Key points

• The Megaport share price has dived 31% since January 4
• Shareholders didn’t respond well to the company’s second-quarter update
• The All Technology Index has also dropped nearly 19% in a month.

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The Megaport Ltd (ASX: MP1) share price has had a horror start to the year, despite surging 30% in 2021.

The technology company’s shares have fallen 31% since market close on 4 January. However, in today’s trading, they are currently up 1.08% to $13.13.

Let’s take a look at what might be impacting the company’s shares.

What’s happening with Megaport?

The Megaport share price has been on a steady decline for most of the month. However, it took one major hit in mid-January.

Megaport is a global leading provider of elastic interconnection services using software-defined networking.

Shares in the company collapsed 16% on 19 January, after the release of its second-quarter update. Investors sold down the share despite the company reporting an 8% increase in second-quarter revenue to $26.6 million.

However, multiple brokers lowered their price targets due to expectations of greater investment spend. The company reported 2 new SD-Wan partners, 2 leading global value-added distributors and launched its partner portal Vantage Hub.

Since then, the Megaport share price has continued to decline 14% despite no price-sensitive news from the company.

For perspective, the S&P ASX All Technology Index (ASX: XTX) fell 9% in the same time period.

ASX technology share Appen Ltd (ASX: APX) has also gravitated nearly 9% since market close on 19 January, while Altium Limited (ASX: ALU) has nosedived nearly 15%.

On 28 January, Megaport held an extraordinary general meeting, however, the company’s share price showed no movement on this day.

Shareholders voted against the granting of options to directors Michael Klayko, Melinda Snowden, and Glo Gordon. This was despite the board recommending that investors vote in favour of the proposal to retain top talent at the company.

Looking ahead, Goldman Sachs recently rated the Megaport share price as a “buy” with a $20 price target. As my Foolish colleague James reported this week, Goldman Sachs predicts Megaport has an “immense” $129 billion market opportunity.

Megaport share price snapshot

The Megaport share price has rocketed a mammoth 253% in the past three years since January 4, 2019.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has returned nearly 26% in the same time period.

The company has a market capitalisation of about $2 billion based on its current share price.

The post Why has ASX tech share Megaport (ASX:MP1) tumbled 31% in a month? appeared first on The Motley Fool Australia.

More reading

• Why did ASX 200 tech shares get annihilated today?
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• 2 exciting ASX growth shares tipped as buys
• What happened to ASX tech shares today?

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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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 crypto market is certainly getting its fair share of lumps today. However, among the hardest-hit cryptocurrencies right now are those dealing in the metaverse. Top metaverse-themed tokens Axie Infinity (CRYPTO: AXS), The Sandbox (CRYPTO: SAND), and Enjin Coin (CRYPTO: ENJ) are down 5.6%, 4.8%, and 3.9%, respectively, over the past 24 hours, as of 1 p.m. ET.

These losses come as Facebook parent Meta Platforms (NASDAQ: FB) reported earnings today, which missed the mark across the board. Weak guidance and lower active user counts highlighted most investors’ concerns. However, another key highlight of this report was the company’s loss in its metaverse business — of more than $10 billion. 

So what

Corporate adoption of the metaverse has, in many ways, made the otherwise conceptual virtual reality known as the metaverse a more tangible concept for the average investor to understand. However, these massive losses suggest that the expected rates of adoption among metaverse users isn’t matching up to the investment dollars deep-pocketed Meta Platforms is putting up to generate growth.

For investors in these top metaverse-related tokens, that’s being looked at as a negative right now. Sure, many crypto investors may view Meta Platforms as a potential threat in the metaverse (i.e., Meta’s losses could be these cryptos’ gains). However, until Meta’s revenue can catch up to its expenses, it looks like the metaverse argument will be a tough one to sell to investors.

Now what

What does this mean for crypto investors? Perhaps more investment is needed to propel a blockchain-first metaverse forward. The rate at which Axie Infinity, The Sandbox, and Enjin can entice developers to come aboard may become a more important metric for investors to consider.

Additionally, user growth rates matter, and these platforms will need to show impressive numbers to wow investors in the face of massive corporate investment in this space.

Broadly speaking, most cryptocurrencies have followed equities much more closely in recent years, trading in higher correlation than what was seen in pre-pandemic times. For metaverse-linked tokens, Meta Platforms is certainly a benchmark to compare to. Today, that’s not a good thing at all. 

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

The post Meta’s metaverse losses pour cold water on these 3 cryptocurrencies appeared first on The Motley Fool Australia.

