The Global Lithium Resources Ltd (ASX: GL1) share price is exploding this year.

The company’s shares closed at $1.50 today, a 0.67% gain. In comparison, the S&P/ASX 200 Index (ASX: XJO) has gained 0.13% today.

Let’s take a look at what has caused the company’s share price to surge.

Why is Global Lithium having such a good month?

The Global Lithium share price has rocketed 57.89% since the market close on 31 December 2021. As my Motley Fool colleague Bernd reported last week, ASX lithium shares have benefited from skyrocketing prices and supply shortages of battery metal.

Global Lithium Resources is a lithium miner exploring the Marble Bar Lithium Project (MBLP) in the Pilbara region of Western Australia. The company also acquired an 80% stake in the Manna Lithium Project in Kalgoorlie at the end of the December quarter.

Today, the company revealed drilling has started at its flagship WA lithium project. This is the largest drilling program conducted by the company to date and will involve drilling 380 holes. While the Global Lithium share price did not move substantially today, it may be that investors have already priced in the company’s drilling program at the mine.

What did management say?

Commenting on the announcement, Global Lithium chair Warrick Hazeldine said:

The lithium sector in the Pilbara has the potential to become this generation’s mining success story in
Western Australia and deliver parallels to the growth achieved in recent decades by the region’s iron ore
industry.

Global Lithium has a significant opportunity to play a major role in this expansion at MBLP. Not only are we advancing an exciting project in a well-established mining region, but we have also secured a cornerstone strategic investor, Yibin Tianyi, to help drive development of this asset.

January 2022 updates

In late January, the company released its quarterly activities report. However, shares fell 11% on that day. The company reported a cash balance of $11.1 million and no debt. Exploration and evaluation expenses totalled nearly $1.3 million.

Global Lithium also stated it plans to undertake significant exploring activities at its Manna Project in 2022.

On 13 January, the company’s shares elevated 15% on news of new appointments on its board. Ronald Mitchell was appointed executive director of markets and growth, while Greg Lilleyman took on the role of non-executive director.

Lilleyman has 30 years of international experience in the mining sector, while Mitchell has 25 years of industry experience including 10 years in the lithium and battery industry.

Share price snap shot

The Global Lithium share price has exploded by around 650% in the past 12 months. In the past month, it has soared 39%, while it has fallen 3% in the past week.

For perspective, the S&P/ASX 200 Index (ASX: XJO) has returned nearly 4% over the past year.

The company has a market capitalisation of roughly $204 million based on its current share price.

The post How has the Global Lithium (ASX:GL1) share price managed to surge 58% in 2022? appeared first on The Motley Fool Australia.

More reading

• Global Lithium (ASX:GL1) share price soars 13% to record highs

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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With a new year, the ASX now seems to be in the grip of some new fears. As most investors would be aware, 2022 hasn’t been the easiest start to the year. As it stands today, the ASX 200 remains down more than 6.3% in 2022 so far. Why such a disappointing beginning to the year? Inflation concerns have arguably stoked many of the uncertainties we’ve seen across investing markets recently.

Inflation has indeed been on the rise. Just last week, we heard from the Reserve Bank of Australia (RBA) which told the public that inflation was running hotter than it predicted just a few months ago. Seeing as inflation can erode the wealth of all investors, this has understandably prompted some concerns.

So how does one position an ASX share portfolio to beat inflation? Let’s check out the ideas of one investing expert.

Jason Beddow is the managing director of listed investment company (LIC) Argo Investments Limited (ASX: ARG). According to reporting in the Australian Financial Review (AFR) this week, he recently gave an interview discussing the current inflationary environment. Mr Beddow reckons the gains we have seen over the ASX the past 18 months or so are unlikely to be repeated. That’s given the “extreme stimulus” in response to the COVID-19 pandemic is winding up.

ASX expert picks shares to beat inflation

As such, Beddow says that Argo is “moving up the safety scale a bit”.

“I think you’ve got to be in the bigger, quality stocks,” he stated.

So how does one position a portfolio in such an environment when inflation is of major concern? With those same larger, higher-quality companies, according to Beddow. He names CSL Limited (ASX: CSL), Macquarie Group Ltd (ASX: MQG), and BHP Group Ltd (ASX: BHP) as great places to start.

