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.

Netflix (NASDAQ: NFLX) disappointed investors when it reported fewer than 4 million net subscriber additions for the first quarter and forecast a measly 1 million net adds for the second quarter. The hangover from 2020’s streaming bonanza hit Netflix, and it hit hard.

But after a couple of quarters of recuperation, Netflix is set to bounce back to its normal self again, potentially adding 10 million to 15 million subscribers in the back half of the year, similar to normal times. Credit Suisse analyst Douglas Mitchelson thinks subscriber growth will normalize by the fourth quarter, based on information from a proprietary survey. Here’s why Netflix’s second half should look much better than the first half.

Three challenges in the first half of the year

Netflix wasn’t just coming off a once-in-a-lifetime event that pulled forward millions of subscribers for the streaming service — it also faced several challenges in the first half of the year, hindering subscriber growth.

First, it raised the price of its subscription in several big markets, including the United States. While Netflix still has plenty of pricing power, some subscribers have balked at its last few price increases. While this price hike appears to have been more easily digested among Netflix’s subscriber base, it was still a likely cause for some subscriber churn. And with Netflix’s ballooning subscriber base, a small increase in churn translates into a lot of subscriber losses.

Second, Netflix had a relatively weak content slate in the first half of the year. Management acknowledged this at the start of the year, noting that some of its big tentpole series — Stranger Things, The Witcher, Money Heist, Sex Education — won’t premiere until the latter part of the year.

Finally, Netflix is facing the headwind of economies reopening and warming weather, which will temporarily reduce gross additions as consumers look to make up for lost time with out-of-home activities.

Getting back to normal

While Netflix may have suffered because of its price hike earlier this year, subscriber churn should normalize going forward. What’s more, Netflix has previously indicated it sees strong rates of resubscribing from customers who churn. That may present an opportunity to improve gross additions later in the year.

Churn is an increasingly important factor for all streaming services as they compete for viewers. That said, Netflix has done a good job of keeping its churn low while others have seen more cancellations. That’s supported by Credit Suisse’s survey showing Netflix subscribers will look to the service before any other they subscribe to when looking for content to watch. In other words, Netflix is a priority for most Netflix subscribers. Furthermore, just 8% of survey respondents raised any concerns about the value of Netflix for the price.

The weak content slate in the first half will give way to an abnormally strong content slate in the back half of the year. Original series are one of the big reasons consumers sign up for a new streaming service, and that’s still true with Netflix.

What it means for investors

Mitchelson says any disappointment in Netflix’s results in the second or third quarters “would prove a clearing event” before the fourth-quarter results look more like 2019 and 2020. And disappointing subscriber growth usually comes with a pullback in Netflix’s stock price.

Expectations are already extremely low for Netflix’s second quarter. Management forecast just 1 million net additions, which would be the fewest net additions it’s seen in any quarter for eight years. And that was before it had much of any international presence.

Much of the focus will be on management’s expectations for the third quarter. If management provides numbers that are weaker than the Street was looking for, it could result in a good buying opportunity for long-term investors. Netflix reports its second-quarter results July 20.

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

The post Netflix subscriber growth will pick up in the second half appeared first on The Motley Fool Australia.

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Adam Levy owns shares of Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Netflix. The Motley Fool Australia has recommended Netflix. 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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Inflation and interest rates have completely dominated ASX share market discussions the past few months.

Is post-COVID inflation just a fad or will it stick around? Will central banks lose their nerve and raise interest rates earlier than they’ve flagged?

This uncertainty is causing some anxiety.

But Montgomery Investment Management chief investment officer Roger Montgomery reckons he’s picked out 3 small-cap ASX shares that will win regardless of macroeconomic conditions.

That is, these companies will enjoy growth because of structural reasons — their business models and the way they’re placed in their sectors makes them unique and valued.

Here are Montgomery’s picks:

Megaport Ltd (ASX: MP1)

Megaport allows computer networks to connect to cloud service providers.

According to Montgomery, the company currently facilitates access for 2,100 customers to reach 740 data centres globally.

Megaport shares closed Tuesday 1.22% higher at $18.20. They’ve gained almost 28% this year so far.

Montgomery reckons the next “catalyst” for a price spike will be the July quarterly update.