More reading

• Meta Platforms’ plummeting stock: Is it a buy?
• Why Meta shares cratered on Thursday
• Why is Twiggy suing Facebook? Hint: It involves cryptocurrency
• Meta (NASDAQ:FB) share price plunges 22%. How might this impact ASX shares?
• 1 green flag and 1 red flag for Meta’s Metaverse dreams

Chris MacDonald has no position in any of the stocks mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Meta Platforms, Inc. The Motley Fool Australia has recommended Meta Platforms, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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Key points

• The Motley Fool Australia analyst Ryan Newman picked Xero shares as a buy
• He told our chief investment officer Scott Phillips about the company’s numerous strengths
• However, Xero shares come with 3 key risks

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The Xero Limited (ASX: XRO) share price has tumbled into the new year – it has fallen a whopping 22% since the final close of 2021 – but this Foolish expert is still betting on the stock.

The Motley Fool Australia analyst Ryan Newman discussed the company, its strengths, and its weaknesses with our chief investment officer, Scott Phillips earlier this week.

The conversation was part of The Motley Fool Australia’s Stock of the Week series, which can be found on our YouTube channel. As always, readers can find coverage of the week’s stock pick here and in podcast form here.

At the time of writing, the Xero share price is $110.36.

Here’s why Newman believes the software-as-a-service (SAAS) company’s future is bright.

Does Xero‘s ‘sales force’ make its shares a buy?

For many ASX market watchers, Xero shares were the gateway to cloud-based software. The company listed back in 2012 when much of the market knew clouds as fluffy and white in the sky.

Xero provides a cloud-based accounting platform. One of its major strengths is its ‘sales force’ of accountants and bookkeepers.

“[A] really important benefit that Xero brings is obviously between managers of a business – small businesses in particular – those small businesses really want to keep a strong relationship with their bookkeeper or with their accountant,” said Newman. He continued:

Xero actually allows that to happen.

It’s my understanding that most accountants really really love the Xero interface and the Xero product. Many more than what competitors offer … I absolutely think that having that sales force through the accountants and bookkeepers has been a major driver.

Accountants act as an extension of Xero’s marketing arm which saves Xero the marketing dollars.

Additionally, the nature of Xero’s cloud-based product is one of its strengths. Newman noted it allows Xero to sell its software as a reoccurring subscription, creating lower costs for customers and greater revenue for the company.  

Looking to the future, Xero hopes to become a small business portal, says Newman.

What [Xero] want to try and do is help small and medium-sized businesses to perform mission critical tasks like payroll invoicing, expense tracking, bank reconciliation and, I suppose, ultimately to allow them to spend more time in managing their business rather than handling the financials.

That, over time, I believe will allow it to grow its average revenue per user.

Additionally, Newman believes the company can apply price increases without issue using a technique called ‘land and expand’. He said:

Generally, these sorts of businesses are able to push through those pricing increases because, as I said, it’s a mission critical service. Without Xero, what are the businesses going to do?

Most, if not just about every business that uses Xero, I think, will probably just be happy enough to pass over those extra couple of dollars per month, which over time can actually add up to quite a large value add for Xero.

What are the down sides to Xero?

Like any investment, Xero shares come with their own set of risks, of which Newman outlined 3.

Firstly, the company’s expansion into the United States has so far been unsuccessful.

“It was always going to be a tough market to crack but ultimately, I would say that that market is essentially lost,” said Newman. “One of the risks here is that Xero continues to really press and try to eke out as much as they can from it. I think that would be a mistake.”

Innovation is another issue for Xero, as well as most other tech shares. Pushing development to stay ahead of competition takes money and comes with no guarantee of success.

Finally, involuntary customer churn is a risk factor for Xero.

Newman said, “the fact that Xero focuses predominantly on small and medium-sized businesses, some of these businesses are actually more prone to suffering through an economic recession, for instance.”

The post Land and expand: Why Motley Fool analyst Ryan Newman thinks Xero (ASX:XRO) shares can still touch the clouds appeared first on The Motley Fool Australia.

More reading

• Should you buy ASX shares now or wait just a little bit?
• Why did ASX 200 tech shares get annihilated today?
• These 2 ASX 200 shares have tumbled into the buy zone: Expert
• With Afterpay shares no longer listed, is WAAAX officially dead?
• The Xero (ASX:XRO) share price is trailing the ASX 200 by a whopping 18% so far in 2022. What’s next?

