The Magellan Financial Group Ltd (ASX: MFG) share price is in freefall this Wednesday after this company released its full-year earnings for FY2022.

At the time of writing, Magellan shares have dropped a painful 7% to $13.94. That comes after the ASX 200 fund manager closed at $15 a share yesterday and opened at $15.20 this morning.

Magellan share price falls on lacklustre full-year results

• Average funds under management of $94.3 billion, down 9% from FY21’s $103.7 billion
• Statutory net profit after tax (NPAT) of $383 million, up 44% on FY21’s $265.2 million.
• Adjusted NPAT of $399.7 million, down 3% on FY21’s $412.4 million
• Adjusted diluted earnings per share (EPS) of 215.9 cents, a fall of 4% over FY21’s 224.9 cents
• Final dividend of 68.9 cents per share declared, a drop of 39.6% over last year’s final payout of $1.1411

Magellan reported that the difference between statutory and adjusted profit after tax was due to “strategic, non-recurring, non-cash or unrealised items”.

Meanwhile, profit before tax and performance fees came in at $4770.7 million, an 11% fall from FY21’s $526.4 million.

The final dividend of 68.9 cents per share, fully franked, brings the company’s total dividends for FY22 to 179 cents per share. That’s down 15% on FY21’s total of 211.2 cents per share.

What else happened in FY22?

It was a tough year for Magellan over FY22. A number of negative developments hit the company. These included the loss of a major institutional mandate in St. James Place, the departure of co-founder and former high-profile stock picker Hamish Douglass and continued lacklustre performance from Magellan’s funds.

Continuing declines in funds under management (FUM) also battered the company. Although the company’s FY22 average FUM was $94.3 billion, earlier this month, Magellan reported that its current FUM as of 31 July was at $60.2 billion.

However, Magellan has also made some capital management moves in recent months that are benefitting shareholders. The company reported this morning that, as of 30 June, it had bought back 626,960 of its own shares under its 10 million share buyback policy.

Shareholders have also been issued with bonus 5-year options on a one-for-eight basis. These options expire in 2027 and have an exercise price of $35.

What did management say?

Hamish McLennan, Magellan’s chair, had this to say on these results:

Whilst it has been a difficult year for the business, we delivered a number of capital management initiatives that we believe are consistent with our aim to deliver capital efficiency, pay solid dividends and generate attractive returns to shareholders.

Magellan is highly focused on its core funds management business, and we look forward to the next chapter of the company’s growth under new CEO and Managing Director, Mr David George

What’s next?

Over FY22, Magellan sold out of its 11.6% stake in fast food chain Guzman y Gomez. It reiterated this morning that “Magellan does not plan to make further investments via Magellan Capital
Partners“.

Here’s some of what CEO David George had to say about the company’s FY23:

Magellan has faced a number of significant challenges in FY22 which have impacted our financial results for the period. Whilst the material client outflows experienced in the second half of the year will impact FY23, we are very positive on the business moving forward.

Despite recent challenges, Magellan’s goal of protecting and growing our clients’ wealth remains undiminished. The current investment landscape is a volatile and difficult one, that should reward outstanding fundamental company research and active management of portfolios, qualities that are trademarks of Magellan products.

Magellan share price snapshot

It’s been a tough few months for Magellan shares. The ASX 200 fund manager remains down by 26.66% in 2022 and more than 66% over the past 12 months.

At the current share price, Magellan has a market capitalisation of $2.59 billion, with a trailing dividend yield of 16.05%.

The post Magellan share price in freefall despite 44% rise in profits appeared first on The Motley Fool Australia.

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

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The Vicinity Centres (ASX: VCX) share price is falling after the company revealed a $1.2 billion after-tax profit for financial year 2022.

After opening slightly lower at $2.04, the stock plunged to reach $2.01 at the time of writing. That marks a 1.95% tumble.

