The S&P/ASX 200 Index (ASX: XJO) has certainly had a good run over the past 12 months.

Despite yesterday’s pullback, the ASX 200 is up almost 10% since this time last year.

While few will complain about 10% annual returns, the ASX 200 banks, with the exception of Westpac Banking Corp (ASX: WBC), have all done much better.

While Westpac trailed the benchmark with a 7.5% gain over 12 months, National Australia Bank Ltd. (ASX: NAB) led the charge, gaining 25.7%.

The Commonwealth Bank of Australia (ASX: CBA) share price was the next best performer among the ASX 200 banks, gaining 18.2%. Coming in a close third, with a share price gain of 17.1% is Australia and New Zealand Banking Group Ltd (ASX: ANZ).

And don’t forget the franked dividends the banks offer. In that category, Westpac comes out ahead, paying a trailing dividend yield of 5.45%, fully franked.

That’s the 12 months gone by.

Looking ahead, with interest rates increasingly likely to rise internationally and Down Under, what might investors expect from the big banks?

Does the prospect of higher rates make ASX 200 bank shares more attractive?

With global central banks, including the Reserve Bank of Australia (RBA), often taking their lead from the US Federal Reserve, investors have been keeping a keen eye on the Fed.

And the Fed is looking ever more likely to raise rates as much as 3 times in 2022.

According to The Wall Street Journal, “Traders in interest-rate futures are pricing in a 71 per cent chance that the Fed will raise its short-term target rate from its range of 0 per cent to 0.25 per cent by the end of its March meeting.” That’s up from 32% just 1 month ago.

The yield on 10-year US Treasury notes has been trending higher and now tops 1.7%.

Rising interest rates are likely to change the playing field for numerous shares.

Growth shares, like many tech companies, could come under increased pressure as much of their earnings won’t be realised until well into the future. While other sectors, like financials and ASX 200 bank shares, could receive a welcome tailwind.

The market action in both the US and Australia yesterday offer some indication of what investors might expect from rising rates.

In the US, the tech-heavy Nasdaq has been sliding, while yesterday the big banks like Bank of America, Wells Fargo and Citigroup all gained some 2%.

Here in Australia, the ASX 200 sank 2.7% yesterday, while the S&P/ASX All Technology Index (ASX: XTX) fell a staggering 5.6%.

As for the ASX 200 bank shares?

ANZ closed flat yesterday; NAB gained a slender 0.04%; Westpac gained 0.2%; and the CBA share price also closed up 0.2%.

Advantage financials?

As the WSJ reports, Lars Skovgaard Andersen, investment strategist at Danske Bank Wealth Management “intends to target the broad market and European banks that stand to benefit when rates rise, rather than US tech.”

Closer to home, Saxo Capital Markets Australian market strategist, Jessica Amir said that interest rates were rising for the first time in a decade. According to the Australian, she said “this would help banks make bigger profits from mortgages”.

Baker Young’s managed portfolio analyst, Toby Grimm was also bullish on the overall outlook for ASX 200 bank shares. Atop his belief that Woolworths Group Ltd (ASX: WOW) is set to outperform, he said that the banks “should also be interesting”.

His leading option among the ASX 200 banks is CBA.

The post Does the prospect of higher rates make ASX 200 bank shares more attractive? appeared first on The Motley Fool Australia.

More reading

• Own Westpac (ASX:WBC) shares? Top broker says ‘there is still a lot of work to be done’
• Could NAB (ASX:NAB) shares be a dividend gold mine this year?
• Is the Bank of Queensland (ASX:BOQ) share price a better buy than CBA? Here’s what top brokers say
• Here’s why the ANZ (ASX:ANZ) share price had such a great run in 2021
• Here’s why the CBA share price had such a good run in December

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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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.

Thursday brought continued uncertainty to Wall Street, as investors kept trying to consider the ramifications of the Federal Reserve’s latest meeting for the stock market and the economy. As of 1 p.m. ET, the Dow Jones Industrial Average (DJINDICES: ^DJI) was down 24 points to 36,383. However, the S&P 500 (SNPINDEX: ^GSPC) added 14 points to 4,714, while the Nasdaq Composite (NASDAQINDEX: ^IXIC) gained 47 points to 15,147.

