The Appen Ltd (ASX: APX) share price continued its slide during the month of June.

The artificial intelligence data services company’s shares lost 13% of their value last month.

This meant that the Appen share price was down 50% since the start of the year at the end of June.

Why did the Appen share price tumble?

The main catalyst for the Appen share price decline was broad market weakness, which was felt hardest in the tech sector.

For example, the ASX 200 index dropped a disappointing 8.9% last month and the S&P ASX All Technology index lost 10.3% of its value over the period.

What else?

Also putting some pressure on the Appen share price was a broker note out of Citi.

According to the note, its analysts downgraded the company’s shares to a neutral rating and slashed their price target on them by 28% to $6.60.

Citi made the move on the belief that Appen could fall short of its earnings guidance after a weaker than expected start to FY 2022. It notes that this will mean the company requires a very big second half to meet guidance, which is far from guaranteed.

And while Citi concedes that the takeover approach from Telus International shows that demand for human labelled artificial intelligence training data clearly exists, it isn’t enough for a more positive rating.

Elsewhere, the team at Macquarie upgraded Appen’s shares late last month to a neutral rating with a $5.70 price target. Its analysts are pleased with the company’s plan to diversify away from major tech customers. However, with 80% of its revenue coming from major US tech giants, it warned that this strategy will take some time.

Macquarie also suspects that Appen will have to deliver on its guidance to regain investor confidence. Though, with Citi predicting an earnings miss in FY 2022, this may not happen.

The post Why did the Appen share price sink 13% in June? appeared first on The Motley Fool Australia.

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More reading

• What on earth happened to ASX 200 tech shares in June?
• Bargains or value traps? Expert rates 3 ASX shares that halved this year
• Why are ASX tech shares struggling today?
• Why Appen, BWX, Imugene, and Wesfarmers shares are dropping
• Down 7%, what’s impacting the Appen share price today?

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 positions in and has recommended Appen 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 JB Hi-Fi Limited (ASX: JBH) share price was not spared during the sell-off in June. It fell over 16%, while the S&P/ASX 200 Index (ASX: XJO) dropped about 9%.

It was a big fall for the ASX 200 in one month, but it was an even bigger drop for the ASX retail share.

Despite the decline of more than 25% since the end of April 2022, JB Hi-Fi shares have only just gone lower than where they were before the COVID-19 crash in 2020.

The operator of The Good Guys stores, as well as JB Hi-Fi stores in Australia and New Zealand, has seen a lot of sales through its doors (and online) over the past two years. However, investor sentiment has turned against the business in the backdrop of high inflation and rising interest rates.

What happened in June?

The retailer didn’t release any market-sensitive news to investors during June. The last operational update came in May, which I will recap in a moment.

However, one of the main things that did happen in June was that the Reserve Bank of Australia (RBA) decided to increase the interest rate by 50 basis points, or 0.5%. That’s a large increase in one month, though the RBA did it again yesterday.

As a retail business, some investors may be thinking that there could be less demand for products sold by JB Hi-Fi.

For example, Macquarie is feeling pessimistic about the outlook for the retail sector, though acknowledges that JB Hi-Fi is high quality in the industry. It pointed out that households have already bought a lot of household products during COVID, so demand here could reduce.

The broker UBS has similar thoughts, noting the increasing costs in numerous areas that households are now facing, which will make it a tougher environment for the ASX retail share.

The UBS price target is now $38 on the JB Hi-Fi share price, while the Macquarie price target for the ASX retail share is $40.90.

Latest sales update

While the following figures are essentially old news considering the inflationary environment, it’s worthwhile pointing out that JB Hi-Fi was still achieving growth.

The ASX retail share said that in the third quarter of FY22, JB Hi-Fi Australia sales were up 11.9% year on year, JB Hi-Fi New Zealand sales were up 4.8% and The Good Guys sales went up 5.5%.

It also said that the aforementioned sales momentum had continued into the fourth quarter in April. However, the company warned that it was still seeing disruption to stock availability and operations because of COVID-19 and other local and global uncertainties.

The company points to four competitive advantages that it has – scale, a low-cost operating model, multichannel capability and its people and culture.

The post Down 16% in June: What put the JB Hi-Fi share price on sale? appeared first on The Motley Fool Australia.