But Beddow also reckons ASX 200 energy companies like Santos Ltd (ASX: ATO) and Woodside Petroleum Limited (ASX: WPL) are also worthy of a look. Beddow says that demand for oil and gas “should be strong for more than a decade” and those companies are likely to be “solid performers as inflation rises and investment returns are harder to come by”. He says packaging company Amcor (ASX: AMC) is also in the same boat.

Beddow also names the big banks, like Commonwealth Bank of Australia (ASX: CBA), as shares that “should be reasonable investments over the next year”. That’s due to the “traditional rule of thumb [that] their net interest margin would benefit from rising interest rates”.

Mr Beddow’s comments come as Argo reported its half-year financial earnings his morning. As my Fool colleague Bernd covered at the time, Argo reported a 91.5% rise in earnings per share (EPS), as well as a 14.3% rise in its interim dividend. Over the period, Argo topped up its investments in Macquarie, CSL, and EML Payments Ltd (ASX: EML). It unloaded positions in Boral Limited (ASX: BLD), AGL Energy Limited (ASX: AGL), and Crown Resorts Ltd (ASX: CWN).

The post These ASX 200 shares can beat inflation: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. The Motley Fool Australia owns and has recommended Amcor Limited. 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 Bruce Jackson.

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The Silver Lake Resources Limited. (ASX: SLR) share price pushed higher on Monday. The gold producing and exploration company released an announcement regarding an on-market share buyback.

At market close, Silver Lake shares finished the day up 1.99% to $1.54. It’s worth noting that its shares are down more than 10% in the past month.

Silver Lake set to commence share buy back

In today’s statement, Silver Lake advised it intends to begin an on-market share buyback over the next 12 months. This will see management begin to reduce surplus capital whilst increasing shareholder value.

Basically, this means that when Silver Lake buys back its shares, the number of shares on its registry will decrease. With a lesser amount, this effectively increases the value of each share as the revenue and profits remain the same.

The company is seeking to buy back up to 10% or approximately 912.48 million ordinary shares within the above period.

The proposed start date will commence on 24 February 2022 and run until 23 February 2023.

Silver Lake noted that its strong balance sheet, as well as forecasted free cash flow generation, provides it ample flexibility.

As such, the board made the decision to undertake the value accretive capital management initiative.

The company stated that the structure of an on-market buyback allows it to take advantage of share price volatility.

By conducting purchases during periods where the share price has fallen significantly, this is an opportunity to benefit the business.

The on-market buyback program does not require shareholder approval and will be executed at the company’s discretion.

Silver Lake share price snapshot

Over the past 12 months, Silver Lake shares have fallen around 1% despite surging since late September. When looking at 2021 alone, its shares are down over 13%.

Silver Lake commands a market capitalisation of roughly $1.41 billion with approximately 912.46 million shares issued.

The post Down 10% in a month, here’s why the Silver Lake (ASX:SLR) share price climbed today appeared first on The Motley Fool Australia.

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• Silver Lake (ASX:SLR) share price drops today following this bidding news

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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Today, the S&P/ASX 200 Index (ASX: XJO) struggled to give investors a positive start to the week. At the end of the session, the benchmark index finished 0.13% lower at 7,110.8 points.

As per usual, the market was filled with red and green pockets today. The most severe losses were witnessed across the real estate and healthcare sectors on Monday. Fortunately, companies in the energy sector provided some counterweight to the equation. In addition, miners and travel shares put on a solid performance for their shareholders.

However, the question is: which shares delivered the biggest returns to investors on the ASX today? Here are the top ten stocks that came through for investors:

Top 10 ASX shares countdown today

Looking at the top 200 listed companies, Flight Centre Travel Group Ltd (ASX: FLT) was the biggest gainer today. Shares in the travel management company jumped 7.80% on plans to reopen international borders to tourists from 21 February. Find out more about Flight Centre Travel Group here.

