The Appen Ltd (ASX: APX) share price has had a difficult start to the year.

Since the start of 2022, the artificial intelligence data labelling services provider’s shares are down 15% to $9.46.

This means the Appen share price is now down 58% over the last 12 months.

What’s going on with the Appen share price?

The Appen share price has come under pressure in recent weeks for a number of reasons.

One of those is of course the broad weakness in the tech sector, which has been caused by concerns over the prospect of interest rate increases happening quicker than expected.

Another reason is the recent update from one of its biggest customers, Meta (Facebook), which revealed that the social media giant has experienced significantly weaker advertising demand and revenues than expected.

This doesn’t bode well for Appen, as Facebook uses Appen’s services to support its advertising operations. Appen’s million-plus team of contractors help teach machines to predict which advertisements will resonate with which users.

But that may not be the only Meta blow that Appen has to deal with.

Will Meta disrupt Appen?

Also potentially weighing on the Appen share price has been a recent major development by Meta in relation to artificial intelligence and self-supervised learning.

Meta notes that self-supervised learning is “where machines learn by directly observing the environment rather than being explicitly taught through labeled images, text, audio, and other data sources.” The latter is the type of service that Appen provides.

And while the social media giant highlights that self-supervised learning has powered many significant recent advances in artificial intelligence, it hasn’t been overly successful and human interaction has continued to be necessary in most cases.

But that could be about to change thanks to Meta’s data2vec, which is the first high-performance self-supervised algorithm that works across multiple modalities (text, images, speech, etc).

Meta explained: “We apply data2vec separately to speech, images and text and it outperformed the previous best single-purpose algorithms for computer vision and speech and it is competitive on NLP tasks. It also represents a new paradigm of holistic self-supervised learning, where new research improves multiple modalities rather than just one. It also does not rely on contrastive learning or reconstructing the input example. In addition to helping accelerate progress in AI, data2vec brings us closer to building machines that learn seamlessly about different aspects of the world around them. It will enable us to develop more adaptable AI, which we believe will be able to perform tasks beyond what today’s systems can do.”

“This paves the way for more general self-supervised learning and brings us closer to a world where AI might use videos, articles, and audio recordings to learn about complicated subjects, such as the game of soccer or different ways to bake bread. We also hope data2vec will bring us closer to a world where computers need very little labeled data in order to accomplish tasks,” it added.

The post Is there more pain ahead for the Appen (ASX:APX) share price? appeared first on The Motley Fool Australia.

More reading

• Brokers name 3 ASX shares to buy today
• Why is Meta’s earnings miss bad news for the Appen (ASX:APX) share price?
• Why did ASX 200 tech shares get annihilated today?
• With Afterpay shares no longer listed, is WAAAX officially dead?
• ASX 200 (ASX:XJO) midday update: Westpac higher on Q1 update, tech shares sink

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 Appen Ltd. The Motley Fool Australia owns and has recommended Appen 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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Key points

• The Westpac share price is cheap according to one leading broker, implying there’s 30% upside with the price target
• Westpac has been cutting costs, though its net interest margin is also under pressure
• Asset quality remain strong, though its quarterly result included an impairment charge of more than $100 million

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The Westpac Banking Corp (ASX: WBC) share price is rising after the bank delivered its FY22 first quarter update.

After seeing that announcement and the numbers, some of the country’s leading brokers now reckon that the big four ASX bank is worth buying.

Firstly, let’s look at what Westpac actually said before getting to the ratings:

Westpac’s FY22 first quarter performance

The big four bank reported that its statutory profit for the three months to December 2021 was $1.82 billion (up 80%) and cash earnings were up 74% to $1.58 billion. However, excluding notable items, cash earnings were only up 1%.

Westpac’s lending increased $5 billion, or 0.7% over the quarter. Expenses were down 26% to $2.7 billion. Excluding notable items, expenses fell 7%.

The business also didn’t get the benefit of the earnings of some of the businesses that it has sold off, like insurance.

However, the net interest margin (NIM) fell another 8 basis points to 1.91% because of competition and higher liquid assets. The NIM can be integral for profit changes, which then can have a flow on effect to the Westpac share price.

The bank took on an impairment charge of $118 million, mostly due to increased provision overlays, reflecting continuing COVID-19 related uncertainty.

However, asset quality metrics continue to improve and it finished the period with a common equity tier 1 (CET1) capital ratio of 12.2%.

