The AVZ Minerals Ltd (ASX: AVZ) share price is back from its trading halt and sinking notably lower.

At the time of writing, the lithium explorer’s shares are down 15% to 54.5 cents.

Why is the AVZ Minerals share price sinking?

The AVZ Minerals share price has come under pressure today after the company completed its institutional placement.

According to the release, AVZ has received firm commitments to raise $75 million (before costs) at a 22% discount of 50 cents per new share. Approximately 85% of the funds were raised from global institutions, with the balance coming from existing sophisticated shareholders. This includes cornerstone investor Suzhou CATH Energy Technologies.

Management highlights that the capital raising will allow the AVZ Board to efficiently progress towards a Final Investment Decision (FID) for the commencement of project development at the Manono Lithium Project in the Democratic Republic of the Congo.

In addition, management notes that it will provide foundation support for AVZ’s longer term strategic vision to vertically integrate via further investments into downstream lithium processing opportunities.

An important milestone

AVZ Minerals’ Managing Director, Nigel Ferguson, believes this is an important milestone for the company.

He commented: “This capital raising marks an important milestone in our journey to develop the Manono Project which strengthens the financial position of the Company and will assist to keep the Project timeline within reach, despite the award of our Mining Licence taking longer than we had previously anticipated.”

Speaking of which, Mr Ferguson remains confident that the company will receive its licence.

He explained: “We are in close consultation with the DRC Government authorities that are undertaking the Mining Licence assessment and are confident of delivering a favorable outcome for all stakeholders – most importantly the people of the DRC and our shareholders.”

Finally, the company also feels that the capital raising has de-risked things meaningfully and positions it well for financing discussions.

“Such a significant cash injection further de-risks the Company during a time where increased market volatility is apparent and global economic uncertainty still remains. The placement also assists our financing discussions, providing capital for up-front debt finance establishment costs and ensuring minimum liquidity requirements are met which provides AVZ with a solid foundation to negotiate favourable terms,” Mr Ferguson added.

The AVZ share price is up 220% in 2021 despite today’s decline.

The post Why is the AVZ (ASX:AVZ) share price crashing 15% today? appeared first on The Motley Fool Australia.

More reading

• These were the 5 best performing ASX shares in November

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

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

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

What happened

Concerns around crypto mining have hampered the price of Bitcoin (CRYPTO: BTC) today, with the world’s largest cryptocurrency down 4.6% over the past 24 hours, as of 10:15 a.m. ET.

This near-term sentiment didn’t dissuade high-profile growth investor Cathie Wood from placing an astronomical price target on Bitcoin. Wood believes it could surge 1,000%, adding another $500,000 to the token’s existing price around $50,000 today.

So what

Today, headlines suggesting that key Bitcoin mining jurisdictions, such as Kazakhstan, could become less friendly to miners have some concerned about the bearish regulatory stance that’s increasing among regulators of large crypto mining markets. China has already cracked down hard on crypto mining, with the U.S. also apparently looking into the environmental impacts of this energy-intensive activity.

But Bitcoin bulls like Cathie Wood appear to be looking past this negative near-term catalyst. She believes that institutional adoption of Bitcoin could propel it to much higher levels.

Wood argues that despite what appear to be high levels of correlation among Bitcoin and other risk assets during this omicron-related market dip, the digital currency is actually a “low correlation” asset. Institutional investors looking for portfolio diversification may adopt Bitcoin rapidly, to improve risk-adjusted returns. Wood cites relatively low institutional exposure to crypto, and Bitcoin’s status as a top cryptocurrency, as reasons this token in particular could see massive capital inflows.

Now what

The idea that institutional money is likely to flow into Bitcoin first is not necessarily a fringe view. The recent capital inflows into Bitcoin as a result of various ETFs and other investment products targeting Bitcoin are certainly something to watch. It is possible that Bitcoin’s longer-term track record in the crypto market could be the catalyst for increased portfolio adoption.