“We believe MP1 has a large growth opportunity in front of it, including from new products, an example being the recently launched Megaport Virtual Edge, which is being sold by the salesforce of Cisco Systems Inc (NASDAQ: CSCO),”  

“We expect the company to enjoy the tailwinds of rapid growth in cloud computing, which is a lowly penetrated market, offering multi-years of opportunity runway ahead.”

Alliance Aviation Services Ltd (ASX: AQZ)

Montgomery had already identified Alliance Aviation’s enviable market position back in April, but again reiterated the attractiveness of this ASX share.

Both the big players, Qantas Airways Limited (ASX: QAN) and Virgin Australia, wet lease planes from Alliance.

“Wet leases are agreements between 2 airlines, where the lessor agrees to provide an aircraft, crew, maintenance and insurance to the lessee in return for payment on the number of hours the aircraft is operated, irrespective of how many passengers are on the plane or the price they paid for their seat,” said Montgomery. 

“Wet leases offer the lessee everything needed to begin flights on an almost immediate basis.”

The company cleverly took advantage of the depressed aviation market last year, buying up 30 Embraer E190 planes for just $197 million.

“These prices are cents on the dollar of the original capital cost of the assets,” Montgomery said.

“This is AQZ’s key competitive advantage, great operational on-time performance from the lowest capital cost aircraft in the market.”

Alliance shares closed slightly lower on Tuesday at $4.34. That’s 13.02% up from the start of the year.

“We believe it is worth in excess of $5.00 per share.”

Aeris Resources Ltd (ASX: AIS)

Copper is a theme that Montgomery thinks has a lot of merit currently.

“There has been a long-identified dearth of global copper discoveries and projects coming online, with mined grades continuing to fall as the easiest to find and cheapest to mine copper gets accessed and depleted,” he said.

“Future supply growth for copper looks challenged, whilst the future demand — driven by incremental needs from decarbonising economies — looks strong.”

Among the local copper producers, his pick is Aeris Resources.

The company recently raised $50 million to fund more drilling, and extend the working life of its Queensland Cracow Gold Mine and NSW Tritton Copper Project.

“The exciting story is this influx of capital has funded increased drilling activity at targets close to existing infrastructure,” said Montgomery.

“High copper grades have been found near [the] surface, which could mean higher copper production, longer mine life, and cheaper extraction costs and potentially higher margins in a commodity that looks structurally attractive.”

Aeris shares closed flat for the day on Tuesday at 18.5 cents. The stocks are up a whopping 85% this year.

“We have been an investor in AIS from 3 cents per share and assuming continued strong drilling results, we think 30 cents is not out of the realm of possibility.”

The post 3 ASX shares that’ll grow regardless of inflation or economy: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo owns shares of Qantas Airways Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT 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 Rio Tinto Limited (ASX: RIO) share price will be one to watch on Tuesday morning. This comes after the mining giant provided an update to its Richard Bay Minerals in South Africa.

At yesterday’s market close, Rio Tinto shares finished the day at $125.

What did Rio Tinto announce?

Investors may act on their concerns about the company’s latest announcement to the ASX.

According to this morning’s release, Rio Tinto advised that it has declared “force majeure” on customer contracts at the Richard Bay Minerals. The legal term, force majeure refers to an event or effect that can be neither anticipated nor controlled.

Rio Tinto stated that the security condition at its operations has unfortunately escalated as violence and destruction has raged. Last month, a senior manager at the site was murdered, and heavy equipment was set alight.

This has led the company to suspend all mining and smelting operations until the safety and security of the situation improves.

Rio Tinto chief executive Minerals, Sinead Kaufman touched on the current situation, saying:

The safety of our people is our top priority. We continue to offer our full support to the investigating authorities and I would like to acknowledge the ongoing support of the regional and national governments and South African Police Service as we work together to ensure that we can safely resume operations.

The Zulti South project, also in South Africa is still in limbo with operations in full suspension since 2019.

Rio Tinto share price summary

While the news is concerning, Rio Tinto shares have risen 27% over the course of the last 12 months. The company’s share price reached a 52-week high of $132.94 in mid-May before moving in circles.

Rio Tinto commands a market capitalisation of roughly $46.4 billion, making it the eleventh largest company on the ASX. The company has more than 371 million shares listed on its registry.

The post Why the Rio Tinto (ASX:RIO) share price will be in the spotlight today appeared first on The Motley Fool Australia.

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

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Investors with cash may want to consider some ASX shares that have longer-term growth potential.