Vicinity Centres share price slips despite $1.5b profit jump

Here are the key takeaways from the S&P/ASX 200 Index (ASX: XJO) shopping centre-focused real estate investment trust (REIT)’s full year earnings:

• Net profit after tax (NPAT) of $1.215 billion – up from financial year 2021’s $258 million loss
• Funds from operations (FFO) came to $598 million, or 13.1 cents per share – a 7.1% improvement
• Net tangible assets (NTA) per security reached $2.36 – a 10.3% rise
• Net property valuation gain of $554 million
• Occupancy rate increased to 98.3%
• 5.7 cents per share final dividend, bringing full year dividends to 10.4 cents per share

Vicinity Centres’ FFO growth was driven by an 8% lift in net property income, which came in at $803 million.

That mostly reflects sustained strength of retail and improved negotiation outcomes with retailers. It was partially offset by higher interest costs.

The company’s gearing of 25.1% is still at the lower end of its target range. Vicinity’s weighted average cost of debt for financial year 2022 was slightly higher at 4% and the weighted average maturity was 4.3 years based on limits and 4.8 years based on drawn debt.

What else happened in FY22?

The major news from Vicinity Centres last financial year was its acquisition of a 50% stake in the Gold Coast’s Harbour Town Premium Outlets. The $358 million acquisition saw the Vicinity Centres share price dip 0.3%.

On top of that, Vicinity completed its inaugural green bond in June, issuing $300 million of six-year notes. Despite volatility in debt markets, demand from investors saw an oversubscribed issuance at attractive pricing.

What did management say?

Vicinity CEO and managing director Grant Kelley commented on the company’s earnings, saying:

Our results highlight strong operational and financial execution in a recovering retail landscape.

While we are mindful of inflation, rising interest rates, and increased building costs, we are still seeing positive retail sales trends in our centres.

Vicinity is also relatively well positioned for a rising interest rate environment given our continued prudence with respect to fixed debt costs. Vicinity concluded financial year 2022 with approximately 85% of its drawn debt hedged and approximately 80% of our drawn debt is hedged over financial year 2023, with a very modest step down in financial year 2024.

What’s next?

Vicinity Centres also revealed guidance for financial year 2023 today.

It expects to post between 13 cents and 13.6 cents of FFO per share this fiscal year. It also predicts its adjusted FFO per share will come in between 10.9 cents and 11.5 cents. Its full year dividends will likely be within 95% and 100% of adjusted FFO.

The company is currently transitioning from planning to execution of its $2.9 billion development pipeline. That comprises of projects expected to be completed between financial year 2023 and financial year 2027.

Vicinity expects its development capital expenditure to increase to around $200 million to $250 million this fiscal year and average at approximately $300 million to $400 million each year over the medium term.

Vicinity Centre share price snapshot

Today’s fall included, the Vicinity share price is 13.5% higher than it was at the start of 2022.

It’s also 28% higher than it was this time last year.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has dumped 6% so far this year and 6% over the last 12 months.

The post Vicinity Centres share price slides despite $1.2b FY22 profit 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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The Whispir Ltd (ASX: WSP) share price is trudging its way upwards on Wednesday amid the release of full-year results for FY22.

At the time of writing, shares in the communications platform provider are 3.8% in the green at $1.24. However, the share price did reach a high of $1.27 earlier in the session.

Whispir share price rallies despite costly growth

• Revenue up 48% on the prior corresponding period to a record $70.6 million
• Annual recurring revenue (ARR) up 22% to $65.4 million
• Gross margins slipped from 59.8% to 58.5%
• EBITDA loss deepened to $10.6 million from $3.8 million
• Net loss expanded to $19.5 million from $9.5 million
• Cash balance at the end of June 2022 of $26.08 million

While the bottom line worsened in FY22, the company took its revenue to the next level. The full-year reports indicate that this substantial growth was mostly underpinned by the Australia and New Zealand operations (ANZ).

Specifically, the ANZ business conjured up a 56% improvement in revenue. Whispir highlighted its partnership with major healthcare providers throughout COVID-19 as a part driver of this improvement.

Additionally, despite making a concerted effort to reduce expenses in the third and fourth quarters, operating expenses outpaced revenue growth year on year. These increases were said to have been driven by greater marketing, research and development, and admin expenses.