However, the jury remains out on the extent to which Bitcoin moves in low correlation to other speculative risk assets. This is something that investors have pondered for some time, as well as the volatility of this overall sector. 

Wood set a big price target, and whether she is ultimately proved right in her 10-bagger prediction remains to be seen. However, institutional adoption of Bitcoin will likely continue to be a key catalyst that investors watch when assessing the cryptocurrency. 

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

The post Why the Bitcoin price declined over the last 24 hours appeared first on The Motley Fool Australia.

More reading

• Survey reveals surprising crypto swing as Aussie housing bubble fears grow
• Why Cryptocurrency Mining Stocks Were Up Big Today
• Can Bitcoin and other cryptos be used as an inflation hedge?
• Betashares CRYPTO ETF (ASX:CRYP) drops 16% in the past week. What’s next?
• Why Ethereum, Dogecoin, and Solana Fell This Morning

Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin. 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.

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

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Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Alphinity Investment Management client portfolio manager Alfreda Jonker tells why trying to time the market is fraught with danger.

Looking back

The Motley Fool: Is there a move that you regret from the past? For example, a missed opportunity or buying a stock at the wrong timing or price.

Elfreda Jonker: Over the last year or two with COVID, it’s obviously been a very volatile period and a lot of style switches. And for us at Alphinity, our process is sort of our religion, in that we combine fundamental and quantitative research. We look at this all the time and look at the signals: Where are the earnings upgrades? What is the quality? What is the value of the company? I think, over the last 2 years, a lot of us have started to focus on which of the stocks are the COVID beneficiaries — who will lose and who will win, and when will the reopening happen? 

As a result, we get a stock like Qantas Airways Limited (ASX: QAN) in our portfolio. Even though we reduced it slightly, it’s actually started to see big earnings downgrades.

With all the [COVID] shutdowns and all these false starts, we held out to say, “Okay, we think it’ll get back to that earnings upgrade cycle now”. Then it’s, “Okay, not happening now. Then next year”. 

The regret for us is rather than trying to be cute about timing the cycle — timing particular themes like a COVID reopening — just stick to your process. Just go back to process and, especially through volatile times, just focus on that and say, that is what we always do. 

We’ve been managing our funds like that for 11 years now. Don’t try and play these themes and cycles because, if we did, we probably would’ve traded that particular stock better. 

But of course, you always look at this in hindsight. And I think a lot of people make mistakes over their years, but it’s definitely a lesson that we’ve learned over the last year is… when things get volatile and there are so many different themes driving the market, don’t try and play with those.

Rather, go back to basics and focus on the fundamentals and the earnings, and let that guide you as far as when and how to invest in a company. 

There’s a lot of COVID beneficiaries and reopening stocks that you can put in that same bucket, from a global perspective as well. So that, I would say, is probably our regret. We probably should not try [to] call timing on when to invest in reopening companies.

MF: Fair enough. Regardless of whether you’re an amateur or professional, no one has a crystal ball, do they?

EJ: Exactly. 

Well, on the other hand, it did open up opportunities like Sydney Airport (ASX: SYD), which we didn’t own, but that the valuations obviously pulled back so much that it opened up for opportunity to be bought out. So there was some good that came out of this as well. 

But yeah, nobody’s [got] a crystal ball and I guess that’s why we don’t try and make really big overarching trades on themes or trends or macro calls. 

We rather just focus on that fundamental — bottom-up — finding the leadership opportunities. That’s a better approach for us over the long term if we want to get that consistent return we want to offer.

The post Why investors should never try to time the market or themes appeared first on The Motley Fool Australia.

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• Is the CSL (ASX:CSL) share price great value? Here’s what analysts think:
• Why Ethereum, Dogecoin, and Polkadot are heading lower today
• Westpac (ASX:WBC) share price higher on $3.5bn buyback update
• Why the Vulcan (ASX:VUL) share price is jumping again on Friday
• What I’d do with these ASX dogs of 2021: expert

Motley Fool contributor Tony Yoo owns Sydney Airport Holdings 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 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 CSL Limited (ASX: CSL) share price has been underperforming in 2021.

