The Select Harvests Limited (ASX: SHV) share price is sliding today after the company released its results for the 6-months up to 31 March 2021.

At the time of writing, shares in the fruit and nut grower are trading for $5.80 each – down 2.68%. By comparison, the S&P/ASX All Ordinaries Index (ASX: XAO) is 0.84% higher.

Let’s take a closer look at the numbers and what they mean for the Select Harvests share price.

Select Harvests share price falls with profits

For the first half of FY21, net profit after tax collapsed 92.7% from the prior corresponding period (pcp) to $1.27 billion. Total revenue actually increased 37.4% to $84.8 billion in the period.

Cost of sales, however, shot up 71.8% at the same time. Select Harvests attributed the rising revenue to more crop harvests (and therefore sales). At the same time, the company claims the increase in costs outpaced revenue because of higher water rights prices. Water rights prices are lower this year and the company expects this to flow through to the next financial report.

In today’s release, Select Harvest was also pessimistic about the future prices of almonds, its main product. The company says almond prices are set mostly by output from California. It is expecting supply from the state to increase into the next year, thus hampering the almond price.

The price of almonds was already down 20% on the pcp to $6.00 a kilogram.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) are down 62.9% on the pcp to $12.8 million. Earnings per share (EPS) sunk 94.3% to 1.1 cents and, unsurprisingly, no interim dividend was paid.

Management commentary

Select Harvests managing director Paul Thompson said of today’s results:

As anticipated, lower global almond prices have negatively impacted earnings, delivering a first half financial result well below recent prior periods.

With a record breaking 2020 Californian crop and a USDA Subjective Almond Estimate indicating another large crop this year, we are anticipating low levels of pricing for the remainder of 2021.

Looking forward to the 2022 crop, our tree health remains good with strong 2021 vegetative growth and high bud load. Water prices are expected to remain relatively low given current weather forecasts and storage levels. Global demand for almonds continues to increase at a steady rate, as plant-based protein consumption grows in all markets.

Select Harvests share price snapshot

Over the past 12 months, the Select Harvests share price has decreased 11.42%. Before the COVID-induced market sell-off of March 2020, company shares ended a trading day as high as $9.18 at the beginning of that year.

Given its current share price, Select Harvests has a market capitalisation of $679 million.

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The Telstra Corporation Ltd (ASX: TLS) share price is edging higher on Friday morning.

At the time of writing, the telco giant’s shares are up 0.5% to $3.48.

This latest gain means the Telstra share price is now up 16% since the start of the year.

Can the Telstra share price keep pushing higher?

According to one leading broker, the Telstra share price could continue to rise from here.

A note out of Goldman Sachs reveals that its analysts have been looking at the telco sector and have ultimately retained their buy rating and $4.00 price target on the company’s shares.

Based on the latest Telstra share price, this price target implies potential upside of 15% over the next 12 months excluding dividends. If you include the 16 cents per share dividend the broker is forecasting, this potential return stretches to 19.5%.

What did Goldman say?

Goldman Sachs has been looking at current trading conditions in the mobile and fixed markets. And while it feels that the company’s mobile deal with JB Hi-Fi Limited (ASX: JBH) could be limiting market repair, it isn’t enough to impact its forecasts or recommendation.

Speaking about the mobile market, Goldman said: “VOD [Vodafone] extended the discounts on its Red Postpaid plans for an extra week, now expiring June 3. We expect this reflects VOD intention to see what TLS does with its JBH promotions, given that the $800 gift card / $99 TLS plan expires on June 2 (VOD & Optus have both criticized these promotions as preventing market repair).”

It also notes that the recent SingTel result appears to indicate that mobile pricing is increasing and will be sustained.

The broker said: “Commentary on SingTel FY21 result was positive, suggesting higher mobile pricing in Australia is here to stay as the business focuses on improving profitability; and Optus returned to postpaid sub growth following 12m of declines; however, we expect TPG declines have continued YTD given border restrictions.”

What about the fixed market?

Goldman points out that NBN pricing has lifted modestly across the NBN 50 speed plans. Though, it feels Telstra could be more aggressive with its fixed wireless plans.

