Key points

• The Lumos Diagnostics share price is up 8% today, and 22% in the last 3 days
• RAT supply shortages soon coming to an end
• Victorian government’s investment in Lumos Diagnostics has excited investors

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The Lumos Diagnostics Holdings Ltd (ASX: LDX) share price is again on the move today. This comes after news broke that rapid antigen test (RAT) shortages have started to ease over the past few days.

During afternoon trade, the medical diagnostics company’s shares are up 7.92% to $1.09 apiece, having earlier been as high as $1.26. This means that since the end of January — the close of trade on Monday — Lumos Diagnostics shares are up by more than 22%.

RAT supply concerns almost a thing in the past

Investors are pushing up the Lumos Diagnostics share price following the Federal Health Minister’s comments today regarding RATs.

According to an article published by news.com.au, Australia’s supply shortage of RATs could soon be at an end.

Health Minister Greg Hunt said he received a positive message from Chemist Warehouse boss Mario Verrocchi on Wednesday morning.

“The message from the CEO … was that they have very significant supplies,” Hunt said.

On January 24, the government launched a scheme to provide free RATs for pensioners and concession cardholders.

Around 3.1 million RATs have been handed out under the scheme, which is available to roughly 6 million Australians.

Chemist Warehouse, Australia’s largest pharmacy chain, revealed it has handed out two-thirds of free RATs to eligible users. This equates to about 2 million free RATs.

The news follows Lumos Diagnostics’ release yesterday in which it advised the Victorian government intends to support a diagnostics manufacturing facility and innovation hub.

The Andrews government plans to invest $17.2 million in Lumos Diagnostics to establish capability for manufacturing RATs in Victoria.

However, this is subject to the company meeting a number of requirements such as securing approval from the Australian Therapeutic Goods Administration (TGA) for its RATs.

Lumos Diagnostics believes if it is granted these rights, production can begin as early as the second quarter of 2022.

Once the facility is set up, up to 1 million RATs will be initially produced each year. This is expected to increase to up to 50 million RATs a year through the introduction of greater automation and expanding production lines.

Furthermore, the RATs can also be modified to be used for influenza, infectious diseases, reproductive health, and chronic disease management.

About the Lumos Diagnostics share price

Since being listed in July last year, the Lumos Diagnostics share price is down around 12%. However, with this week’s gains, it is up around 13% year to date.

Lumos Diagnostics has a market capitalisation of about $152 million.

The post The Lumos Diagnostics (ASX:LDX) share price is soaring another 8% today. Here’s why appeared first on The Motley Fool Australia.

More reading

• Why the Lumos Diagnostics (ASX:LDX) share price is up 15% today
• AnteoTech (ASX:ADO) share price gains 42% in a week amid RAT race
• Lumos Diagnostics (ASX:LDX) share price climbs amid RAT mania

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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Motley Fool Australia Chief Investment Officer Scott Phillips joined Nine’s Late News on Wednesday night to discuss the RBA hosing down expectations of a rate hike, the surge in energy stocks, and Telstra’s new $1.6b investment.

The post Energy stocks surge and RBA hoses down the chances of a rate rise. Scott Phillips on Nine’s Late News appeared first on The Motley Fool Australia.

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• Why Amcor, Ansell, Block, and Credit Corp shares are sinking today
• These 3 ASX 200 shares are topping the volume charts on Wednesday
• Why Aussie Broadband, BrainChip, Talga, and Telstra shares are pushing higher
• ASX 200 (ASX:XJO) midday update: Amcor slides, BHP and Fortescue storm higher
• Telstra (ASX:TLS) share price climbs on new $1.6 billion ‘nation-building’ projects

Motley Fool contributor Scott Phillips owns Telstra Corporation Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Amcor Limited and Telstra Corporation 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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There are surprisingly few ASX shares that have a record of dividend increases that is longer than a few years. This is especially the case in the aftermath of the coronavirus pandemic. Between 2019 and today, there are only a select few ASX shares that have dialled up their shareholder payments annually. Any of the big banks? Nope. Woolworths Group Ltd (ASX: WOW)? Sadly not. Telstra Corporation Ltd (ASX: TLS)? Its divined has been a flat 16 cents per share for years.

