Key points

• ResMed shares have been upgraded by Goldman Sachs
• Broker wasn’t blown away by its second quarter update
• Analysts see enough long term potential to make it a buy

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The ResMed Inc (ASX: RMD) share price is charging higher on Monday.

In morning trade, the sleep treatment focused medical device company’s shares are up 3% to $32.17.

Why is the ResMed share price charging higher?

Investors have been bidding the ResMed share price higher today following the release of a bullish broker note.

According to a note out of Goldman Sachs, its analysts have upgraded the company’s shares to a buy rating with a slightly trimmed price target of $35.80.

Based on the current ResMed share price, this implies potential upside of 11% for investors over the next 12 months.

Why is Goldman bullish on ResMed?

Goldman notes that ResMed’s second quarter update was a bit of a disappointment. Not only did its revenue and earnings fall a touch short of the broker’s estimates, Goldman’s concerns about the impact of supply shortages on the company’s ability to capitalise on a competitor recall were only heightened.

Goldman said: “The 2Q22 update did little to ease our concerns that supply shortages will materially restrict the near-term upside from competitor challenges. The recall tailwind of $45-55m in 2Q represented a sharp sequential slowdown from $80-90m in 1Q, and we now forecast the FY22 benefit at $285m, below the guided range of $300-350m.”

Nevertheless, the broker notes that the ResMed share price has pulled back recently to a more attractive level. This, combined with its bullish view on the company’s long term prospects, warranted an upgrade to buy.

The broker explained: “RMD is the clear leader in an attractive market with long-term, realizable penetration upside (underpinning a high-single digit organic profile). Competitive positioning has consistently strengthened over the last decade and looks set to continue to do so. The pricing profile is the most supportive in years, and whilst the ongoing supply/distribution headwinds add cost and complexity to near-term performance, these pressures should progressively ease through the coming quarters, and so have created an attractive entry point in the shares, in our view.”

The post Broker upgrade sends ResMed (ASX:RMD) share price charging higher appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• Why AnteoTech, Newcrest, Nitro, and ResMed shares are falling
• ASX 200 (ASX:XJO) midday update: ResMed and PointsBet disappoint
• ResMed (ASX:RMD) share price on watch after Q2 update disappoints
• 5 things to watch on the ASX 200 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. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ResMed Inc. 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 bank shares are in the spotlight amid rising rate expectations
• Higher rates help banks’ lending margins
• Higher rates could also depress mortgage lending markets

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ASX banks shares are in the spotlight as investors are increasingly convinced that the Reserve Bank of Australia (RBA) will follow the US Fed and begin ratcheting up the official cash rate.

Atop the cash rate likely rising from the current historic low of 0.10%, analysts also are flagging an unwinding of the RBA’s bond buying – or quantitative easing (QE) – program.

If you own ASX bank shares, or are thinking of investing, here’s what the prospect of higher rates could mean for the likes of Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), and Westpac Banking Corp (ASX: WBC).

What these experts are saying on rate rises

On the plus side for ASX bank share prices, higher interest rates tend to increase banks’ lending margins. But that benefit could be impacted by higher rates dragging on new lending in mortgage markets. And then there’s the looming end to government pandemic funding benefits.

Commenting on the potential impact on ASX banks shares, Citigroup analyst Brendan Sproules said (quoted by the Australian Financial Review):

Despite a better short-term rate outlook over the next two years, revenue challenges will remain as the unwinding of COVID-related funding benefits (11 basis points), as well as continued mortgage competition (19 basis points), will consume much of the deposit margin benefit…

Higher rates will invariably lower borrowing capacity and pressure the housing market.

While housing market lending could take a hit, Sproules was bullish on the outlook for business lending. “System credit growth will also benefit from accelerating business credit, which we estimate will print 7.5 per cent in financial year 2022 as under-leveraged businesses gear up,” he said.

Jarden analyst Carlos Cacho also thinks ASX bank shares could be battling some headwinds in the year ahead.

According to Cacho (quoted by the AFR):

While 2022 is likely to be a solid year for the Australian economy, we expect it to be a tougher one for the banks – margin pressure, while fading, is set to remain, while credit growth is likely near its peak and mortgage competition remains intense…

Looking ahead, we still expect margin compression but see scope for moderating pressure given support from the repricing of fixed-rate mortgages, higher swap rates and moderating funding cost tailwinds.

