Key Points

• St Barbara shares are in the red following the release of the comany’s Q2 FY22 trading update
• Production levels slightly dropped due to lower grades at its Leonora operation
• FY22 guidance is on track of up to 335koz at ASIC $1,815 per ounce

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The St Barbara Ltd (ASX: SBM) share price has dipped in morning trade amid the company providing a trading update for its second quarter.

At the time of writing, the gold miner’s shares are at $1.355 apiece, a drop of 1.45%.

How did St Barbara perform in Q2 FY22?

The St Barbara share price has edged lower as investors digest the company’s latest performance report.

For the three-month period ending 31 December, St Barbara produced 65,523 ounces of gold at an all-in sustaining cost of $1,587 per attributable ounce. Although production dropped at Leonora in the second quarter, this was largely offset by higher feed grades at Atlantic. In comparison, production levels in the prior period came to 67,000 ounces.

Operating cashflow came in at $49 million for the period. However, after growth capital, corporate costs, and tax payments, net cash contribution stood at $3 million.

St Barbara sold 76,000 ounces of gold at an average price of $2,423 per ounce.

The gold miner recorded a robust balance sheet with cash on hand of $94 million, up from $42 million on 30 September. Total debts included a syndicated facility of C$80 million (A$88.61 million) and $50 million which was recently drawn down.

Management noted that the pandemic is causing issues sourcing required labour and equipment for the Atlantic and Simberi operations. A tightening of the labour market in Western Australia as a result of border closures is also hampering the company’s efforts.

Nonetheless, a contingency plan has been developed to minimise any potential interruptions if the Western Australian border opens.

What did the head of St Barbara say?

St Barbara managing director and CEO Craig Jetson commented:

The end of the December FY22 quarter marks a momentous period for St Barbara.

Through the announcement of our acquisition of Bardoc Gold, we took decisive steps towards securing Leonora’s future as a significant processing hub in the Western Australian goldfields. The acquisition uniquely positions St Barbara to add value to the high quality Bardoc ore bodies by processing the ore at the Leonora processing plant.

We also had some very encouraging drilling results in the Old South Gwalia ore body, which has the potential to add new mining fronts higher up in the mine. By the end of this financial year, we are targeting an updated Mineral Resource for this area.

FY22 outlook

Looking ahead for the full year, St Barbara is expecting FY22 to be broadly in line with previous expectations.

The miner is forecasting consolidated gold production of between 305,000 ounces and 335,000 ounces. This is assumed at an AISC (all-in sustaining cost) of between $1,650 and $1,815 per ounce.

St Barbara is scheduled to release its half-year results to the market on 23 February.

About the St Barbara share price

Over the past 12 months, St Barbara shares have plummeted around 40%, with year-to-date performance also sinking 7%. The company’s share price reached a 52-week high of $2.36 in February last year before treading on a downward path.

Based on today’s price, St Barbara commands a market capitalisation of roughly $964 million, with approximately 709 million shares outstanding.

The post What’s going on with the St Barbara (ASX:SBM) share price today? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
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• Why API, James Hardie, Magellan, and St Barbara shares are dropping
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• These were the 5 worst ASX 200 mining shares to hold in 2021

Motley Fool contributor Aaron Teboneras 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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Key points

• Fortescue delivered record shipments during the first half
• The discount for its low grade iron ore product is widening
• Costs are up 20% year on year but flat quarter on quarter

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The Fortescue Metals Group Limited (ASX: FMG) share price is falling on Tuesday.

In morning trade, the iron ore producer’s shares are down 1% to $20.32.

Fortescue share price falls following second quarter update

Investors have been selling down the Fortescue share price this morning following the release of its second quarter update.

For the three months ended 31 December, the company recorded iron ore shipments of 47.5 million tonnes (mt). This led to a 3% increase in first half shipments to a record of 93.1mt.

However, taking the shine off these strong shipments was further weakness in the price Fortescue is commanding for its low grade iron ore.