BHP Group Ltd (ASX: BHP) may have doled out monster dividends last year, but its income track record is bumpier than an outback road.

So then you would think that finding a company that has given investors an annual dividend pay rise every year for almost two decades is harder to find than an egg-laying rooster.

But they are out there. And APA Group (ASX: APA) is one of them.

Why APA shares are ASX dividend royalty

Yes, APA has been paying its investors a rising dividend every financial year since FY2004. Back then, investors received a total of 21.5 cents per share. In FY2021, APA shareholders received 51 cents per share in dividend payments. That came after 50 cents per share in FY2020 and 47 cents per share in FY2019. The growth from 21.5 cents per share to 51 cents per share equates to a compounded annual growth rate (CAGR) of 4.92% per annum, which handily outperforms inflation over that period.

Now, of course, APA isn’t the only ASX share with those kinds of dividend bonafides.

Brickworks Limited (ASX: BKW) has been paying a consistent dividend for more than 45 years, although it hasn’t always risen every year. In saying that, the company has raised its dividend every year since 2014.

Before 2020, Ramsay Health Care Limited (ASX: RHC) had given its investors a dividend increase every year since 2000. Unfortunately, the pandemic put an end to that streak for 2020. However, the company did return its dividend payments to 2019 levels in 2021.

But Washington H. Soul Pattinson and Co Ltd (ASX: SOL) is the undisputed dividend king of the ASX. It has paid a rising dividend every single year since 2000, with no interruptions whatsoever over the ‘COVID era’.

So APA might not yet be at that dividend share calibre. But it certainly still has a dividend record that is amongst the best the ASX can offer.

At the current APA share price, the company has a trailing dividend yield of 5.02%. 

The post The APA (ASX:APA) dividend has grown every year for 18 years. What’s next? appeared first on The Motley Fool Australia.

More reading

• Dividend investors should put these 2 top ASX shares on the watchlist
• What kinds of dividends will APA Group (ASX:APA) pay out in 2022?
• What’s up with the APA Group (ASX:APA) share price today?
• These ASX dividend shares keep giving investors a payrise

Motley Fool contributor Sebastian Bowen owns Ramsay Health Care Limited, Telstra Corporation Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns and has recommended APA Group, Brickworks, Telstra Corporation Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Ramsay Health Care 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

• Stablecoins are different from other cryptocurrencies
• They’re backed by another asset, often a more traditional one
• Stablecoins are far less susceptible to market moves due to their backing
• Investors can still earn returns from Stablecoins through various platforms

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It’s been a tumultuous past few months for cryptocurrency. The market has seen wild fluctuations in value, with Bitcoin (CRYPTO: BTC) and other digital currencies plummeting in price. However, one sub-category of digital currencies has been largely immune to the cryptocurrency bloodbath: Stablecoins.

In this article, we will explore the unique characteristics that set Stablecoins apart from other cryptocurrencies.

What are Stablecoins?

It turns out the wild, wild world of crypto is not completely consumed by volatility. Indeed, even the speculative landscape of cryptocurrency demands a need for stability. Perhaps more so than traditional assets.

The solution… Stablecoins.

Put simply, Stablecoins are cryptocurrency tokens that have been pegged to another asset with a more stable value. To date, most Stablecoins have been backed by either a fiat currency or a cryptocurrency.

In other words, the value fluctuates in tandem with the value of a ‘steady’ asset. The largest Stablecoins in the world by market capitalisation all use the United States dollar as their reference point.

USD Coin (CRYPTO: USDC), for example, is pegged to the US dollar and each USDC token is supposedly backed by a real-world dollar held in reserve. Other notable examples include Tether (CRYPTO: USDT) and Dai (CRYPTO: DAI).

Stablecoin	Price (USD)	Market capitalisation (USD)
Tether	$1.00	$77.97 billion
USD Coin	$0.9999	$50.42 billion
Binance USD	$1.00	$15.78 billion
TerraUSD	$0.9994	$11.28 billion
Dai	$1.00	$9.64 billion
TrueUSD	$1.00	$1.51 billion
Pax Dollar	$1.00	$0.94 billion
Neutrino USD	$0.9771	$0.47 billion
Fei USD	$0.994	$0.42 billion
Tribe	$0.6802	$0.31 billion

While many of the above Stablecoins are fiat-backed, there are other options open to investors. For the more decentralised-desiring crypto enthusiasts, Stablecoins also come in crypto-backed and algorithmic forms, removing the link to central banks.