Cryptocurrencies, however, continued to lose value, extending declines from all-time highs several months ago. As the tug of war between crypto bulls and bears goes on, though, the more important question of how average investors perceive the digital asset market remains unanswered. Today’s market action reveals a shortcoming of the crypto market, and change will be necessary before many investors will take cryptocurrency seriously.

Moving in lockstep

On its face, there wasn’t anything particularly unusual about today’s moves in prices of top crypto assets. Bitcoin (CRYPTO: BTC) was down almost 6% to just over $43,000. Ethereum (CRYPTO: ETH), meanwhile, fell 8% to around $3,425.

There wasn’t anything fundamental that stood out as justifying these steep moves. Rather, investor sentiment seemed to hinge on the perception that crypto asset values will rise and fall with monetary policy, and the Fed’s tightening stance is seen as a threat to further upward moves in Bitcoin and Ethereum.

Indeed, the near-universal downward movement throughout the cryptocurrency realm provides evidence for that view. If you look at the top 40 or so digital assets, you’ll see very consistent, nearly lockstep movements downward. The only two exceptions early this afternoon were Cosmos (CRYPTO: ATOM) and Decentraland (CRYPTO: MANA), which actually gained ground.

Not all cryptos are the same

That kind of price movement is what you expect when investors don’t see much distinction across different investments in a given asset class. Precious metals investors are used to seeing some days when gold, silver, platinum, and palladium all fall by roughly the same percentages in response to macroeconomic factors that affect them similarly. However, each market has its own dynamics, with supply and demand disruptions not necessarily moving completely in parallel.

The same should be true of cryptocurrencies. When Ethereum takes steps to extend the utility of its platform beyond what Bitcoin can offer, then you should see days when Ethereum rises but Bitcoin falls. Similarly, when smaller crypto projects find success, you should see more divergence across different digital assets, with potential rivals losing ground in comparison to assets that are gaining adoption and becoming fundamentally stronger.

To be fair, you can see some winners and losers shake out when you look more at long-term performance. Gains in Ethereum prices have outpaced Bitcoin’s returns. You can find smaller tokens with stellar performance that leave larger digital assets in the dust. However, much of that has to do with liquidity and the relative size of markets, both of which can amplify price movements.

Still, there’s enough correlation across all crypto assets that investors can’t count on being rewarded for making smart calls about which cryptocurrency projects have the greatest chance of long-term success in their respective missions. That makes the risks involved untenable for many investors. But if the market matures to the point where you start to see clear divergences between winning crypto ideas and losing ones, it could spur the mainstream investor interest that so many in the cryptocurrency arena have looked forward to for years now. 

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

The post This has to happen before investors take cryptocurrency seriously appeared first on The Motley Fool Australia.

More reading

• Should ASX investors allocate 3% to Bitcoin and Ethereum?
• Can Bitcoin (CRYPTO:BTC) steal gold’s safe haven shine to top US$100,000?
• Can these 3 ‘Ethereum Killers’ actually kill Ethereum in 2022?
• Investing in Bitcoin? Here’s what the crypto experts are predicting for 2022
• Here’s what happened with the Ethereum price in 2021

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and recommends 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 Australian Pharmaceutical Industries Ltd (ASX: API) share price has come under pressure on Friday.

This follows news that Woolworths Group Ltd (ASX: WOW) has pulled out of the race to acquire the pharmacy chain operator.

At the time of writing, the API share price is down by a sizeable 12% to $1.52.

What’s happening?

This morning Woolworths announced that it has withdrawn its $1.75 per share takeover offer following a period of due diligence. The retail giant advised that its due diligence revealed that the financial returns from the transaction were not sufficient.

The release explained: “Following the completion of a comprehensive due diligence process, Woolworths Group has advised API that it has withdrawn its proposal as it has not been able to validate the financial returns it requires in line with the Group’s capital allocation framework.”