The release reveals that the company recorded average revenue per dry metric tonne (dmt) of US$74.36. This represents revenue realisation of 68% of the Platts 62% CFR Index for the quarter, which is down from 73% in the first quarter.

And while Fortescue’s C1 costs were up 20% year on year, they remained flat quarter on quarter at US$15.31/wet metric tonne (wmt). The year on year jump in costs reflects the price escalation of key input costs. These include diesel, other consumables and labour rates, the integration of Eliwana, and mine plan driven cost escalation.

Looking ahead, management expects its costs to remain broadly in line with current levels over the rest of FY 2022 and is guiding to full year C1 costs of US$15.00 to US$15.50 per wmt.

As for shipments, Fortescue expects a similar performance in the second half. This will lead to full year shipments of 180mt to 185mt.

However, Fortescue has warned that its capital expenditure is likely to be US$200 million higher than previously planned at between US$3 billion and US$3.4 billion after incorporating the acquisition of Williams Advanced Engineering. This doesn’t include any costs relating to the highly divisive Fortescue Future Industries business.

Management commentary

Fortescue’s Chief Executive Officer, Elizabeth Gaines, was very pleased with the first half.

She said: “The Fortescue team has again delivered an outstanding performance for the first half of FY22 with mining, processing, rail and shipping combining to deliver record second quarter shipments of 47.5 million tonnes, contributing to record performance for a half year of 93.1 million tonnes. “

“Our C1 cost was in line with the previous quarter, reflecting our strong focus on cost management to mitigate inflationary pressures associated with strong demand for labour and resources, as well as supply chain constraints due to COVID-19. We are proud of the entire Fortescue family who continue to deliver record operating performance and achieve key project milestones,” Ms Gaines added.

The Fortescue share price is down 20% over the last 12 months.

The post Fortescue (ASX:FMG) share price lower following Q2 update appeared first on The Motley Fool Australia.

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• Fortescue (ASX:FMG) share price slides on $310 million acquisition
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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 Bruce Jackson.

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Key Points

• Accent shares fall after trading update fails to impress investors
• Trading conditions impacted by Omicron variant
• EBIT forecasted to be between $30 million to $31 million for H1 FY22

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The Accent Group Ltd (ASX: AX1) share price is edging lower today following the release of a trading update by the company.

At the time of writing, the shoe retailer’s shares are down 2.84% to $2.05. This means that the company’s shares have now lost almost 15% in value over the past month.

How is Accent performing so far for FY22?

The Accent share price is being sold off today following a mixed performance for the first-half of FY22.

For the period ending 26 December, Accent reported sub-par trading conditions, particularly in the last two months.

The company revealed that like-for-like sales across November and December fell 3.4% when compared against the prior corresponding period.

Pleasingly, digital sales continued to remain strong throughout the final months of 2021, with gross margin above management’s expectations.

Following the reopening of Accent stores in New South Wales and Victoria, trade was generally in line with previous forecasts.

However, in the final week of December and one of the busiest days of the year, Boxing Day, store traffic and sales dropped. The rapid rise of the Omicron variant heavily impacted foot traffic across all banners and states, including in New Zealand.

Trade for the month of January is continuing to be affected by COVID-19, although case numbers are starting to dwindle. This could be a sign that Omicron has reached its peak, and that a recovery is near.

As a result, Accent advised first-half earnings before interest and tax (EBIT) will be between $30 million to $31 million.

Accent went further to mention that inventory levels are currently back in line, after facing delivery delays from external suppliers across December and early January.

The company is expected to release its H1 FY22 results to the market on 22 February.

Management commentary

Accent group CEO, Daniel Agostinelli touched on the company’s effort, saying:

…It is clear that the ongoing pandemic continues to impact customer traffic and trade in the short term. Considering the lockdowns and other COVID-related impacts experienced in the first half of the year, I am pleased with the performance of the business.