The below two businesses have grown considerably over the last two years, but they may have more growth potential over the coming years:

Sonic Healthcare Ltd (ASX: SHL)

Sonic is a large, global business that’s involved in pathology, diagnostic imaging and radiology as well as general practice medicine and corporate medical services.

In the first half of FY21, it saw elevated revenue growth of 33% to $4.4 billion. Profit measures grew even faster. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 89% to $1.3 billion and net profit increased 166% to $678 million. This profit growth occurred thanks to the operating leverage of using existing facilities.

Whilst the global base business was flat, it was the millions of COVID-19 tests that drove revenue and earnings higher. Whilst COVID-19 immunity testing could see potential growth, there is another wave of COVID-19 as the Delta strain spreads across the world which is causing renewed testing volumes.

Sonic Healthcare also recently announced that it was acquiring Canberra Imaging Group (CIG). This will boost the ASX share’s imaging Australian revenue by approximately 10% and offer potential synergy benefits.

CIG has annual revenue of around $60 million and is the leading radiology practice in Canberra.

Settlement of the transaction is expected in the first quarter of FY22. It will be funded from cash and/or available debt and will immediately add to earnings per share (EPS).

Kogan.com Ltd (ASX: KGN)

Kogan has a number of retail offerings and services. Not only does it sell a wide array of products on its main website such as TVs, phones, computers, appliances, heating, cooling, furniture, office supplies and so on, it also has other services including mobile, internet, insurance, superannuation, energy and so on.

The e-commerce business also owns a couple of businesses it has acquired like furniture business Matt Blatt and New Zealand online retailer Mighty Ape.

Kogan’s share price has dropped around 34% since the start of the 2021 calendar year.

There has been demurrage costs impacting its profit and loss in FY21. The company recently explained that a key challenge caused by COVID-19 has been managing inventory levels to support its growth. It built up its inventory position in late 2020, causing high warehousing costs that are continuing.

The ASX share has been optimising its inventory to reflect the current market conditions by increasing promotional activity, which has led to near-term gross margin and higher near-term marketing costs. Kogan is expecting to return to normal inventory levels (relative to the size of the business) and marketing spending as the inventory is reduced.

Before these inventory problems, Kogan had been experiencing steadily increasing profit margins at different profit margin lines of the business.

In the company’s outlook update, Kogan said:

The longer term fundamentals for Kogan.com remain very attractive given the company’s position in the Australian and New Zealand online retail markets, and with online retail sales currently only accounting for a small percentage of total retail sales in Australia and New Zealand.

The post Got cash to invest? Here are 2 ASX shares that could be buys appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia has recommended Sonic Healthcare 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 AGL Energy Limited (ASX: AGL) share price will be one to watch closely on Wednesday morning.

Why is the AGL share price on watch?

All eyes will be on the AGL share price today following the release of an update on its demerger plans.

According to the release, the company has confirmed its intention to undertake a demerger to create two leading energy businesses with separate ASX listings.

What’s next?

The release explains that AGL Energy will become Accel Energy, an electricity generation business focused on the accelerating energy transition and the redevelopment of its sites as low-carbon industrial energy hubs. It will be led by Chairman Peter Botten AC, CBE and CEO Graeme Hunt.

Accel Energy will then demerge a new entity, AGL Australia, which will be a multi-product energy-led retailing and flexible energy trading, storage and supply business. AGL Australia will retain the AGL brand. The new business will be led by Chair Patricia McKenzie and CEO Christine Corbett. The latter has been Chief Customer Officer of AGL Energy since July 2019.

The company intends to hold a scheme and general meeting to enable shareholders to vote on the proposal, with the aim of completing the demerger in the fourth quarter of FY 2022.

After the demerger, AGL Energy shareholders would hold one share in each of Accel Energy and AGL Australia for every share they own in AGL Energy on the applicable record date.

Management notes that that Accel Energy is expected to retain a minority ownership interest of between 15% to 20% in AGL Australia following the demerger. This will allow Accel Energy to share in the anticipated value creation in AGL Australia following demerger and provide balance sheet flexibility.

An inflection point

AGL Energy’s Chairman, Peter Botten, said: “The impact of recent challenging market conditions on our financial performance emphasises that AGL Energy is now at an inflection point, as the transition of the energy sector accelerates, driven by the rapid evolution in renewables and decentralised energy technology, customer needs and community expectations.”

