markets, with the US stock market having now experienced its worst first nine months of a calendar year in 20 years.

If your portfolio is hurting, like mine, you’ll know why. 

It’s even worse if you don’t hold any of the hot lithium and coal stocks, like me, and the Cyan C3G Fund. Or you do hold some of the many big losers over the past 12 months, like the Aussie Broadband Ltd (ASX: ABB) share price slumping 59% or the Pinnacle Investment Management Group Ltd (ASX: PNI) share price falling 41%, like me.

Cyan C3G Fund portfolio managers Graeme Carson and Dean Fergie say “the Australian economy appears to be in a stronger position than some of its counterparts, but the financial markets aren’t yet reflecting this.”

That’s certainly the case in the small-cap space, with the share prices of many companies down 60% or more despite some of them growing quickly, having good balance sheets with no debt, and being cash generative.

Or perhaps I’m just bemoaning the performance of the small and micro cap stocks in my portfolio…

Here’s when stock markets could start to move higher…

Looking for a silver lining amongst these cloudiest of times, the Cyan C3G portfolio managers say that with the market already pricing in an upcoming economic slowdown, the hope is “financial markets will front-run the recovery just as they did the downturn… as they have with all bull and bear market cycles in the past.”

As for the timing, as ever, no-one knows when markets will turn. That said, it may be sooner rather than later.

Cyan C3G believes “the most-likely first positive catalyst for a stock market recovery will be a line of sight as to when the interest rate hike cycle will end.” The portfolio managers go on to say it is expected the US will end its cycle in the first quarter of calendar 2023, with Australia perhaps being a month or two earlier.

That’s not too far away, and markets, being forward-looking beasts, could move higher before then. 

If I was taking a guess – and it’s nothing more than a guess – I reckon the stock market could be in for a big January as the so-called January Effect kicks into high gear.

As bottom-up stock pickers, the Cyan C3G portfolio managers are confident the companies in their portfolio will have materially stronger market share positions in their industry in years to come, irrespective of economic conditions.

The September monthly update outlines the investment rationale for some of the Cyan C3G key portfolio positions including…

Alcidion Group Ltd (ASX: ALC), a company building a strong position in the digitisation of hospital management systems, both administrative and clinical, in Australia and the much larger UK market. The Alcidion share price is down almost 60% over the past 12 months, yet Cyan say “the timing looks perfect to scale the business significantly over the next 2 years as governments drive the push towards technology in healthcare in a post-Covid environment.”

Playside Studios Ltd (ASX: PLY) is an independent video game developer with “a business model based on work-for-hire, original IP development and new initiatives like a 3rd party publishing division,” according to Cyan C3G. The Playside share price fell 25% in September, yet the fund managers believe the company “can deliver great returns to shareholders independently or as an M&A target in time (hopefully both). We see this as a unique opportunity to get exposure to these dynamics in the ASX listed space.”

The post Top fund manager thinks ASX could start to move decisively higher, potentially sooner than you might be expecting appeared first on The Motley Fool Australia.

More reading

• Experts say these small cap ASX shares are buys

Motley Fool contributor Bruce Jackson has positions in Aussie Broadband Limited and PINNACLE FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alcidion Group Ltd, Aussie Broadband Limited, and PINNACLE FPO. The Motley Fool Australia has positions in and has recommended PINNACLE FPO. The Motley Fool Australia has recommended Alcidion Group Ltd and Aussie Broadband 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 BrainChip Holdings Ltd (ASX: BRN) share price is edging higher on Friday.

At the time of writing, the semiconductor company’s shares are up 0.5% to 89.5 cents.

Why is the BrainChip share price rising?

The BrainChip share price is ending the week in the black thanks to a major improvement in investor sentiment.

This follows a stellar night on the tech-focused NASDAQ index, which recovered from being down 3% in early trade to end the session 2.2% higher.

This has given the Australian tech sector a lift on Friday, leading to the S&P/ASX All Technology Index rising 2.1% this morning.

But, as you might have noticed, the BrainChip share price isn’t rising anywhere near as strongly as its peers.

What’s going on?

The BrainChip share price is underperforming today after the company revealed that it will issue 8 million restricted stock units to its former chairman in order to prevent “any potential claim.”

According to the release, when Emmanuel Hernandez resigned with immediate effect as chairman on 1 March, the options that were granted to him in 2017 lapsed.

The release states that Mr Hernandez expressed interest in reaching an agreement with the company to avoid exercising his options at the same time and instead to continue holding them beyond his resignation date up to expiration.