Cacho added that he sees “the business-oriented banks” – ANZ and NAB – as “better placed in managing margin contractions in financial year 2022”.

How have these ASX bank shares been performing in 2022?

The S&P/ASX 200 Index (ASX: XJO) is down 6.77% so far in 2022.

By comparison, the NAB share price has fallen 4.13%; the CBA share price is down 5.28%; ANZ shares have lost 0.15%; and Westpac is down 3.37%.

Not exactly shooting the lights out, but all the ASX bank shares are beating the benchmark…so far.

The post Here’s what higher interest rates could mean for ASX bank shares appeared first on The Motley Fool Australia.

More reading

• What to expect from the NAB (ASX:NAB) Q1 update next month
• NAB (ASX:NAB) is the only Aussie bank on this international list of 7,000 companies. Here’s why
• Top broker sees 43% upside for the Westpac (ASX:WBC) share price
• Own CBA (ASX:CBA) shares? Here’s what the big bank reported this week
• Are these beaten down ASX 200 shares now too cheap to ignore?

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

• Sezzle delivered strong growth during the fourth quarter
• Customer and merchant numbers continue to rise
• Key merchant additions expected to boost its performance in FY 2022

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The Sezzle Inc (ASX: SZL) share price is on the move on Monday morning following the release of its fourth quarter update.

In early trade, the buy now pay later (BNPL) provider’s shares are up 2% to $2.39.

Sezzle share price rises on strong Q4 growth

• Underlying merchant sales (UMS) up 74.9% to US$561 million (A$772.2 million)
• Fourth quarter total income grew 49.1% to US$32.9 million
• Total income to UMS margin of 5.9%
• Active merchants rose 76% year on year and 5.8% quarter on quarter to 47,000
• Active consumers reached 3.4 million at year end, up 51.5% year on year and 6.5% quarter on quarter
• IKEA signs up in USA and Canada

What happened in the fourth quarter?

For the three months ended 31 December, Sezzle’s UMS grew 74.9% over the prior corresponding period and 21.8% quarter on quarter to US$561 million (A$772.2 million).

A key driver of this strong growth was its performance during the key holiday period. For the four-day period of Black Friday through to Cyber Monday, Sezzle’s UMS rose 53% year on year. This reflects instore growth of 783% and online growth of 46%.

Also supporting its growth were further rises in its customer and merchant numbers. Active customers rose 51.5% to 3.4 million year on year and active merchants rose 76% year on year to 47,000. Among those merchants is IKEA in the US and Canada after the retail giant selected Sezzle as its preferred BNPL partner in these markets.

While the company reported a slight contraction in its total income to UMS margin to 5.9%, Sezzle still delivered strong total income growth of 49.1% to US$32.9 million. Positively, as a percentage of UMS, the provision for uncollectible accounts receivable and transaction expense remains flat year on year.

At the end of the period, Sezzle had total cash on hand of US$78.9 million.

Management commentary

Sezzle’s Executive Chairman and CEO, Charlie Youakim, was pleased with the quarter.

He commented: “Our 4Q21 results demonstrate our strong secular growth, as we reached new highs in UMS, Active Merchants, and Active Consumers. We are also enthusiastic about our in-store growth reflecting the significant opportunity to be more than just an online option for consumers.”

No further updates were given on its potential merger with Zip Co Ltd (ASX: Z1P).

The post Sezzle (ASX:SZL) share price higher after reporting 75% Q4 sales jump appeared first on The Motley Fool Australia.

More reading

• Zip (ASX:Z1P) share price tumbles 10% as top broker questions possible Sezzle play
• Why A2 Milk, Baby Bunting, Codan, and Sezzle shares are surging higher
• ASX 200 (ASX:XJO) midday update: Zip confirms Sezzle talks, Fortescue’s Q2 update
• Why is the Sezzle (ASX:SZL) share price rocketing 20% higher?
• Zip (ASX:Z1P) share price higher amid Sezzle acquisition talks

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

• Bubs has delivered strong growth during the second quarter
• Demand in daigou channel improving
• Solid growth in Australian channels

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The Bubs Australia Ltd (ASX: BUB) share price has started the week with a bang following the release of its second quarter update.

At the time of writing, the infant formula company’s shares are up 14% to 51 cents.