Woolworths CEO, Brad Banducci, commented: “We are grateful to the Board and leadership team of API for their constructive engagement and support throughout the due diligence process.”

What now?

This news now puts rival Wesfarmers Ltd (ASX: WES) in pole position to acquire the Priceline operator.

However, much to the disappointment of API shareholders, the Kmart operator’s offer was considerably lower than Woolworth’s offer.

Wesfarmers has signed an agreement to acquire API for $1.55 per share, which was 10% lower than where the API share price was trading on Thursday. Though, this will be reduced to $1.53 to reflect a recently paid 2 cents per share dividend.

In response to today’s news, API stated that the agreement with Wesfarmers “remains in place and is on track for completion in the first quarter of calendar year 2022.”

In the meantime, the company will continue to keep the market informed in accordance with its continuous disclosure obligations.

The post API (ASX:API) share price crashes 12% after Woolworths withdraws takeover offer appeared first on The Motley Fool Australia.

More reading

• Wesfarmers (ASX:WES) share price higher after receiving API takeover boost
• How does the Wesfarmers (ASX:WES) dividend compare to other ASX 200 blue chips?
• Leading brokers name 3 ASX shares to sell today
• Woolworths (ASX:WOW) share price shrugs off COVID-induced supply issues
• December has been pretty dire for the Woolworths (ASX:WOW) share price. Here’s why

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 owns and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Wesfarmers Ltd (ASX: WES) share price is pushing higher on Friday morning.

In early trade, the conglomerate’s shares are up 2% to $59.30.

Why is the Wesfarmers share price rising today?

There have been a couple of catalysts for the rise in the Wesfarmers share price on Friday.

One is the Australian share market’s rebound from a severe selloff on Thursday. Investors appear to believe the selling was an overreaction and are back buying shares again this morning.

Also giving the Wesfarmers share price a boost is news that Woolworths Group Ltd (ASX: WOW) has withdrawn its competing takeover approach for pharmacy chain operator Australian Pharmaceutical Industries Ltd (ASX: API).

Woolworths became the favourite to acquire the Priceline owner late last year when it outbid Wesfarmers with its $1.75 per share proposal. This compared to Wesfarmers’ offer of $1.55 per share.

However, following a period of due diligence, Woolworths was unable to validate the financial returns it requires in line with its capital allocation framework. As such, it has withdrawn its proposal and put Wesfarmers back in pole position.

And while Wesfarmers has not commented on the news, API has released an announcement. It advised that the agreement with Wesfarmers “remains in place and is on track for completion in the first quarter of calendar year 2022.”

Why is Wesfarmers wanting to acquire API?

Last year Wesfarmers’ Managing Director, Rob Scott, revealed the rationale for the acquisition.

He said: “Wesfarmers supports the community pharmacy model, including the pharmacy ownership and location rules. If the proposal is successful, we see opportunities to invest to strengthen the competitive position of API and its community pharmacy partners by expanding ranges, improving supply chain capabilities and enhancing the online experience for customers.”

“API would also provide the basis of a new Healthcare division of Wesfarmers and a platform from which to invest and develop capabilities in the growing health, wellbeing and beauty sector,” Mr Scott added.

The post Wesfarmers (ASX:WES) share price higher after receiving API takeover boost appeared first on The Motley Fool Australia.

More reading

• How does the Wesfarmers (ASX:WES) dividend compare to other ASX 200 blue chips?
• Leading brokers name 3 ASX shares to sell today
• Woolworths (ASX:WOW) share price shrugs off COVID-induced supply issues
• December has been pretty dire for the Woolworths (ASX:WOW) share price. Here’s why
• Is the Wesfarmers (ASX:WES) share price an opportunity 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 owns and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Regional Express Holdings Ltd (ASX: REX) share price suffered massively in 2021 as COVID-19 continued to impact the travel industry.