The two parties agreed to find an alternative to exercising the options, as apparently “this was considered to be in the best interest of the Company and shareholders.” However, it was determined that the company could not modify the terms of the options without seeking shareholder approval or a waiver from ASX.

During the time taken for the $1.5 billion tech company to investigate the proper method of modifying the options and negotiating the terms with Mr Hernandez, the options ultimately lapsed.

But as this occurred whilst Mr Hernandez was engaging with BrainChip on the process for exercise, the company “considers it appropriate to award Mr Hernandez with the new RSUs.” This will still require shareholder approval, though.

The release concludes:

The board does not consider that the issue of the New Rights will materially prejudice the Company or other shareholders. Brainchip also considers the issue of the New Rights to Mr Hernandez to be a necessary step in the prevention of any potential claim by Mr Hernandez.

The post Why is the BrainChip share price underperforming on Friday? appeared first on The Motley Fool Australia.

More reading

• BrainChip share price flat despite ‘new milestone’
• Here are the top 10 ASX 200 shares today
• Bank of Queensland, BrainChip, Coronado Global, and Lake Resources shares are rising
• BrainChip share price higher on new US patent issue
• How did the BrainChip share price manage to smash the ASX 200 in Q1?

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

The market went on a wild ride on Thursday morning after inflation data was released and investors tried to project how that would impact the Federal Reserve’s interest-rate moves. Early on, worry about higher rates resulted in falling stock prices, and cryptocurrencies were some of the hardest hit. But the drop passed quickly, and values have mostly recovered.

For example, Dogecoin (CRYPTO: DOGE) has had a strange day, falling as much as 7.7% in early-morning trading only to recover and trade about flat on the day as of 1:30 p.m. ET. Polkadot (CRYPTO: DOT) dropped up to 7.9% and is now down 1.9%, ChainLink (CRYPTO: LINK) was down as much as 11.7% and is currently off 2.8%, while The Sandbox (CRYPTO: SAND) plunged 10.9% and is now down 3.4% on the day.

So what

The biggest news of the day was the Bureau of Labor Statistics releasing data that showed consumer prices were up 8.2% year over year and 0.4% month over month in September 2022. This was a slightly higher inflation rate than investors were expecting, which was why stocks and cryptocurrencies dropped sharply early in trading.

Investors have spent much of the last six months trying to figure out how far and how fast the Federal Reserve will raise interest rates, and inflation is the Fed’s biggest concern. So higher inflation is seen as a sign that the Fed will keep increasing rates, which hurts the value of risky assets.

It’s worth keeping in mind that inflation is up big over the last year, but it’s slowed dramatically since June 2022. Although 0.4% inflation month over month seems high, that’s only one month. And the trend is toward tepid inflation right now, which might mean the Fed is closer to slowing rate increases, especially if there’s a recession.

Now what

There’s a lot to digest today, and the market seemed to have multiple views in just a few hours. But I think the takeaway is that the Federal Reserve will likely raise rates through the end of the year, and it’s possible that will lead to a recession. This isn’t a new concern; stocks have been falling for months on exactly this uncertainty.

For crypto, the impact of higher rates isn’t really known. Investors might see this as a risky asset, but cryptocurrencies aren’t risky companies that carry debt loads or aren’t profitable. These are blockchain assets that might or might not continue trading in step with volatile securities like tech stocks.

I think today’s move is another example of typical market volatility. There’s no underlying change in what’s being built on the blockchain today, but assets are being priced differently based on what the public thinks the Federal Reserve is doing. Investors with a long-term mindset should look past volatile days and focus on the long term, because that’s what matters for our portfolios. 

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

The post Why crypto cratered before a quick recovery today appeared first on The Motley Fool Australia.

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• 3 altcoins to buy right now
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• Why Bitcoin, Dogecoin, and Shiba Inu fell this morning

Travis Hoium 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 ChainLink. The Motley Fool Australia owns and has recommended Chainlink. 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 Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has underperformed all the bank’s big four peers through 2022 so far.

Stock in the smallest of the four banks has dumped around 9% since the start of this year. The ANZ share price is trading at $25.68 right now.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has fallen 12.5% year to date.

Does its recent slump put the ANZ share price in the buy zone? Let’s take a look at what experts are predicting for the stock’s future.

Is now a good time to snap up ANZ shares?