Bubs share price jumps on improved performance

• Quarterly gross revenue up 8% quarter on quarter and 56% over the COVID-impacted prior corresponding period to $19.9 million
• Half year revenue of $38.5 million, which is up 73% over the prior corresponding period
• Infant formula revenue up 83% across all markets
• Corporate daigou channel revenue up 196% and China CBEC sales up 48%
• Generated positive cash flow for second quarter in a row, improving cash balance by $2.3 million to $30.6 million

What happened during the second quarter?

The Bub share price is storming higher today after revealing a major improvement in its performance during the second quarter. This saw revenue grow 56% over the COVID-impacted prior corresponding period to $19.9 million.

Management advised that this was driven by demand for its infant formula, particularly in China. Its corporate daigou channel delivered growth of 196% after demand exceeded pre-pandemic levels. This was supported by the Chinese cross border ecommerce channel, which reported a 48% lift in sales.

Bubs also revealed that sales have been strong in Australian supermarkets and chemists. And while it claims to be the fastest growing infant formula brand across these channels, it is worth remembering that it is growing from a very small base compared to its larger rivals. The company’s current market share stands at 3.9%.

All in all, this improved performance led to Bubs generating positive cash flow during the quarter, lifting its cash balance by $2.3 million to $30.6 million. Though, this was also due to its cash receipts being $4 million larger than its revenues during the period.

Management commentary

Bubs Founder and CEO Kristy Carr, commented: “Bubs has consolidated the solid gains of its COVID turnaround in the first quarter into a pattern of growth momentum across all key markets and product groups. Bubs Infant Formula remains our hero product line and lead margin driver, up 83% on prior year, accounting for nearly two thirds of revenues.

“On the home front, sales revenue of branded products increased 17 percent quarter-on-quarter. Despite the subdued market, Bubs Infant Formula grew in both absolute terms and in market share with scan sales growth of 31 percent in Coles, Woolworths and Chemist Warehouse consolidating its strong market share position to remain the fastest growing infant formula manufacturer, achieving nearly 4 percent market share of the total infant formula category.”

Outlook

Bubs’ Executive Chair, Dennis Lin, said: “Against the backdrop of myriad challenges, the team continue to execute strategy with precision through operational excellence, and the results speak for themselves as we lead the return to growth for our category.”

“As our momentum gains further pace, we will continue to look for ways to grow through market and products expansion as we aspire to become the leading global family nutrition brand from Australia,” Mr Lin concluded.

The post Bubs (ASX:BUB) share price jumps 14% amid strong daigou-fuelled Q2 growth appeared first on The Motley Fool Australia.

More reading

• 2 ASX shares that could soar in 2022: experts
• Can the Bubs (ASX:BUB) share price bounce back in 2022?

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 BUBS AUST 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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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.

The recent sell-off in the stock market hasn’t spared crypto; Bitcoin is barely up over the past year and down almost 60% from its all-time high. Shares of cryptocurrency technology company Coinbase Global (NASDAQ: COIN) are facing a similar struggle, down roughly the same amount.

Bitcoin and Coinbase tend to trade together, so the recent slide could be seen as an opportunity for investors to consider Coinbase as a long-term holding. Here’s why.

Bitcoin influences Coinbase stock

Coinbase is a cryptocurrency technology company, but its primary business is its exchange that allows people to buy and sell crypto. It charges transaction fees for these trades, generating revenue.

Users can buy and sell nearly 100 different cryptocurrencies on Coinbase, but Bitcoin and Ethereum are the two largest, contributing 21% and 22% of transaction revenue, respectively. All of the other cryptos add up to the remaining 57%.

Bitcoin price. Data by YCharts.

The strong link between Coinbase and Bitcoin seems to influence how the stock trades. You can see in the above chart how they show nearly identical price action.

But there’s a crucial difference between the two assets: Coinbase’s stock price is a function of supply and demand in the short term, but it’s a real business that generates revenue and earnings, which tend to influence a stock’s value over the long term. Cryptocurrency prices, including Bitcoin’s, are almost solely a matter of supply and demand; they don’t have underlying fundamentals, which could make them more volatile. Bitcoin’s recent drop in price may be influencing Coinbase’s stock, regardless of the company’s underlying financials.

Stellar financials

Cryptocurrency has become increasingly mainstream in the investment community, both among retail users and institutions. In Coinbase’s 2021 third quarter, trading volume rose to $327 billion from just $45 billion the year-earlier period.