The next biggest gaining ASX share today was Coronado Global Resources Inc (ASX: CRN). The high-quality metallurgical coal producer rose 7.55% today, despite there being no announcements out from the company. Uncover the latest Coronado Global Resources details here.

Today’s top 10 biggest gains were made in these ASX shares:

ASX-listed company	Share price	Price change
Flight Centre Travel Group Ltd (ASX: FLT)	$18.94	7.80%
Coronado Global Resources Inc (ASX: CRN)	$1.495	7.55%
Corporate Travel Management Ltd (ASX: CTD)	$22.02	7.00%
GQG Partners Inc (ASX: GQG)	$1.73	6.14%
Yancoal Australia Ltd (ASX: YAL)	$2.98	6.05%
Qantas Airways Ltd (ASX: QAN)	$5.43	4.62%
Iluka Resources Ltd (ASX: ILU)	$10.87	4.52%
IDP Education Ltd (ASX: IEL)	$30.70	4.21%
Viva Energy Group Ltd (ASX: VEA)	$2.28	3.64%
Hyperion GBL Growth Companies Fund (ASX: HYGG)	$4.02	2.81%

Our top 10 ASX shares today countdown is a recurring end-of-day summary to ensure you know which companies were making big moves on the day. Check-in at Fool.com.au after the market has closed during weekdays to see which stocks make the countdown.

The post Here are the top 10 ASX shares today appeared first on The Motley Fool Australia.

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• Are ASX travel shares finally emerging from the COVID storm?

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. owns and has recommended Idp Education Pty Ltd. The Motley Fool Australia has recommended Corporate Travel Management Limited and Flight Centre Travel Group 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 Aristocrat Leisure Ltd (ASX: ALL) share price slipped today amid a fresh perspective on the gaming operator’s recently shot-down acquisition.

At the close, shares in Aristocrat Leisure are sitting at $40.76, down 1.55%.

The latest thoughts on where the gaming company will go from here are hitting the headlines four days after Aristocrat’s takeover of Playtech was blocked by shareholders.

However, analysts at Jarden now think there could be potential for a different deal.

A piece of Playtech might be better than none

While the $5 billion takeover of the online real money gambling company, Playtech, is now off the table, it seems a more subtle proposition from ASX-listed Aristocrat could be floating around the board room.

According to analysts at Jarden, another consideration for the company could be to pick apart Playtech. At first glance, investors might think this would be a lost cause considering the initial proposal was already voted down.

However, Jarden highlights that a grab for Playtech’s B2B business wouldn’t require approval from Aristocrat’s side of the fence. Instead, it would only need to get a thumbs up from Playtech shareholders — who already voted in favour of the previous deal.

Playtech has already removed another obstacle that would typically prevent an alternative proposal. Specifically, the online gaming giant has waived the typical 6-month window preventing a new bid. Given this, Jarden’s analysts believe there’s still a chance the two could unite in some form.

What are the alternatives?

Although ASX-listed Aristocrat Leisure has highlighted it will continue its push into online casino gambling ‘one way or another’, its other options are not so clear.

Jarden’s Ben Brownette believes the company could go down a path of more bite-sized mergers and acquisitions. Notably, Aristocrat last reported A$2.44 billion of cash on its balance sheet. For that reason, Brownette believes it has the financial resources to undertake such a strategy.

On the flip side, the company could suffer reduced returns on equity without a meaningful acquisition to make use of its capital.

How has Aristocrat Leisure been performing on the ASX?

Shareholders of Aristocrat Leisure could say the company has seen better days with its start to 2022. So far, the gaming company’s shares have shaved off 6.5% since the beginning of the year. For comparison, the S&P/ASX 200 Index (ASX: XJO) is down 4.5%.

Despite the ASX slump, Aristocrat Leisure is currently trading on a price-to-earnings (P/E) ratio of 37 times. This is roughly in line with the industry average.

The post Could Aristocrat (ASX:ALL) still be eyeing a Playtech deal of sorts? appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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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Investing in the small side of the share market carries more risk than other areas.

However, if your risk tolerance allows for it, having a bit of exposure to the small side of the market could be a good thing for a balanced portfolio. This is due to the potential returns on offer from promising small caps.