There are two major themes when it comes to experts’ outlooks for the ANZ share price. They are net interest margins (NIMs) and the bank’s $4.9 billion takeover of Suncorp Group Ltd (ASX: SUN)’s banking business.

Let’s start with the former. A bank’s NIM represents the difference between the income it receives from interest on loans and the interest it pays out to deposit holders. This can be recalibrated when rates are hiked, as they have been in 2022.

ANZ’s fellow ASX 200 bank, Bank of Queensland Ltd (ASX: BOQ), revealed its NIM had leapt to 1.81% in the final quarter of financial year 2022 earlier this week.

In response, JP Morgan is said to have upgraded its outlook for the banking sector, my Fool colleague Bronwyn reports. ANZ is the broker’s second favourite banking pick, behind National Australia Bank Ltd (ASX: NAB).

The market will likely be watching the metric closely when ANZ reports later this month.

Meanwhile, Baker Young’s Toby Grimm recently tipped ANZ as the best value ASX 200 big four bank buy, saying it offers the lowest price-to-earnings (P/E) ratio and highest dividend yield, as per The Bull.

Grimm also liked the bank’s planned acquisition of Suncorp Bank as it “reduces risk and supports medium-term growth”.

And Citi is bullish on the ANZ share price due to both its potential NIM growth and its takeover, tipping it to lift to $29, as my colleague James reports. That represents a potential 13% upside.

The top broker also expects the bank to up its dividends in coming years.

Meanwhile, Goldman Sachs is neutral on ANZ shares, slapping the stock with a $26.36 price target.

The post ANZ shares: Buy, hold, or fold? appeared first on The Motley Fool Australia.

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• When can Suncorp shareholders expect their cash from the ANZ deal?
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• Why Endeavour shares could offer access to an ‘attractive asset’: expert
• Are Coles shares a buy ahead of the company’s November AGM?

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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While the market volatility this year has been very disappointing, it could have created some very attractive buying opportunities for patient investors.

For example, listed below are a couple of ASX 200 shares that have been beaten down this year but are tipped to rebound strongly from current levels.

In fact, the team at Morgans believe they each offer potential upside of greater than 50% over the next 12 months. Here’s what you need to know:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The first ASX 200 share that Morgans believes could rocket higher is Domino’s. It is a leading pizza chain operator with operations across the ANZ, Asian, and European markets.

Morgans is positive on the company due to its store expansion plans. It explained:

The engine of DMP’s growth is its ability to roll out new stores all over the world. It added 438 stores to its global network in the year to June 2022, a pace of expansion that we forecast to accelerate to nearly 600 in FY23. This will take the total to almost 4,000 stores, up fourfold over a ten-year period. Over the next ten years, DMP expects to grow organically to 7,250 stores in the 13 countries in which it currently operates. This means DMP expects to more than double in size again by 2033, not including any future acquisitions.

Morgans has an add rating and $90.00 price target on the company’s shares. Based on the current Domino’s share price of $56.61, this implies potential upside of 59%.

Nextdc Ltd (ASX: NXT)

Another ASX 200 share that Morgans believes has major upside potential is NextDC. It is a leading data centre operator that it is exposed to structural tailwinds such as the shift to the cloud.

Morgans is expecting another strong year for NextDC in FY 2023 and suspects that it could outperform its guidance. It explained:

NXT should deliver another good set of results in FY23 with some upside risk to guidance, in our view. Structural demand for cloud and colocation remains incredibly strong. NXT’s new S3 and M3 data centres are now open. Consequently, we expect significant new customer wins over the next six-to-twelve months (including CSP options being exercised). Sales should drive the share price higher. NXT looks comfortably on-track to generate over $300m of EBITDA in the next three to five years.

Morgans has an add rating and $13.30 price target on the company’s shares. Based on the current NextDC share price of $8.79, this suggests potential upside of 51% for investors.

The post Morgans names 2 ASX 200 shares to buy with 50%+ upside appeared first on The Motley Fool Australia.

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• Analysts say these ASX growth shares are buys
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• Morgans names 2 more of the best ASX shares to buy in October

Motley Fool contributor James Mickleboro has positions in NEXTDC Limited. 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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WAM Capital Limited (ASX: WAM) is a big listed investment company (LIC) that is soon going to pay its final dividend for the 2022 financial year.

The business pays a dividend every six months, with the second dividend of FY22 about to go ex-dividend.

Here are the details.

WAM Capital’s latest dividend

The ex-dividend date for WAM Capital is 17 October, which is on Monday.