Comments from management

The Westpac chief financial officer (CFO), Michael Rowland, said:

We have made a sound start to the year and we are seeing the cost benefits of our simplification programs. The environment however remains highly competitive and we continue to see pressure on margins.

Given this, we are bringing forward our simplification plans and changing our operating structure to improve efficiency and move more of our people closer to the customers they support.

Broker thoughts about the Westpac share price

Morgans is one of the most positive brokers on the big bank at the moment. It rates Westpac as a buy and the price rating is $29.50, that’s more than 35% higher than where it is today. The broker thinks that the medium-term doesn’t look too bad for the bank.

The broker notes that Westpac is working and delivering on cutting costs.

Based on Morgans’ estimates, the Westpac share price is valued at 9x FY23’s estimated earnings with a projected FY23 grossed-up dividend yield of 10.6%.

Morgan Stanley is less certain, with a hold/equal weight rating. The price target here is $22.20 – only slightly higher than today. This broker sees that costs are coming down, but it’s not clear how revenue and profit margins are going to perform.

Morgan Stanley puts the Westpac share price at 13x FY23’s estimated earnings.

The post Is the Westpac (ASX:WBC) share price too cheap to ignore? appeared first on The Motley Fool Australia.

More reading

• 2 quality ASX dividend shares for income investors to buy
• Brokers name 3 ASX shares to buy today
• Hunting for ASX shares? Experts say to avoid this sector in 2022
• Is the Westpac (ASX:WBC) share price good value after its first quarter update?
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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

• Some promising ASX shares are offering both reasonable dividend yields, earnings growth and plans for more
• Collins Foods is a leading fast food business with expanding networks of KFCs and Taco Bells
• Healthia is a rapidly growing allied health business which is growing organically and enacting a steady stream of acquisitions

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Some ASX shares are known for growth, whilst others are known for dividends. There is a select group that may be able to offer investors a combination of both growth and dividends.

These are businesses that have long-term growth plans whilst also paying shareholders dividends along the way:

Collins Foods Ltd (ASX: CKF)

Collins Foods is an ASX share that operates a network of KFCs in both Europe and Australia. It is steadily expanding its outlet numbers, which is adding to profitability. The company is also achieving long-term same store sales growth.

At the start of February 2022, it completed the acquisition of nine KFC restaurants in the Netherlands.

In the first half of FY22, underlying net profit increased by 31.6% to $28.9 million. This allowed the business to fund a 14% increase of the interim dividend.

But Collins Foods is no longer just a KFC business. It’s leveraging its KFC experience and fast-food know-how to scale its Taco Bell Australia business. The ASX share is investing in marketing to build brand awareness. HY22 Taco Bell revenue surged 33% to $14.8 million, reflecting the contribution of five new restaurants.

The Taco Bell segment is now breakeven at the earnings before interest, tax, depreciation and amortisation (EBITDA) level. It increased the total to 17 restaurants. It’s expecting to add nine to 12 new outlets in FY22.

Overall, the ASX share is expecting to add 24 new restaurants across the group in FY22.

According to Commsec, the Collins Foods share price is valued at 23x FY22’s estimated earnings with a grossed-up dividend yield of 3.1%.

Healthia Ltd (ASX: HLA)

Healthia is a business that operates across multiple allied health services including optometry, podiatry and physiotherapy clinics.

The business is utilising two methods of growth. It’s looking to organically grow profit by improving its current clinic network. Healthia is also expanding through the use of acquisitions.

For example, in late December it announced acquisitions that would add underlying revenue of $9.52 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of $1.9 million. Those acquisitions by the ASX share included eight optometry locations and two physiotherapy locations.

FY21 saw the business grow underlying revenue by 51.8%, organic revenue growth of 9.1% and underlying earnings per share (EPS) growth of 51.6% to 11.13 cents. The business paid a FY21 annual dividend of 4.5 cents per share, the final dividend was increased by 25%.

The Healthia share price is valued at 16x FY22’s estimated earnings with a projected grossed-up dividend yield of 4.1%.

The post 2 ASX shares that could be good buys for both growth and dividends appeared first on The Motley Fool Australia.

More reading

• 2 ASX 200 shares with major upside potential
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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 HEALTHIA FPO. The Motley Fool Australia has recommended Collins Foods Limited and HEALTHIA 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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If you’re looking for growth shares, then look no further. Listed below are four ASX growth shares which have been tipped for strong growth in the future.