It explained: “We note rational pricing across the NBN 50 speed plans (+1% yoy) and an increased focus on the high speed plans (250mbps/1gbps) which we estimate to be more profitable and margin accretive to RSPs (i.e., increasing TLS margins from c.9% (NBN50) to 29% (NBN1GB)). Telstra also announced it will increased Fixed Wireless plans to 1TB – which although positive, is not nearly as aggressive as we believe the industry should be (we would expect meaningful promotions/discounts to accelerate migration).”

In light of the above, Goldman continues to prefer Telstra over rival TPG Telecom Ltd (ASX: TPG).

Its analysts have retained their neutral rating and cut their price target on TPG’s shares by 5% to $5.90.

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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.

GameStop‘s (NYSE: GME) stock price recovery from single-digit levels began with a short squeeze inspired by Reddit’s WallStreetBets blog site. Outsized enthusiasm for the stock has offered a needed lifeline to GameStop, enabling it to raise capital and revive its ailing retailing business.

While this move increases the odds of GameStop’s survival, its business model and financials indicate limited further upside. That strongly suggests the stock is overpriced. Here’s why.

Competitive advantage and GameStop

The retailer previously built a competitive advantage as a one-stop-shop for all things gaming, especially electronic gaming. Customers could visit GameStop to find the latest video games, get refurbished hardware, and buy, sell, or trade games. However, the rise of downloadable video game sales slowly made GameStop an unnecessary middleman as gamers could buy games and upgrades more easily directly from manufacturers.

Nonetheless, some good news for GameStop has resulted. GameStop has used its capital to transform itself primarily into a “digital-first, omnichannel retailer.”

Also, it has replaced much of its previous executive management team, removing both the CEO and CFO. Experienced internet retail leaders such as incoming chairman of the board Ryan Cohen has joined the company. Cohen previously co-founded online retailer Chewy. Additionally, to adapt its buy-sell-trade business to a world of video game downloads, it has ventured into collectibles, board games, and other items.

Unfortunately, this move may also leave GameStop with a less significant competitive advantage. The collectibles business has existed for decades. While GameStop can serve as a name-brand outlet for such a business, it holds little discernible advantage outside of the GameStop name.

Moreover, one can say the same for its core game download business. Yes, it can aggregate available games from each of the manufacturers onto its website. For example, Microsoft (NASDAQ: MSFT) has agreed to give GameStop a cut for each Xbox game sold on its site. Still, investors have little visibility on the percentage GameStop receives. Furthermore, when comparing the Xbox site versus GameStop, the games sell for the same price, leaving GameStop with no advantage there.

GameStop, financially speaking

GameStop’s financials offer a mixed picture. In fiscal 2020, net sales fell 21% to just under $5.1 billion. However, due to dramatically lower cost of goods sold, more modest operating costs, and an income tax benefit, its net loss improved to just $215 million. GameStop lost $471 million in 2019.

Moreover, fourth-quarter fiscal 2020 net sales fell by only 3% from year-ago levels. GameStop also earned a before-tax profit of $11 million in that quarter. This time, it experienced higher operating costs that prevented it from coming close to the $69 million quarterly before-tax profit in Q4 2019.

The company did not publish an outlook. Nonetheless, even with the stock’s volatility, one cannot escape the 4,200% return the Reddit-inspired short squeeze helped bring to the company.

GME data by YCharts

However, this gain brings bad news from a valuation sense. While its 2.4 price-to-sales ratio may not appear high, it now sells for more than 29 times its book value. In comparison, Best Buy sells for six times its book value, and even Amazon boasts a price-to-book value ratio of only 16.

Still, since the stock trades in the $185 per-share range as of the time of this writing, it has raised funds by issuing shares. Now, almost 71 million shares have become available, up from 65 million in March. While this strategy can help save the company, shareholders pay the price in the form of less valuable shares. Worse, this dependence confirms that the stock remains in survival mode with no obvious path for prosperity.

The bottom line

The massive run-up in GameStop stock and the strategic shift to online sales may have saved GameStop. Now, GameStop holds the needed funding to make its digital-first transformation a reality.

However, survival is not prosperity, and with a weak competitive advantage, it could struggle to maintain its valuation long term. While it is not “game over” for GameStop, long-term investors will more likely win with other internet-centric retail stocks.