We have a proven and high-quality management team that has risen to the challenges and effectively dealt with the complexities around store operations, staffing and supply chain due to Omicron.

As we emerge from the COVID-19 pandemic, I am confident that our integrated omnichannel business model and key growth strategies, including digital, new stores, vertical owned brands, new businesses and exclusive distribution agreements remain highly relevant and position us well for the future.

Accent share price snapshot

Over the past 12 months, the Accent share price has declined by around 15%. It’s worth noting that these losses have come year to date.

Based on valuation grounds, Accent commands a market capitalisation of around $1.14 billion and has approximately 541.87 million shares outstanding.

The post Why is the Accent (ASX:AX1) share price backtracking today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras 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 Accent Group. 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

• Zip has confirmed that it is in talks to acquire Sezzle
• Talks are at a preliminary stage
• No financial details have been provided to the market

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The Zip Co Ltd (ASX: Z1P) share price is rising on Tuesday morning.

At the time of writing, the buy now pay later (BNPL) provider’s shares are up 1% to $3.32.

Why is the Zip share price rising?

Investors have been bidding the Zip share price higher this morning after it confirmed speculation that it is interested in acquiring rival Sezzle Inc (ASX: SZL).

However, no details have been provided in respect to the potential price that Zip would pay to acquire its BNPL rival.

The Zip Board commented: “Zip confirms it is in discussions with Sezzle in relation to a potential acquisition. Zip is always interested in pursuing options that are in the best interests of shareholders; however the discussions with Sezzle are preliminary in nature and there is no certainty that the discussions will result in a transaction of any kind.”

Unsurprisingly, the Sezzle share price is charging higher on the news. Its shares are currently up 19% to $2.55 in early trade.

Why would Zip acquire Sezzle?

The Zip Board revealed that it is always on the lookout for transactions that will deliver value to shareholders.

It explained: “The Zip Board remains committed to ensuring any transaction delivers value to shareholders and will always be disciplined in its assessment of potential opportunities. It will only pursue transformational transactions that help accelerate the delivery of Zip’s broader strategic objectives such as enhanced scale in core markets, improved customer and merchant propositions and a faster path to profitability through significant synergy opportunities.”

Based on its discussions, it appears to see Sezzle as a potential transaction that could achieve these requirements. Time will tell if these talks turn into something more concrete.

The post Zip (ASX:Z1P) share price higher amid Sezzle acquisition talks appeared first on The Motley Fool Australia.

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• The Nasdaq Index fell 2.7% on Friday. What does that mean for ASX tech shares?
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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. owns and has recommended ZIPCOLTD FPO. 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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Key points

• The ANZ share price is outperforming all other big banks in 2022, having slipped just 0.8% year to date
• For context, the next best performing ASX big bank has fallen 3.9% over the same time frame
• Additionally, the ASX 200 is down 5.9% year to date

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The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is the best performing big bank stock of 2022 so far.

That’s despite no price-sensitive news having been released by the smallest of the big four banks in months.

As of Monday’s close, the ANZ share price is $27.77 – down 0.82% year to date.

For context, the S&P/ASX 200 Index (ASX: XJO) has slipped 5.93% in that time frame.

Let’s take a look at how that stacks up against its peers’ movements.

How the ANZ share price’s year-to-date performance compares

While the ANZ share price has experienced a slight slump over the course of 2022 so far, its fellow big banks have been suffering, as can be seen in the chart below.

The Commonwealth Bank of Australia (ASX: CBA) share price has been hit hard, having fallen 4.95% year to date.

Meanwhile, shares of Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) have slipped 3.97% and 4.18% year to date.

Finally, bringing in the rear is the newly minted big bank, Macquarie Group Ltd (ASX: MQG).

The investment bank’s market capitalisation overtook ANZ’s valuation in November 2021 and surpassed that of Westpac earlier this month, making it the third biggest bank on the ASX.