That means that today is the last day for investors to be able to buy WAM Capital shares to get entitlement to that dividend.

The LIC is going to pay investors a final dividend of 7.75 cents per share.

In terms of the payment date, it’s only two weeks away. The dividend will be headed investors’ way on 28 October.

How did the LIC afford this?

It has been a very volatile period for the ASX share market, which is where the Wilson Asset Management team go hunting for opportunities.

In the 12 months to 30 June 2022, which is the financial year this dividend comes from, the WAM Capital investment portfolio fell by 18.8%. That compares to just a 7.4% drop for the All Ordinaries Index (ASX: XAO).

However, the portfolio did better than the S&P/ASX Small Ordinaries Accumulation Index (ASX: XSOA), which fell by 19.5% over the year.

The LIC was able to pay a dividend because it had built up a profit reserve of investment returns generated from previous years.

It was noted by the company that it had 8.7 cents per share available in its profit reserve before the payment of this final dividend and it will have 1 cent per share after the payment.

In other words, it needs to generate enough investment returns this year to keep paying its dividend.

Since its inception in August 1999 to 30 June 2022, the investment portfolio generated gross (total) returns of 14.7% per annum. The LIC has been using the profits from previous financial years to afford the WAM Capital dividend.

What next?

There has been a lot of volatility in 2022. Markets continue to jump and fall as investors take in the latest inflation numbers, unemployment rates and so on.

For WAM Capital, its job is to find undervalued growth opportunities. There are plenty of ASX growth shares that have been sold off heavily.

At the end of August, some of the names in its portfolio included Hub24 Ltd (ASX: HUB), Idp Education Ltd (ASX: IEL), Xero Limited (ASX: XRO), and Webjet Limited (ASX: WEB).

It is due to hand in its monthly update today, so it will be interesting to see if the portfolio has changed much.

The post Want to snare the next WAM Capital dividend? Here’s how appeared first on The Motley Fool Australia.

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• 2 little-known ASX shares that this fund manager says have ‘strong’ outlooks

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 Hub24 Ltd, Idp Education Pty Ltd, and Xero. The Motley Fool Australia has positions in and has recommended Hub24 Ltd and Xero. The Motley Fool Australia has recommended Webjet Ltd. 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 Woolworths Group Ltd (ASX: WOW) share price is charging higher today.

In morning trade, the retail conglomerate’s shares are up almost 2% to $33.49.

Why is the Woolworths share price rising?

There are a couple of catalysts for the rise in the Woolworths share price on Friday.

The first is a roaring ASX 200 index following a surprisingly strong night of trade on Wall Street even after inflation came in hotter than expected.

Another catalyst could be a broker note out of Goldman Sachs this morning.

What did the broker say?

Goldman has been looking at the consumer staples sector this week.

And while it has trimmed its earnings estimates for consumer staple stocks to reflect a consumer shift to value, it remains very positive on Woolworths.

In fact, the broker has reiterated its conviction buy rating with a trimmed price target of $42.70. Based on the current Woolworths share price, this implies potential upside of 28% for investors over the next 12 months.

It commented:

Our top pick in the sector still remains our Buy-rated WOW (on the Conviction List), TP A$42.70/sh (previous A$44.1) implying ~30% share price upside. We see the 12m forward P/E multiple premium of WOW vs COL at 1.3x, vs historical average of 4.1x, while the FY22-25e 3yr-CAGR NPAT growth is ~10% WOW and ~3% COL as providing an opportunity to accumulate shares in a high quality retailer in Australia.

We trim our Staples (WOW, COL, MTS) comps sales growth by -0.5%-1.8% across FY23-24 mainly on lower mix growth. That said, we believe that WOW remains in an advantaged position with the increasing operational complexity playing into its strength in more advanced digital capabilities (personalized pricing and promotional efficiency as example).

The post Here’s why the Woolworths share price is charging higher today appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Is the Woolworths share price a buy ahead of this month’s AGM?
• Even amid inflation, we all have to buy food. So why is the Woolworths share price struggling?
• Have ASX 200 retail shares been worth buying so far in FY23?
• Down 9% in a month, could the Woolworths share price turn around in October?

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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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

Thursday morning, Netflix (NASDAQ: NFLX) filled in the details of its ad-supported subscriber tier. Investors obviously liked what they heard, and consequently they pushed up the streaming service’s stock price. As of midafternoon trading, Netflix shares were rising at a 4%-plus clip over the previous day’s close, well outpacing the S&P 500 index’s 2.2% gain.