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• Why are ASX 200 retail shares getting bought up today?
• How did ASX 200 retail shares perform in June?
• ASX 200 retail shares in the doldrums today despite improving sales data
• ASX 200 midday update: Tech shares tumble, Collins Foods jumps
• What impacted ASX 200 retail shares this week?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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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New Zealand software maker Xero Limited (ASX: XRO) has made plenty of investors wealthy during its lifetime.

The company originally listed on the NZX, but over its almost 10-year life on the ASX, the stock has gained an impressive 1,636%, according to Google Finance.

But 2022 has seen the party come to an abrupt pause.

Unfortunately, Xero shareholders have watched in horror as their shares made a 44% loss over the 2022 financial year.

In fact, Xero shares plunged 14% just in the final month.

Yikes.

Growth over profit

There is no doubt much of the stock price plunge has been due to investor sentiment turning against technology businesses.

The S&P/ASX All Technology Index (ASX: XTX) has shed more than 40% since November as the market turned against high-growth companies.

Xero certainly didn’t release any shocking news over the past 12 months that would suggest it deserves to be almost halved.

Even the freefall in June seemed to be driven by external factors.

“Xero recorded a loss of 13.8% over the month, a marked underperformance of the broader S&P/ASX 200 Index (ASX: XJO),” reported The Motley Fool’s Sebastian Bowen.

“This was despite the absence of any news or announcements out of Xero over June. So it’s likely the nasty falls Xero shares experienced were purely driven by the investor apathy towards tech shares that we saw during the month.”

The only performance-related bump could have been back in May after the release of its full-year financials.

Even though the company posted decent numbers, the market punished it for investing its earnings back into the growth of the business — rather than boosting profits.

Xero shares sank 10% within just a few hours of that result.

The pros love Xero

Despite the rapid fall in the stock price, Xero still has plenty of fans.

In fact, professional investors seem to suggest the high quality of the business means it’s now more attractive to buy than ever before.

According to CMC Markets, nine out of 15 analysts rate Xero as a strong buy.

Back in May, Shaw and Partners portfolio manager James Gerrish revealed that the accounting software provider was the biggest holding in his personal portfolio.

“We didn’t think the [financial] result was a bad one. They have simply prioritised growth over profit, which the market currently doesn’t like.”

The post How did Xero shares do in the 2022 financial year? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX shares today
• What’s going on with ASX 200 bank shares on Tuesday?
• Why the ASX 200 is rallying after the RBA’s rate hike today
• Why is the Woodside Energy share price leading the ASX 200 higher on Tuesday?

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

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With interest rates rising, the outlook for both ordinary Australians and businesses is pretty gloomy.

Consumer spending will certainly dip for the rest of this year, and debt repayments are becoming more onerous for homeowners and companies.

But there are some ASX-listed businesses that have enough tailwinds that macroeconomic conditions might not be enough to put them off.

Medallion Financial Group director Phillippe Bui recently named two such ASX shares to buy:

No end in sight for the energy crisis 

The war in Ukraine continues to drag on, which means global oil and gas supplies will remain disrupted at an unprecedented scale.

“We expect energy prices to remain above historical averages, despite the possibility they may moderate during 2022,” Bui told The Bull.

This is why he likes the look of Santos Ltd (ASX: STO), despite already seeing the share price increase more than 13% year-to-date.

It was even up in excess of 32% until everything cooled off in June.

Bui expects Santos’ fortunes to kick on.

“Over the medium term, we expect LNG prices to remain resilient, given an expected reduction in coal fired energy.”

Bui is not the only one bullish on Santos. According to CMC Markets, 11 out of 17 analysts surveyed rate the energy producer as a strong buy. A further three recommend it as a moderate buy.

Santos shares also pay out a tidy 2.6% dividend yield.

Margins squeezed but business is growing

Industrial property provider Goodman Group (ASX: GMG) has been a darling of investors over the last half-decade as demand from e-commerce ran hot.

But this year the valuation has taken a 30% dive.

“The share price is off its year highs in response to investor concerns regarding rising interest rates possibly impacting margins.”

This may be an overreaction by the market though, as Bui noted Goodman is a growing business.

“The company still has a substantial development pipeline and a track record of increasing rent per square metre by 10% a year in the past six to seven years.”

He was also pleased with the last financials.

“This integrated commercial and industrial property group upgraded impending fiscal year 2022 results. It lifted earnings per share [EPS] guidance [by] 23%.”

Goodman is also a favourite among the wider professional community. Eight out of 12 analysts surveyed on CMC Markets rate it as a strong buy.