However, looking at the positive Whispir share price, it appears investors are focusing on the solid revenue growth today.

What else happened in FY22?

Turning to key events during the financial year, Whispir landed several notable deals. For example, the company signed a 36-month contract with The Department of Education South Australia, enabling 900 schools to make use of the platform for a variety of purposes, including internal communications.

Furthermore, an 8-year long contract was secured with a ‘significant’ Australian government department in FY22.

Pleasingly, while still a small portion of the business, Whispir grew its revenues in Asia and North America. Asia witnessed a marginal 1% increase, whereas North America delivered a 38% jump.

What did management say?

Commenting on the result, Whispir CEO Jeromy Wells said:

Whispir has again delivered a strong financial performance, with record revenues secured while reducing operating expenses in Q4. Our strengthened leadership team has contributed to Whispir’s continued success as we set our sights firmly on becoming EBITDA positive in the second half of FY23.

Further bolstering confidence in the Whispir product, Wells stated:

Governments, enterprises and other organisations are now clearly committed to a future where digitisation plays an essential role in ensuring communications are targeted, efficient and effective. The benefits of incorporating artificial intelligence, algorithms and data to inform how and when to communicate are becoming clear, and this realisation continues to drive our business in all markets. Put simply, it is becoming costly for organisations not to invest in intelligent communication services.

What’s next?

Rather than a distinct range of financial expectations for FY23, management opted to go for a more general outlook commentary today. This might make the Whispir share price difficult to forecast in the near term.

Generally, the company is aiming to continue delivering strong revenue growth across all regions. In addition, management is aiming for gross margin improvements.

Finally, Whispir is eyeing positive EBITDA in the second half. Management believes this is achievable without further capital requirements.

Whispir share price snapshot

It has been a slobber-knocker of a last 12 months for the Whispir share price. Over this time, investors have watched as their shares have eroded 41% in value.

Likely the company’s valuation has been punished during this time as the market abandoned its desire for unprofitable businesses. This is demonstrated by the 27% fall in the S&P/ASX All Technology Index (ASX: XJO) over the last year.

The post Whispir share price roars higher on record revenue 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 positions in and has recommended Whispir Ltd. The Motley Fool Australia has recommended Whispir 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 Super Retail Group Ltd (ASX: SUL) share price is trading higher this morning after the company posted a soft set of results for FY22.

At the time of writing, the retail group’s shares are trading for $11.03 apiece, a 7.93% gain.

Super Retail has four core retail brands: Supercheap Auto, Rebel, BCF, and Macpac.

Let’s take a look at the company’s FY22 results.

What did the company report?

Here’s a quick snapshot of the report’s takeaways.

• Sales went up 2.8% to $3.55 billion due to a strong second-half performance
• Gross margin dropped from 48% to 46.8%
• Net profit after tax (NPAT) declined 19.9% from $301 million to $241.2 million
• Operating cash flow plummeted 43% to $340.4 million
• Declared a fully franked dividend of 43 cents per share, resulting in a full-year dividend of 70 cents per share

All four key retail brands experienced growth in revenue. Supercheap Auto and BCF led the pack, contributing $63 million in extra revenue relative to FY21.

However, Macpac New Zealand experienced a fall in like-for-like sales of 6.5% because of reduced travel and tourism.

It’s interesting that marketing expenditure went backwards yet Super Retail Group still grew its top line. On top of this, online sales jumped 44% to $601 million.

This is why it’s important for Super Retail Group to focus on improving its loyal customer base, who are more likely to purchase more frequently. Active club members are up 14% to 9.2 million.

Company challenges

However, the increase in revenue wasn’t enough to offset the adverse impact of global supply chain disruptions and rising inflation.

The drop in gross margins is a reflection of this impact as manufacturers and suppliers pass on increased costs.

Unallocated operational costs also pushed down Super Retail Group’s bottom line. This amounted to a $7.8 million jump on FY21, resulting in $38.5 million of unallocated costs.

