The Commonwealth Bank of Australia (ASX: CBA) share price has gone up quite a bit in 2021 so far.

Since the start of the year, the big four ASX bank has seen its share price go 26% higher.

That compares favourably to the S&P/ASX 200 Index (ASX: XJO) which has only risen by 10% from the start of the year.

CBA share price recovers

Just before the COVID-19 crash near the start of 2020, CBA shares were just above $90. It wasn’t until May 2021 that the bank finally surpassed that previous valuation level.

Investors often like to value a business on where they believe a business’ profit or growth is going. Brokers and analysts had been expecting that the FY21 result would show a substantial improvement from the FY20 result. This turned out to be the case.

The headline net cash net profit after tax (NPAT) rose by 19.8% to $8.65 billion. Statutory net profit grew 19.7% to $8.84 billion. In summary, CBA said that net profit increased because of improved economic conditions and outlook resulting in a lower loan impairment expense and a strong operational performance.

That loan impairment expense was $554 million, which was a 78% reduction on FY20. The bank noted that it has maintained a strong provision coverage ratio of 1.63%, reflecting the economic uncertainty from the continuing impacts of COVID-19.

However, profitability of its loan book edged lower with the net interest margin (NIM) dropping by 4 basis points because of higher liquid assets and the ongoing impact of a low interest rate environment, partly offset by management actions, lower wholesale funding costs and a “favourable” funding mix.

The bank continues to grow its core businesses at a relatively fast rate. In FY21, business lending increased $11 billion, more than three times faster than the system. Home lending and household deposits both increased by $31 billion, which was 1.2 times the system.

Balance sheet, dividends and the share buyback

Another factor that can impact the CBA share price is how much capital it has and what it does with it.

The big four ASX bank said that at the end of FY21, its common equity tier 1 (CET1) capital ratio was 13.1%, an increase of 150 basis points on FY20. This was above APRA’s ‘unquestionably strong’ benchmark of 10.5%.

Commonwealth Bank said that its strong capital position and the progress on executing on its strategy means that it is well placed to support customers and manage ongoing uncertainties, while also returning a portion of excess capital to shareholders. It decided to announce a $6 billion off-market share buy-back.

In terms of the dividend, the big bank decided to declare a fully franked dividend of $3.50 per share. That represented a 17% increase on FY20.

Is the CBA share price a buy?

One of the latest brokers to have their say on CBA was Morgan Stanley, which currently has an ‘underweight’/sell rating on the bank with a price target of $90. That suggests the broker believes the CBA share price could fall more than 10% over the next year.

One of the reasons for the broker’s subdued thoughts on CBA relates to APRA changes which could limit loan growth

Based on the broker’s estimates, CBA shares are valued at 21x FY22’s estimated earnings with a projected grossed-up dividend yield of 5.4%.

The post It’s been a great 2021 so far for the CBA (ASX:CBA) share price appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX shares today
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The MGC Pharmaceuticals Ltd (ASX: MXC) share price is shooting higher and is currently up around 2% at 4.9 cents. Earlier in the day it was up to 5.1 cents, a gain of around 6% on the previous closing price.

MGC shares have been in the green all day after the biopharmaceuticals and phytomedicine company announced a key update regarding its drug candidate CimetrA.

Here are the details.

What did MGC Pharmaceuticals announce?

MGC said the Israeli Ministry of Health had approved a dosing study of CimetrA, used in the treatment of Covid-19. Today’s announcement appears to have impressed investors, pushing the MGC Pharmaceuticals share price higher.

For reference, CimetrA is formulated from naturally derived anti-inflammatories found in the plants Curcumin and Boswellia (also known as Indian frankincense).

A dosing study is a necessary step in a drug’s approval process. It is used to determine the most effective amount of active ingredient required to achieve a desired response, without causing any adverse side effects.

The aim is to identify a label’s “therapeutic dose” alongside a wider safety profile, in preparation for registration and sale to the public.

As such, MGC’s latest study will “further examine the anti-inflammatory and immune-modulatory effects of CimetrA”.

It will recruit 240 patients across a number of jurisdictions, including Israel, South Africa, the US, and Russia. After which, results will be submitted to the health authorities of each country.

Interpretation of the results will then be used to determine the “most effective dosage of CimetrA for treating symptoms of Covid-19”. This includes a rare but serious complication known as a ‘cytokine storm’.