This leap in volume created triple-digit revenue growth for Coinbase; revenue in the third quarter increased more than 300% year over year, but declined from the previous quarter, indicating how the business can fluctuate based on how actively crypto is trading on the platform.

The business is very profitable because Coinbase doesn’t need to spend much to maintain its platform. It turned 25% of its revenue into free cash flow in the 2021 third quarter, and $406 million of its $1.2 billion in revenue fell to the bottom line, a net profit margin of almost 33%.

COIN revenue (quarterly YOY growth). Data by YCharts. YOY = year over year.

Analysts are looking for full 2021 revenue of $7.29 billion, which puts the stock at a price-to-sales ratio of less than 6, despite its tremendous growth. Expected earnings per share (EPS) for 2021 are $13.06, a price-to-earnings (P/E) ratio of just under 15.

The company is growing and is profitable, yet the stock trades at almost half the P/E ratio of Coca-Cola, which produces EPS growth at a mid-single-digit rate!

Now, Coca-Cola is a more proven business than Coinbase, and investors might not be sure yet of crypto’s future, which would, in turn, mean that Coinbase’s long-term prospects are uncertain. Still, the financials seem to be easily justified by this low valuation. If sentiment toward crypto picks up in the future, it could create a lot of upside in Coinbase’s stock via a higher valuation.

A long runway for growth

In other words, an investment in Coinbase probably means that you’re a believer in cryptocurrency as a whole. Assuming that crypto has a long-term future, the company is well positioned for many potential growth opportunities. It’s going to release Coinbase Card, a physical payment card that lets you spend any assets in your Coinbase portfolio (both U.S. dollars and cryptocurrencies), earning crypto rewards. Hardly any businesses accept crypto as payment, and while this isn’t a direct solution, it could significantly help crypto investors get more use out of it.

Coinbase is also developing a marketplace for non-fungible tokens (NFTs), digital assets that use blockchain technology to authenticate and record their ownership. The waiting list for this marketplace runs to more than 2.6 million names, making it potentially the largest NFT marketplace at launch. According to investment bank Jefferies, the NFT industry is small but rapidly growing, and could reach $80 billion in value by 2025.

There could be ups and downs along the way

More people are steadily adopting cryptocurrencies, so Coinbase’s role as one of the primary exchanges for these digital assets could make for tremendous long-term growth. However, it’s important to remember that Coinbase might be more volatile than most stocks.

So much of its current revenue comes from transaction volume, which can fluctuate depending on the overall price level of cryptocurrencies. Coinbase might see periods of explosive growth, and then it might contract. Investors will want to keep this in mind and remember that it’s the long-term trends that matter most. This is a young company in a rapidly growing industry; the road will probably be bumpy, but the destination could be worth it. 

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

The post Thank Bitcoin for Making this stock so cheap in 2022 appeared first on The Motley Fool Australia.

More reading

• Is winter coming for the crypto world? A bull and bear case
• What? 2 days of gains for Bitcoin, Ethereum, and Dogecoin?
• Bitcoin and Ethereum are at 6-month lows. Is now the time to pounce?
• Could this Achilles’ heel bring Bitcoin tumbling down?
• Bitcoin in the crosshairs. What Russia’s proposed ban could mean: expert

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and recommends Bitcoin, Coinbase Global, Inc., Ethereum, and Jefferies Financial Group Inc. The Motley Fool Australia owns and recommends Bitcoin and Ethereum. 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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Key Points

• Qantas shares down 6% last week due to market fears and WA border closure
• Retains lowest domestic capacity needed to break-even against rivals
• Scheduled to report H1 FY22 results on 24 February

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A few turbulent weeks has led the Qantas Airways Limited (ASX: QAN) share price lower in 2022.

Stock markets around the world plummeted following concerns of military tension between Russia and Ukraine. In addition, interest rate rises and the spread of Omicron has fuelled investors’ worries.

Nonetheless, after a strong sell-off during the week, the airline operator’s shares rebounded by 3.96% to $4.73 apiece. It is worth noting though that Qantas shares are still down by 6% over the last five trading days.

In contrast, the S&P/ASX 200 Index (ASX: XJO) rose 2.19% to 6,988.1 points on Friday. While ending the day on a positive note, the benchmark index shed 4.83% for the week, hitting a 9-month low.

How’s Qantas coping with COVID-19?

Known as the ‘flying kangaroo’, Qantas has been diligent in its fight against the COVID-19 pandemic.

Management’s focus on trimming down costs has helped the company stay afloat during the last two years.