Motley Fool analyst Ryan Newman owns Xero. 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. owns and has recommended Xero. The Motley Fool Australia owns and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• Supply chain issues and shipping costs are in focus for ASX retail shares
• Furniture retailer Nick Scali warns the rising cost of shipping could impact profits
• Both major retail indexes are down for the month but recovering this week

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ASX retail shares could face a big issue in the trading period ahead and we’ll likely hear about it this earnings season.

The S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) has fallen by 10% in the past month. However, it has climbed 2% this week. The S&P/ASX 200 Consumer Staples Index (ASX: XSJ) has fallen 9% over the month and is up 0.66% this week.

Let’s take a look at what could impact ASX retail shares in the trading period ahead.

What could impact ASX retail shares?

Furniture retailer Nick Scali Limited (ASX: NCK) is warning of the impact of rising shipping costs and supply chain delays on profits.

The Nick Scali share price climbed 0.83% yesterday on the back of the company’s first half-year results for 2022. The company announced a 35 cents per share interim dividend. In today’s trade, Nick Scali shares are down slightly by 0.07% to $14.53.

International COVID-19 lockdowns, including in Vietnam, had an impact on the company’s suppliers according to the retailer’s directors’ report.

The report stated:

The group’s supply chain has been severely impacted by the pandemic, with overseas manufacturers operating under government constraints in the supply of raw materials and shipping container ability being significantly impaired.

Whilst the Group’s suppliers have recently reinstated normal lead times, shipping costs and the availability of containers remains uncertain, and therefore supply chain delays may persist for the remainder of the financial year.

Will shipping costs and supply issues also affect other retailers? We’ll likely find out this earnings season, with other big-name retailers due to report soon. They include JB Hi-Fi Limited (ASX: JBH), Kogan.com Ltd (ASX: KGN), City Chic Collective Ltd (ASX: CCX), and Adairs Ltd (ASX: ADH).

Other ASX retail shares include Australian Pharmaceutical Industries Ltd (ASX: API) and Wesfarmers Ltd (ASX: WES). There’s also Harvey Norman Holdings Limited (ASX: HVN), Coles Group Ltd (ASX: COL), and Woolworths Group Ltd (ASX: WOW). Many of these companies will be announcing their earnings results soon.

Commenting on the outlook, Nick Scali stated that shipping costs could impact profits in the second half of FY22:

Whilst the group continues to expect revenue to increase materially during the second half, the costs of shipping could well impact profitability during the period.

In recent times, retail outlet supplies have also been impacted due to worker shortages amid the Omicron outbreak.

The post Could this be the biggest issue faced by ASX retail shares heading into earnings season? appeared first on The Motley Fool Australia.

More reading

• Do any ASX lithium shares pay dividends?
• Morgans names 4 more of the best ASX shares to buy in February
• 2 buy-rated ASX dividend shares with attractive fully franked yields
• Are these 2 ASX tech shares good buys in February?
• Nick Scali (ASX:NCK) share price jumps on first-half revenue increase

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended ADAIRS FPO and Kogan.com ltd. The Motley Fool Australia owns and has recommended ADAIRS FPO, COLESGROUP DEF SET, Harvey Norman Holdings Ltd., Kogan.com ltd, and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Motley Fool’s Scott Phillips discusses the ASX tech slump, big gains for Nufarm Ltd (ASX: NUF), and the latest on the Sydney Airport (ASX: SYD) takeover.

The post Tech stocks crash, while Nufarm soars. Scott Phillips on Nine’s Late News appeared first on The Motley Fool Australia.

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• Why did ASX 200 tech shares get annihilated today?
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• Now departing: Farewell, Sydney Airport (ASX:SYD) shares
• Tech train wreck: WiseTech (ASX:WTC) share price tumbles 8%
• Why Amcor, Boral, Nufarm, and Westpac shares are rising today

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Block, Inc. and WiseTech Global. The Motley Fool Australia owns and has recommended WiseTech Global. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The CSL Limited (ASX: CSL) share price is on course to end the week in the red.

In afternoon trade, the biotherapeutics giant’s shares are down 0.5% to $255.80.

This means the CSL share price is down over 13% in 2022 and 20% from its 52-week high of $319.78.

Why is the CSL share price falling today?

The weakness in the CSL share price on Friday appears to have been driven by a mixed result from one of its rivals, Takeda.

While the Japanese biotech giant reported strong immunoglobulin sales for the third quarter, it also revealed a sizeable reduction in plasma collections.