Cytokines are markers in the body that are critical in regulating the immune system. Covid-19 can cause them to be released in overwhelming abundance — a cytokine storm — which is detrimental to the body’s tissues.

Previous studies MGC has undertaken support CimetrA’s use as an immune system modulator that is effective in preventing and treating cytokine storms.

This appears significant, as cytokine storms are believed to be the main cause of death in Covid-19 patients.

What is management saying?

Speaking on the announcement possibly driving the MGC Pharmaceuticals share price, co-founder and managing director Roby Zomer said:

This latest dosage study is the latest step as we move closer to being in a position to apply for marketing authorisation for CimetrA in territories across the globe.

We believe that CimetrA will prove to be a vitally important drug in the treatment of COVID-19 going forward, and look forward to sharing the results of the study in due course, along with further steps towards providing COVID-19 patients and governments across the world a cost-effective treatment to fast-track patient recovery and minimise the massive cost burden of long-term hospitalisation.

MGC Pharmaceuticals share price snapshot

The MGC Pharmaceuticals share price has been an outsized winner this year to date, having climbed almost 100%.

It has also gained 122% over the past 12 months. That’s well ahead of the benchmark S&P/ASX 200 index (ASX: XJO)’s return of around 25% in that time.

The post MGC Pharmaceuticals (ASX:MXC) share price climbs on study approval appeared first on The Motley Fool Australia.

More reading

• Why the Bubs (ASX:BUB) share price has rocketed 51% in a month
• Why is the Brickworks (ASX:BKW) share price falling today?
• Here’s why the Telix (ASX:TLX) share price is charging 5% higher today
• IAG (ASX:IAG) share price sinks 6% on guidance downgrade
• National Tyre (ASX:NTD) share price surges 8% on acquisition news

The author Zach Bristow has no positions 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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The last few weeks have been a welcome change for the long-suffering shareholders of Bubs Australia Ltd (ASX: BUB). Since this time last month, the Bubs share price has risen a remarkable 51%.

Though, it is worth highlighting that the goat milk infant formula company’s shares are still down by approximately 50% from their June 2020 high.

Why is the Bubs share price up 51% in a month?

The catalyst for the rampant rise by the Bubs share price was the release of its first quarter update last month.

After many disappointing quarters, the company’s performance improved materially during the three months ended 30 September.

For example, Bubs reported a 96% year on year increase (and 45% quarter on quarter increase) in revenue to $18.5 million during the first quarter.

Management revealed that a key driver of this growth was its China business. Sales across the Chinese daigou, cross border ecommerce, and general trade channels increased by 156% over the prior corresponding period to $9.8 million. This accounts for over half of its revenue for the period.

In light of this strong form, investors appear optimistic that the worst is now behind the company and it will return to consistent growth again.

What else?

Also giving the Bubs share price a boost was the announcement of yet another product launch.

While Bubs’ previous launches of a vitamin range and dairy-based infant formula have yet to move the needle, this didn’t stop investors from getting excited about the launch of a range of cow’s milk powder products for the whole family.

The new range, Bubs Family Nutrition, will reportedly give Bubs access to a global US$15.7 billion market for whole milk powder. Though, it is worth remembering that Bubs is still only a very small player in a competitive market dominated by multinationals.

Are its shares good value?

The team at Citi are reasonably upbeat on the Bubs share price but see limited upside after its strong run.

The broker currently has a buy (high risk) rating and 58 cents price target on its shares. Based on the current Bubs share price of 55.5 cents, this implies potential upside of 4.5%.

The post Why the Bubs (ASX:BUB) share price has rocketed 51% in a month appeared first on The Motley Fool Australia.

More reading

• 2 ASX growth shares that could be buys in November 2021
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• The Bubs (ASX:BUB) share price is up 40% in 6 days. Here’s why
• A2 Milk (ASX:A2M) share price ticks higher as UBS increases holding
• ASX 200 (ASX:XJO) midday update: HUB24 & Netwealth impress, A2 Milk surges again

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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The S&P/ASX 200 Index (ASX: XJO) is having a bit of a strange start to today’s trading session this Tuesday. At the time of writing, the ASX 200 is currently down 0.36% at 7,344 points after erasing an initial bump into positive territory earlier this morning. But one ASX 200 share is moving far more decisively today. That would be the Brickworks Ltd (ASX: BKW) share price.