“After careful consideration, the Board has confirmed that AGL Energy should move forward as two independently-listed companies as the Board believes this will be in the best interests of shareholders. The clarity of purpose created by this change will protect shareholder value, enabling each business to focus on their respective strategic opportunities and challenges presented by the accelerating energy transition,” he added.

Earnings guidance

AGL Energy has also provided the market with guidance for FY 2021. It revealed that it continues to expect underlying EBITDA to be at the low end of its previous guidance range of $1,585 million to $1,845 million.

On the bottom line, underlying net profit after tax is expected to be around the middle of the previous range of $500 million to $580 million. This includes approximately $90 million of insurance proceeds relating to the FY 2019 Unit 2 outage at the Loy Yang A power station and is consistent with previous guidance.

However, management has terminated its special dividend program because of its demerger plans. This means AGL will no longer pay out an additional 25% of underlying profit after tax for the FY 2021 final dividend or in FY 2022. Nor will it underwrite the dividend reinvestment plan for the FY 2021 final and FY 2022 interim ordinary dividends during the demerger planning period.

The AGL share price is down 25% in 2021. Investors will no doubt be hoping this demerger update is the catalyst to getting its share price heading in the right direction again.

The post AGL (ASX:AGL) share price on watch following demerger update appeared first on The Motley Fool Australia.

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

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Afterpay Ltd (ASX: APT) is the ASX fairytale story of recent times.

After listing at $1 per share, those lucky enough to put in $10,000 during the 2016 initial public offering would now be sitting on $1.2 million.

So it’s no surprise the last few years have seen a whole bunch of buy now, pay later and ‘something-pay’ companies floating on the ASX.

But most of them are early-stage businesses burning cash and not yet turning a profit. Not to mention competing in a hot sector that sees a new rival pop up almost each month.

Even the market leader Afterpay doesn’t currently make any money. It’s still concentrating on spending capital to try to grow faster than its rivals.

But there is one battler with a market capitalisation of just $105 million that’s bucking the trend: Earlypay Ltd (ASX: EPY).

Earlypay is actually making money 

Earlypay’s clientele is businesses, rather than end consumers. The North Sydney company sells products like line-of-credit and equipment finance.

According to Burman Invest chief investment officer Julia Lee, Earlypay seems to be doing everything right.

“When you have a look at anything with ‘pay’ in it, usually it’s not making a profit. But this one actually is,” she told SwitzerTV Investing this week.

“This year, they’re actually forecasting a net profit after tax and amortisation of above $8.5 million… Next year they’re forecasting a net profit after tax and amortisation around about $12 million — so almost 50% growth there.”

Not only is the company earning more than it spends, but the share price is attractive at the moment.

“PE multiples in this space are commonly above 80 or 100 times. But this one’s trading at around about 20 times historical,” Lee said.

“And you’ve got a dividend yield of about 5% as well.”

The Earlypay share price was trading at 45 cents per share at market close on Tuesday, which is 4.26% down for the day. The stock is up 18.4% for the year.

“We usually don’t track smaller companies like this. But having a quick look through some of the numbers… the numbers don’t look too bad in the type of market that we’re in.”

But Earlypay has these headwinds…

Tribeca Investment Partners portfolio manager Jun Bei Liu disagrees with Lee, indicating she would stay away from Earlypay.

The fear is that interest rates would rise due to post-COVID inflation.

“My view is that a lot of those financing businesses, when you have bond yields start moving higher it’s not in a great environment for these guys to do business,” she said.

“It is well-funded and exposed to the SME [small to medium enterprise] space — it will have a little bit of growth. But it’s not something that I would rush into.”

Earlypay just last week announced it would raise $18.75 million through the issue of almost 45 million new shares.

The post Unlike Afterpay, this ASX fintech actually makes a profit appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo 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. 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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One thing the Australian share market isn’t short of is growth shares. At present, there are plenty of companies that appear well-positioned to grow at an above-average rate over the next decade.

But which ones should you consider adding to your portfolio? Three that are highly rated are listed below:

IDP Education Ltd (ASX: IEL)

IDP Education could be a growth share to look at. It is a provider of international student placement services and English language testing services. Although demand for its services has softened during the pandemic, it has been tipped to bounce back strongly once trading conditions return to normal. After which, analysts at UBS expect IDP Education’s growth to accelerate as it emerges as a stronger player with a quality technology business differentiating it from the remaining competition. Earlier this month UBS put a buy rating and $28.25 price target on its shares.