With that in mind, here are three small cap ASX shares to watch closely:

Airtasker Ltd (ASX: ART)

The first small cap ASX share to consider is this growing online marketplace for local services. The team at Morgans is very positive on Airtasker due to its belief that the company has a very attractive business model and a significant market opportunity. The broker highlights that the company’s product works for both sides of the marketplace, has attractive unit dynamics with healthy gross and contribution margins, and an enormous total addressable market (TAM) which is in the early stages of ecommerce adoption. It also sees opportunities for Airtasker to expand globally. Morgans has an add rating and $1.27 price target on the company’s shares.

PlaySide Studios Limited (ASX: PLY)

Another small cap ASX share to watch is PlaySide Studios. It is one of the largest independent video game developers in Australia with a portfolio comprising 50+ titles. Among these titles are games developed in collaboration with studios such as Disney, Pixar, Warner Bros, and Nickelodeon. PlaySide has also recently announced promising deals with games publishing giant 2K Games and gaming influencer company One True King. Canaccord Genuity currently has a buy rating on its shares. Though, a 30% gain on Monday has taken its shares beyond the broker’s price target. Thus, investors may want to wait for the broker to assess the company’s latest update before considering an investment.

SILK Laser Australia Limited (ASX: SLA)

A final small cap ASX share to look at is SILK Laser. It is one of Australia’s largest specialist clinic networks, offering a range of nonsurgical aesthetic products and services. This includes laser hair removal, cosmetic injectables, skin treatments, body contouring, and skincare products. Pleasingly, SILK has continued to experience strong demand for its services during the pandemic, which has underpinned robust sales and profit growth. The good news is that management doesn’t expect its growth to stop there. Particularly given its plan to expand its clinic materially over the next decade. Wilsons is bullish on the SILK share price and has an overweight rating and $5.25 price target on its shares.

The post 3 highly rated small cap shares with heaps of potential appeared first on The Motley Fool Australia.

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• Why is the PlaySide Studios (ASX:PLY) share price on pause today?
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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 recommended Airtasker Limited. The Motley Fool Australia has recommended SILK Laser Australia 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 share price of mining technology provider Imdex Limited (ASX: IMD) suffered today following the release of the company’s results for the first half of financial year 2022.

As of Monday’s close, the Imdex share price is $2.89, 2.36% lower than it was at the end of last week.

However, earlier in the day the company’s stock reached $3.15, representing a 6.4% gain.

Imdex share price slips despite record revenue and profits

• $167.8 million of revenue – 34.9% more than in the first half of financial year 2021
• Record earnings before interest, tax, depreciation, and amortisation (EBITDA) of $51.5 million ­– up 55.1%
• $24.4 millon of net profit after tax, an 80.8% increase
• $30 million of cash at the end of the half, 31% more than at the end of the prior comparable period
• Fully franked 1.5 cent interim dividend

Over the course of the 6 months ended 31 December, the company saw its activity increase in all regions, particularly Australia and the Americas.  

Further, 35% more of the company’s sensors were on hire during the half compared to the prior comparable period.

However, its pace of growth was hampered by labour restrictions and wider industry pressures.

Due to said pressures, the company increased its manufacturing capabilities and inventory levels to ensure it can continue supporting its clients.

Finally, IMDEX HUB-IQ‘s connected revenue increased by 46% last half.

The fully franked 1.5 cent interim dividend declared today represents a 24% payout ratio. It’s also 50% more than the company handed out through its previous interim dividend.

What else happened during the first half?

Over the half just gone, Imdex acquired the MinePortal software from DataCloud International for around $20 million. It expects the acquisition will boost its growth within the mining production market.

It also acquired a 30% interest in Datarock Holdings for $5.5 million. The purchase will allow Imdex to offer image analysis software, artificial intelligence (AI) capabilities, and additional answer products.

The number of client sites trialling IMDEX BLAST DOG including integration with both IMDEX HUB-IQ and MinePortal software was expanded last half.

Imdex also released an IMDEX HUB-IQ software-as-a-service (SaaS) module for quality assurance survey data and next generation aiSIRIS software.

The company also released its first sustainability report.

What did management say?