Brickworks shares are currently trading at $23.05 each, down a nasty 4.12% from yesterday’s closing price. So why is Brickworks getting so severely sold off this morning, especially compared to what the ASX 200 is doing today?

The pitfalls of trading ex-dividend…

Well, it’s not as bad as you might fear. We can put this seemingly disappointing performance for Brickworks today down to the company trading ex-dividend for its upcoming final shareholder payment for the year this morning. When a company announces a dividend, it also includes the ex-dividend date which determines which shareholders receive the dividend in question.

Shareholders who held Brickworks shares yesterday or prior will receive this 40 cents per share payout while new shareholders from today will not. This means the value of this dividend effectively left the Brickworks share price today. It’s one of the best reasons to have one of your shares fall in value.

So how much is this dividend worth?

Back on 23 September, Brickworks delivered its full-year earnings results for the 2021 financial year. Back then, the company announced that its final dividend for FY21 would come in at 40 cents per share, fully franked. That pips last year’s final dividend of 39 cents per share by 1 cent (or 2.6%) and brings its total dividends paid in 2021 to 61 cents per share, a 3.4% increase over 2020’s total dividends.

Brickworks is an ASX 200 company with one of the strongest dividend streaks on the market. It hasn’t cut its annual dividend for more than 40 years and has increased it every year since 2009.

Shareholders who held Brickworks shares before today will receive this 40 cents per share dividend later this month on 24 November.

Brickworks share price snapshot

As it stands at today’s share price, Brickworks has a dividend yield of 2.59%, fully franked. At this pricing, Brickworks is up more than 20% year to date in 2021 so far, as well as being up 33.3% over the past 12 months, and 81.6% over the past 5 years.

Saying that, the company has pulled back from the recent all-time highs we were seeing back in September. Late in that month, Brickworks hit a new all-time high of $26.32 a share. The company is now around 10% off of that high after today’s sizeable drop.

At the current Brickworks share price, this ASX 200 share has a market capitalisation of $3.57 billion and a price-to-earnings (P/E) ratio of 14.8. 

The post Why is the Brickworks (ASX:BKW) share price falling today? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Tuesday
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• ASX 200 (ASX:XJO) midday update: Westpac sinks, Macquarie raises $1.5bn
• Can the Macquarie (ASX:MQG) share price break new highs over $200?
• These were the worst performing ASX 200 shares in October

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Brickworks. The Motley Fool Australia owns shares of and has recommended Brickworks. 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 Telix Pharmaceuticals Ltd (ASX: TLX) share price is charging higher, up 4.8% in morning trade to $6.96 per share.

Below, we take a look at the latest regulatory approval that looks to be spurring investor interest in the ASX biotech share.

What regulatory approval was announced?

The Telix share price is gaining after the company reported that it has received approval for its prostate imaging product, Illuccix, from the Australian Therapeutic Goods Administration (TGA).

Illuccix is a “positron emission tomography agent” used to diagnose men with prostate cancer.

According to the release, Illuccix, after radiolabeling with gallium-68, is the first commercially approved PSMA-PET imaging agent available in Australia.

With the TGA approval, the company aims to provide state-of-the-art PSMA PET imaging for men across the country, including in regional areas.

Telix noted that prostate cancer was the second most common cause of cancer death for men in Australia in 2020, claiming some 3,500 lives. 17,000 new cases were diagnosed in Australia in 2020 alone.

What did management say?

Commenting on the TGA approval, Telix President David Cade said:

The approval of Illuccix means Australian patients with prostate cancer will have broad access to a TGA-approved PSMA-PET imaging agent. This new mode of imaging has been recognised in leading clinical practice guidelines as superior to conventional imaging with CT1 or MRI2, for the staging of prostate cancer.

Illuccix attaches to prostate cancer cells expressing PSMA and can be picked up by a PET scanner, giving physicians the ability to visualise tumour cells, including very small metastases, wherever they are in the body.

The Telix share price could also be getting a boost today from the wider implications of the TGA approval for other international markets.