How do they differ from other cryptocurrencies?

The key difference between Stablecoins and other forms of cryptocurrency is that they are not beholden to the whims of the market.

Their stability makes them attractive to many cryptocurrency advocates, as they can safely store their money in Stablecoins without fear that their value will fluctuate significantly. But they still offer most of the benefits associated with cryptocurrency.

While the removal of the downside risk is appealing, keep in mind the upside is no longer present. However, crypto users can take advantage of attractive yields offered on Stablecoins across various platforms at their discretion.

Unlike traditional cryptocurrencies, this is one of the only ways to accrue returns while holding the token.

The post What are Stablecoins and how do they differ from other cryptocurrencies? appeared first on The Motley Fool Australia.

More reading

• Here’s why the leading cryptocurrencies are ticking higher
• Bitcoin has crashed 45%: but its fundamentals remain the same
• Why investing in Bitcoin today is a much trickier environment: expert
• ASX shares have had a shaky start to 2022. Here’s what investors are planning: survey
• Bitcoin price sinks again. Here’s where it could find support: expert

Motley Fool contributor Mitchell Lawler owns Bitcoin. 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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The Westpac Banking Corp (ASX: WBC) share price is pushing higher in afternoon trade.

At the time of writing, the banking giant’s shares are up 2% to $21.03.

Why is the Westpac share price pushing higher?

Investors have been bidding the Westpac share price higher today in response to its first quarter update.

In case you missed it, Australia’s oldest bank delivered unaudited cash earnings of $1.58 billion for the three months. This was up 1% over the quarterly average during the second half of FY 2021.

And while this fell short of Bell Potter’s estimate of $1.82 billion, it was better than some were expecting.

How did Westpac’s result compare?

According to a note out of Goldman Sachs, Westpac is currently outperforming its expectations following this update.

It commented: “WBC announced 1Q22 unaudited cash earnings (ex-notables) of A$1.58 bn, which was 1% higher than the 2H21 quarterly average of A$1.57 bn and run-rating 4% ahead of what is implied by our current 1H22E, with the beat entirely driven by better than expected revenues, which would appear due to Markets and Treasury. The A$118 mn BDD charge was broadly consistent with what is implied by our 1H22E charge of A$233 mn.”

However, Goldman, which has a neutral rating and $25.60 price target on its shares, does have concerns over its net interest margin (NIM) which fell 8 basis points to 1.91%.

It concluded: “Overall, today’s headline performance is slightly better than we had been expecting and while it appears largely driven by Markets and Treasury revenues, this should provide some comfort to the market. That said, the underlying decline in the NIM remains significant, with the NIM (ex-Markets and Treasury) 20 bp lower at Dec-21 than it was on average over 2H21. With approximately one-third of this driven by liquids and two-thirds from competition, retail banking profitability remains under intense pressure.”

The post Here’s what this broker thinks of the Westpac (ASX:WBC) Q1 result appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Westpac higher on Q1 update, tech shares sink
• Westpac (ASX:WBC) share price on watch after reporting $1.58bn Q1 profit
• 5 things to watch on the ASX 200 on Thursday
• How are ASX bank shares responding to the RBA’s interest rate call?
• Morgans names the best ASX financial shares to buy in February

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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Key points

• ASX 200 energy shares have trounced the index this year
• Soaring crude prices could head even higher
• Many OPEC members can’t increase production from current levels

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The S&P/ASX 200 Index (ASX: XJO) is down approximately 7% since the opening bell on 4 January.

That’s despite some outsized gains posted by leading ASX 200 energy shares.

The Santos Ltd (ASX: STO) share price, for example, has gained 11% year-to-date.

Woodside Petroleum Limited (ASX: WPL) shares are up 15%.

And rival ASX 200 energy share Beach Energy Ltd (ASX: BPT) has also gained 15% so far in 2022.