One of the primary unallocated costs relates to expenses incurred to launch new loyalty programs and make personalised offers to customers through first-party data.

Such costs are a necessary evil to ensure customers engage in repeat purchases.

The significant lift in cost of sales and operational costs meant operating cash flow plummeted from $600 million to $340.4 million.

What else happened in FY22?

Investors should be reminded that FY21 was a particularly strong year where Super Retail Group recorded record gross margins and net operating margins.

The government payments to encourage people to go out and spend played a strong influence on FY21 results. This ought to be considered when evaluating FY22 results.

The company is debt free and continues to generate free cash flow.

It’s encouraging to see Super Retail Group invest $65.9 million in omni-retail, loyalty and personalisation, and IT projects.

In addition, $58.8 million was spent on new stores and refurbishments.

What did management say?

Super Retail Group Managing Director and CEO Anthony Heraghty highlighted the numerous initiatives that the business is undertaking to improve its competitive position.

He emphasised the importance of deploying capital to improve the company’s digital offering, store formats, and customer value proposition.

In response to major risks, Heraghty said:

The Group’s conservative balance sheet, our customer value proposition, the strength of our brands and the resilience of our key auto and sports businesses positions us well to manage inflationary pressures and a more challenging retail environment.

What’s in store for Super Retail Group?

Super Retail Group is planning on rolling out up to 30 new stores across its four key brands, including a BCF superstore in Townsville, Queensland.

On top of this, Super Retail Group plans to upgrade another five Rebel stores to a new format.

Super Retail is guiding $125 million of capital expenditure in FY23, which will be used to fund its store development program and investment in digital capability and customer retention strategies.

In terms of unallocated costs, Super Retail Group expects to incur $25 million in corporate costs and $19 million for personalisation and loyalty strategies.

Super Retail share price snapshot

In the last year, the Super Retail share price has fallen by 22% but managed to claw back some gains with a jump of 7% across the past month.

The S&P/ASX 200 Index (ASX: XJO) has dropped by 6% in the last year but has bounced back in a similar fashion, rising 6% in the last month.

Recent interest rate rises could present an opportunity to invest, as people can become overly pessimistic about retail stocks.

The post Super Retail Group share price jumps 8% on soft FY22 results appeared first on The Motley Fool Australia.

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Motley Fool contributor Raymond Jang 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 Super Retail Group Limited. The Motley Fool Australia has positions in and has recommended Super Retail Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. 

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The CSL Limited (ASX: CSL) share price is currently down 4% after the healthcare giant reported its FY22 result.

CSL is Australia’s biggest ASX healthcare share. But, it’s a little smaller today in market capitalisation terms as the market didn’t respond positively to the company’s report and guidance.

The headline number was that its net profit after tax (NPAT) fell 6% to $2.255 billion, using a constant currency comparison. That was despite revenue going up by 3%. In Australian dollar terms, the annual FY22 dividend is up 6% to AU$3.11 per share.

CSL said the performance was “as expected” in a difficult global environment. Nonetheless, it managed to reach the top end of its guidance.

The company reported higher collection costs, and it also significantly grew its investment in research and development. Its growth was limited by FY21 plasma collections being reduced due to the pandemic, which then constrained subsequent sales of core plasma therapies in FY22, due to the long-term nature of its manufacturing cycle.

Markets are usually forward-looking

Investors are learning about how FY22 went for the company. But they may be paying particular attention to what the company is expecting in FY23, as investors like to ‘price in’ what’s happening next. Is this what’s affecting the CSL share price today?

CSL said that as FY22 progressed, its plasma collections grew significantly. Collections were up 24%, which it expects will “underpin strong sales growth” in core plasma products going forward. But, the pandemic put it two years behind the projected growth in plasma collections, which is “suboptimal for patient care”.

However, the company warned that the current higher cost of plasma is “also expected to prevail into FY23”. But, it predicted that its influenza business, CSL Seqirus, will deliver another strong year driven by demand for its differentiated products. Seqirus saw revenue growth of 13% in FY22.