The airline can sell fewer seats and still make a profit as compared to industry rivals, Virgin Australia, Regional Express Holdings Ltd (ASX: REX) and upcoming low-cost carrier, Bonza.

In the past 12 months, domestic planes flying across Australia were at 55% capacity. This is compared to around 80% before the pandemic struck, with Qantas and Virgin taking the lion’s share.

According to Jarden analyst, Jakob Cakarnis, Qantas only needs 55% of its seat to fill in order to break even. For low-cost subsidiary, Jetstar, this number stands at just 43% due to its ‘no frills’ approach.

On the other hand, out of voluntary administration, Virgin, needs 76% of its seats to be bought to reach break-even.

Regional Express, which launched several new domestic routes to compete with Qantas and Virgin, requires at least 80% capacity.

Bonza is expected to arrive to Australia sometime this year and be ultra-cost competitive with Jetstar.

Without a doubt, Qantas remains in a strong position given its premium offering and wide network of flights. As the most established airline in Australia, it is only a matter of time before Qantas returns to pre-COVID profitability.

This is despite providing an update on its domestic capacity settings following the border closure of West Australia.

Consequently, management advised that it will cut its planned domestic capacity by roughly 10% from 5 February to 31 March. Qantas stated that whilst it operates at a reduced capacity, core connections between Perth and other capital cities will remain.

Factoring in the latest changes, total group domestic capacity stands around 60% of pre-COVID levels for the third-quarter of FY22.

Qantas is scheduled to report its FY22 half-year results on 24 February.

What do the brokers think?

A couple of brokers believe that the Qantas share price is attractively valued at its current price.

Last month, UBS slashed its outlook by 3.1% to $6.20 per share, representing a potential upside of 26%.

Similar to UBS’s view, the team at JPMorgan also reduced its valuation by 1.6% to $6.15 on Thursday. It appears the broker thinks that there is still significant value in the airline and that a recovery is inevitable.

Qantas share price summary

Since the start of 2022, the Qantas share price has fallen by 5% amid negative investor sentiment across global markets. However, when looking at a larger time frame such as the last 12 months, its shares are up 4%.

Based on valuation grounds, Qantas has a market capitalisation of around $8.92 billion, with approximately 1.89 billion shares on issue.

The post Is Qantas (ASX:QAN) poised to smash its rivals once travel recovers? appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to sell next week
• Are Virgin Australia shares set to rejoin the ASX soon?
• Qantas (ASX:QAN) share price falls amid rollercoaster day for ASX travel shares
• 3 ASX shares to buy right now that are famous Aussie brands
• Why the Qantas (ASX:QAN) share price will be on watch today

Motley Fool contributor Aaron Teboneras owns Qantas Airways 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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Key points

• NAB’s first quarter update will be released early next month
• Bell Potter expects a quarterly cash earnings of $1.59 billion
• The broker thinks now is a good time to buy. It has a buy rating and $31.00 price target on its shares

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The National Australia Bank Ltd (ASX: NAB) share price will be one to watch next month when it releases its first quarter update.

Ahead of the release, let’s take a look to see what the market is expecting from the banking giant.

What should you expect from the NAB Q1 update?

According to a note out of Bell Potter, the broker is expecting NAB to deliver a result largely in line with what was achieved in FY 2021.

Bell Potter is forecasting cash earnings of $1.59 billion and cash earnings per share (EPS) of 49 cents.

It explained: “Back in FY21, cash earnings and cash EPS were $6.56bn and 199¢ and there was no difference to numbers ex-large notable items (i.e. excluding restructuring-related costs and customer-related remediation). On a quarterly basis, these would be around $1.61bn cash earnings and 49¢ cash EPS respectively and would be equivalent to our forecasts of close to $1.59bn cash earnings and around 49¢ cash EPS in 1Q22 (again with no difference to ex-large notable items).”

As for its CET1 ratio, the broker expects this to come in at 12.2% after taking into account the Citi acquisition and its $2.5 billion share buyback. This is still ahead of its target range of 10.75% to 11.25%.

Another positive that Bell Potter is expecting is the bank’s credit impairment charge. It expects better credit impairment outcomes overall including ongoing momentum across home lending, SME lending, and New Zealand.

As for its outlook, Bell Potter concluded: “The COVID-19 outlook still calls for calm but the bank remains “optimistic about the long-term outlook for Australia and New Zealand” – something that we can still agree with.