While many factors influence the prices of individual ASX 200 energy shares, the soaring price of crude oil has certainly offered some strong tailwinds.

On 31 December Brent crude was trading for US$77.80 per barrel. Today that same barrel is fetching US$89.40, up 12% to 7-year highs.

And with the pace of new supplies looking to be outstripped by growing demand, crude could march even higher from here, offering more support to ASX 200 energy shares.

OPEC’s gradual increase

The Organization of Petroleum Exporting Countries (OPEC) and its partners, including Russia, successfully managed to cut global production after the pandemic saw demand evaporate and Brent crude oil prices plummet to US$21 per barrel in March 2020.

As energy demand rebounded when the world began to reopen, OPEC has been gradually opening up the crude spigots.

Gradually enough to keep oil prices marching higher, and ASX energy shares outperforming the benchmark.

Speaking ahead of yesterday’s meeting in Riyadh, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said (quoted by Bloomberg), “Prudence as I’ve been preaching about is what saved us in OPEC+. Prudence dictates that you have a bit of a think here and a bit of think there.”

During the meeting, OPEC+ members agreed to increase the cartel’s production level by 400,000 barrels per day (bpd) in March.

However, with political unrest afflicting several members, and a broader lack of investment impacting production capacity, analysts say many members already haven’t been meeting their monthly share of crude output.

As Bloomberg reports:

The 10 OPEC nations engaged in managing supplies increased by 160,000 barrels a day in January, about two-thirds of their targeted amount. The full 23-nation OPEC+ alliance is cutting far more than required, with a compliance rate of 122% in December…

That’s led many analysts, including Goldman Sachs Group, led by Damien Courvalin, to offer bullish forecasts for crude oil moving forward, which should come as good news to ASX energy shareholders.

According to Goldman’s analysts, “Core to our bullish oil price view is the now historically low levels of the oil market’s two buffers: inventory and spare capacity. Even if OPEC+ were ramping up faster, this would only come at the expense of a critically lower level of spare capacity.”

How have these ASX 200 energy shares been performing?

As noted above, the 3 ASX 200 energy shares we named have all outperformed the benchmark in 2020.

They’ve also outpaced it over the past 6 months.

While the ASX 200 is down 5% over the last 6 months, the Woodside share price is up 19%, the Santos share price is up 14%, and Beach Energy shares have soared 25%. 

The post Own ASX 200 energy shares? Here’s what OPEC’s been up to appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Oil prices are at an 8-year high, so why isn’t the Woodside (ASX:WPL) share price?
• Here’s why Santos (ASX:STO) is attracting some investor ire this week
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 shares offer 12% upside after sell-off: JP Morgan

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

• The A2 Milk share price is in the red and down 5.7% over the past 30 days
• In the past year, the company’s shares have dropped nearly 50%
• Takeover rumours emerged in late January but no news as yet

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The A2 Milk Company Ltd (ASX: A2M) share price is gravitating lower over the past month after diving nearly 50% in a year.

Since the first trading day of 2022 on 4 January, the company’s shares have lost 5.7% in value. A2 Milk shares are now trading for $5.25, down 1.31% for the day so far.

Let’s take a look at how the past 30 days have played out.

What’s moving the A2 Milk share price?

A2 Milk shares have been bouncing around in the past month. The biggest fall took place between 20 January and 24 January, when the shares fell 4%.

A2 Milk is a fresh milk and infant formula company. They sell milk products made from cow’s milk that contain the A2 protein type.

Falling revenue in China has plagued the company’s share price, with shipments of products between Australia and China severely disrupted by COVID-19.

It may be that Omicron and interest rate fears plaguing the market as a whole between 20-24 January had an impact on A2 Milk. For perspective, the S&P/ASX 200 Index (ASX: XJO) fell nearly 3% during this period.

However, it hasn’t been all bad this month for A2 Milk. On 25 January, the A2 Milk share price surged 7% on speculation that it could be a takeover target for the Canadian dairy company Saputo Inc. (TSE: SAP).

However, the company’s shares had given back some of these gains by 27 January, falling 3.85%. It may be that investors sold off the shares after the takeover rumour wasn’t confirmed. In fact, A2 Milk did not comment on the rumour at all.