Concerns about plasma collection headwinds and the impact they could have on CSL’s margins have been weighing on sentiment during the pandemic. Based on Takeda’s update, it appears as though these headwinds have yet to ease.

Can its shares get back above $300 in 2022?

Until the aforementioned plasma collection headwinds ease, the CSL share price is likely to remain out of favour with investors.

Though, when these headwinds do finally ease and investor sentiment improves, a number of brokers believe its shares could be trading at materially higher levels and well beyond the $300 mark.

For example, both Citi and Morgans have the equivalent of buy ratings on its shares with price targets of $340.00 and $334.70, respectively. These price targets imply potential upside of 30%+ over the next 12 months.

In respect to Morgans, it feels FY 2022 is a transitional year but remains very positive on the long term.

The broker commented: “We view CSL as a core holding and best positioned among its peers to meet growing patient demand, but the near term remains challenged, with timing uncertainty around a full recovery in plasma collections and increasing costs.”

The post Can the CSL (ASX:CSL) share price crack the $300 mark in 2022? appeared first on The Motley Fool Australia.

More reading

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• 3 ‘champion stocks’ for ASX investors in 2022
• 3 blue chip ASX 200 shares to buy after the selloff

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. owns 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 Bruce Jackson.

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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

Shares of e-commerce giant Amazon (NASDAQ: AMZN) ended Thursday down by 7.81%. The tumble follows another key internet company’s fourth-quarter earnings miss, during a market-wide sell-off. Amazon’s fourth-quarter earnings report is slated for release after Thursday’s closing bell rings.

So what

Blame Meta Platforms (NYSE: FB) — the company formerly known as Facebook — mostly. The world’s most prolific social network posted Q4 per-share earnings of $3.67 Wednesday evening, missing estimates of $3.84. Its revenue outlook for the quarter currently underway also came up short, with the company citing new competitive pressure and pricing challenges linked to policy changes with Apple‘s iOS mobile operating system.

Investors are (understandably) assuming Amazon is facing comparable headwinds.

Now what

Analysts expect Amazon to report earnings of between $3.58 and $3.88 per share, depending on the source, though those figures should be taken with a grain of salt. Amazon’s profitability is being dramatically reduced by investments in its own growth. The company would normally report income on the order of $6 per share, and earned anywhere between $10 and $15 per share in the throes of the pandemic; it’s difficult to meaningfully guess exactly how much money the company made as the world moves on from the COVID-19 contagion.

A more relevant measure of Amazon’s fourth-quarter success will be the company’s top line, which the analyst community collectively believes will be $137.6 billion, up 9.6% year over year.

Regardless, given today’s volatility and the sheer uncertainty as to the actual health of the internet’s top names, the smart move here is remaining on the sidelines if you’re not already holding the stock, or sticking with Amazon if you’re holding it for the long haul anyway. Short-term speculators stand to get burned. 

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

The post Why Amazon shares tumbled 8% today appeared first on The Motley Fool Australia.

More reading

• Do this now to be filthy rich later: expert
• Alphabet and Amazon will make or break the Nasdaq this week
• The cloud wars are heating up, and Amazon is primed to thrive
• FAANG Stocks: 2022 Winners and Losers
• Amazon challenges SpaceX in space

James Brumley has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Amazon, Apple and Meta Platforms, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Amazon, Apple, and Meta Platforms, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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If you’re looking for ASX lithium shares that offer a dividend, you may be in for a bit of a search.

The prices of lithium have been on the rise lately as the demand for electric vehicles has skyrocketed. This has caused the shares of many ASX lithium companies to soar. But for many shareholders, this hasn’t translated into dividends quite yet.

However, this could just be a matter of time. Lithium continues to be in high demand. The spodumene concentrate price experienced an incredible 46% rally in January alone. Understandably, many companies are reinvesting the bulk of their spare cash in attempting to meet the insatiable demand.

In saying that, if you’re looking for a piece of the action and some passive income, we have pulled together a list of ASX lithium shares that currently offer dividends.

Electrifying your portfolio with extra ASX lithium shares juice

Mineral Resources Limited (ASX: MIN)

The team at Mineral Resources has been keeping busy with their Mt Marion and Wodgina lithium projects.

They are one of Australia’s largest miners, and with a market capitalisation of more than $11 billion, they’re also one of the ASX lithium shares with a dividend.