Is the NAB share price in the buy zone?

Bell Potter believes the NAB share price is good value at the current level.

It has retained its buy rating and $31.00 price target. Based on the current NAB share price of $27.65, this implies potential upside of 12% over the next 12 months. In addition, Bell Potter expects a fully franked 4.9% dividend yield in FY 2022, boosting the total potential return to almost 17%.

The post What to expect from the NAB (ASX:NAB) Q1 update next month appeared first on The Motley Fool Australia.

More reading

• NAB (ASX:NAB) is the only Aussie bank on this international list of 7,000 companies. Here’s why
• Own NAB (ASX:NAB) shares? Here’s why the bank could be facing a $200m class action
• What’s happening to ASX bank shares today?
• 2 ASX dividend shares with large and growing yields
• Does the NAB (ASX:NAB) share price make it the best value bank right now?

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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If you’re a fan of small cap ASX shares, then you may want to add the two shares listed below to your watch list.

Here’s what you need to know about these growing small cap ASX shares:

PlaySide Studios Limited (ASX: PLY)

The first small cap to watch is PlaySide Studios. It is one of the largest independent video game developers in Australia. At present, the company’s portfolio comprises 50+ titles that are delivered across four platforms – mobile, virtual reality, augmented reality, and PC. Among these titles are games developed in collaboration with studios such as Disney, Pixar, Warner Bros, and Nickelodeon. PlaySide has also recently announced promising deals with games publishing giant 2K Games and gaming influencer company One True King that could be a big boost to its growth in the coming years. Management estimates that it has a US$159 billion global addressable market to grow into over the next decade.

Canaccord Genuity currently has a buy rating and $1.00 price target on its shares.

Serko Ltd (ASX: SKO)

Another small cap to watch is Serko. It is the online travel booking and expense management provider behind the Zeno Travel and Zeno Expense platforms. The Zeno Travel platform provides artificial intelligence-powered end-to-end travel itineraries, cost control and travel policy compliance to corporate customers. Whereas the Zeno Expense platform allows users to automate and streamline the expense administration function, identify out-of-policy expense claims, and prevent fraud. While demand for its offering has suffered during the pandemic, demand has been rebounding. For example, Serko reported an 81% jump in operating revenue to NZ$9.2 million during the first half of FY 2022. The good news is that the second half should be boosted by the Booking.com deal, which has seen 300,000 business customers migrated to the Zeno platform.

Ord Minnett has a buy rating and $8.10 price target on Serko’s shares.

The post 2 growing small cap ASX shares to watch appeared first on The Motley Fool Australia.

More reading

• Playside Studios (ASX:PLY) share price rockets 18%. What’s going on?
• 2 exciting ASX tech shares that actually jumped last month
• 3 small cap ASX shares to watch in January

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 Serko Ltd. The Motley Fool Australia has recommended Serko 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 some dividend options for your portfolio? Then check out the two ASX shares listed below that Goldman Sachs rates highly.

Here’s why these ASX dividend shares have been tipped to as buys:

Scentre Group (ASX: SCG)

The first ASX dividend share to look at is Scentre. It is the owner and operator of Australia’s leading shopping centre portfolio. Scentre has over $50 billion of retail real estate assets under management across 42 Westfield shopping centres.

While Scentre has been hit hard by the pandemic, the team at Goldman Sachs sees the company as a top reopening play.

Goldman Sachs commented: “Prior to the snap lockdown restrictions, sales metrics showed signs of improvement along with a pick-up in leasing momentum which we expect to continue as restrictions continue to ease and customer visitations continue to rebound.”

And with 70%+ of its base rental income subject to inflation-linked escalation, the broker believes that Scentre is well-placed to benefit from rising inflation.

As for dividends, Goldman is forecasting dividends of ~14 cents per share in FY 2021 and then 15.9 cents per share in FY 2022. Based on the latest Scentre share price of $2,88, will mean yields of 4.9% and 5.5%, respectively.

Goldman has a buy rating and $3.47 price target on the company’s shares.

Suncorp Group Ltd (ASX: SUN)

Another ASX dividend share that could be in the buy zone is Suncorp. Through its numerous brands, for over a century Suncorp has been building futures and protecting what matters by offering insurance, banking, and wealth products and services.

This has allowed the company to carve out a strong market position in Australia, which looks unlikely to change in the foreseeable future.