Here’s why analysts have rated them as buys:

Altium Limited (ASX: ALU)

The first ASX growth share to look at is Altium. It is a printed circuit board (PCB) design software provider that has carved out a leading position in a growing electronic design market thanks to the quality of its technology. But the company isn’t settling for that and is now aiming to dominate this market with its cloud-based Altium 365 product. Analysts at Jefferies are positive on its future. The broker currently has a buy rating and $48.83 price target on its shares.

Breville Group Ltd (ASX: BRG)

Another growth share that could be a buy is Breville. It is a leading appliance manufacturer responsible for a number of popular brands. These include the Kambrook, Sage and Breville brands. The team at Morgan Stanley is very positive on the company. This is due partly to its global expansion, burgeoning product pipeline, and favourable consumer trends. Last week the broker retained its overweight rating and $36.00 price target on Breville’s shares.

Hipages Group Holdings Ltd (ASX: HPG)

A third ASX growth share to look at is Hipages. This leading Australian-based online platform and software as a service (SaaS) provider connects consumers with trusted tradies. While its recent quarterly update was disappointing due to the impact of lockdowns on its tradie subscriptions, Goldman Sachs remains confident that a post-lockdown rebound is coming. After which, it believes Hipages is well-placed for strong long term growth as it grows its ecosystem into a huge addressable market. The broker currently has a buy rating and $4.60 price target on its shares.

NEXTDC Ltd (ASX: NXT)

A final growth share that could be a buy is NEXTDC. It is a leading data centre operator which appears well-placed to benefit from the structural shift to the cloud. Particularly given its world class network of centres and expansion into edge centres. The company also has its eyes on the Asia market and has opened up offices in Singapore and Tokyo. These markets could provide NEXTDC with a long growth runway.

Citi is a fan and currently has a buy rating and $15.40 price target on NEXTDC’s shares.

The post 4 fantastic ASX growth shares to buy appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor James Mickleboro owns NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Hipages Group Holdings Ltd. and Temple & Webster Group Ltd. The Motley Fool Australia owns and has recommended Hipages Group Holdings 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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Are you looking for ASX dividend shares to buy? If you are, then you may want to look at the shares listed below.

Here’s why these ASX dividend shares could be in the buy zone right now:

Accent Group Ltd (ASX: AX1)

The first ASX dividend share to look at is this footwear focused retailer which owns and operates a range of brands such as HYPE DC, Platypus, and The Athlete’s Foot.

While its performance in FY 2022 has disappointed because of lockdowns, this is only expected to be a short term headwind. In light of this, the future remains very bright for Accent and the team at Bell Potter has urged investors to “buy on current weakness.”

The broker has a buy rating and $2.75 price target. This compares favourably to the current Accent share price of $2.10.

In addition, Bell Potter is expecting fully franked dividends per share of 5.4 cents in FY 2022 and then 11 cents in FY 2023. This equates to yields of 2.6% and 5.2%, respectively.

Westpac Banking Corp (ASX: WBC)

This banking giant could be a dividend share to buy according to the team at Morgans.

In response to the bank’s first quarter update, its analysts have reiterated their add rating and $29.50 price target.

For some time now the broker has been stating its belief that the market was being too negative on the bank’s outlook. It feels this view has been justified with its latest update.

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.”

As for dividends, the broker has pencilled in fully franked dividends per share of $1.19 in FY 2022 and then $1.60 in FY 2023. Based on the current Westpac share price of $21.52, this will mean yields of 5.5% and 7.4%, respectively.

The post 2 quality ASX dividend shares for income investors to buy appeared first on The Motley Fool Australia.

More reading

• Brokers name 3 ASX shares to buy today
• Hunting for ASX shares? Experts say to avoid this sector in 2022
• Is the Westpac (ASX:WBC) share price good value after its first quarter update?
• 5 things to watch on the ASX 200 on Friday
• What can the Westpac results tell us about the outlook for ASX 200 bank shares?

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 Accent Group 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

• ASX tech shares are capable of producing a high level of growth
• Bailador is a tech investment fund with holdings of several leading, private businesses with global aspirations
• Audinate is a leader in the AV space. It’s widely recognised for its audio services and it’s working hard on the video side of the strategy

ASX tech shares have the ability to grow quickly and achieve good profit margins because of the underlying nature of the business.

The recent sell-off in recent weeks and months has opened up some potential opportunities for investors to jump on.