NEXTDC Ltd (ASX: NXT)

Also worth a closer look is NEXTDC. It is one of the Asia-Pacific region’s leading data centre operators with a growing number of world class centres in key locations across Australia. Thanks to insatiable demand for data centre capacity due to the structural shift to the cloud, NEXTDC has been growing its sales and operating earnings at a solid rate for years. The company is now looking to bolster its growth by expanding into the Asian market. If this is a success, it could provide it with a significant growth runway. Citi currently has a buy rating and $14.45 price target on the company’s shares.

Temple & Webster Group Ltd (ASX: TPW)

Another ASX growth share to look at is Temple & Webster. It is Australia’s leading online furniture and homewares retailer which has been benefiting greatly from the shift to online shopping. The good news is that this shift still has a long way to go, which bodes well for the company given its leadership position. Credit Suisse is positive on the company and sees scope for the furniture industry to reach ~13% in online penetration by FY 2025. The broker currently has an outperform rating and $12.54 price target on its shares.

The post 3 high quality ASX growth shares analysts love appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Idp Education Pty Ltd and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group 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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Post-COVID recovery stocks have had a nice run the past 6 months. So much so that many are now above their pre-pandemic highs, making them fairly expensive.

But one fund manager reckons he’s found a cheap ASX share that’s yet to realise its potential.

“We have screened the small caps universe for tactical opportunities within the later-stage (recovery) cohort which still offer earnings and valuation upside potential,” said Montgomery portfolio manager Dominic Rose. 

“A clear standout here is outdoor media company, oOh!Media Ltd (ASX: OML).”

oOh!Media is a provider of ‘out of home’ advertising.

“The company reaches 77% of the metropolitan and regional population via an extensive network of circa 37,000 digital and static asset locations,” Rose said.

“These include roadside billboards, retail shopping centres, offices, bus stops, train stations and airports.”

How COVID-19 killed oOh!Media’s business

The pandemic last year completely floored the outdoor advertising market.

“COVID-19 absolutely hammered the out-of-home sector, far worse than most other forms of media, with audiences significantly declining due to initial lockdowns and mobility restrictions,” said Rose.

“Advertisers pulled outdoor campaigns and redirected what was left of their budgets towards viewers stuck at home in front of the telly.”

oOh!Media suffered a painful 62% reduction in year-on-year revenue for the quarter ending June 2020.

“Faced with a rapidly evolving and highly uncertain near-term outlook, management took the decisive steps to materially reduce operating costs and strengthen the balance sheet,” said Rose.

Outdoor ads will roar back

Rose is optimistic about oOh!Media’s recovery as he’s certain outdoor ads will make a comeback as Australia adjusts to post-coronavirus life. 

Earnings would recover to pre-pandemic levels next year, he suspects.

“Clear upside potential for the business exists as workers eventually return to offices and borders reopen to facilitate a travel sector recovery,” Rose said.

“We also see OML as well positioned to benefit from the strong domestic macro backdrop which should drive higher advertising rates across all formats as big advertisers like banks and auto come back into the outdoor market.”

The best thing is that the fund manager is convinced the market has not yet fully realised the ASX share’s comeback potential.

At the market close on Tuesday, oOh!Media shares were down 0.58%, trading at $1.71. That’s only 5.2% up from the start of the year.

“Valuation looks too cheap to us. The stock is trading on 7.5x recovered EBITDA (2022) which compares to OML’s historic average of 10x to 12x and the broader small cap market on 11x,” Rose said.

“We see potential for the stock to rerate towards 10x as confidence in the earnings recovery builds.”

That’s a 33% upside that the Montgomery Small Companies Fund is betting on.

Rose admitted the recent lockdowns in Sydney and Melbourne have been a setback for the ASX share.

“However, successful vaccination programs in countries like the US and the UK provide confidence in the medium-term outlook.”

The post Pssst… here’s a cheap COVID-recovery ASX share appeared first on The Motley Fool Australia.

More reading

• COVID-19 lockdown hits oOh!Media (ASX:OML) share price

Motley Fool contributor Tony Yoo 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 oOh!Media 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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The Telstra Corporation Ltd (ASX: TLS) share price has been a very strong performer in 2021.

Since the start of the year, the telco giant’s shares are up almost 20%.