The Macquarie share price has slumped 10.11% since the first close of 2022.

Why is ANZ outperforming its peers?

There’s no clear reason why the ANZ share price is besting its fellow big banks’ stock this year.

However, Morgan Stanley last week upgraded the bank to a buy. Analysts like the bank’s well-diversified business exposure, improving loan growth outlook, and an equally improved outlook for margins.

In contrast, the CBA share price might have been impacted by analyst expectations. As The Motley Fool Australia recently reported, Morgans is predicting the bank’s upcoming half-year results will disappoint the market.

Similarly, Bell Potter is cautious of Westpac’s soon-to-be-released results for the first half of financial year 2022.

Additionally, ASX bank shares have been under pressure recently as whispers of rising interest rates swirl in the United States and Australia.

The post The ANZ (ASX:ANZ) share price is outperforming its big bank peers in 2022. Here’s why 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 recommended Macquarie Group Limited and Westpac Banking Corporation. 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

• CSL shares continue to face challenging market conditions
• Recent placement a factor in share price weakness
• Brokers put forward their 12-months price targets for CSL shares

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The CSL Limited (ASX: CSL) share price has sensationally been dumped amid a broader market sell-off by investors.

Year to date, the global biotech’s shares have fallen by around 10%. By compassion, the S&P/ASX 200 Index (ASX: XJO) has lost 4% during the same timeframe.

Looking at Monday’s market close, CSL shares edged 0.74% lower to $262.57 apiece.

What’s weighing down CSL shares?

A couple of factors have had a negative impact on the CSL share price, sending investors to hit the sell button.

Firstly, the rapid spread of the COVID-19 Omicron variant has spelled a sluggish economic recovery for Australia. A surge of cases has led Western Australia closing its borders, as well as renewed restrictions across the country.

With the fear of Omicron spreading, this has most likely led to reduced foot traffic in CSL’s plasma collection centres.

In addition, the company announced an institutional placement to raise $6.3 billon to purchase Vifor Pharma in December. This was Australia’s second largest equity raise, behind Telstra Corporation Ltd (ASX: TLS) for 2021.

The company also launched a $750 million share purchase plan, offering the same terms to retail investors at $273 apiece.

With another 23.1 million new CSL shares brought onto its registry, this has inevitably diluted shareholder value. The company added more than 5%, giving a current total of 478.75 million shares outstanding.

Can CSL shares reach pre-COVID highs?

Before COVID-19, CSL shares were known for their high-growth and defensive qualities. The company’s share price had a healthy track record of outperforming the benchmark index, which attracted investors.

In February 2020, CSL shares hit an all-time high of $342.75, before losing more than 20% within a month.

Fast-forward to today, a number of brokers have weighed in on the CSL share price.

Last month, the team at Morgans raised its 12-month price target by 3.2% to $334.70 for CSL shares. Based on the current share price, this implies an upside of about 27.5% for investors.

Analysts at Citi had a more bullish outlook on the company’s shares, improving its rating by 4.6% to $340. From where CSL trades as of yesterday, it represents an uplift of 29.5% over the next 12 months.

However, the latest broker note came from Jefferies last week, cutting its position on CSL shares by 2.3% to $335.

Clearly, all these brokers believe that the CSL share price will return to pre-COVID highs within the next 12 months.

A recap on the CSL share price

No doubt it has been a frustrating time for CSL shareholders. Traditionally, its shares outperform the broader market, however, this has not been the case since the onset of COVID-19.

Over the past year, the company’s shares have failed to take off, posting a loss of almost 5%.

On valuation grounds, CSL is the third largest company on the ASX with a market capitalisation of roughly $125.70 billion.

The post Can the CSL (ASX:CSL) share price reach pre-COVID highs? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras 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.