Shares in the airline dropped a mammoth 33% during the year, falling from $2.06 to $1.38. In contrast, the Qantas Airways Limited (ASX: QAN) share price gained 3.3% in the same time frame.

Let’s take a look at what weighed on the REX share price in 2021.

Covid-19 travel bans

It was a tough year for the REX share price as the airline dealt with COVID-19 travel bans. However, the final few months of the year provided relief overall for the company’s shareholders.

The company’s shares dropped nearly 46% between the start of the year and their low point of $1.12 on August 26. Meanwhile, Qantas edged higher from $4.85 to $5.05 during this time, a 4% rise.

After hitting their yearly low, REX shares bounced back to $1.38 on 31 December, a 23% recovery. In the same time frame, Qantas shed 0.6%.

There were a number of low points that hurt the REX share price. These included the company predicting a loss of $15 million before tax for FY 2021, as interstate border restrictions during Covid-19 adversely impacted the airline’s revenue projections. Then, in early August, the company further downgraded its revenue forecast to predict a loss of $18 million. The company attributed these losses to the Sydney lockdown and announced it would temporarily stand down staff.

Then came the fightback. In late August, REX released its full-year results. Management kept costs down by 20.9% compared to the previous year.

In September, the airline revealed its staff stand-downs and service suspensions would continue. Despite this news, the share price continued to rise. Hope that borders would open once the population reached 80% vaccination may have been on investors’ minds.

In October, the REX share price continued to shine. News that flights between Sydney, Melbourne, and Canberra would resume helped drive this recovery.

However, between 1 November and 31 December, the REX share price fell nearly 14%. This was despite the airline announcing it would fly between Brisbane and Sydney and winning a new regulated flight path in Queensland.

Despite the company launching this new interstate flight route in late December, wider Omicron fears continued to impact ASX travel shares including REX. A Tourism and Transport Australia Forum survey revealed four out of five Australians had either cancelled, or were unsure about, their summer travel plans.

REX share price snapshot

Over the course of the year, the REX share price performed 46% worse than the  S&P/ASX 200 Index (ASX: XJO), which gained 13%.

The airline has made a steady start to the year, with its shares currently down just 0.3% to $1.38 apiece.

REX has a market capitalisation of about $151 million based on the current share price.

The post Why did REX (ASX:REX) shares nosedive 33% in 2021 while Qantas edged higher? appeared first on The Motley Fool Australia.

More reading

• What’s impacting the Regional Express (ASX:REX) share price this week?

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 Magellan Financial Group Ltd (ASX: MFG) share price is on the slide on Friday morning.

At the time of writing, the fund manager’s shares are down 1.5% to $20.12.

Why is the Magellan share price falling?

Investors have been selling down the Magellan share price after it released its first funds under management (FUM) update since the loss of the St. James’s Place mandate.

According to the release, Magellan’s total FUM was $95,491 million at the end of December. This was down 18% (or $21,000 million) from $116,413 million at the end of November.

Magellan’s total FUM comprises Retail FUM of $30,837 million and Institutional FUM of $64,654 million. This compares to $30,229 million and $86,184 million, respectively, from 30 November.

What about the quarter?

Magellan had a tough quarter even if you exclude the $23 billion St. James’s Place mandate loss.

According to the release, excluding the mandate termination, Magellan experienced net outflows of $1,552 million during the second quarter of FY 2022. This included net retail outflows of $1,093 million and net institutional outflows of $459 million.

These net institutional outflows comprise Global Equities ($256 million outflow), Infrastructure Equities ($215 million outflow), and Australian Equities ($12 million inflow).

Management and performance fees

For the six months ended 31 December, base management fees were approximately 62 basis points (per annum) of the average of month-end funds under management over the period. Funds under management averaged $112.7 billion for the six months.

Whereas Magellan is entitled to performance fees of only $11 million for the six months.

Following today’s decline, the Magellan share price is now down by a very disappointing 60% since this time last year. This makes it one of the worst performers on the ASX 200.

The post Magellan (ASX:MFG) share price falls after revealing $21bn FUM decline appeared first on The Motley Fool Australia.