In FY23, CSL expects net profit after tax for FY23 to be between $2.4 billion and $2.5 billion at constant currency, “returning to strong sustainable growth”. This guidance excludes the earnings and costs of Vifor, the recently-acquired business. The company will update guidance to include Vifor when it can.

The idea behind buying Vifor is that CSL will expand its leadership across an “attractive portfolio focused on renal disease and diseases of iron deficiency”.

CSL share price snapshot

Since the beginning of 2022, CSL is down by around 2%.

The post CSL share price drops despite expectations of growth in FY23 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 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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The Domain Holdings Australia Ltd (ASX: DHG) share price is in the red after the company released its financial year 2022 earnings.

The property marketing provider’s stock opened 5% lower at $3.85 before tumbling to $3.70. That marks an 8.64% fall on its previous close. At the time of writing, the Domain share price has recovered some ground to trade at $3.87, down 4.44%.

Domain share price tumbles on full-year earnings

Here are the key takeaways from the company’s full-year earnings:

• $356.7 million of revenue – up 23.2% on that of the prior corresponding period (pcp)
• Earnings before interest, tax, depreciation, and amortisation (EBITDA) reached $122.1 million – a 21.4% jump
• Net after-tax profit of $35.1 million ­– a 2% improvement
• Earnings per share (EPS) came to 9.3 cents, up 43.4%
• Expenses came to $234.6 million, up 24%
• Declared a 4-cent fully franked final dividend

The company’s latest full-year results were impacted by the timing of JobKeeper payments, as well as costs and benefits of its voluntary employee program Zipline.

It received a $6.5 million EBITDA benefit from JobKeeper and Zipline in financial year 2021. That reversed to an $8 million expense in financial year 2022.

Adjusted for such impacts, Domain’s EBITDA increased to $130.1 million, a 38.2% improvement. Its EBITDA margin also lifted to 36.5%. Meanwhile, its expenses, including its acquisition of Realbase, came in at $226.7 million, 15.9% greater than those of the prior corresponding period.

Additionally, after discounting significant items, the company’s net profits came in at $55.3 million, representing a 46% improvement.

It ended financial year 2022 with $151.5 million of net debt, representing a leverage ratio of 1.2 times ongoing EBITDA.

What else happened in FY22?

Domain made two notable acquisitions in financial year 2022.

First, it announced its plan to snap up property data business Insight Data Solutions for $60 million in September.

Next, it underwent a capital raise to acquire campaign management technology platform Realbase in a deal worth as much as $230 million in April. Its share price ultimately slumped 2% on the back of the news.

What did management say?

Domain CEO and managing director Jason Pellegrino commented on the company’s earnings, saying:

Over the past four years our team has remained laser focused on the elements of our business that we can control, against a backdrop of considerable trading volatility. This mindset has positioned Domain to leverage property market strength, while providing downside protection when the cycle has been less supportive. The creativity and hard work of our team are building Domain into a fundamentally stronger business, and this is reflected in the outstanding set of results we are delivering today.

What’s next?

The company didn’t provide vast earnings guidance for financial year 2022 today. Though, it did provide a quick update and made note of several expected happenings.

Firstly, it said the first six weeks of financial year 2023 saw ongoing growth in new ‘for sale’ listings and a return to normal trading patterns.

The company expects its financial year 2023 costs, excluding acquisition impacts, to increase in the low double-digit range. It also believes this fiscal year will see the full-year expense impact of the Insight Data Solutions and Realbase acquisitions. Together, they’re expected to add around $27 million to ongoing operating expenses and an associated incremental revenue contribution.

Finally, it anticipates its financial year 2023 EBITDA margins will remain stable on an adjusted basis, while expanding on a reported basis.

Domain share price snapshot

Today’s tumble included, the Domain share price is trading 34.9% lower than it was at the start of 2022.

It has also slipped 24% since this time last year.

In comparison, the S&P/ASX 200 Index (ASX: XJO) has fallen 6% year to date and 6% over the last 12 months.