So what

Netflix’s ad-supported tier has been formally christened Basic With Ads. It will cost $6.99 per month in the U.S. The tier will also be available in 11 other countries, including the U.K., Germany, Japan, Korea, and Mexico. Netflix did not specify the pricing for those non-U.S. markets.

Basic With Ads will launch on the morning of Thursday, Nov. 3. The tier will be the lowest on a four-rung ladder, underneath the video streaming giant’s Basic, Standard, and Premium pricing levels.

The new tier’s subscribers will be able to screen movies and shows at 720p/HD resolutions, while being fed an average of four to five minutes of advertising per hour, Netflix said. The company added without elaboration that “a limited number” of titles will be unavailable because of licensing restrictions, although it is working to resolve this.

Netflix is already pushing for advertisers to get aboard. In the press release heralding the arrival of Basic With Ads, it wrote that the service “represents an exciting opportunity for advertisers — the chance to reach a diverse audience, including younger viewers who increasingly don’t watch linear TV, in a premium environment with a seamless, high-resolution ad experience.”

Now what

Although it’s yet to be put through its paces with consumers, on paper Basic With Ads seems like a compelling offer. It’s notably cheaper than Netflix’s other tiers, and the ad load doesn’t seem overly burdensome for viewers. As for the advertisers, the company’s wide, global customer base is an enticing market, so there should be plenty of interest in buying spots. 

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

The post Why Netflix was a US stock market star on Thursday  appeared first on The Motley Fool Australia.

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Eric Volkman 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 Netflix. The Motley Fool Australia has recommended Netflix. 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 Block Inc CDI (ASX: SQ2) share price has been pummelled this year, alongside many other ASX tech shares.

Since hitting the ASX boards in January, Block has seen its share price almost cut in half. Shares last changed hands at $89.60 apiece, tumbling 49% in the year to date.

But amidst the volatility, here are a few reasons why I’m still holding onto my Block shares as a long-term play.

A powerful two-sided network

Block’s core business centres on two separate but interrelated ecosystems: the seller ecosystem and the Cash App.

The seller ecosystem, also known as Square, is where it all started. And it’s what the company is best known for in Australia. 

Here, Square provides an integrated suite of hardware, software, and services that help merchants run their businesses across physical and digital channels. Square’s bread and butter is point-of-sales and payment processing. But it also offers a range of complementary, sticky subscription services, including payroll, inventory, loyalty programs, invoicing, rostering, and online. 

Alongside Square sits the dominant Cash App, which is currently only available in the US and the UK. Cash App started as a peer-to-peer payments platform that allows users to quickly send and receive money. But, primarily in the US, it’s since expanded into stock trading, Bitcoin trading, debit cards, and direct deposits.

Both of these ecosystems have significant cross-selling opportunities. Meanwhile, Cash App, in particular, boasts strong network effects. The virality of Cash App saw it become the eighth most downloaded app in the US in 2021, contributing to customer acquisition costs of just $10.

Block’s seller and consumer ecosystems are powerful in their own right. But they could be even more powerful together, with the potential for a closed-loop system where money travels back and forth between Square merchants and Cash App users. 

Nevertheless, a strong presence on both sides of the network – buyers and sellers – creates plenty of opportunities for Block to take an even bigger bite out of the growing commerce pie.

Moving upmarket 

Square initially targeted small businesses, a segment of the market that typically wasn’t served by the big banks.

Recognising the company’s success, Jamie Dimon, CEO of America’s largest bank JPMorgan Chase (NYSE: JPM), once commented: “Square innovated where we should have”.

With a mission of enabling small businesses to accept card payments, it created a square-shaped card reader that plugged straight into a smartphone’s headphone jack. These readers landed in customers’ hands in 2010.

As we know, in the years that followed, Square has developed several other card readers, along with a suite of complementary software and solutions to meet its customers’ every need.

After resonating with small business owners, Square now has its sights set on moving upstream. It’s trying to gain traction among larger businesses, which have lower churn and rake in higher payment volumes.

With this, its fastest-growing cohort is what Square calls ‘mid-market sellers’. These are merchants with annualised gross payment volume (GPV) greater than US$500,000. In the most recent set of second-quarter 2022 results, gross profit from these sellers grew 24% year on year to made up 39% of the GPV mix. This is up from 35% in 2Q21 and 27% in 2Q20.