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

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The Costa Group Holdings Ltd (ASX: CGC) share price is rebounding from yesterday’s selloff.

In morning trade, the horticulture company’s shares are up over 1% to $3.41.

Why did the Costa share price crash lower on Thursday?

The Costa share price crashed 24% lower yesterday following the release of its annual general meeting update.

Costa revealed that it is expecting its first half performance to be marginally ahead of the prior corresponding period. This is being driven by weakness in its domestic operations and currency headwinds.

Is this a buying opportunity?

According to a note out of Goldman Sachs, its analysts believe the selloff was overdone.

And while the broker has cut its price target by 9% to $4.85, it has held firm with its buy recommendation.

Based on the current Costa share price, this implies potential upside of 42% over the next 12 months.

What did Goldman say?

Goldman said: “CGC has released a trading update at its AGM. Performance across categories has been mixed YTD: international is performing very strongly, but challenges in domestic produce have emerged, particularly in the mushroom operations (labour sourcing) and the Avocado and Tomato categories (price deflation).”

“We see a positive earnings growth trajectory for the company over the medium term driven largely by volume growth from new plantings. However, the challenges observed through this half illustrate the leverage CGC has not only to agricultural conditions (as we saw through 2019), but also to market conditions.”

“We think the share price reaction today (-24%) is overdone, and with our revised 12m TP by -9% to A$4.85 providing 44% upside, we retain our Buy recommendation,” it concluded.

Goldman made the revision to its price target after reducing its FY 2021/FY 2022/FY 2023 by -22%/-12%/-14%. However, despite these downgrades, the broker still believes Costa can grow its earnings per share by a CAGR of 19% between FY 2020 and FY 2023.

In light of this, with the Costa share price trading at 19x estimated FY 2021, it sees a lot of value here for investors.

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The Latitude Group Holdings Ltd (ASX: LFS) share price is climbing in early trade today. At the time of writing, the company’s shares are changing hands for $2.50, a rise of 2.04%.

This comes after the instalments and lending business released a trading update for the first half of 2021.

How is Latitude performing?

The Latitude share price is climbing today following a positive update showing improved business performance.

According to this morning’s release, Latitude’s loan volumes for the six months ending 30 June 2021 (H1 21) are expected to come in at $3.7 billion.

This is an increase of 7%, with personal loan volumes up 25% in Australia, and 50% in New Zealand compared to H1 20.

Latitude noted the growth in volume comes despite its international and travel segment being impacted by COVID-19.

Those categories are forecast to be down 46% and 74% respectively on the prior corresponding period (pcp) due to border closures.

Gross loan receivables are projected to remain consistent with H2 20 levels at $6.5 billion. According to the company, this is because customers have been able to make early repayments on loans due to lower spending and government cash stimulus packages.

Costs are anticipated to fall by around 10% over the pcp due to management’s focus on its simplification program.

Pleasingly, the company’s book credit value has improved with net charge-offs predicted to decline by around 40% from H1 20.

As a result, Latitude expects a net profit after tax (NPAT) of between $115 million and $120 million for the six months ending 30 June 2021.

Management said the current 7-day lockdown in Victoria will not affect its H1 21 guidance.

Management commentary

Latitude managing director and CEO Ahmed Fahour said:

Volumes have recovered strongly in all areas other than travel and current indications are that this trend will continue for the remainder of 2021. Instalments volumes have been pleasing, particularly in the home segment, and we see this performance continuing. Personal loans and auto loans volumes are growing strongly and Latitude is now the number two originator of new personal loans in Australia and one of the leaders in New Zealand. We remain optimistic that travel volumes will recover quickly when borders reopen, although the reopening has been further delayed.

The LatitudePay+ (big-ticket buy now, pay later) pilot is currently in market and will move to full launch in 2H21. Latitude will also apply for the necessary licences to build its instalments business in Singapore and Malaysia in the coming months, in conjunction with our key merchant partners.

About the Latitude share price

Since listing on the ASX late last month, Latitude shares have dropped by around 7%. This is despite the company raising $150 million in its initial public offering (IPO) at $2.60 per share.

Based on valuation grounds, Latitude has a market capitalisation of $2.5 billion, with exactly 1 billion shares on its registry.

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The BetMakers Technology Group Ltd (ASX: BET) share price is sinking on Friday.