With that in mind, here are two under-the-radar ASX tech share ideas:

Bailador Technology Investments Ltd (ASX: BTI)

This business is a growth capital fund. It is focused on the technology sector, actively managed by an investment team. Bailador gives investors exposure to a portfolio of IT businesses with global addressable markets.

The companies that are within the portfolio are in the ‘expansion stage’. Some of the businesses in the portfolio are Siteminder Ltd (ASX: SDR), Straker Translations Ltd (ASX: STG), Instaclustr, Rezdy, Access Telehealth, Standard Media Index and Nosto.

• Siteminder is a world leader in hotel management and distribution for online accommodation bookings.
• Instaclustr is an open source data platform for cloud-based solutions that require very large scale.
• Straker is one of the world’s fastest growing digital language translation service providers.
• Rezdy is an online channel manager and booking platform for tours and activities.
• Access Telehealth is a telehealth platform for Aussies to get access to healthcare services.
• Standard Media Index is a big data aggregation and analysis platform with exclusive access to advertising expenditure data.
• Nosto is an AI-powered e-commerce personalisation platform.

Bailador remains committed to a portfolio of around 10 to 12 investments and will be patient in waiting for the right opportunities and rigorous in assessing opportunities.

The ASX tech share typically invests $5 million or more in businesses that are usually run by the founders, are two to six years old, with a proven business model and attractive unit economics, have international revenue generation, are exposed to a huge market opportunity and can generate repeat revenue.

Audinate Ltd (ASX: AD8)

Audinate is a business focused on improving the audio visual experience for clients.

It offers the Dante audio over IP networking solution, which the company boasts is the worldwide leader. It’s used by sectors such as professional live sound, commercial installation, broadcast, public address and recording industries.

How does it work? Dante replaces traditional analogue cables by transmitting audio signals to multiple locations at once, using just an ethernet cable.

The ASX tech share is also heavily focused on building up the video side of the business because then it will be able to offer the full AV package to win over clients.

Audinate recently announced the acquisition of the Silex Insight video business. Silex produces video networking products for manufacturers of AV equipment. It has an experienced team of eight engineers, an existing revenue base of approximately US$2.5 million and intellectual property.

Silex’s team will complement the UK video team in Cambridge.

In the first quarter of FY22, Audinate made revenue of US$7.6 million, up 46.1% year on year. Demand is at a record high, with backlog orders for chips, cards and modules. However, component shortages are expected in the second half of FY22.

The post Tech investors should put these 2 top ASX shares on the watchlist appeared first on The Motley Fool Australia.

More reading

• Audinate (ASX:AD8) share price edges higher on acquisition update
• 2 exciting ASX growth shares tipped as buys

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 AUDINATEGL FPO, Bailador Technology Investments Limited, and SiteMinder Limited. The Motley Fool Australia owns and has recommended AUDINATEGL FPO. The Motley Fool Australia has recommended Bailador Technology Investments Limited and Straker Translations. 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 S&P/ASX 200 Index (ASX: XJO) returned to form last week after a major a selloff a week earlier. This led to the benchmark index rising 1.9% over the five days to end it at 7,120.2 points

While a good number of shares pushed higher with the market, some rose more than most. Here’s why they were the best performers on the ASX 200 over the period:

Nufarm Ltd (ASX: NUF)

The Nufarm share price was the best performer on the ASX 200 last week with a 26% gain. Investors were bidding the agricultural chemicals company’s shares higher following the release of a very upbeat trading update. According to the release, Nufarm’s first quarter revenue grew 36% over the prior corresponding period. Management advised that this was supported by favourable weather conditions.

News Corp (ASX: NWS)

The News Corp share price was on form and charged 11.7% higher over the week. Investors were buying the media giant’s shares following the release of its second quarter and half year update. In respect to the second quarter, News Corp delivered a 13% increase in revenue and an 18% jump in EBITDA. This led to the company reporting a first half operating profit of almost US$1 billion, which is up 30% over the same period a year earlier.

QBE Insurance Group Ltd (ASX: QBE)

The QBE share price wasn’t far behind with a 10% gain. There may have been a couple of drivers of this gain. One is the insurance giant being named one of Morgans’ best shares to buy in February. The broker has an add rating and $14.32 price target on its share. In addition to this, the company became a member of the United Nations-convened Net Zero Insurance Alliance last week.

Flight Centre Travel Group Ltd (ASX: FLT)

The Flight Centre share price was a positive performer and rose 10% last week. A number of travel shares were on form over the five days despite there being no news out of them. However, with COVID-19 case numbers easing in Australia, investors may be optimistic that the travel market recovery is coming now.