A2 Milk will report its FY22 financial year results on Monday 21 February. In FY21, the company reported a 30% fall in revenue to NZ$1.16 billion and a 79.1% reduction in net profit after tax to NZ$80.7 million.

One broker is optimistic about the company’s fortunes. My Foolish colleague James reported recently that Bell Potter has a $7.70 price target on A2 Milk shares. That’s 46% more than the current price at the time of writing.

A2 Milk share price recap

The A2 Milk share price has fallen by 1.15% over the past 5 days.

That compares to the S&P/ASX 200 Index (ASX: XJO) which is up 2.25% over the same period.

The company commands a market capitalisation of roughly $3.9 billion based on the current share price.

The post Why has the A2 Milk (ASX:A2M) share price spilled 5% in a month? appeared first on The Motley Fool Australia.

More reading

• Can the beaten down A2 Milk (ASX:A2M) share price get back to $10?
• Here are the top 10 ASX shares today
• Why A2 Milk, Baby Bunting, Codan, and Sezzle shares are surging higher
• Why the A2 Milk (ASX:A2M) share price is jumping 8% despite the market selloff
• A2 Milk (ASX:A2M) share price awaits judgement day as earnings draw near

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 A2 Milk. 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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After gyrating downwards over the last 6–8 months, the Cochlear Limited (ASX: COH) share price finally bottomed at 52-week lows of $182.06 in late January.

It has since pushed hard off that level – although at a far smaller trajectory than its 52-week highs of $256.09 in August last year.

Losing approximately $74 per share is a hard pill to swallow in any length of time, let alone within the course of a financial year.

Alas, analyst views are mixed on Cochlear’s direction at the moment. Still, there’s been a flurry of remodelling and valuation changes in the last few weeks in response to the changing healthcare landscape (not to mention Omicron as well).

Can Cochlear live up to these expectations? Let’s take a closer look.

Sentiment is a mixed salad for Cochlear

There are firms recommending to buy, hold and sell the company’s shares, however, the weighting appears to be biased towards a hold.

Out of the 19 analysts covering Cochlear in a list provided by Bloomberg Intelligence, one third have it as a buy, over 44% have it as a hold whereas the remaining 22.2% urge their clients to sell or short Cochlear shares now.

Amongst this list, the consensus price target is $223.74 per share, indicating the overall sentiment appears to be bullish when factoring the ‘wisdom of the crowd’.

Credit Suisse recently upgraded its rating on Cochlear to a buy, assigning a $235 per share price target in doing so. Given the recent pullback in share price, this could be an entry signal and also makes the valuation more attractive.

Fellow broker Citi agrees. It also upgraded Cochlear to a buy today and values the company at a premium of $220 per share.

Meanwhile, each of Jefferies, Macquarie and Morgan Stanley see the opposite side of the coin. All three firms aren’t so rosy on the outlook for the hearing aid giant for 2022 and beyond.

Jefferies and Macquarie are both neutral, although both also reduced their valuations on Cochlear in January as well.

Whereas analysts at Jeffereis value Cochear at $206.40 per share after a 6% haircut, the team at Macquarie are more constructive and see it valued at $222.50 per share (even after a 13% decrease).

Both downgraded the Cochlear share price to neutral in the last few weeks, in contrast to the two upgrades discussed earlier. JP Morgan is also neutral on the company with a $227 price target.

Morgan Stanley is bearish however, and urges its clients to sell Cochlear shares after valuing the company at $180 per share in January.

The broker notes issues on valuation in its recommendation to sell – a rating it shares alongside Goldman Sachs. Analysts at Goldman see Cochlear valued at $197 per share in a note from last year as well.

Nevertheless, factoring in the scope of analysts covering the company, then the sentiment is clearly bullish on Cochlear shares.

Which way will the Cochlear share price go?

Of course, making predictions in the stocks market is a fool’s game, although, perhaps not The Motley Fool’s one. So far in 2022, shares are down 9%, outpacing losses in the wider market.

Yet, most of the bearish commentary is centred around valuation, and not necessarily the company’s Fundamentals. Even the neutral ratings value the company at a substantial premium to where it is trading at today.