Enterprises are increasingly relying on data to drive business decisions. One of the most critical components of data synthesis and aggregation is cloud computing, a form of server virtualization to deliver infrastructure-as-a-service (IaaS). Instead of investing heavily into capital expenditures in the form of physical servers, cloud providers allow customers more scalability because enterprises are essentially outsourcing active management of data aggregation and server maintenance. According to Gartner, the public cloud market is dominated by Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), and Amazon is emerging as the leader. Does that positioning merit an investment in the web giant right now?

AWS has proven tough to beat

Through the first nine months of 2021, Amazon’s cloud segment, Amazon Web Services (AWS), generated $44.4 billion of revenue while operating at a 30% margin. For one point of comparison, Google Cloud contributed $13.7 billion of revenue for the first nine months of 2021 and is unprofitable, as it reported a loss of $2.2 billion.

What’s even more staggering is the pace of AWS’s growth. During Q3 2021, AWS generated $16.1 billion of revenue, which represented 39% year-over-year growth. Investors can see that the quarterly operating income of $4.9 billion for the AWS segment was more than Amazon’s entire business combined. Amazon Web Services is arguably becoming the most important pillar of the company’s ecosystem.

Despite the impressive growth of AWS and the operating leverage it’s providing Amazon’s business, investors may find it curious that Amazon stock has remained relatively flat over the last 12 months. Competing cloud providers Microsoft and Google witnessed 42% and 52% stock price increases over the last 12 months, compared to Amazon’s 0.10%.

Ambitions beyond the cloud

Amazon has been able to reinvest the profits from its cloud business into other segments, as the company works to differentiate itself from other technology behemoths. One area that is quickly becoming an important crux of Amazon’s business is digital advertising.

According to eMarketer, Amazon is expected to comprise 10.7% of the U.S. digital ad market in 2021 and grow to 12.8% by 2023. Although the uptick has been bolstered by increasing consumer reliance on digital shopping during the pandemic, one could argue that this theme will stick because Amazon’s platform makes it more time-efficient and cost-effective for consumers to make purchases online versus going to a physical retail location.

The boom on the digital ad side of its business could serve as another lucrative catalyst for the company as it gains market share from Google and Meta Platforms. On the contrary, eMarketer predicts that Google’s digital ad business in the U.S. is expected to decrease from 28.9% in 2020 to 26.6% in 2023. 

Amazon is well-positioned to benefit from enterprise investment in digital transformation. As the company gains market share over its competition, AWS’s capital efficient margin profile will continue fueling additional growth drivers as the company looks to enter new industries.

When in doubt, zoom out

Investors and Wall Street analysts kept a close eye on Amazon during 2021 as the company significantly increased its operating expenses to combat pandemic-driven supply chain speed bumps. The effects of these increased expenses were most apparent in the company’s Q3 2021 financials. For the quarter ended Sept. 30, 2021, Amazon reported operating margins of 1.3% and –3% for its North American and International e-commerce segments, respectively.

During times of economic uncertainty, it is important for investors to zoom out and look at the larger picture. Microsoft, Google, and Amazon all appear to be compelling investments, especially given many growth and technology stocks witnessed significant sell-offs during the final months of 2021 due to lingering concerns over inflation. Although Amazon’s overall profitability profile has taken a hit due to challenges on the e-commerce side of the business, it could be argued that this is primarily a function of short-term headwinds related to wage inflation and supply chain. The growth in AWS has allowed the company to combat these near-term challenges given the strong operating profits it produces. Moreover, Amazon is able to reinvest some of these profits into other areas such as digital market, entertainment, and consumer electronics.

Amazon’s business appears far more prolific than its competitors who are heavily reliant on singular products, namely hardware devices and advertising, which are also markets that Amazon competes in. As the company trades for three times trailing 12-month sales compared to Microsoft’s 15 times and Alphabet’s eight times, now may be a unique time for investors to consider Amazon before its next bull run. 

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

The post The cloud wars are heating up, and Amazon is primed to thrive appeared first on The Motley Fool Australia.