According to Telix CEO Christian Behrenbruch, “This approval is an important milestone for Telix, demonstrating the approvability of Illuccix and establishing a blueprint for a series of near-term regulatory submissions and reviews in other important markets across the Asia Pacific.”

Telix share price snapshot

The Telix share price has been a star performer in 2021, up 83%. By comparison the All Ordinaries Index (ASX: XAO) is up 12% year-to-date.

Over the past month, Telix shares are up 20%.

The post Here’s why the Telix (ASX:TLX) share price is charging 5% higher today appeared first on The Motley Fool Australia.

More reading

• IAG (ASX:IAG) share price sinks 6% on guidance downgrade
• National Tyre (ASX:NTD) share price surges 8% on acquisition news
• Travel is resuming but the Flight Centre (ASX: FLT) share price still lost 7% in October
• Netwealth (ASX:NWL) share price drops on Praemium merger proposal
• What happened for the Afterpay (ASX:APT) share price in October?

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 Insurance Australia Group Ltd (ASX: IAG) share price is sinking on Tuesday.

In morning trade, the insurance giant’s shares are down almost 6% to $4.56.

Why is the IAG share price sinking?

Investors have been selling down the IAG share price after it provided an update on net natural perils claim costs for FY 2022. This follows severe storm and hail activity experienced over the course of October.

According to the release, the most recent event, which impacted South Australia and Victoria between 27 and 29 October and South East Queensland on 30 October, saw IAG receive approximately 14,000 claims by 4pm on 1 November. This is expected to rise further over the coming days.

IAG anticipates the net cost for this event to be $169 million, the maximum retention for a first loss under IAG’s catastrophe program.

What’s impact will this have on FY 2022?

In light of the above and other events that impacted the second half of October, IAG has increased its expectation for FY 2022 net natural perils claim costs. It now expects its claim costs to be $1,045 million, compared to the previous assumption of $765 million.

The $280 million increase in net natural perils claim costs equates to approximately 360 basis points at the reported insurance margin level.

As a result, IAG has lowered its FY 2022 reported insurance margin guidance range from 13.5% – 15.5% to 10% – 12%. Other assumptions remain unchanged.

Despite this, IAG’s Managing Director and CEO, Nick Hawkins, remains optimistic on the company’s outlook.

He commented: “We remain confident in IAG’s operational momentum in FY22, after the strong start in the first quarter that we reported at the recent AGM.”

Today’s decline means the IAG share price is now into negative territory year to date.

The post IAG (ASX:IAG) share price sinks 6% on guidance downgrade 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 owns shares of and has recommended Insurance Australia 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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The National Tyre & Wheel Ltd (ASX: NTD) share price is gaining momentum on Tuesday morning. This enthusiasm has sprung to action following the tyre and wheel retailer announcing an acquisition.

In early trade, shares in the company are being exchanged for $1.24 apiece, up 8.3%. However, the intraday high was set at $1.30 soon after the market opened.

Let’s take a look at the details of the deal.

What’s moving the National Tyre share price today?

Investors are bidding up the price of National Tyre and Wheels shares with ferocity after the company revealed a new acquisition this morning.

According to the release, a share sale and purchase deed was signed yesterday for the acquisition of Black Rubber. The company being acquired operates under two entities, both Black Rubber Pty Ltd and Black Rubber Sydney Pty Limited. National Tyre is set to acquire Black Rubber in its entirety for a total consideration of up to $26.3 million.

Moreover, several facets of Black Rubber have appealed to National Tyre in the making of this deal. Firstly, it expands upon the company’s current offering of commercial tyres for trucks and buses.

In addition, value-add services such as pricing based on cents per kilometre solutions, tyre performance monitoring, fitting at customer depots, and retreading capabilities are all offered by Black Rubber.

Despite being established in 2013, the company to be acquired has expanded operations across three states. These are Western Australia (Perth and Port Hedland), Queensland (Brisbane), and New South Wales (Sydney).

Its revenue from these sites are predominantly from selling truck, bus, and agricultural tyres to commercial fleets and other business to business customers — at 60% of revenue.

National Tyre plans to put Black Rubber’s relationship with Michelin to good use. The target company operates three of the four retread factories in Australia, with authorisation to use Michelin materials and techniques. As such, Black Rubber retreads are planned to be sold through National Tyre’s distribution network.