More reading

• Down 60%: Is the Magellan (ASX:MFG) share price now a bargain?
• These were the 5 worst performing ASX 200 shares in 2021
• These were the worst performing ASX 200 shares in December
• ASX 200 falls on Friday but records 13% gain in 2021
• Is the Magellan (ASX:MFG) share price a beaten-up buy?

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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Perhaps no sector on the ASX has been hit harder by COVID-19 than travel shares.

And 2021 proved to be in many ways more devastating than 2020 for ASX shares in that industry.

That’s because fortunes in the past 12 months have swung wildly through pandemic-related twists and turns.

First, the travel sector started 2021 with high hopes — coronavirus vaccines were to be rolled out globally and a new US president would guide the world to stability.

Then mid-year, the Delta variant crushed the world’s optimism, forcing many trip cancellations and triggering anti-travel lockdowns.

By November, most states seemed to accept that reopening must happen and the phrase “living with COVID” came into vogue.

Then the world became paralysed with fear in the final 5 weeks of the year as a new variant of the virus, dubbed Omicron, spread like a bushfire.

Phew, that’s a decade’s worth of drama in one calendar year.

The star performers of 2021

So it’s no wonder that the market saw a wide variety of returns from travel shares in 2021.

Here are the 5 that performed the best:

Company	2021 change
Apollo Tourism & Leisure Ltd (ASX: ATL)	98.41%
Sydney Airport (ASX: SYD)	35.41%
Corporate Travel Management Ltd (ASX: CTD)	25.77%
Flight Centre Travel Group Ltd (ASX: FLT)	11.17%
Kelsian Group Ltd (ASX: KLS)	10.31%

Recreational vehicle provider Apollo has put massive smiles on the faces of its investors, with its shares doubling in 2021.

Credit must go to the team at Forager, who was spruiking the stock as a buy from early in the year.

Forager Funds chief investment officer Steve Johnson said back in August that the market did not properly appreciate Apollo’s pandemic-recovery tailwinds.

“Mr Market is anticipating a recovery, but he’s underestimating the amount of structural change [Apollo has] made.”

In a quiet year for plane rides, Sydney Airport shares raked in more than 35% over 2021.

The stock did most of its heavy lifting over just a couple of days in July, when a takeover bid was revealed to the public.

The consortium that wanted to acquire the infrastructure eventually came back with a higher offer, which meant Sydney Airport shares steadily climbed the past 5 months.

The $23.6 billion deal still needs approval from Sydney Airport shareholders in February. But regulatory authorities have given their blessing already.

A takeover-a-thon for this ASX share

Rounding out the top 3 is Corporate Travel Management, which was praised by more than one analyst for acquiring cheap assets during 2020 after COVID-19 first hit.

It followed up this year with a bid for fellow ASX-listed business Helloworld Travel Ltd (ASX: HLO).

Apparently, the 2021 returns are just the start for this ASX share with 8 out of 11 analysts still recommending it as a buy, according to CMC Markets.

The Motley Fool listed Corporate Travel as one of the top shares to buy this month.

“Morgan Stanley noted that Corporate Travel’s Australia and New Zealand business peaked in the 2019 calendar year,” reported The Motley Fool’s Brendon Lau.

“Adding Helloworld’s CY19 total transaction value of around $1.1 billion provides meaningful change in scale. The broker’s 12-month price target on Corporate Travel shares is $23.50.”

Corporate Travel stock closed Thursday at $22.20 a share.

The post 5 best ASX 200 travel shares of 2021 appeared first on The Motley Fool Australia.

More reading

• 2 ASX travel shares that flew higher than Flight Centre (ASX:FLT) in 2021
• Top ASX shares to buy in January 2022
• Why 4DS, Healius, Helloworld, and Humm shares are dropping today
• Why didn’t Flight Centre (ASX:FLT) shares enjoy any Christmas cheer in December?
• Why is the Webjet (ASX:WEB) share price underperforming Helloworld in December?