At the moment, Mineral Resources is offering up a dividend yield of 4.7%. This yield has been boosted by a period of high margin prices in its iron ore business.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is one of the ASX’s most diversified companies. They operate in a range of industries, including retail, coal mining, and energy generation.

It might be a bit of a stretch to label this conglomerate an ASX lithium share. However, it offers exposure to the sector while also providing a reasonable dividend.

Through its acquisition of the formerly listed Kidman Resources, which joined forces with Wesfarmers’ jointly-owned Covalent Lithium, the conglomerate’s lithium credentials are valid.

At present, the company offers investors a dividend yield of 3.3%.

Rio Tinto Limited (ASX: RIO)

Rio Tinto is one of the biggest companies on the ASX, boasting a massive $171 billion market cap. The company owns and operates a range of assets across the globe, including coal, copper, diamond, gold, and iron ore mines.

In recent years, Rio Tinto has been making a concerted effort to increase its exposure to lithium. For example, the miner entered an agreement to acquire the Rincon Lithium project in Argentina during the fourth quarter for US$825 million.

Although Rio is yet to record any lithium production, the company is now exposed to the sector. In addition, shareholders can bask in the dividend fruits of this diversified miner. Currently, the company has a market-beating yield of 8% — the biggest payer on this list.

One ASX lithium share to watch for future dividends

Last, but not least, is an ASX lithium share that currently does not pay dividends but might in the future.

Allkem Ltd (ASX: AKE) is the combination of two lithium heavyweights, Orocobre and Galaxy Resources. Today, they operate under one umbrella. In its December quarterly activities report, the company revealed 230,065 dry metric tonnes of spodumene concentrate production in 2021.

In talking with The Australian Financial Review, Allkem boss Martin Perez de Solay explained the complexity of dividend payments. Because the chemical company is situated in Argentina, it cannot distribute a dividend without Argentina’s approval.

However, Perez de Solay noted that the government has now stipulated up to 20% of proceeds can be kept offshore for future dividends payments. While a dividend isn’t guaranteed, this opens the door to Allkem becoming another dividend-paying ASX lithium share.

The post Do any ASX lithium shares pay dividends? appeared first on The Motley Fool Australia.

More reading

• Morgans names 4 more of the best ASX shares to buy in February
• The Wesfarmers (ASX:WES) share price is 20% off its all-time high. Is it a buy?
• 2 now-cheap lithium ASX shares to buy this instant
• Rio Tinto (ASX:RIO) boss: ‘This is not the type of company we want to be’
• Here’s why the Mineral Resources (ASX:MIN) share price is shooting higher today

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• ASX 200 mining shares are seen to be safer bets due to high commodity prices and strong balance sheets
• But Goldman Sachs warns that miners may take a more conservative stance on dividends and capital returns
• Given high expectations on both these fronts, the sector could be vulnerable to a sell-off

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Our large ASX mining shares are seen as a bastion of strength during these volatile times, but a top broker is warning that they could disappoint this reporting season.

This isn’t what investors want to hear as many are on tenterhooks ahead of this month’s profit announcements.

The US$251 billion collapse in the Meta Platforms Inc (NASDAQ: FB) share price underscores the anxiety. In contrast, high commodity prices and balance sheets overflowing with cash have made S&P/ASX 200 Index (ASX: XJO) mining shares a safe haven of sorts.

Earnings growth largely locked in for ASX 200 mining shares

But there’s a risk that our bulk miners may not meet investors’ expectations when they turn in their profit report cards, warned Goldman Sachs.

The issue isn’t so much with profit growth. Thanks to the quarterly updates by ASX 200 mining shares, there should be few surprises.

In fact, Goldman Sachs is forecasting ASX bulk miners to deliver a circa 45% uplift in earnings before interest, tax, depreciation and amortisation (EBITDA) for the 2021 December reporting period compared to the same time last year.

The broker is tipping a further circa 10% increase in EBITDA for 2022, both estimates are market cap weighted.

Areas to watch this reporting season

However, there is still plenty of room for the sector to surprise – both in a good and bad way. Some of the things that could catch investors off guard are costs, production growth, capital expenditure, dividends and capital returns.

It’s the last two that may be of particular interest as the bar of expectation is set high. Many are expecting big cash handouts from the excess cash sitting on balance sheets.

“Although capital returns should be strong, we think those companies that are reporting interim/1H results will likely take a conservative approach to the dividend based on uncertainty on costs and the China outlook,” cautioned Goldman.