The post 2 bargain ASX shares with good times ahead: expert appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Wednesday
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• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Tony Yoo 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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Interest rates have now jumped an astounding 125 basis points in just nine weeks.

In May, many homeowners had never ever seen their home loan repayments rise. But after the Reserve Bank of Australia increased rates on Tuesday for the third consecutive month, there are now plenty of Australians feeling acute financial pain.

The RBA has a job to do in bringing inflation under control. Otherwise the country could find itself in irreparable long-term trouble.

But will the Australian people become collateral damage, with rising rates degrading consumer morale so much that the country slips into recession?

Shaw and Partners portfolio manager James Gerrish said it’s certainly not out of the question.

“Arguably the main issue facing everyone today is never before in history has the RBA started hiking rates when consumer confidence was already so depressed.”

In normal times, just a slight pullback in real estate prices is enough to curb Australians’ enthusiasm.

But 2022 ain’t normal.

“This year there’s a multitude of factors weighing on us all — including soaring fuel, food and everyday living costs before we even consider lingering COVID & geopolitical tensions,” said Gerrish in his Market Matters newsletter.

“Leading economic indicators are already suggesting that the US has entered a recession… Australia feels likely to follow suit, although our strong labour market and commodities exports should help the downturn.”

Gerrish’s team suspects the RBA will start cutting rates in “late 2023” to give the economy a breath of life. But clearly there’s a long way to go before that can happen.

Meanwhile, everyone may have to deal with a recession. And there are certainly some ASX shares to buy that could fare much better than others during such times.

The ASX shares best placed to withstand an economic downturn

According to Gerrish, the sectors that best survive a recession are utilities, consumer staples, telecommunications, health, and gold.

The areas to avoid are industrials, diversified financials, resources, and real estate.

Packaging supplier Orora Ltd (ASX: ORA) is one that Gerrish likes at current prices.

“We believe Orora is reasonable value trading on an estimated PE [price to earnings ratio] of 17.7x for 2022 while its 4.2% unfranked yield is a useful top-up for performance.”

The Orora share price has risen more than 3% year-to-date during a period when most stocks have taken a tumble.

“The company is growing in North America while inflation has been navigated by timely price increases — i.e. the business has pricing power,” said Gerrish.

“For good measure, sustainability trends are aiding demand for Orora’s cans and fibre packaging solutions. While it stays ahead of the curve in this department things look solid for Orora.”

Coles Group Ltd (ASX: COL) shares are more expensive, but the supermarket giant is another reliable name to get through tough times, according to Gerrish.

“The stock is not particularly cheap trading on an estimated PE of 23.9x for 2022 but a sustainable 3.4% fully franked yield makes it relatively easy to be patient if concerns are growing towards much of the ASX.”

Gerrish added that Coles “delivered a solid result” last quarter with “sales growth driven by accelerating inflation”.

“Everything looks solid over the next year or two with Coles but it will need population growth to expand meaningfully moving forward.”

His third pick, and perhaps with the least conviction of the three, is alcohol and hospitality provider Endeavour Group Ltd (ASX: EDV).

“Our main concern [is] whether the stock’s close to being fully priced,” said Gerrish.

“The stock’s not cheap, trading on an estimated PE for 2022 of 27.8x — richer than Coles for a similar amount of revenue growth. However, margins are better and profitability is growing at a higher clip which could justify the premium multiple.” 

The idea here is that demand for alcoholic drinks, whether bought for home or at a pub, is maintained through economic downturns.

“People are partial to a drink during tough times and the owners of Dan Murphy’s and BWS are clearly well-positioned for this trend,” Gerrish said.

“The group [enjoys] online sales In excess of $1 billion with 40% of its sales now digitally influenced.”

One caveat with recession busters

When picking recession-busting defensive ASX shares to purchase, Gerrish cautioned investors to watch the price they pay.

“We must be mindful that investors have been migrating their portfolios towards defensives for many months,” he said.

“Hence don’t expect any bargains… For example, so far in 2022 the utility stocks are all up while retail is all down.”

The post 3 ASX shares that could survive a recession: expert appeared first on The Motley Fool Australia.

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• Experts name 2 ASX dividend shares to buy next week
• How did the Coles share price stay positive in June while the ASX 200 slumped?
• 2 excellent ASX dividend shares that experts rate as buys this week
• The ASX share I hold to ‘sleep really well at night’: fund manager
• Here are 2 ASX 200 dividend shares to buy according to analysts

Motley Fool contributor Tony Yoo 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.