Imdex CEO Paul House commented on the company’s results for the first half, saying:

The combination of 35% revenue growth, 55% EBITDA growth, and 81% NPAT growth, is the strongest possible statement of the underlying quality of the Imdex business and the Imdex business model.

Our significant uplift in earnings reflected strong demand across all regions, particularly for our higher margin sensors and software.

What’s next?

Those interested in the Imdex share price might be excited to learn the company’s plan to grow in the future.

To achieve sustainable earnings growth, it will be growing its core business in resources-focussed exploration and development and expanding its technologies within the adjacent mining production market.

It will also be investing further into research and development and leveraging its capabilities in the mining production market.

Finally, it will be looking for more acquisition or collaboration opportunities to build on its geoscience analytics, AI, and computer visualisation capabilities.

It expects drivers of growth will include new innovations, discoveries, decarbonisation, and strong commodity prices.

Looking to the remainder of financial year 2022, Imdex expects additional expenses to come from the inflationary environment.

It also anticipates that COVID-19-induced challenges will remain in some form for another year or two. Though, it states it’s in “its strongest position” to face the risks front on.

Imdex share price snapshot

The Imdex share price has slipped 0.6% year to date.

However, over the 6 months ended 31 December, it has gained 44%.

It is also currently 56% higher than it was this time last year.

The post Rock and roll: Why the Imdex (ASX:IMD) share price slid downhill today 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. owns and has recommended Imdex Limited. 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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The Champion Iron Ltd (ASX: CIA) share price finished in the red today amid the company providing an investor update.

The iron ore explorer’s share price closed the day at $6.75, down 2.46%. For perspective, the S&P/ASX 200 Index closed down 0.13%.

Let’s take a look at the company’s latest news.

What is happening at Champion Iron?

Champion Iron is an iron ore miner exploring the Bloom Lake and Fire Lake projects in the Canadian province of Quebec.

Today’s share price fall may have been because the company traded ex-dividend today. Ex-dividend day is the first date a company’s shares trade minus their declared dividend. This means that anyone buying CIA shares from today will not receive the dividend payment.

Champion Iron declared a dividend payment of 10 cents per share on 27 January. As the company stated in its third-quarter investor presentation, shareholders who owned shares before today will receive their dividend payment on 1 March 2022.

As my Foolish colleague Sebastian has explained, a company’s share price can be reasonably expected to fall by the value of the dividend amount at open on the ex-dividend date.

In the case of the Champion Iron share price, it opened 8 cents lower than Friday’s closing price.

What else did Champion Iron announce?

Champion Iron released a new investor presentation to the market today. The report covers the company’s FY22 results for the 9 month period ending 31 December 2021.

The report reiterates the figures released in the company’s third-quarter results. However, there was one key difference.

Today, the company reported a net average realised selling price of US$157.9 per tonne year to date. In its third-quarter financial results, Champion Iron reported the net realised selling price at US$196.1 per tonne. That’s a 19% decline on its previously-stated price.

Champion Iron also reported it has invested more than $4 billion in high-quality assets and has substantial reserves and resources on top of Bloom Lake’s 20-year mine life.

The mine is producing high-grade iron concentrate with a 66.2% Fe concentrate with very few impurities. The miner has a study underway looking into increasing the concentrate to 69% Fe.

Share price snapshot

The Champion Iron share price is up 32% in the past year and has risen 24% year to date.

The company’s shares have gained 6.39% in the past week alone.

For perspective, the benchmark ASX 200 has returned 4% over the past year.

Champion Iron has a market capitalisation of about $3.4 billion based on today’s share price.

The post What happened to the Champion Iron Ltd (ASX:CIA) share price today? appeared first on The Motley Fool Australia.

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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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ASX growth shares could be smart opportunities in February 2022. Plenty of businesses have seen declines since the start of the year.

If businesses keep growing at an attractive pace, then lower prices can mean the ASX share is better value.

But, experts have been looking at the potential opportunities and have rated these two as buys:

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is an ASX growth share that is liked by several brokers, including UBS which has a price target of $12.20 on the company. That implies a potential increase of the Temple & Webster share price by around 50% this year.