Goldman Sachs is positive on Suncorp’s future and has a buy rating and $13.74 price target on its shares.

It commented: “While it is now harder to argue that SUN is cheap, we have nonetheless maintained our Buy rating, where we see good momentum in the business, plus near-term earnings risks as skewed positively.”

The broker is expecting some generous dividends in the near term. It has pencilled in fully franked dividends per share of 61 cents in FY 2022 and 73 cents in FY 2023. Based on the current Suncorp share price of $11.16, this will mean yields of 5.5% and 6.5%, respectively.

The post 2 ASX dividend shares Goldman Sachs rates as buys appeared first on The Motley Fool Australia.

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• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Analysts name 2 ASX 200 dividend shares to buy today
• Own Suncorp (ASX:SUN) shares? Here’s what top analysts are saying
• Could this impact the performance of ASX 200 banks more than interest rates in 2022?

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

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Key points

• Telstra shares are viewed as an opportunity by several leading analysts
• It has made two, useful bolt-on acquisitions in recent months
• The T25 strategy is expected to increase profitability and lead to growing dividends over time

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The Telstra Corporation Ltd (ASX: TLS) share price looks like an opportunity according to some analysts.

Despite the recent drop of the ASX share market, Telstra shares are still actually up by 25% over the past year.

It has been a big year of strategic moves by the business. Analysts are taking note and think that the company could be an opportunity.

Analyst ratings on the Telstra share price

Ord Minnett currently rates the Telstra share price as a buy with a price target of $4.85. That’s a potential increase of more than 20% this year if the broker is right.

Another broker that likes the telco is Credit Suisse, which rates it as a buy with a price target of $4.40.

Morgans rates the Telstra share price as a buy with a price target of $4.55.

What are the experts seeing?

The telco giant has made two acquisitions in the last several months that can diversify and help grow the company’s earnings over the long-term.

MedicalDirector deal

Telstra Health has bought a business called MedicalDirector for an enterprise value of $350 million.

It’s described as a leading GP clinical and practice management software company. It helps the specialists focus on providing high-quality care and reducing time on paperwork and administration. At the time of the acquisition, it supported approximately 23,000 medical practitioners and is used to deliver more than 80 million consultations a year.

Digicel Pacific acquisition

One of the most interesting acquisitions on the ASX in 2021 was the purchase of the Digicel Pacific business in partnership with the Australian Government. The purchase price for the South Pacific telco was US$1.6 billion and up to an additional US$250 million subject to business performance.

The Digicel Pacific business will be owned and operated by Telstra. The ASX telco is providing US$270 million of equity to the purchase price, whilst the Australian Government will provide the remaining US$1.33 billion through a combination of non-recourse debt facilities and equity-like securities.

It has a “strong” market position in the South Pacific region, with a leading position in PNG, Nauru, Samoa, Tonga and Vanuatu. Digicel is number two in Fiji.

Digicel Pacific made US$233 million of earnings before interest, tax, depreciation and amortisation (EBITDA) in the 12 months to 31 March 2021.

T25 strategy

One of the main things that analysts are now focused on in regards to the Telstra share price is its strategy for the next few years, called T25.

It involves ongoing expansion of 5G coverage and regional 4G coverage, increasing customer satisfaction and increasing the number of Telstra Plus members to 6 million.

On the financial side of things, to FY25, Telstra wants to achieve a compound annual growth rate (CAGR) of mid-single digits for underlying earnings before interest, tax, depreciation and amortisation (EBITDA) and high-teens for underlying earnings per share (EPS).

The company is also looking to reduce its net fixed costs by another $500 million.

Telstra also said that it’s looking to maximise its fully franked dividends and seek to grow them over time.

Telstra share price valuation

Using Ord Minnett’s numbers, Telstra shares are valued at 21x FY23’s estimated earnings with a grossed-up dividend yield of 5.8%.

The post Here’s why the Telstra (ASX:TLS) share price could be an opportunity: analysts appeared first on The Motley Fool Australia.

More reading

• 2 ASX dividend shares with 4%+ yields
• These 3 ASX 200 shares are topping the volume charts this Friday
• Here’s why the Telstra (ASX:TLS) dividend is back over 4%
• These 3 ASX 200 shares are topping the volume charts on Thursday
• Telstra (ASX:TLS) ‘best placed in the Aussie mobile market’ says JP Morgan

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 owns and has recommended 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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