If there’s a perfect word to sum up the first six months of 2022 for the investing community, I believe it’s “Yuck!” As of the closing bell on June 30, 2022, the U.S. stock market delivered its worst first-half return in 52 years. 

Since hitting their respective all-time closing highs between mid-November and the first week of January, the widely followed Dow Jones Industrial Average (DJINDICES: ^DJI), broad-based S&P 500 (SNPINDEX: ^GSPC), and growth-stock-driven Nasdaq Composite (NASDAQINDEX: ^IXIC), respectively plunged by as much as 19%, 24%, and 34%. You’ll note these figures firmly entrench the S&P 500 and Nasdaq in a bear market, with the iconic Dow Jones just one bad day away from joining its peers. 

But the big question on the minds of Wall Street professionals and investors is very simply, “How far could the stock market fall?” The answer may lie with two key indicators.

Valuation comes into focus during bear market declines

When the benchmark S&P 500 falls into a bear market, it’s not uncommon for equities to experience multiple compression. In other words, price-to-earnings (P/E) ratios, price-to-sales ratios, and so on, decline to reflect a general wave of pessimism throughout the investing landscape and broader economy.

What you might not realize is that this pessimism has resulted in the S&P 500’s forward-year P/E ratio falling into a similar range during significant pullbacks. During the coronavirus crash in the first quarter of 2020, the fourth-quarter pullback of 2018, and the end of the dot-com bubble in 2002, the S&P 500’s forward P/E bottomed out between 13 and 14 each time. 

As of the end of June 2022, the S&P 500’s forward P/E ratio stood at 15.8. If the S&P 500’s forward P/E ratio were simply to fall to the median of its historic pullback range (i.e., 13.5), the index would decline by an additional 14.55% from where it closed on Thursday, June 30. This would imply a bottom of around 3,235 on the S&P 500.

Of course, this calculation only holds merit if the “e” component, earnings, doesn’t change. With the nation’s central bank rapidly increasing interest rates to bring historically high inflation under control, there’s a high likelihood that corporate earnings revisions are in the offing.

FINRA Margin Debt data by YCharts.

Margin debt is an ominous indicator for the broader market

The other key indicator that can be helpful in identifying how much further the stock market could plunge is outstanding margin debt. Margin debt being the amount of money borrowed from brokerages by investors, with interest, to purchase or short-sell securities.

As a general rule, it’s perfectly normal for the amount of outstanding margin debt to grow in-step with the aggregate value of the equity markets over time. What sounds the warning bells is when margin debt skyrockets over a short period. History has shown time and again that rapid increases in risk-taking end poorly.

Since the beginning of 1995, there have been three instances where margin debt increased by 60% or more in a 12-month period. It first occurred between March 1999 and March 2000, and pretty much marked the top of the dot-com bubble. The ensuing bear market was the longest on record (929 calendar days) and wiped out nearly half of the S&P 500’s value.

It next occurred between June 2006 and June 2007, which was just a few months prior to the financial crisis taking shape. The S&P 500 shed 57% of its value by the time March 2009 rolled around.

Lastly, margin debt soared again between March 2020 and March 2021. If history serves as a guide, the S&P 500 could lose half its value. This would put the bottom a long way off at around 2,400. 

Patience pays off handsomely

According to these two indicators, which have proved fairly accurate over the past quarter of a century, the S&P 500 is unlikely to find a bottom until somewhere between 2,400 and 3,235. For context, it ended the first half of 2022 at 3,785.

However, no indicator is foolproof. If there was a surefire index or indicator that told investors when to buy, we’d all be using it by now to get rich.

While the prospect of additional downside in the near-term might be unnerving to some investors, I’d again point to history as your guide. That’s because every single stock market crash, correction, and bear market throughout history (excluding the current bear market) has eventually been cleared away by a bull market rally. In short, it pays to be both patient and optimistic.

With the Nasdaq and S&P 500 in bear market territory, and the Dow Jones mired in a steep correction, now is the ideal time for long-term investors to put their money to work.

Arguably one of the smartest investing strategies to employ when market volatility picks up is dollar-cost averaging. Dollar-cost averaging involves putting your money to work at specific time intervals, regardless of where a stock happens to be trading. It’s a great way to remove some of the emotional aspects of investing in a down market. 

A plunging stock market is also an excellent time to buy dividend stocks. Publicly traded companies that regularly pay a dividend are usually profitable and time-tested. Having navigated tough times before, these are just the type of companies we’d expect to increase in value over long stretches. 