The post Domain share price plummets 9% as expenses grow 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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One of the interesting aspects about Fortescue Metals Group Limited (ASX: FMG) shares is its green division called Fortescue Future Industries (FFI). It has big green hydrogen production goals and Fortescue also pays a big dividend.

Getting involved in a new industry is unsurprisingly going to take a lot of money and investment.

But, Fortescue is also known as one of the biggest dividend payers in Australia and on the ASX.

How is it going to keep the money flowing to its green initiatives and to shareholders? It’s a tricky conundrum. Is it possible to fund both?

What is the current split of Fortescue’s money?

Fortescue has set up a ratio of how much money it wants to allocate to FFI and how much it plans to pay as dividends to shareholders.

The ASX mining share’s policy is to have a dividend payout ratio of between 50% and 80% of full-year net profit after tax (NPAT).

In the FY22 half-year result it paid a fully-franked interim dividend of 86 cents per share. That represented a dividend payout ratio of 70% of the FY22 half-year net profit.

The capital allocation for Fortescue Future Industries is that 10% of Fortescue’s net profit after tax will go towards FFI.

So, even if Fortescue paid an 80% dividend payout ratio and 10% of profit towards FFI, it would still have 10% of its annual net profit to work with. However, the question is whether 10% of net profit will be enough to fund all of FFI’s ambitions. The volatility and long-term price action of iron ore could also be a factor.

The Australian reported on recent comments from Macquarie. The broker said there may be “increased scrutiny on capital allocation to FFI given earnings headwinds from soft iron ore prices”. Macquarie also said:

To date, FFI has underspent versus its 10% allocation from group earnings, with US$728m unutilised at the end of FY22. We note the FFI guidance is US$600-700m for FY23. However, we believe the weakness in iron ore prices could constrain FFI’s budget beyond the near term.

What is FFI doing with the money?

Fortescue Future Industries aims to take a global leadership position in green energy and green technology.

One of its first key projects as a global green energy manufacturing centre is in Queensland. The project is an electrolyser manufacturing facility in Gladstone, with an initial capacity of 2GW per annum.

It’s looking to convert the Gibson Island ammonia facility to green hydrogen power, in partnership with Incitec Pivot Ltd (ASX: IPL).

Fortescue Future Industries is also looking to repurpose coal infrastructure at AGL Energy Limited (ASX: AGL)’s Hunter Valley Liddell and Bayswater coal-fired power stations.

It’s also working on green energy projects in a number of countries including Papua New Guinea, Indonesia, New Zealand and Germany.

FFI is working on decarbonising Fortescue’s operations, as well as growing its acquired advanced battery business, Williams Advanced Engineering.

Fortescue share price snapshot

Over the last month, Fortescue shares have risen by 15%.

The post Can shareholders have bigger dividends AND more spending on Fortescue Future Industries? appeared first on The Motley Fool Australia.

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More reading

• Why is the Rio Tinto share price lagging the ASX 200 on Tuesday?
• ‘Self-interested billionaires’: Fortescue share price climbed today despite union war of words
• Guess which ASX All Ords share just inked a new deal with Fortescue
• How did the Fortescue share price respond last earnings season?
• Can the iron ore price regain its March highs in 2022?

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group 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 Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Life360 Inc (ASX: 360) share price swung like a pendulum on Tuesday as investors digested the company’s first-half results.

After tumbling more than 8% in early morning trade, the Life360 share price made a stunning recovery to finish the day more than 5% higher.

Despite yesterday’s rise, the Life360 share price is still languishing around 40% lower this year. 

Could the dip present a buying opportunity for this up-and-coming ASX tech share?

Setting the scene

Life360 is a US-based company that made a name for itself by designing a family safety app for smartphones.

The company offers a freemium model where a basic subscription allows families (also known as ‘circles’) to see the whereabouts of other members in their group on a map in real-time. It’s similar to Apple Inc’s (NASDAQ: AAPL) Find My feature on its devices.

But Life360 differentiates itself through the comprehensiveness of features on offer. Families can access a range of features through the company’s paid subscriptions, including crash detection, driver reports, roadside assistance, and ID theft protection.