Motley Fool contributor Tony Yoo owns Corporate Travel Management Limited and Sydney Airport Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Helloworld Limited. The Motley Fool Australia owns and has recommended Helloworld Limited. The Motley Fool Australia has recommended Corporate Travel Management Limited and Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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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

Between a price target hike from Bank of America and some very positive news on electric car battery ranges, Thursday should have been a great day to own Tesla (NASDAQ: TSLA) stock — but it’s not working out that way.

Instead of going up, Tesla stock is going down today, falling 4% as of 10:30 a.m. ET and extending a three-day slide that has already cost Tesla investors 12.5% since the start of the New Year.

So what

But let’s begin with the good news. This morning, analysts at Bank of America raised their price target on Tesla stock to $1,300 a share, as StreetInsider.com reports. On the one hand, the news isn’t as good as it could have been, because BofA stuck with its neutral stock rating on Tesla. On the other hand, though, if the banker is right about its price target, Tesla stock could do a whole lot better than “neutral” this year. It could actually gain as much as 24%.

More unambiguously good news today comes out of Michigan, where battery start-up Our Next Energy, which goes by the nickname ONE, says it has just conducted a road test of a Tesla Model S sedan retrofitted with a prototype ONE battery — and gotten the car to go 752 miles on a single charge. Even more incredible, ONE’s tweaked Tesla accomplished this feat in the ice-cold month of December, when rechargeable battery performance is usually at its weakest. (A third-party tester validating ONE’s result “using a vehicle dynamometer,” presumably not at outdoor temperatures, was able to achieve an even more incredible 882-mile range for the car).  

Now what

Now, that all sounds like fantastic news for Tesla. From an investing angle, one investment bank thinks its stock is worth a lot more than it costs today. From a business angle, another company has independently come up with a battery that — if produced at commercial volumes — could dramatically increase the range of Tesla’s cars.

Granted, that might come at the cost of some profit margin for Tesla, if it needs to license ONE’s technology to achieve the range improvement, rather than building its own batteries in-house and with partners. But if the upside is eliminating car buyers’ “range anxiety” about electric cars once and for all, I suspect it would be worth sacrificing a point or two of profit margin to do that.

Sadly, Tesla stock isn’t reaping any gains from today’s positive developments. Instead, its stock is continuing to crumble along with the rest of the growth stocks on fears the Federal Reserve’s planned interest rate hikes will kill the bull market in stocks.

It just goes to show: Sometimes, you can’t fight the Fed — going up or going down. 

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

The post Why Tesla stock just keeps falling appeared first on The Motley Fool Australia.

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• Could Tesla deliveries double this year?
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• Can Tesla Lead EV Stocks Higher in 2022?
• 3 obscure lithium ASX shares ready to pop in 2022
• Lucid, Rivian, and Tesla are just the tip of the EV stock iceberg

Rich Smith has no position in any of the stocks mentioned. Bank of America is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and recommends Tesla. 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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Biotherapeutics giant CSL Limited (ASX: CSL) recently announced the acquisition of Vifor Pharma for $17 billion. While its shares have not fared overly well since then, the transaction is expected to be a boost to its long term growth.

But just how much of a boost? To find out, I thought I would take a look at what analysts are saying about this massive acquisition.

The Vifor Pharma acquisition

CSL has signed an agreement to acquire Swiss biotech giant Vifor Pharma for US$12.3 billion (A$17.2 billion) in cash.

Management expects the deal to expand its leadership across an attractive portfolio focused on renal disease and iron deficiency. In addition, it highlights that Vifor has a high quality pipeline and complements CSL’s existing therapeutic focus areas. These include Haematology, Thrombosis, Cardiovascular, and Transplant.

The response

Commenting on the acquisition, Goldman Sachs said: “The transaction expands its blood products franchise and provides exposure to a growing renal disease market (>US$25bn by 2026), where the prevalence of Chronic Kidney Disease (CKD) is expected to grow at +8% pa. Vifor’s product portfolio also has broad complementarities to CSL’s development pipeline, notably CSL112 in reducing the incidence of recurrent cardiovascular episodes and CSL889 in treating Sickle Cell Anaemia.”