The point being that now is not the time to run for cover. Rather, it’s the time to consider putting some of your available cash, which won’t be needed for bills or emergencies, to work. 

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

The post How far could the stock market fall? 2 indicators may hold the answer appeared first on The Motley Fool Australia.

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Sean Williams 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. 

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

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On Tuesday, the S&P/ASX 200 Index (ASX: XJO) was on form again and pushed higher. The benchmark index rose 0.25% to 6,629.3 points.

Will the market be able to build on this on Wednesday? Here are five things to watch:

ASX 200 expected to fall

The Australian share market looks set to tumble on Wednesday following a volatile night of trade in the United States. According to the latest SPI futures, the ASX 200 is expected to open the day 63 points or 1% lower this morning. On Wall Street, the Dow Jones fell 0.4%, the S&P 500 rose 0.2%, and the Nasdaq climbed 1.75%. The S&P 500 was down as much as 2% at one stage before rebounding.

Oil prices crash

Energy producers such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could have a very tough day after oil prices crashed. According to Bloomberg, the WTI crude oil price is down 8.15% to US$99.59 a barrel and the Brent crude oil price has sunk 9.3% to US$103.03 a barrel. Growing recession fears are to blame for this sharp decline.

GrainCorp goes ex-dividend

The GrainCorp Ltd (ASX: GNC) share price is likely to trade lower on Wednesday. This is due to the grain exporter’s shares trading ex-dividend this morning for its latest dividend. Eligible shareholders can now look forward to receiving its bumper 24 cents per share fully franked interim dividend later this month on 21 July.

Gold price tumbles

Gold miners Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a poor day after the gold price tumbled lower overnight. According to CNBC, the spot gold price is down 1.9% to US$1,766.4 an ounce. A strong US dollar weighed on the safe haven asset.

Copper price sinks

BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) could have a tough day after a number of commodities sank into the red amid recession fears. One of the worst performers was the price of copper, which fell by almost 5% to US$3.436 a pound. The chances of a US recession are now 38%, according to the latest forecasts from Bloomberg Economics.

The post 5 things to watch on the ASX 200 on Wednesday appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has 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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Earlier today the Reserve Bank increased the cash rate by 50 basis points to 1.35%. While this is looking a lot more attractive to income investors, it is still a long way from the yields you’ll get from the buy-rated ASX dividend shares listed below.

Here’s what income investors need to know about these dividend shares:

Charter Hall Long WALE REIT (ASX: CLW)

The first ASX dividend share that analysts rate highly is the Charter Hall Long Wale REIT.

It is a property company that invests in high quality real estate assets that are leased predominantly to corporate and government tenants on very long term leases (hence its name).

Citi is a fan of the company due to its defensive qualities and has a buy rating and $5.71 price target on its shares. It explained that “we retain our Buy rating, given the appeal of secure income in uncertain times, the >6% dividend yield, and upside to FY22 guidance.”

In respect to dividends, the broker is forecasting dividends per share of 31 cents in FY 2022 and FY 2023. Based on the current Charter Hall Long Wale REIT share price of $4.37, this will mean yields of ~7.1%.

Telstra Corporation Ltd (ASX: TLS)

Another ASX dividend share that has been rated as a buy by analysts is Telstra.

A number of brokers are feeling bullish on Telstra due to its much-improved outlook thanks to the successful execution of its transformative T22 strategy.

In addition, Telstra expects the upcoming growth-focused T25 strategy to support mid-single digit underlying EBITDA and high-teens underlying earnings per share compound annual growth rates (CAGR) from FY21 to FY25.

One of those bullish brokers is Morgans. It currently has an add rating and $4.56 price target on the company’s shares. Its analysts have been pleased with its transformation and note that “under the hood it’s looking good.”

In addition, the broker continues to expect the telco to pay fully franked dividends per share of 16 cents for both FY 2022 and FY 2023. Based on the current Telstra share price of $3.89, this implies yields of 4.1%.

The post 2 ASX dividend shares that analysts are tipping as buys in July appeared first on The Motley Fool Australia.

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More reading

• The Telstra share price outperformed the ASX 200 in June
• Could July be a good month for the Telstra share price?
• Telstra share price slides as Optus exec ramps up calls for TPG deal to be canned
• 4 ASX dividend shares to buy that aren’t banks or miners: expert
• Here are 2 top ASX 200 dividend shares to buy right now according to experts

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 Telstra Corporation 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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Technology shares have borne the brunt of the ASX 200 sell-off in 2022.