The broker thinks that the company will be one of the beneficiaries as more people do their shopping for homewares and furniture online. Management says that the business-to-consumer market for furniture and homewares is worth $16 billion, with less than 9% of that sold online. This equates to $1.1 billion to $1.4 billion sold online.

UBS thinks that Temple & Webster can continue to grow with both its existing client base as well as through winning new customers. The FY21, the number of active customers increased by 62% year on year to 778,000. FY21’s revenue per active customer increased 12% because of customers repeat buying more often and spending more when they do.

The company is regularly expanding its product range and service offering for customers. For example, it’s working on its private label program which saw its share of revenue grow from 19% to 26%. It also has a highly-rated app as well as an AI interior design service which helps make shopping easier and allows customers to visualise products.

City Chic Collective Ltd (ASX: CCX)

This ASX growth share is a leader in the retail of clothes, apparel and footwear for plus-size women.

It operates through a number of different brands including City Chic, Avenue and Evans.

The business is currently rated as a buy by the broker UBS with a price target of $6 – that’s around 10% higher than where it is today.

UBS has noted a number of positives from a recent trading update from City Chic.

For the 26 weeks to 26 December 2021, sales soared by 49.8% to $178.3 million despite the impact of store closures.

The company said that revenue growth has been supported by the strategic investment in inventory to proactively manage the risks associated with global supply chain volatility. City Chic’s “strong” inventory position supported sales growth in the US and Australia through the critical Black Friday and Christmas trading.

The active customer base rose 23% to 1.32 million and website traffic rose 22% to 70.6 million.

The ASX growth share thinks that the strong performance in the USA shows the potential to capture and grow its share of international markets, with total Americans revenue rising 62% to $77.2 million.

City Chic said that the global opportunity for the company is stronger than ever and it continues to experience growing customer demand across its multi-channel offering.

The post 2 ASX growth shares to buy this month: experts appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group 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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While the Westpac Banking Corp (ASX: WBC) share price has been performing better this month, it is still down materially from its highest levels.

This has been caused by concerns over margin pressures, its cost cutting plans, and ultimately fears that its shares could be a value trap.

A value trap is a share that is trading at such low levels that it appears to be dirt cheap when in fact it is being accurately priced by the market.

Is the Westpac share price a value trap?

According to the team at Morgans, its analysts believe the bank’s first quarter update demonstrates that the Westpac share price isn’t a value trap.

Morgans commented: “We believe the trading update supports the view that the challenges facing WBC are not unsurmountable and that the stock should not be priced like a value trap. We believe the update particularly serves to alleviate investor concerns around the cost outlook.”

According to the note, the broker has retained its add rating and $29.50 price target on the shares of Australia’s oldest bank. Based on the current Westpac share price, this implies potential upside of 37% over the next 12 months.

What did Morgans say?

Although Morgans acknowledges that Westpac’s net interest margin (NIM) is falling, its analysts aren’t overly concerned. Particularly given their belief that competition in home loans will ease as rates rise.

Its analysts explained: “With the RBA’s announcement that its bond purchase program will end on 10 February 2022 and with prospects of rising interest rates, we believe there are growing prospects of normalisation in basis risk which we generally expect to hit the NIMs of non-bank lenders harder than the NIMs of banks. We consequently see diminishing ability of the non-bank lenders to compete on price and we see potential for the prevailing fierce competition in the variable rate home loans space to abate.”

In addition, the broker remains confident that Westpac can achieve its target of an $8 billion cost base by FY 2024.

It commented: “WBC’s FY21 result led to increased investor scepticism about the outlook for operating expenses and the ability of WBC to achieve its $8bn cost target by FY24. We believe today’s trading update will serve to alleviate some of this scepticism. 1Q22 operating expenses (excluding notable items) are broadly in line with our expectation. Expenses reduced 7% from 2H21 to 1Q22 on a run-rate basis. Including notable items, operating expenses reduced 26% over this period.”

All in all, Morgans believes this makes the Westpac share price great value at the current level.

The post Here’s why the Westpac (ASX:WBC) share price isn’t a value trap appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro owns Westpac Banking Corporation. 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 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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