Since the start of the year, the biotherapeutics giant’s shares are up approximately 7%.

This falls short of the S&P/ASX 200 Index (ASX: XJO) with its gain of 10.5%.

Is the CSL share price good value at the current level?

While the CSL share price underperformance is disappointing for shareholders, it could be a buying opportunity for non-shareholders.

Two brokers that are bullish on the company right now are Morgans and Macquarie Group Ltd (ASX: MQG).

Morgans currently has an add rating and $324.40 price target on its shares, whereas Macquarie has an outperform rating and $338.00 price target.

Based on the current CSL share price of $304.68, this implies potential upside of 6.5% to 11% over the next 12 months.

Why are the brokers positive on CSL?

Both brokers appear confident in the company’s long term growth profile. Macquarie notes that immunoglobulins demand remains strong and is expected to grow in the future. This should be supported by a more efficient plasma collection platform that CSL is working on at present.

Morgans appears to agree with this view. And while it acknowledges that the near term will be challenging because of plasma collection headwinds, it feels CSL is best-positioned to meet the aforementioned growing demand for immunoglobulins.

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

All in all, this could make the CSL share price one to consider for investors that are looking for options in the healthcare sector right now.

The post Is the CSL (ASX:CSL) share price great value? Here’s what analysts think: appeared first on The Motley Fool Australia.

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• What’s going on with the CSL (ASX:CSL) share price on Friday?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. The Motley Fool Australia has 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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

What happened

Top-15 cryptocurrencies Ethereum (CRYPTO: ETH), Dogecoin (CRYPTO: DOGE), and Polkadot (CRYPTO: DOT) were all trading lower Thursday. Over the past 24 hours, these cryptocurrencies sank 4.2%, 1.7%, and 6.1%, respectively, as of 1 p.m. ET.

These moves generally fell in line with the broader market sell-off today in major cryptocurrencies. The entire market dropped 3.6% in value over the past 24 hours, to a total of $2.29 trillion.

So what

A first-mover among smart-contract-enabled blockchains, Ethereum has grown into a potential challenger for Bitcoin for top spot in the crypto market cap rankings. Ethereum’s network is often viewed as the foundational building block of the decentralized finance movement, playing an integral role in many of the use cases we’ve seen of late.

However, investors appear to remain concerned about high gas fees (transaction fees) on Ethereum’s network. These fees have allowed lower-cost competitors such as Solana and Avalanche to gain ground on Ethereum’s market share. Accordingly, this token is seeing pressure today.

Dogecoin’s status as one of the most prevalent meme tokens makes this cryptocurrency a rather sensitive one to market sentiment. In hyper bull markets, this is a good thing. Recently, Dogecoin has rapidly moved to the upside.

That said, in a down market fueled by a rather bearish tone, many investors appear to be rotating out of Dogecoin. Dogecoin can be viewed as a momentum play on the broader market, and more specifically, risk assets. Right now, it appears investors are content to sit on the sidelines with this dog-inspired token.

Polkadot is certainly an interesting token, in that it’s been trending in the wrong direction over the past month. Polkadot’s decline today has brought this token more than 50% below its early November peak. 

Today’s decline in Polkadot is on little news, suggesting broader market momentum is at play with this token.

Now what

Today’s widespread decline appears to be amplifying the negative catalysts already at play with these three tokens. It’s clear that broad capital flows into the crypto sector act as tides, taking most boats (tokens) higher or lower over specific periods of time. With the tide ebbing, investors seem to be content waiting for the dust to settle.

That said, each of these tokens have longer-term catalysts that bulls may look at in a different light, should the tides shift anytime soon. Right now, predicting which direction the crypto market will move from day to day seems to be a fool’s errand. 

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

The post Why Ethereum, Dogecoin, and Polkadot are heading lower today appeared first on The Motley Fool Australia.