Goldman notes that the deal is expected to boost CSL’s earnings in the coming years.

It commented: “The transaction is expected to be low-to-mid teens NPATA per share accretive in the first full year of CSL ownership, including US$75m full rate cost synergies. The synergies are expected to be phased in a 3-year period post acquisition close.”

This sentiment was echoed by the team at Citi. It said: “We calculate the acquisition to be ~9% accretive to NPATA per share (NPAT before acquisition-related amortization) – a proxy for cash flow. Including amortization, the transaction is expected to be “modestly accretive” to EPS.”

In light of the above, Citi is forecasting earnings per share of $6.92 in FY 2022, $9.16 in FY 2023, and then $10.27 in FY 2024.

Are CSL’s shares in the buy zone?

Goldman Sachs is helping CSL with its transaction. As a result, it is unable to provide a recommendation at this stage.

However, Citi can make recommendations and currently has a buy rating and $340.00 price target on CSL’s shares. Based on its current share price, this suggests potential upside of 21% for investors over the next 12 months.

The post Own CSL (ASX:CSL) shares? Here’ s how the $17bn Vifor Pharma acquisition will boost its growth appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy today
• Why did Pro Medicus (ASX:PME) and 2 other ASX 200 healthcare shares fall today?
• Leading brokers name 3 ASX shares to buy
• Here are the 5 best performing ASX biotech shares of 2021
• Why did the CSL (ASX:CSL) share price go backwards in December?

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 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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Analysts are always on the lookout for ASX dividend shares for income potential.

Businesses that pay dividends to investors may be options to consider for their yields. However, the valuation also needs to make sense for the analysts to call it a buy.

With that in mind, the two businesses in this article are rated as buys, with compelling potential income:

Telstra Corporation Ltd (ASX: TLS)

Telstra is the leading telecommunications business in Australia. An acquisition called Digicel Pacific has turned it into a leader in other countries as well, including PNG, Nauru, Samoa, Tonga and Vanuatu. It also has a position in the Fiji market.

It’s currently rated as a buy by the broker Ord Minnett with a price target of $4.60. That is approximately 10% higher than where it is right now. The broker thinks that Telstra is going to pay a dividend of $0.16 per share in both FY22 and FY23, which translates to a grossed-up dividend yield of 5.5%.

One of the things that Ord Minnett is focused on is the strength that Telstra has with its network as well as its ongoing plans to keep investing.

When Telstra’s T25 strategy was released, it said that part of the plan was to extend its 5G network coverage to 95% of the population.

The ASX dividend share’s regional coverage is to be expanded with 100,000 square kilometres of new 4G and 5G coverage. Telstra Plus members are targeted to grow to 6 million by FY25.

Telstra also said that it’s gaining greater access to tower assets with 250 new stores and 700 additional tenancies.

Other parts of the Telstra plan includes cutting another $500 million of fixed costs from FY23 to FY25. Also, it wants to achieve a compound annual growth rate (CAGR) in the high teens to FY25 for earnings per share (EPS).

Nine Entertainment Co Holdings Ltd (ASX: NEC)

Nine is a large media business with its TV channels, newspapers and Stan video streaming service.

It’s currently rated as a buy by the broker UBS, with a price target of $3.90. That’s a potential upside of around 40%, if the broker is right.

Nine is continuing to see progress with different parts of the business.

The ASX dividend share recently gave a trading update at its annual general meeting. In the first quarter, Nine said that its digital subscription revenue grew 10%, as well as receiving the first instalments from Google and Facebook. Stan continues to see subscription growth but it’s still profitable. Video on demand continues to see growth – 9Now revenue in the first half is expected to be 45% higher.

Overall, the FY22 first half earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to grow by around 10% year on year.

UBS thinks the Nine share price is valued at 16x FY22’s estimated earnings with a grossed-up dividend yield for the current financial year of 6.1%.

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

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