The post These were the best performing ASX 200 shares last week appeared first on The Motley Fool Australia.

More reading

• Why top brokers see further upside to the Nufarm (ASX:NUF) share price
• Here are the top 10 ASX shares today
• Freaky Friday: Why was the ASX 200 so indecisive 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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• Investors will probably want to know about the great ASX dividend shares revealed below
• Sonic Healthcare has a progressive dividend policy and is steadily expanding its operations with acquisitions
• Inghams has a policy of a high dividend payout ratio and it’s expecting poultry sales to grow in the long-term

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ASX dividend share investors will want to know about the two businesses that are about to be revealed.

They are businesses that have been paying dividends for a while and aim to reward shareholders.

These are companies that have long-term growth plans and could also pay solid dividends:

Sonic Healthcare Ltd (ASX: SHL)

Sonic Healthcare is one of the world’s leading pathology businesses. It also offers imaging services.

It operates in a number of countries including Australia, the UK, Germany, the USA and New Zealand.

Sonic Healthcare has increased its dividend every year in a row for about a decade. It has a progressive dividend policy, meaning the ASX healthcare share looks to grow the dividend every year if possible. It grew the FY21 dividend by 7.1% after a 149% increase in net profit to $1.32 billion.

That strong FY21 result demonstrated operating leverage in both laboratory and imaging divisions, with significant profit margin expansion.

A significant part of the ASX dividend share’s profit growth has been due to COVID testing. In August 2021 it reported that it had conducted around 30 million COVID PCR tests from the start of the pandemic. It’s also the largest non-government COVID vaccination provider.

In the first four months of FY22 to October 2021, it had grown revenue by 5% to $3.09 billion and earnings before interest, tax, depreciation and amortisation (EBITDA) had risen by 16% to $991 million. That was before the huge surge of Omicron cases.

Sonic Healthcare is rated as a buy by Morgan Stanley and expected to pay a dividend yield of 3.5% in FY22.

Inghams Group Ltd (ASX: ING)

Inghams is one of the largest poultry businesses in Australia.

It’s currently rated as a buy by the broker Citi with expectations of a grossed-up dividend yield of 8%.

The broker is expecting Inghams sales will have been significantly impacted because of the labour shortage due to the widespread outbreak of the Omicron variant.

Sales are/were being impacted by the fact that the lower levels of staff were hurting production volumes and operational efficiency.

Another issue for the ASX dividend share is that feed costs continue to remain elevated.

However, the Federal Government and State Government have made changes to isolation rules for close contacts in the food sector which should assist in alleviating some of the staff shortages. As operating conditions begin to stabilise, the company is expecting production capacity to recover quickly to meet customer and consumer demand.

Investors may want to know that in FY21, the business increased its total dividend by 17.9% to 16.5 cents per share.

Inghams has a policy of paying out “reliable dividends” to shareholders, with a dividend payout ratio of between 60% to 80% of underlying net profit after tax. It also wants to keep investing in growth opportunities and major projects.

The post 2 ASX shares every dividend investor needs to know about appeared first on The Motley Fool Australia.

More reading

• These were the best performing ASX 200 shares last week
• Top broker just rated these 3 ASX shares as buys
• Why BWX, PolyNovo, Sandfire, and Sonic shares are tumbling today
• ASX 200 (ASX:XJO) midday update: Crown jumps, miners rally, Sonic sinks
• 2 cheap ASX shares for value investors

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare 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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Last week was a positive one for the S&P/ASX 200 Index (ASX: XJO) at last. The benchmark index rebounded from a selloff a week earlier to rise 1.9% over the period to end it at 7,120.2 points.

Unfortunately, not all shares were able to climb with the market. Here’s why these shares were the worst performers on the ASX 200 over the period:

Boral Limited (ASX: BLD)

The Boral share price was the worst performer on the ASX 200 last week with a massive 36.1% decline. However, this decline was not driven by anything bad. Quite the opposite! This decline relates to Boral returning a total of $3 billion to shareholders following a series of asset sales. This led to Boral’s shares trading ex-capital return on Friday for a total cash distribution of $2.72 per share. This comprises a $2.65 per share capital reduction and an unfranked dividend of 7 cents per share.

Ansell Limited (ASX: ANN)

The Ansell share price was a very poor performer and sank 16.8% over the five days. Investors were  selling this health and safety products company’s shares after it downgraded its earnings guidance. Due to softening demand and COVID-related operational challenges, Ansell now expects its FY 2022 earnings per share to be between 125 US cents to 145 US cents. This is down materially from its previous guidance of 175 US cents to 195 US cents.