JP Morgan even notes the same point explicitly in a recent note, saying that “valuation remains our only real concern with Cochlear, so we retain our Neutral rating, given the lack of upside to our DCF-based price target”.

Cochlear’s products also sit on the podium as the premier offering in hearing implants, non-negotiable, says JP Morgan.

“In our view, Cochlear can comfortably claim to offer the most reliable implants, based on many years of data. This matters, as the importance of reliability has likely risen in the minds of both clinicians and recipients after two competitors have announced major recalls (corrective field actions) in the last two years” the broker said in a recent note.

However, revenue growth has ‘faltered’ for Cochlear recently, according to Redpoint Investment Management chief Max Cappetta, when speaking to The Motley Fool’s Tony Yoo last year.

Cappetta noted that implant sales stagnated during COVID-19 as well, and also believes future growth prospects are already fully priced into the stock.

Hence, it appears that factors of valuation and concerns around the COVID-19 trajectory are weighing the growth outlook for Cochlear shares coming into the near future.

As to which way it will go – if the bulls have it, Cochlear might push towards the consensus price target of approximately $224 per share, but the bearish market pundits reckon it could sink to $180–$197 per share.

In the last 12 months, the Cochlear share price has slipped 6% into the red and is down 9% this year to date. In the past week, shares have regained some steam and are now 2% in the green.

The post Can the Cochlear (ASX:COH) share price live up to analyst expectations? appeared first on The Motley Fool Australia.

More reading

• Do this now to be filthy rich later: expert
• 3 buy-rated ASX shares that just hit 52-week lows
• Why is the Cochlear (ASX:COH) share price tumbling 5% on Thursday?
• Top brokers name 3 ASX shares to buy today
• Here are the latest broker updates from Macquarie. It’s not all pretty for ASX shares.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Cochlear Ltd. The Motley Fool Australia has recommended Cochlear 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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Late last month Zip Co Ltd (ASX: Z1P) confirmed speculation that it was in discussions with buy now pay later rival Sezzle Inc (ASX: SZL) in relation to a potential acquisition.

The company advised that it is always interested in pursuing options that are in the best interests of shareholders. Though, it warned that the discussions with Sezzle are preliminary in nature and there was no certainty that they would result in a transaction of any kind.

And while no details have been provided in respect to the potential terms of the deal, that hasn’t stopped analysts from looking into the potential consequences.

What are analysts saying?

One broker that has run the rule over the potential acquisition is Citi.

According to the note, it feels the acquisition of Sezzle could help Zip scale up in the key United States market, but it isn’t convinced it is the right strategy.

Citi commented: “While we understand the need for Zip to increase scale in the US, we have mixed views on [the] potential acquisition of Sezzle.”

The broker’s main concerns are the deal being unlikely to change Zip’s competitive position and the costs it would be paying to acquire Sezzle’s customer base.

“We see Sezzle as largely complementary in terms of the US consumer and retailer base and Zip could leverage their partnerships (e.g. Discover) to accelerate growth. However, it would not really alter Zip’s competitive position and does not immediately change the Enterprise merchant base in a meaningful way.”

“Further, from a customer acquisition standpoint we see it as an expensive strategy (4.3x Zip’s 2H21 CAC using Sezzle’s market cap and applying 75% of the transaction value to the consumer base) and question whether it would be better to strike equity deals with key enterprise retailers in the US,“ it added.

Though, from a sector perspective, the broker concedes that “increasing consolidation activity as positive for industry profitability.”

Citi currently has a neutral rating and $3.65 price target on Zip’s shares. This compares to the latest Zip share price of $3.04.

The post Is Zip’s (ASX:Z1P) potential acquisition of Sezzle the right strategy? appeared first on The Motley Fool Australia.