Importantly, mid-market sellers typically use more of Square’s products, developing deeper relationships with the payments company. In 2021, 38% of Square’s gross profit came from sellers using four or more products. This was up from 10% five years ago. 

To top it all off, Block boasts positive dollar-based net retention across its historical annual cohorts for both Square and Cash App. In other words, Block is not only retaining customers but these customers are also engaging and spending more over time.

Flourishing market opportunity

Block believes its seller ecosystem represents a US$120 billion-plus gross profit opportunity. Meanwhile, Cash App adds a further US$70 billion-plus to the company’s total addressable market (TAM) in the US alone.

The company’s penetration rates are in the low single digits for both ecosystems, leaving a tremendous runway to grow.

As investors, we learn to dismiss management’s often highly optimistic (and sometimes, very promotional) addressable market figures.

But there’s no denying that the global payments industry is one of the most lucrative spots to be in. And Block already has a strong foothold to carve out more market share at the expense of incumbents.

What’s more, Block has consistently expanded its addressable market over time by rolling out new solutions, opening up new verticals, and growing upmarket.

But another key growth lever is global expansion, particularly for the Square ecosystem.

In the second quarter of 2021, just 8% of Square’s gross profit came from outside of the US. After entering new regions and rolling out more products in its existing international markets, this figure dialled up to 13% in the most recent quarter of 2Q22. 

The runway for growth here is substantial, given that Square only operates in eight countries outside of the US, three of which came online in 2021 or 2022. In fact, Australia currently holds the crown as Square’s largest international market after the company ventured down under in 2016.

Bottom line

In my view, Block shares are a high-risk, high-reward proposition packed full of optionality and compelling growth drivers. But there are notable risks to be mindful of.

Increasingly fierce competition could threaten Block’s growth avenues, the company’s exposure to Bitcoin adds another dimension to the investment case, and there’s no guarantee that its success in the US will be replicated internationally at scale.

In saying this, the company has a tremendous opportunity at its feet in an industry where multiple players can win. With a history of innovation and an established two-sided network, I think Block is uniquely placed to capitalise on secular tailwinds and grow its presence in a booming market.

The post Down 49% this year, here’s why I’m still holding my Block shares appeared first on The Motley Fool Australia.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Cathryn Goh has positions in Block, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. and JPMorgan Chase. The Motley Fool Australia has positions in and has recommended Block, Inc. 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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Owners of Suncorp Group Ltd (ASX: SUN) shares will likely know all too well about the company’s $4.9 billion deal to sell its banking business to Australia and New Zealand Banking Group Ltd (ASX: ANZ).

Sadly, it will probably be a while until investors get a taste of the proceeds. But the good news is, they’re expected to be to the tune of around $3.21 per share.

The Suncorp share price closed Thursday’s session at $10.22.

That’s 8% lower than the stock was trading prior to the sale’s announcement. Comparatively, the S&P/ASX 200 Index (ASX: XJO) has lifted 0.5% in that time.

Let’s take a closer look at the road ahead for ANZ’s planned merger with Suncorp Bank.

Own Suncorp shares? Here’s the latest on its bank’s sale

The Suncorp share price leapt 6% on 18 July when ANZ’s $4.9 billion plan to acquire Suncorp Bank was announced.

That sum will be handed to Suncorp in cash, with the ASX 200 financial services conglomerate hoping to reap $4.1 billion of proceeds.

That equals around $3.21 per share, with the then-insurance goliath planning to hand most of the profits to shareholders.

But the sale isn’t expected to be completed for some time yet. The pair are expecting to complete the deal in the final half of 2023.

And it will have to push through plenty of red tape before then.

Not only does it need the approval of the treasurer and the Australian Competition and Consumer Commission (ACCC), but the merger also requires a change to Queensland’s State Financial Institutions and Metway Merger Act 1996.

Fortunately, owners of Suncorp shares likely won’t wait long for the next instalment of news regarding the sale.

ANZ is reportedly working to submit a draft application to the competition watchdog shortly, with a formal submission expected next month.

Scrutiny of the acquisition might be lessened due to the regulator’s assessment of Commonwealth Bank of Australia (ASX: CBA)’s 2008 acquisition of BankWest, The Australian reports.

That merger was given the green flag despite substantially bolstering CBA’s footprint in Western Australia.

Federal treasurer Jim Chalmers is waiting to hear advice from the watchdog before making a decision.

The post When can Suncorp shareholders expect their cash from the ANZ deal? 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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