Hub24 Ltd (ASX: HUB)

The HUB24 share price was out of form and dropped 5.8% last week. This was despite there being no news out of the investment platform provider. One broker that would see this as a buying opportunity is Macquarie. A week earlier it upgraded HUB24’s shares to an outperform rating with a $32.40 price target. This implies potential upside of over 25% for investors.

Codan Limited (ASX: CDA)

The Codan share price wasn’t far behind with a 4.3% decline over the five days. This decline may have been driven by profit taking from some investors after a very strong gain in the previous week. That week, the Codan share price stormed higher despite the market selloff thanks to a very positive trading update.

The post These were the worst performing ASX 200 shares last week appeared first on The Motley Fool Australia.

More reading

• Why Boral, Magellan, REA, and SEEK shares are falling today
• ASX 200 (ASX:XJO) midday update: REA and News Corp impress, Boral plummets
• Did the Boral (ASX:BLD) share price really just collapse 40%?
• Down 20% in 2022, is the Ansell (ASX:ANN) share price a bargain buy?
• Why Amcor, Boral, Nufarm, and Westpac shares are rising today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Hub24 Ltd. The Motley Fool Australia has recommended Ansell Ltd. and Hub24 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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Key points

• The buy now, pay later (BNPL) sector could be in for a tough time in 2022 according to one expert
• 2022 has already seen a big decline for many of the players, including the Zip share price which is down 30% this year
• Brad Kelly points out that almost none of the BNPL ASX shares are making a profit, which will make it harder to raise capital

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The buy now, buy later (BNPL) ASX shares could be in for a “tough time” according to one of the experts of the payments industry.

There are plenty of BNPL businesses on the ASX like Zip Co Ltd (ASX: Z1P), Block Inc (ASX: SQ2), Sezzle Inc (ASX: SZL), Splitit Ltd (ASX: SPT), Laybuy Holdings Ltd (ASX: LBY), Openpay Group Ltd (ASX: OPY) and Ioupay Ltd (ASX: IOU).

Big declines

Investors have already seen major declines of the share prices of plenty of the buy now, pay later players.

In 2022, the Zip share price has fallen 30% so far. Over the past six months it has slumped 60%.

Since listing on the ASX a couple of weeks ago, the Block share price has fallen 17%. Block is the American company that recently acquired Afterpay.

In the calendar year to date, the Sezzle share price has fallen 27%. The past half-year has seen a 71% capitulation of Sezzle shares.

And so on. There has been a huge deterioration since the last reporting season.

‘Tough time’ coming

According to reporting by News.com.au, an expert of the payments sector called Brad Kelly has some negative expectations for the industry.

Mr Kelly, the managing director of Payment Services, said:

They are very good at marketing spin and PR, good at using the services of highly paid consultants to get around the Consumer Credit Act and are able to offer credit without it appearing as credit.

The reality is the BNPL provider’s bad debts are astronomical, none of them have made a profit, none of them have paid a dividend and share prices are down 70% to 80% to even 90% in some cases.

Mr Kelly points out that nearly all of the companies in the buy now, pay later sector are reporting annual accounting losses.

Another, expert, Grant Halverson, the founder and chief executive of payments consultancy McLean Roche, thinks there is a danger that the buy now, pay later sector could see rising bad debts and the ASX shares could end up with a ‘junk’ rating regarding their debt.

Mr Halverson warned that the BNPL sector could suffer from rising interest rates, which would make it trickier to make a profit and raise money. Speaking to the Australian Financial Review, he said:

They’re going to have to try to raise a lot of money.

It partly depends on how quickly interest rates go up, because if they go up quickly there could be carnage. If there’s a slower uptick then obviously the carnage will be slower in my view.

What are some of the issues?

The experts point out that several large financial players have entered the BNPL space including Commonwealth Bank of Australia (ASX: CBA), Suncorp Group Ltd (ASX: SUN) and Citibank. PayPal is another player that now offers a buy, pay later option.

News.com.au reported that Mr Kelly believes that with no profit and none being sustainably profitable yet, it’s likely that there will be consolidation in the sector.

There is also the longer-term risk of regulation and interest rate rises, which could impact growth too.

The post BNPL ASX shares in for a ‘tough time’: expert 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 Block, Inc. and 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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