While this remains Life360’s core offering, the company has turned to acquisitions to build out its ecosystem.

In September 2021, it completed the acquisition of Jiobit, a provider of wearable location devices for young children, pets, and seniors.

Not long after, Life360 made headlines when it announced the US$170 million acquisition of Tile, a leading provider of location trackers that can be attached to valuable items.

With these acquisitions under its belt, Life360 has completed its ‘360’ vision of protecting people, pets, and things.

The company believes these deals have expanded its addressable market. And integrated together, it expects its new bundled offering to lead to higher conversion rates to paid subscriptions, increased average revenue per paying circle, and improved retention rates.

Profitability ahoy

As a consumer-focused software-as-a-service (SaaS) business, Life360 reports plenty of metrics for investors to monitor.

But beyond these metrics and financials, what likely caught the attention of the market yesterday was the company’s commentary around profitability.

The flavour of February’s reporting season earlier this year was costs and, in turn, profits. ASX growth shares, in particular, were swiftly and brutally sold down on signs of increasing operating expenses and/or no line of sight to profitability.

So perhaps learning from this, Life360 has made its focus on the bottom line clear. 

In welcome news for investors, the company expects to deliver positive cash flow in the fourth quarter of CY22. And according to management, its current trajectory should see Life360 becoming earnings before interest, tax, depreciation and amortisation (EBITDA) positive by late CY23.

This path to profitability is underpinned by a leaner cost base, organisational cost efficiencies, reducing commissions, new bundled memberships, and improving subscriber metrics.

What’s more, the company is currently market testing higher price points for its subscriptions. If Life360 does indeed have latent pricing power and decides to flex it, these price increases could add further upside.

Life360 share price snapshot

The Life360 share price went on a tear in 2021, rocketing more than 150% to be on the radar of many ASX growth investors.

2022 hasn’t been so kind, with Life360 shares tumbling roughly 40% in the year to date.

The company expects to deliver revenue between US$245 million and US$260 million in CY22. The midpoint of this range represents 124% growth compared to CY21, predominantly driven by the addition of Tile.

Taking the midpoint of CY22 revenue guidance, Life360 shares are trading on a forward price-to-sales ratio of roughly 3x.

With a rapidly-growing user base, strong optionality, improving economics, and a founder at the helm, Life360 is an ASX tech share firmly on my watchlist.

The post Down 40% this year, should you pounce on this ASX tech share now before it becomes profitable? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why BHP, Life360, Tassal, and Temple & Webster shares are charging higher
• Life360 share price rises as revenue more than doubles
• 2 exciting ASX tech shares to buy now according to analysts
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Cathryn Goh has positions in Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Life360, Inc. 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 Apple. 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

A bifurcation in performance is starting to be seen in the crypto sector. However, unlike the uneven performance we saw for most of this year, in which high-quality tokens outperformed their more speculative counterparts, the more recent rally that’s played out over the past few weeks has seen more speculative meme tokens outperform on a relative basis.

Today, this trend has continued. As of 10:30 a.m. ET, Dogecoin (CRYPTO: DOGE) surged 15.1% higher, despite relative weakness in many top-tier tokens. This move represents the addition of more than $1 billion in market capitalisation overnight, as this token’s overall valuation has surged to more than $11 billion.

The key catalyst driving Dogecoin’s outperformance appears to be bullish sentiment surrounding the upcoming Ethereum merge. Various Ethereum-based tokens, such as Dogecoin, have outperformed in this merge-based rally, in many cases to a greater degree than Ethereum itself. 

So what

The speculative interest that’s prevailing in the crypto sector isn’t isolated. In fact, in the equity market, there’s been some rather impressive moves among what seemed to be forgotten meme stocks. Short sellers are once again on their heels, as the retail investor has seemingly stormed back with a vengeance. 

For the crypto sector, one that’s inherently more speculative, meme tokens represent some of the highest-risk assets around. Accordingly, during speculative booms, this sector has seen outsized interest. Dogecoin’s returns during previous bull market rallies speak for themselves.