Looking at the numbers

Bolstering the company’s earnings, Black Rubber is expected to achieve $5.5 million in earnings before interest, tax, depreciation, and amortisation (EBITDA) in FY22. This would be on an anticipated ~$40 million worth of revenue during the period.

Based on this information, National Tyre will be paying 4.7 times Black Rubber’s FY22 forecast EBITDA for the acquisition. However, $5.2 million of the total consideration will be dependent on earnings over the next two financial years.

The National Tyre & Wheel share price is now up nearly 64% in the past year.

The post National Tyre (ASX:NTD) share price surges 8% on acquisition news appeared first on The Motley Fool Australia.

More reading

• Travel is resuming but the Flight Centre (ASX: FLT) share price still lost 7% in October
• Netwealth (ASX:NWL) share price drops on Praemium merger proposal
• What happened for the Afterpay (ASX:APT) share price in October?
• Goodman (ASX:GMG) share price storms 5% higher on earnings guidance upgrade
• 2 ASX shares for the Christmas stocking

Motley Fool contributor Mitchell Lawler 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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The Flight Centre Travel Group Ltd (ASX: FLT) share price struggled in October, closing the month down 6.9%.

October wasn’t the best of months for many S&P/ASX 200 Index (ASX: XJO) shares, with the benchmark index also losing 0.2% for the month.

But still, with Australia’s COVID-19 vaccine rollout hitting top gear and domestic and international air travel reopening, some investors are scratching their heads at the ASX travel agency’s October slide.

What put the Flight Centre share price under pressure?

As mentioned, Flight Centre shares weren’t the only ones to slide in October.

Fellow ASX 200 travel share Qantas Airways Limited (ASX: QAN), for example, dropped 5.6% over that same time.

But wider selling pressure aside, the Flight Centre share price could have fallen victim to a bout of profit-taking. That’s because shares gained a whopping 30.8% in September. This came as Australia’s vaccine rollout began to take hold and the government announced international air travel would recommence before Christmas.

Combining the performance of September and October may offer a fairer picture. Over the 2 months, Flight Centre shares finished up 21.8%.

The quarterly report and more debt

Profit-taking aside, the company’s quarterly report likely didn’t stoke a lot of ASX investor enthusiasm. While management pointed to the looming reopening indicating a strong 2022, September sales were still only 27% of what they were pre-pandemic. And the company reported a net operating cash outflow of $41 million for the quarter ending 30 September.

Later in October, Flight Centre came under some renewed pressure when the company announced its successful issue of a $400 million offering in senior unsecured convertible debt with a 2028 maturity.

What is convertible debt?

As my Foolish colleague Zach Bristow explained, “It allows investors the option to convert their debt asset into equity if Flight Centre’s share price hits a certain level… With this particular note issue, the conversion price is $27.30 per share. At that point, bondholders will have the opportunity – but not the obligation – to obtain Flight Centre shares at that price.”

While not always the case, convertible debt has the potential to pull down the share price if the company ends up issuing a significant amount of new shares to its convertible debt holders.

How has the Flight Centre share price performed longer-term?

The Flight Centre share price is up 79% over the past 12 months. That is well ahead of the 24% gains posted by the ASX 200 over that same time.

Year-to-date Flight Centre shares are up 28%.

The post Travel is resuming but the Flight Centre (ASX: FLT) share price still lost 7% in October appeared first on The Motley Fool Australia.

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• Why has the Webjet (ASX:WEB) share price outperformed Flight Centre (ASX:FLT) lately?

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

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The Netwealth Group Ltd (ASX: NWL) share price is edging lower on Tuesday morning.

In early trade, the investment platform provider’s shares are down 0.5% to $17.42.

Why is the Netwealth share price edging lower

The catalyst for the fall in the Netwealth share price this morning is news that the company has made a non-binding indicative proposal to merge with smaller rival Praemium Ltd (ASX: PPS).

According to the release, the company has offered one Netwealth share for every 11.96 Praemium shares plus a cash consideration of $50 million. The latter reflects the expected net proceeds from the sale process of Praemium’s international operations.

Based on the Netwealth share price of $17.94 at the close on 27 October (the day prior to its proposal being made), this implies a base consideration of $1.50 per Praemium share.

This represents a premium of 29% to the Praemium share price on 27 October and a 20% premium to its last close share price.