Can the Telstra share price climb even higher?

The good news is that one leading broker still believes the Telstra share price has a lot further to run from here.

According to a note out of Goldman Sachs this morning, the broker has retained its buy rating and lifted its price target to $4.20.

Based on the current Telstra share price, this implies potential upside of 16.5% over the next 12 months excluding dividends. And if you include the 16 cents per share fully franked dividend the broker is forecasting, this potential return stretches to over 21%.

What did Goldman say?

Goldman Sachs is bullish on the Telstra share price largely due to its belief that the key Mobile business is well-placed for growth.

Its analysts commented: “We have high conviction on the quantum of mobile market repair that is occurring in Australia, along Telstra’s ability to grow subscribers and ARPU across FY21-23E. Based on our detailed analysis, we estimate that Telstra could potentially achieve a postpaid ARPU > A$53/sub/m in FY23 (vs. $46 in 1H21) which is c.6% ahead of Visible Alpha Consensus Data expectations.”

Goldman believes there are a number of reasons why this is achievable. This includes deferred 5G prices rises impacting ~30% of subscribers, rational market behaviour, and international roaming recovery.

Overall, the broker notes that this underpins its $7.8 billion underlying EBITDA estimate for FY 2023, which is 4% ahead of the consensus estimate but well within Telstra’s $7.5 billion to $8.5 billion aspiration.

What else did it say?

Also potentially giving the Telstra share price a lift in the coming years could be the introduction of inflation-linked pricing. Goldman sees opportunities for Telstra to follow the lead of UK telcos that have done this recently.

It explained: “We also consider whether the AU telco market has capacity to introduce inflation linked pricing across fixed & mobile plans, potentially in response to the recent NBN pricing proposals that has a CPI plus component to access pricing.”

“We believe that should Telstra, as the incumbent, introduce inflation-linked pricing, the industry would likely follow, which could drive sustained revenue growth in an industry that has historically seen pricing deflation.”

“This would be consistent with what was launched in the UK in 2020, where operators are implementing +4.5% price rises in early 2021 (CPI + 3.9%). On a recent earnings call, VOD also noted it was planning on launching inflation-linked pricing across Europe, given it was well-received in the UK,” it added.

The post Telstra (ASX:TLS) share price tipped to jump 16% from here 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 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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Luckily for income investors during these low interest rate times, the Australian share market is home to a number of companies offering very generous yields.

Two that do just this are listed below. Here’s why they could be top options for income investors:

Aventus Group (ASX: AVN)

The first ASX dividend share to look at is this leading owner, manager, and developer of retail parks. Aventus has been performing very positively during the pandemic. This has been driven by its high weighting to household goods and everyday needs retailing, which have experienced strong and sustained consumer demand.

Things have been going so well that Aventus recently revealed that the value of its properties have increased by $254 million or 12% since the end of December. It also advised that it expects its earnings to grow 7% this year, compared to its prior guidance of 4% growth.

This went down well with analysts at Goldman Sachs, who retained their buy rating and lifted their price target to $3.27. The broker is also forecasting distributions per share of 16.7 cents, 18.85 cents, and then 20.4 cents between now and FY 2023. Based on the current Aventus share price, this represents yields of 5.2%, 5.9%, and 6.4%, respectively.

Mineral Resources Limited (ASX: MIN)

Another high yield ASX dividend share to consider is Mineral Resources. It is a mining and mining services company with exposure to iron ore and lithium.

Thanks to the sky high iron ore price, Mineral Resources has been tipped by analysts at Macquarie to reward shareholders with some big dividends over the next couple of years. It is for this reason that the broker currently has an outperform rating and $73.00 price target on the company’s shares.

Macquarie is expecting Mineral Resources to pay fully franked dividends of $3.32 per share in FY 2021 and then $3.05 per share in FY 2022. Based on the latest Mineral Resources share price of $51.64, this will mean fully franked yields of 6.4% and 5.9%, respectively, over the next two financial years.

The post 2 high yield ASX dividend shares named as buys appeared first on The Motley Fool Australia.

More reading

• Mineral Resources (ASX:MIN) share price nears all-time high
• 2 buy-rated ASX dividend shares with 4%+ yields
• Why the Aventus (ASX:AVN) share price edged higher today
• 2 high yield ASX dividend shares rated as buys
• These ASX dividend shares have generous yields

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 AVENTUS RE UNIT. 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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