More reading

• Why did these tech shares lead the ASX 200 today?
• How much value would buying Sezzle add to the Zip (ASX:Z1P) share price?
• Why Airtasker, ARB, Bubs, and Sezzle shares are pushing higher
• These are the 10 most shorted ASX shares
• ASX 200 (ASX:XJO) midday update: Ansell crushed, ResMed upgraded

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

• VAS is the most popular and widely-held ASX index exchange-traded fund (ETF)
• Uniquely, it tracks the ASX 300 index, which includes the largest 300 ASX shares
• VAS is about to undergo some major changes in its next rebalance to align with its index

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It’s been a big month for the Vanguard Australian Shares Index ETF (ASX: VAS). Not just because of the gyrations we’ve seen in the Australian share market over 2022 thus far. Not that those are insignificant. Since the start of the year, the VAS share price has lost a nasty 7.1%, reflecting the volatility we have seen from the S&P/ASX 200 Index (ASX: XJO) and other ASX shares.

But that’s a pretty normal part of investing, even though we haven’t really seen volatility of this nature for quite a while. No, today, we’re discussing the changes that all ASX index-tracking exchange-traded funds (ETFs) are having to make to reflect some very big changes in the underlying indexes they track. Let’s dig in.

So VAS is a rather unique ASX ETF in that it is the only major index fund to track the ASX 300 Index (ASX: XKO), rather than the far more common ASX 200. That doesn’t have too much impact in terms of VAS’s long-term performance against ASX 200 ETFs but the difference is there. Because the ASX 300 index is spread out over an additional 100 companies compared to the ASX 200 index, VAS’s portfolio weightings are spread a little more thinly than other ETFs.

But how exactly will VAS holdings change in its next rebalance?

New kid on the Block

Well, like most ETFs, VAS will have to adapt to the holdings of its underlying index. And both the ASX 200 and the ASX 300 indexes have been forced to make some big changes over the past month or two.

The first major change follows the completed acquisition of Afterpay. As most investors would be aware, Afterpay was recently delisted and replaced with Block Inc (ASX: SQ2) shares. Block purchased Afterpay in an all-scrip deal. That means that all Afterpay shareholders had to hand in their Afterpay shares last month in return for Block shares.

Investors received 0.375 of a Block share for every Afterpay share owned. This, of course, has also resulted in Afterpay being kicked out of the ASX 200 and ASX 300 indexes to be replaced with Block.

Block shares represent shares in the entire Block company and not just its new Afterpay division. So that’s a presence of a US payments giant that wasn’t there a month ago.

VAS hasn’t yet updated its portfolio beyond 31 December. But as of that date, Afterpay commanded a VAS portfolio weighting of roughly 0.95%. Looking at the updated figures of ASX 200 ETF iShares Core S&P/ASX 200 ETF (ASX: IOZ), we see that Block now has a 0.81% weighting in that ETF. So it’s now likely something similar will occur for VAS.

VAS has got a brand new BHP

Secondly (and more impactfully), we have the unification of BHP Group Ltd (ASX: BHP). Until this week, BHP held a dual-listing across both the ASX and the London Stock Exchange. That meant that BHP’s full market capitalisation was split across these 2 share markets.

But last year, BHP announced that it would be ending this dual-listing structure and moving exclusively to the ASX. That means that all of those London-listed shares have had to relocate to the ASX, which occurred this week. This has pushed up BHP’s weighting in the ASX 200 and ASX 300 indexes.

As of 31 December, BHP had a 5.57% weighting in VAS’s portfolio. But now that unification has been completed, BHP is now the top share in the iShares ASX 200 ETF. It now has a weighting of 10.82% in IOZ. That comes in way ahead of the silver medallist, Commonwealth Bank of Australia (ASX: CBA), with its weighting of 7.62%.

Again, we will probably see a similar change in VAS when it updates its share portfolio. This far higher weighting means that BHP shares now have far more influence on the entire ASX 200 and ASX 300 than they used to.

So those are the not-insignificant changes that VAS will be undertaking in its next update. Indexes naturally shift and evolve over time. But these changes are without a doubt the most significant the ASX indexes have seen for years.

VAS charges a management fee of 0.1% per annum and has delivered an average annual return of 10.69% over the past 10 years. At the time of writing, the VAS share price is $90.47, down 0.23% for the day and down 6.8% year to date.

The post The Vanguard Australian Shares ETF (ASX:VAS) is about to get a major 2022 makeover. Here’s what is changing… 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 Block, 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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