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Adam Spatacco owns Amazon, Microsoft, Alphabet, and Facebook. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft 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. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Alphabet (A shares), Alphabet (C shares), Meta Platforms, Inc., and Microsoft and Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Gartner and recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, 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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Prior to today, the S&P ASX All Technology index was down 15% since the start of the year.

While this is very disappointing, it may have created a buying opportunity for long term focused investors.

Two ASX tech shares that could be in the buy zone now are listed below. Here’s what you need to know:

Altium Limited (ASX: ALU)

This leading electronic design software provider could be a top option in the tech sector. Altium is the company behind the Altium Designer and Altium 365 platforms, the NEXUS design collaboration platform, and the Octopart electronic parts search engine.

These platforms are used by some of the biggest businesses and organisations in the world. This includes giants such as Boeing, Microsoft, NASA, and Tesla.

Over the coming years, Altium is aiming to dominate the electronic design market and believes its cloud-based Altium 365 platform is key to achieving this. It is targeting 100,000 subscribers and revenue of US$500 million by 2026. If it does deliver on this target, it should be supportive of strong earnings growth over the 2020s.

Jefferies is positive on Altium and currently has a buy rating and $48.83 price target on its shares.

Life360 Inc (ASX: 360)

Another ASX tech share that could be a buy after recent market weakness is Life360. It is the technology company behind the popular Life360 mobile app for families, which boasts over 30 million active users.

From these users, the company is generating very strong recurring revenue. For example, excluding acquisitions, during the third quarter of FY 2021, the company delivered a 48% year on year increase in Annualised Monthly Revenue (AMR) to US$120.1 million.

Looking ahead, management sees significant opportunities to monetise its massive user base through cross-selling and upselling. This will be supported by recent acquisitions of items tracking company Tile and wearables company Jiobit. The latter will allow Life360 to tap into two fast growing markets: the multi-billion pet supplies and services and elder care markets.

The team at Bell Potter is very positive on Life360. It currently has a buy rating and $15.00 price target on its shares.

The post 2 ASX tech shares to buy after the market meltdown appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro owns Life360, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Altium and Life360, Inc. 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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Key points

• The Kogan share price looks good value according to some experts
• This company is benefiting from the boom in e-commerce, particularly as more Aussies shop through online retailers
• Kogan’s gross sales keep growing strongly and it has a long-term target of $3 billion for FY26

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The Kogan.com Ltd (ASX: KGN) share price could be a significant long-term opportunity, according to the experts.

Kogan is one Australia’s leading e-commerce businesses. It has also seen its share price fall by quite a lot in recent times. The last month alone shows a decline of around 18% for Kogan. The past six months shows a drop of 34%.

A lower price does not automatically make a business a buy. However, analysts think that the business has good potential over the long-term.

How much upside does the Kogan share price have?

It is anyone’s guess what a share price is going to do over the next month or the next year. Particularly in the current volatile environment. However, brokers do like to have an estimation of where they think a share price could be in a year from the date of their latest prediction. That’s called a price target.

Both UBS and Credit Suisse have price targets on Kogan which suggest significant increases of the Kogan share price over the next several months.

UBS has a price target of $10, which implies a potential rise of 40%, though UBS just rates Kogan as a ‘hold’ at the moment. The Credit Suisse price target on Kogan is $13.88, with a buy rating. That’s a possible rise of more than 90%. Time will tell whether these price targets change after the recent volatility and interest rate worries.

Why does Credit Suisse like about the ASX share?

The broker has noted that profitability at the business was less than expected after the first four months of FY22 to October 2021. It has been focused on warehousing and marketing costs.

With warehousing, it has right-sized the inventory levels since FY21 after ordering too much stock. This reduction has brought down warehousing costs, which can be helpful for the Kogan share price.

But it has also continued to spend heavily on marketing to expand the Kogan first member base and management are confident this will have long-term benefits for the company.