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• Crypto investors missing millions after 2 Aussie exchanges collapse

Chris MacDonald owns Ethereum and Solana. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin and Ethereum. 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.

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

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The Westpac Banking Corp (ASX: WBC) share price is edging higher today after providing an update on its $3.5 billion share buyback.

At the time of writing, the banking giant’s shares are up slightly to $21.05.

What’s happening?

When Westpac announced its full year results last month, the bank reported an off-market buyback of up to $3.5 billion of shares.

Since that announcement, the Westpac share price has lost over 18% of its value amid concerns over increasing competition and softer than expected margins.

The Westpac Board has noticed this and today highlighted some positive and negative implications for the buyback.

It commented: “Following the recent fall in Westpac’s share price, the rationale for the Buy-Back is even more compelling. Specifically, the lower share price may provide Westpac with the opportunity to buy back more shares than was originally contemplated. However, the lower current share price level also has implications for Buy-Back participants. As a function of the current share price, the sale proceeds and franking credits that are distributed to Buy-Back participants are potentially reduced.”

What now?

In response to the weaker Westpac share price, the bank has decided to amend some of the terms of the buyback.

This includes the discount range of the buyback. This has been changed to a more generous 0% to 10% discount from 8% to 14% previously. Management notes this will improve the potential return of the buyback for shareholders.

Another amendment is the closing date of the tender period. This has been pushed back to 11 February from 17 December to allow shareholders additional time to assess the revised buyback terms.

Everything else stays the same. The capital component will be $11.34 per share, subject to ATO approval, and the dividend component will be the buyback price less the capital component. The final buyback price will be based on the five-day volume weighted average price at the closing date.

Whatever happens, though, Westpac remains committed to buying back up to $3.5 billion worth of shares. This will see the bank buy back shares on-market to make up the difference if the final buyback demand is less than $3.5 billion.

Westpac’s CFO, Michael Rowland, commented: “The lower share price may provide us with the opportunity to buy back and cancel more shares than we originally expected. Accordingly, we are committed to completing our capital management program. The changes to the Buy-Back announced today are designed to ensure that participants are not disadvantaged by recent market movements and increase the likelihood of us buying back $3.5 billion of shares. If Buy-Back demand is less than planned, we intend to commence an on-market buy-back for any shortfall.”

The post Westpac (ASX:WBC) share price higher on $3.5bn buyback update 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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The Vulcan Energy Resources Ltd (ASX: VUL) share price is pushing higher again on Friday.

In morning trade, the lithium developer’s shares are up 5.5% to $11.68.

This means the Vulcan Energy share price is now up 19% over the last two trading sessions.

Why is the Vulcan Energy share price rising today?

The catalyst for the rise in the Vulcan Energy share price today was the release of its sixth announcement in the space of a month.

On this occasion, the short seller target has announced the acquisition of an operational geothermal renewable energy power plant in the Upper Rhine Valley at Insheim, Germany.

According to the release, Vulcan is paying approximately 31.5 million euros for the plant, which will be funded from a portion of the proceeds from its recent $200 million capital raise.

Management notes that the acquisition of the Insheim Plant establishes Vulcan as an operational renewable energy business. It currently has the technical ability to produce a maximum of 4.8MW renewable power, equivalent to approximately 8,000 households, with an additional ability to produce heating. Though, it currently produces 2.9 MW of electricity on average.

Positively, the Insheim Plant is expected to be a source of revenue for Vulcan. It reported sales of 5.8 million euros and EBITDA of 2.9 million euros for the financial year ending 31 December 2020. The plant presently capitalises on the Feed-in Tariff for geothermal power.

Vulcan will formally take over the plant from 1 January 2022 and will retain all existing local employees as part of the transition. The company also plans to invest in the expansion and modernisation of the power plant.

Vulcan’s Managing Director, Dr. Francis Wedin, commented: “This is a significant, first step in establishing Vulcan as a revenue generating, renewable energy producer. German State and Federal policy increasingly supports decarbonising heating and power grids, with a focus on decentralised, renewable energy, and Vulcan intends to build a number of distributed geothermal renewable energy plants across the Upper Rhine Valley region.”