The S&P/ASX All Technology Index (ASX: XTX) has lost 35% in value year to date.

This compares with a 12.6% decline in the S&P/ASX 200 Index (ASX: XJO).

Macro-economic forces including rising inflation and interest rates are worrying investors.

In such conditions, consumers tend to tighten their belts to ensure they can pay their bills, make their mortgage payments, and buy essential items.

This means there’s every chance of a tough time ahead for the Australian economy.

This makes investors nervous and growth shares have fallen out of favour as a result.

Tech shares, in particular.

But top broker Citi says some ASX 200 tech shares are likely to withstand the choppy waters ahead better than others.

Which ASX 200 tech shares are Citi’s picks?

According to reporting in The Australian, Citi says the two ASX 200 tech shares likely to navigate a softened economy and demand weakness best are NextDC Ltd (ASX: NXT) and WiseTech Global Ltd (ASX: WTC).

Citi has told clients in a note that tech multiples are “now trading well below pre-Covid levels”.

Citi said its own portfolio of 200 global shares in software, internet, and fintech service providers is now below the long-term average on a growth-adjusted enterprise value to revenue (EV/R) basis.

According to the note: “While valuation and cost pressures have been the key focus to date, we see
potential risk in the near-term from rebasing of revenue growth expectations.”

Why does Citi like NextDC and WiseTech?

For data centre operator NextDC, Citi sees the contracted backlog underpinning FY23 estimated earnings, according to the article.

However, the broker does see risk to NextDC’s FY24 earnings if material contract wins do not eventuate in FY23.

The NextDC share price dipped by 0.37% today to finish the session at $10.91.

For cloud software solutions business Wisetech, Citi said slowing freight volumes were a headwind.

However, customer wins and wallet expansion through the adoption of new modules are likely to drive strong growth, the broker said.

“Further, there is potential for further cost out as WiseTech integrates all of its acquisitions,” said Citi.

The WiseTech share price finished 5.17% higher today at $40.70.

The post Top broker picks two ASX 200 tech shares for today’s economy appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX shares today
• ASX 200 midday update: Regis Resources jump, big four banks fall ahead of RBA meeting
• Why analysts say investors should buy these top ASX shares
• What on earth happened to ASX 200 tech shares in June?
• Behind the ASX share: What makes WiseTech tick?

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen 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 WiseTech Global. The Motley Fool Australia has positions in and has recommended WiseTech Global. 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 Flight Centre Travel Group Ltd (ASX: FLT) share price was rangebound today after completing a turbulent flight path in FY22.

At the close on Tuesday, it finished at $17.63 apiece, a more than 28% decline from its 52-week closing high of $24.43 on 5 October 2021.

In broad market moves, the benchmark S&P/ASX 200 Index (ASX: XJO) is 55 basis points higher on the day at 6,648.

Flight Centre share price on a trip down south

Travel shares were punished across the entire spectrum of companies in FY22.

Investors were particularly hard in June 2022, driving the Flight Centre share price down from $20.67 to $17.20 in an almost vertical fashion.

Thankfully, a huge recovery after the company’s FY21 results and annual report from August saw the share surge to its yearly highs.

These prior gains have helped the share retain an 11% gain in the past 12 months of trade.

Flight Centre shares also benefitted from a rebound in travel activity in 2021. This was bought on by the reopening of international travel borders and relaxing of COVID-19 restrictions.

Australians in particular were relieved to fly in and out of the country on lax terms for the first time since the restrictions began.

Investors certainly regained confidence too. However ongoing uncertainties around the virus, the geopolitical situation in Europe, and the market meltdown of 2022 have compressed the Flight Centre share price.

It now trades 45 basis points in the red this year to date, or 15% down in the past month.

Flight Centre is also Citi’s worst ASX 200 travel buy at the moment. The broker outlined several headwinds it could face from international travel in a recent note.

The post Flight Centre completes turbulent journey in FY22 appeared first on The Motley Fool Australia.

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More reading

• The Corporate Travel share price hit major turbulence in June
• These are the 10 most shorted ASX shares
• How did ASX travel shares perform in June?
• ASX 200 travel shares leap as Australia scraps COVID-19 vaccine mandates for international arrivals
• Why did the Flight Centre share price tumble 15% in June?

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel 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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