The Kogan first loyalty program increased 99.7% in FY21 to 120,000 members. At the end of October 2021, this had increased to over 220,000. Kogan First members demonstrate stronger loyalty and repeat buy compared to non-members.

This increase in customers is helping the business grow its market share. Not only is e-commerce growing quickly in Australia, but Kogan’s share of that spending is also rising. The Kogan market share in FY19 was 2.1%, in FY20 it was 2.4% and this grew to 2.7% in FY21. E-commerce is expected to be a larger slice of the retail pie in the coming years.

As that might suggest, Kogan’s gross sales continue to grew, even if profitability is hampered at the moment. In the first four months of FY22 to October 2021, Kogan’s total gross sales had gone up another 19% to $432.7 million.

Long-term goals

Kogan is looking to grow its gross sales at a compound annual growth rate (CAGR) of more than 20% per annum to FY26 to get to $3 billion of gross sales.

Over the next five years, it’s also looking to reach 1 million of Kogan First subscribers, not including Mighty Ape subscribers.

Kogan share price valuation

Credit Suisse’s numbers suggest Kogan shares are priced at 18x FY23’s estimated earnings with a projected FY23 grossed-up dividend yield of 4.1%.

The post Here’s why the Kogan share price has a lot of potential upside appeared first on The Motley Fool Australia.

More reading

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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. owns and has recommended Kogan.com ltd. The Motley Fool Australia owns and has recommended Kogan.com ltd. 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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Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Shaw and Partners portfolio manager James Gerrish gives his take on the current sell-off in stock markets and how much further it has to run.

Investment style

The Motley Fool: How would you describe your managed accounts to a potential client?

James Gerrish: We describe our investment style as top-down meets bottom-up. 

I know a lot of fund managers are very fundamentally driven, or very much focused on the company side, and we are, but not exclusively at the expense of the macro side. I think we place probably more importance on the macroeconomic factors that are playing out at the time on our portfolio construction — the sectors we want to be in — rather than letting our views around stocks dictate that.

MF: Since you do take macroeconomic conditions into account, I wonder what your thoughts are on the outlook for this year, given the current carnage?

JG: The macro assumptions that are driving the market at the moment [are] interest rates going up… so short bonds and now selling things that are interest-rate sensitive, and peak policy. 

So peak policy, in terms of central banks and governments, occurred last year. Now we’re going into a scenario where that policy support is going to be less. Whatever it looks like, it is going to be less moving forward from here, and that’s probably the right response. 

I think the market’s positioning right now for sharply high rates. We’ve now got 4 rate hikes priced in the US this year.

I think interest rates are at, or near a peak, in the short term. So I’m more of the view that inflation is probably more transitory than the market is now pricing in. The market, 4 or 5 months ago, was pricing inflation to be transitory. It seems like the market’s had a big change of tack, and it’s now pricing in sustainably higher inflation over time. 

To me, from what I see in the bond market, from a macro standpoint, interest rates are really the key to try and get right. From what I see, I wouldn’t be surprised [for] the US 10-year [bonds] 2% is the cap this year for that. 

So that implies probably, while they might be choppy, in my view, interest rates will be lower this time next year than they are today — which is absolutely not the consensus!

MF: So there could be some real bargains out there at the moment?

I think, in the short term. 

When things don’t play out as the consensus is expecting it to, it creates a lot of volatility. And I think this year will be characterised by really high volatility. We’ll have it tougher. Everyone’s saying that, right? That’s not a new thing. 

But I think there’ll be a huge divergence between sectors and stocks. So, [from] the start of this year, the NASDAQ-100 (NASDAQ: NDX) is down 11% from its highs. That’s a huge divergence out of tech, a huge move out of tech, which I think in the short term has probably run too hard. So we’ll get these, where the elastic band stretches too hard, too far. And I think that’s probably the case in interest rate sensitive sectors at the moment.

The post This is where share markets are headed from here: expert appeared first on The Motley Fool Australia.

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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 Bruce Jackson.

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