“Vulcan subsidiaries GeoThermal Engineering GmbH and gec-co (Global Engineering & Consulting-Company GmbH) have already been successfully active in Insheim for many years. We will capitalise on our local knowledge and expertise to continue to make a positive contribution to the energy transition in the region, while discussions with multiple local stakeholders to provide renewable heating to communities and renewable power to the German grid are ongoing.”

The post Why the Vulcan (ASX:VUL) share price is jumping again on Friday appeared first on The Motley Fool Australia.

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

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In a year when the S&P/ASX 200 Index (ASX: XJO) has risen more than 10.6%, there are still some popular ASX shares that have caused investors to tear their hair out.

Unfortunately, for amateurs and professionals alike, knowing when to sell shares of failing companies is easier said than done.

Shaw and Partners portfolio manager James Gerrish analysed some of the “laggards” in his flagship growth portfolio this week and related to this dilemma.

“Unfortunately when companies come out with downgrades it can be hard to exit at optimum levels as they tend to gap lower,” he said in his Market Matters newsletter.

“We may have enjoyed a solid year but these positions have been the major detractors on this portfolio’s P&L.”

Let’s take a look at 3 ASX shares that have stunk in 2021, and what Gerrish would do with them:

Appen’s risk-reward okay now 

Technology company Appen Ltd (ASX: APX) sure has been a pain in many investors’ portfolios in recent times.

Just this year alone the share price for the artificial intelligence service provider has plunged 62%.

It didn’t help that in late November the stock fell more than 20% in 2 trading days. This was triggered by Macquarie Group Ltd (ASX: MQG) research, which was concerned that Appen hadn’t yet provided a year-end guidance and a trend of its big clients bringing its services in-house.

Gerrish agreed that both points made sense.

“The markets certainly backed the Millionaires’ Factory on this one,” he said.

“The question is how much potentially bad news is baked into this particular cake and can we see another spike back up towards $15 (i.e. our initial target)?”

Appen closed Thursday at $9.72. 

Gerrish would like to cut Appen loose soon.

“We feel the risk-reward is ok around $9.50 but at this stage we are looking for an exit moving into 2022 rather than averaging our position here.”

Is there anything more infuriating than A2 Milk shares?

Dairy producer A2 Milk Company Ltd (ASX: A2M) has infuriated shareholders so much that it will now be defending itself against 2 class actions from its own investors.

After touching $20 back in July 2020, the stock closed Thursday at a sorry $5.63.

After buying in at around $8, Gerrish said he doesn’t intend to buy any more A2 Milk shares now but is optimistic in the short term.

“While there’s nothing comforting about A2 Milk trading sub-$6, we can see another spike into the $7 to $8 region, at least as new management starts to get some runs on the board after completely re-basing earnings at their most recent update, while corporate appeal can’t be ignored.”

His team will then look to exit once it hits those levels.

An ugly spring might turn into an awesome autumn

Many Australian investors looked to Virgin Money UK CDI (ASX: VUK) this year as a post-pandemic recovery play in Europe.

But after hitting a 52-week high in September, the shares have lost almost a quarter of their value. The Virgin stock price lost an eye-watering 11.3% in just one day last month after a financial update.

It closed Thursday at $3.10.

“The stock’s cheap because the market clearly lacks confidence that the company can deliver on their digital transformation and cost out strategy moving forward,” said Gerrish.

Despite the UK returning to COVID-19 restrictions this week, his team reckons “a resurgence” will be coming in the new year and will “likely” be retaining its position.

The post What I’d do with these ASX dogs of 2021: expert appeared first on The Motley Fool Australia.