Now what

From here, the question many investors have is whether this speculative momentum can be sustained for days, weeks, or months. At some point, rallies fizzle out and are replaced with periods of profit taking, consolidation, or a downturn. This year, we’ve seen what can happen when sentiment around hard-to-value tokens takes a hard 180.

It’s important to remember that many macro headwinds remain on the horizon. And while the market is pricing in a soft landing, with a reversion toward a more accommodative monetary policy from the Fed, the continued tightening of financial conditions through the end of the year could provide significant resistance for retail traders. Thus, those looking to buy Dogecoin in this rally ought to take the necessary precautions, as the recovery could be as precarious as previous ones.

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

The post Dogecoin just added $1 billion of market cap on this catalyst appeared first on The Motley Fool Australia.

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More reading

• Here’s why the Dogecoin price has had such a great week
• Why Ethereum, Bitcoin, and Dogecoin jumped this morning
• Why Bitcoin, Ethereum, and Dogecoin are shooting higher today
• Expert panel slashes 2022 outlook for Dogecoin price. Here’s why
• Dogecoin price could more than double by the end of 2022: expert panel

Chris MacDonald has positions in Ethereum. 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.

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

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ASX cannabis shares have been mixed performers on the market in the year to date, but are there better days ahead?

Cannabis shares on the ASX include Cronos Australia Ltd (ASX: CAU), Incannex Healthcare Ltd (ASX: IHL), Emyria Ltd (ASX: EMD), Cann Group Ltd (ASX: CAN) and Creso Pharma Ltd (ASX: CPH).

Let’s take a look at some of the cannabis shares on the market.

What’s going on?

Many ASX cannabis shares have struggled year to date. Incannex shares have slumped 49% this year so far, while Creso Pharma shares have lost 52%.

Meanwhile, Cann Group shares have fallen nearly 2% and Emyria shares have lost nearly 30%.

Incannex is a cannabinoid and psychedelic compound medicine development company. Despite falling in the year to date, the company’s shares have experienced a recent boost on the back of recent news. The company stated it has the “world’s largest portfolio of patented medicinal cannabinoid drug formulations and psychedelic treatment protocols”.

Commenting on the cannabis industry, Former Incannex chief medical officer Dr Sud Agarwal told The Australian the “industry went off with a bang” in 2016 and 2017. However, he said by 2021 and the second half of early 2022, there has been “a real compression of values”. Dr Agarwal, current CEO and founder of Cannvalate Medical Cannabis, added:

That is mainly because a lot of companies haven’t performed in terms of revenues but also people who had previously been investors in cannabis probably just got fatigued.

Meanwhile, Cronos develops and sells cannabinoid brands and products in Australia, Japan and Hong Kong. Cronos shares have soared 55% in the year to date.

SG Hiscock Medical Technology Fund manager Rory Hunter singled out Cronos as a company making money. Also commenting in The Australian, he said:

The fact is not all companies are underperforming. Cronos Australia is one ASX-listed company that has strong financial performance.

It’s downstream in the value chain, highly scalable and has a cash generative business model. It’s also the only ASX-listed company in the industry making money right now.

How have these ASX cannabis shares performed in the last month?

In the past month, ASX cannabis shares appear to be recovering. The Cronos share price has lifted nearly 57%, while Incannex shares have exploded 60% and Emyria shares have jumped nearly 23%.

However, Creso Pharma shares have descended 11% in the last month and Cann Group shares have fallen nearly 7%.

For perspective, the S&P/ASX 200 Health Care Index has climbed 0.7% in the past month.

The post Can ASX cannabis shares ever fully recover? appeared first on The Motley Fool Australia.

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More reading

• Why is the Incannex share price spiking 8% on Tuesday?
• ‘World’s largest portfolio’: Why this ASX cannabis share is up 36% in August
• Why Core Lithium, European Lithium, Incannex, and Qantas shares are pushing higher
• Why Creso Pharma, Endeavour, Orica, and Woodside shares are dropping
• The Incannex share price has plunged 70% so far in 2022. What’s gone so wrong?

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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