“The Dec Q results saw significant operating cost inflation from higher input prices and labour shortages (FX is the only tailwind) and a large build in working capital from higher commodity prices and logistics challenges.”

The broker is tipping that the average payout for the sector is approximately 50% of earnings per share (EPS). This puts the average dividend yield at around 8%.

ASX 200 mining shares to buy

But Goldman believes that the rise in operating expenses is likely to persist into 2023. Further, the growth in capital expenditure will be the next talking point for the market.

“Overall we think CY22 opex and capex guidance (and even production) may be an area of disappointment for the sector relative to expectations,” added Goldman.

This doesn’t mean there aren’t strong buys among ASX 200 mining shares. The broker’s “conviction” buys are the South32 Ltd (ASX: S32) share price and Iluka Resources Limited (ASX: ILU) share price.

Outside of its conviction list, the Rio Tinto Limited (ASX: RIO) share price and the Champion Iron Ltd (ASX: CIA) share price are also rated as “buys”.

The post Why mighty ASX 200 mining shares could stumble this reporting season appeared first on The Motley Fool Australia.

More reading

• Looking to buy NAB (ASX:NAB) shares? Read what this broker says first
• Morgans names 4 more of the best ASX shares to buy in February
• Read all about it: News Corp (ASX:NWS) share price leaps on record quarter
• Own AGL (ASX:AGL) shares? Here’s what to look for when the company reports next week
• ASX 200 (ASX:XJO) midday update: REA and News Corp impress, Boral plummets

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Brendon Lau owns Iluka Resources Ltd., Rio Tinto Ltd., and South32 Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Meta Platforms, Inc. The Motley Fool Australia has recommended Meta Platforms, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Shares in National Australia Bank Ltd (ASX: NAB) are rangebound from the open today and are trading 0.9% down at $27.66.

The NAB share price chart has been on a wave-like journey these past 3 months, trading as high as $30.15 and as low as $27.13.

Still, NAB shares are up almost 12% in the last 12 months, even though the new year has erased a good chunk of its 2021 gains.

Nevertheless, the team at JP Morgan are constructive on the NAB share price. They note that NAB deserves an overweighting in any ASX shares investor’s portfolio.

Here’s what the investment bank had to say about NAB in a recent note.

Stronger revenue growth prospects versus ASX peers

Analysts at JP Morgan are bullish on NAB shares due to a number of factors in the bank’s earnings profile.

Firstly, the broker reckons NAB is well-positioned to deliver stronger-than-peer revenue growth. Hence, this is “more than offsetting uncertainty on potential enforcement action from AUSTRAC on AML”.

The company notes that NAB’s “stronger revenue profile” reflects the bank’s small business banking segment. This, it reckons, should insulate NAB from return on equity (ROE) pressures in retail banking.

Not only that, but the bank’s customer metrics are “very sound with strategic NPS showing strong improvement in recent periods”. The broker reckons this is a bullish signal.

Even when factoring in foreseeable headwinds from NAB’s AML investments, JP Morgan still sees the bank’s pre-provision profit growth outpacing the other banking majors.

It forecasts a net interest income of $14.37 billion in FY22, growing to $14.7 billion in FY23, and $15.41 billion in FY24.

This should carry through to total operating revenues of $17.72 billion in FY22, $18.2 billion in FY23, and $19 billion in FY24.

JP Morgan also expects NAB to pay dividends of $1.40 per share this year and $1.50 and $1.59 in subsequent periods.

Importantly, the broker also sees NAB holding its net interest margin (NIM) at 1.6% over the coming 3 years. This contrasts with the consensus view that the entire banking sector will see ongoing compression to NIMs in years to come.

Instead, JP Morgan sees the bank’s NIM declining by 10 basis points from 1.7% last year to 1.6% in FY22. It expects the NIM to hold the line at this level into FY24.

What’s the outlook for the NAB share price?

The analysts have a December 2022 price target of $31.50 per share for NAB.

They say this reflects “the aggregate of the present value of the dividend stream paid to shareholders through to FY24E and the present value of a multiple of FY24E tangible book value”.

“While we do think it likely that NAB will face some cost headwinds from AML investments, these are factored into our forecasts and still we see NAB’s pre-provision profit growth outstripping peers,” the broker concluded.

NAB share price snapshot

This year to date, the NAB share price has faltered by 5.9%.

The shares have regained support as of this week, having climbed 1.65% into the green over the past 5 trading days.

The post Looking to buy NAB (ASX:NAB) shares? Read what this broker says first 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 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 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 Bruce Jackson.

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