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• This broker thinks the A2 Milk (ASX:A2M) share price is heading to $7.70
• How the A2 Milk (ASX:A2M) share price tanked 5% in November
• Leading brokers name 3 ASX shares to buy today
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Motley Fool contributor Tony Yoo owns A2 Milk and Appen Ltd. 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 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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If you are looking to bolster your portfolio with some S&P/ASX 200 Index (ASX: XJO) shares, you may want to look at the two listed below.

Both of these ASX 200 shares have been given buy ratings recently. Here’s what you need to know about them:

Goodman Group (ASX: GMG)

The first ASX 200 share to look at is Goodman Group. It is a leading integrated commercial and industrial property company with a portfolio of in-demand properties. Goodman’s properties have exposure to key growth markets such as ecommerce and logistics.

The team at Citi are very positive on Goodman’s outlook. Its analysts currently have a buy rating and $27.50 price target on the company’s shares.

In response to its recent trading update, Citi commented: “We continue to see upside to FY22 guidance and now forecast FY22 EPS of 76.9c (+17% growth), 2% ahead of guidance. Importantly, our 3 year EPS CAGR lifts 200bps to ~16%, reflecting higher asset values, and development activity.”

REA Group Limited (ASX: REA)

Another ASX 200 share to look at is property listings company REA Group. It is best-known for the realestate.com.au website, which is dominating the ANZ market with an average of 121.9 million monthly visits to its website in FY 2021.

Goldman Sachs is a big fan of REA Group. The broker currently has a buy rating and $193.00 price target on its shares.

Following its recent acquisition of Mortgage Choice, Goldman said: “We believe the increased focus on finance makes strategic sense for REA, as it looks to capitalize on its strong brand, digital traffic and property data to take share of the sizable, but fragmented mortgage broking industry in Australia. This market has strong near-term volume tailwinds.”

The post 2 highly rated ASX 200 shares to buy appeared first on The Motley Fool Australia.

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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 REA 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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A payments expert has predicted that ASX buy now, pay later (BNPL) shares are going to have a tough year in 2022.

One of the leading minds in the payments space has predicted that bad debts and losses will mount up next year.

Prediction of BNPL woes

According to reporting by the Australian Financial Review, Grant Halverson, who is the founder and boss of payments consultancy outfit McLean Roche, believes that ASX BNPL shares could see even higher bad debts in 2022 which may lead to lower credit ratings and higher funding costs.

Mr Halverson was quoted as saying:

The moment their bad debts go up their cost of funding will go up three or four times faster than the actual rate rises and the rating agencies will downgrade them, and then they’ll get to junk status.

Because they’re all frantically going at the US they’re racing to the bottom. And that means probably more bad debts because they’ve gone after customers who haven’t got credit ratings.

Looking at one of the latest arrears disclosures from a BNPL business, at 30 September 2021, Zip Co Ltd (ASX: Z1P) said that its arrears was 1.87%, which was an increase from 0.91% at 30 September 2020. Arrears are accounts greater than 60 days delinquent, whilst bad debts are defined as accounts delinquent that are overdue by 180 days on an annualised basis. Net bad debts were virtually unchanged at 2.44% at 30 September 2021.

Weak 2022 BNPL expectations

The McLean Roche boss doesn’t have a good outlook for BNPL ASX shares like Zip and Afterpay Ltd (ASX: APT). Cash and cashflow may weaken from here.

The newspaper quoted Mr Halverson on his views:

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.

More regulation coming?

There is growing noise that regulation could be on the way for ASX buy now, pay later companies that could allow merchants to pass on the BNPL fees to customers. Not only has the Treasurer Josh Frydenberg indicated this, the Payments System Board (which includes the RBA governor and other important financial officials) has also had its say.

The Payments System Board said in a statement that it concluded:

It would be in the public interest for ‘buy now, pay later’ providers to remove their no-surcharge rules, consistent with the Board’s longstanding position on such rules. Given the complexity of the regulatory issues, the Bank will continue engaging with the Treasury on regulatory approaches.

The post More pain for ASX buy now, pay later shares in 2022: 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 AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended AFTERPAY T 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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