The base offer values Praemium at $785 million and the transaction at an enterprise value/EBITDA multiple of 55x. Judging by the performance of the Netwealth share price today, the market appears to believe this could be a touch on the expensive side.

What is the rationale for merging?

While the market may have given the news a lukewarm response, management sees many reasons to merge. The release explains that Netwealth expects the transaction to enhance its platform with further scale and accelerate the development of specialist capabilities to capture the long term growth potential of the expanding market for wealth management services. It also sees significant cost and revenue synergies.

Overall, management believes the transaction is compelling and would create substantial value for both sets of shareholders. It would also lead to the creation of the largest independent wealth management platform in Australia by net flows and the leading platform for wealth advisors and investors across all wealth segments.

Combined, the Netwealth-Praemium merged entity would account for $72 billion in Australian platform funds under administration and more than $22 billion in non-custodial assets.

Netwealth’s Joint Managing Director, Matt Heine, commented: “Netwealth is confident that the Proposed Transaction (if implemented) would create a very strong value proposition for existing and future clients and for shareholders of both groups. The Proposed Transaction would ensure that the combined group can continue to lead the industry in net funds flow, technology and client service in what is currently a competitive and rapidly changing platform and advice landscape.”

“Praemium shareholders would have meaningful equity in the combined group and benefit alongside Netwealth shareholders from the strategic benefits as well as the cost and revenue synergies that would arise from the merger,” he added.

What now?

The release explains that Praemium responded to the proposal on Monday, advising that while they acknowledge the benefits of the merger, the proposed transaction does not represent a value it would be willing to recommend to shareholders.

The Praemium share price is up 18% to $1.47 on the news.

The post Netwealth (ASX:NWL) share price drops on Praemium merger proposal appeared first on The Motley Fool Australia.

More reading

• These were the worst performing ASX 200 shares in October
• These were the best performing ASX 200 shares in October
• 2 ASX 200 growth shares that could be buys
• 5 things to watch on the ASX 200 on Wednesday
• Here’s why the Praemium (ASX:PPS) share price soared 6% on Monday

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 shares of and has recommended Netwealth and Praemium Limited. The Motley Fool Australia owns shares of and has recommended Netwealth. The Motley Fool Australia has recommended Praemium 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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It was a bumpy ride for the Afterpay Ltd (ASX: APT) share price in October as we reflect on another month that has come to pass.

Despite the ups and downs, the buy now, pay later (BNPL) company ended up more valuable than it was at the beginning of the month.

What happened to the Afterpay share price in October?

During October, there was effectively zero noteworthy news from Afterpay directly. However, there were developments in the payments space that likely influenced its valuation.

Since August, the Aussie BNPL player has been joined at the hip to its acquirer, Square Inc (NYSE: SQ). This is due to the nature of the deal involving 0.375 Square shares in exchange for 1 Afterpay share. This has created a direct link between the price of Square stock and Afterpay.

Despite this relationship, Square gained 6.4% in October while the Afterpay share price only increased 3.8%. The dislocation would suggest factors that have more of a bearing on the Australian company than its likely US-based suitor.

As we previously covered a couple of weeks ago, the Reserve Bank of Australia (RBA) published the conclusions of its review of retail payments regulation. The document outlines the suggestion for BNPL services to remove the ‘no surcharge‘ rule. This would mean merchants could pass on the fee charged to them by the likes of Afterpay to the end customer.

Additionally, towards the end of October Westpac Banking Corp (ASX: WBC) lifted the curtain on its BNPL-esque offering. This hints at further competition being built out by the big banks in Australia.

What else?

The Afterpay share price might have received a boost throughout October as Square moved closer to its third-quarter earnings.

Investors might have been buying up shares in Square with the expectation of a favourable earnings result. These quarterly numbers will be revealed on 4 November.

Importantly, analysts have an average revenue estimate of US$4.54 billion for the quarter, which would reflect a 50% increase year on year. Meanwhile, the average estimate for earnings per share (EPS) is 39 US cents. This would be a near fivefold increase in earnings year on year.

Undoubtedly, the Afterpay share price will be in focus following Square’s results.

The post What happened for the Afterpay (ASX:APT) share price in October? appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler owns shares of AFTERPAY T FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO and Square. The Motley Fool Australia owns shares of 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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