In morning trade, the betting technology company’s shares are down 9% to $1.45.

Why is the BetMakers share price sinking?

The BetMakers share price is sinking after the company confirmed speculation that it is interested in acquiring the Tabcorp Holdings Limited (ASX: TAH) Wagering and Media business.

According to the release, the company has submitted a non-binding, indicative proposal to acquire Tabcorp’s Wagering and Media business for an enterprise value of $4 billion.

Under the indicative proposal, Tabcorp would receive $1 billion in cash, which BetMakers plans to fund through debt financing, and $3 billion in BetMakers shares. In respect to the latter, the number of shares to be issued will be fixed at the time a transaction is agreed and priced at a 15% premium to the traded price of BetMakers prior to signing.

Based on the 10-day volume weighted average price (VWAP) to 26 May 2021, the indicative proposal would provide Tabcorp shareholders with an approximate 65% interest (on a fully diluted basis) in the combined BetMakers and Tabcorp Wagering and Media business plus A$1 billion in cash to Tabcorp.

Furthermore, BetMakers has proposed that the share consideration is distributed in specie to Tabcorp shareholders on a pro rata basis. This will allows Tabcorp shareholders to convert their indirect interest in Tabcorp Wagering and Media into a direct and liquid shareholding in the combined entity, providing flexibility and choice.

The Combined Entity is expected to be moderately geared at less than 2.5x net debt / EBITDA on a pro forma basis.

Acquisition rationale

There are a number of reasons that BetMakers believes the acquisition and proposal represents a compelling value proposition for both sets of shareholders.

One is that it brings together two highly complementary businesses to create a competitive global wagering and technology platform with scalable operations across both B2B and B2C markets.

Management also notes that the combined entity will be able to take advantage of BetMakers’ technology and product innovation to compete more aggressively in an increasingly digital-driven consumer market.

Another is that global opportunities will be pursued by leveraging the incumbent and iconic Australian TAB brand and content with BetMakers’ established global network, market access and strong partnerships with US racing bodies.

It also expects the monetisation of Tabcorp Wagering and Media’s media content on a global scale through BetMakers’ network of global partners.

BetMakers’ Strategic Adviser, Matt Tripp, said: “I am excited by the potential opportunity to reinvigorate the Tabcorp Wagering and Media business. There is significant potential for the business to grow in partnership with BetMakers and I hope to get the opportunity to support the Australian racing industry which relies on the success and growth of TAB.”

“I have been very impressed with the world-class team BetMakers has put together and the enormous growth opportunities they have created globally, including in the rapidly emerging US wagering landscape, and the timing could not be better for this unique opportunity. Aside from the value that this offer is anticipated to unlock for shareholders in both companies, this is an incredibly exciting opportunity for the Tabcorp Wagering and Media business to maximise its commercial potential on a global scale.”

Tabcorp response

Tabcorp has acknowledged the receipt of the proposal. However, its Board has not yet formed a view on the merits of the proposal. It intends to assess it in the context of the previously announced strategic review.

The Tabcorp share price is up 4% on the news. Judging by the market’s reaction, it appears as though investors believe Tabcorp shareholders are getting the better end of the deal here.

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The EROAD Ltd (ASX: ERD) share price is on the move on Friday morning.

At the time of writing, the transportation technology services company’s shares up 0.5% to $5.26.

Why is the EROAD share price edging higher?

Investors have been buying the company’s shares this morning following the release of its full year results.

According to the release, for the 12 months ended 31 March, EROAD reported a 13% increase in revenue to NZ$91.6 million and a 13% lift in earnings before interest, tax, depreciation and amortisation (EBITDA) to NZ$30.7 million.

Management advised that this was driven by growth in contracted units across all its markets and a stable average SaaS monthly revenue per unit (ARPU) of NZ$58.30 per month.

At the end of the period, the company’s Annualised Monthly Recurring Revenue metric (AMRR) had increased to NZ$88.4 million from NZ$84 million a year earlier.

EROAD’s Chief Executive Officer, Steven Newman, said: “In a year that presented challenging macro-economic conditions we continued to grow across all of our markets delivering a 13% increase in revenue and Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) year on year. In addition, we accelerated our growth strategies to take better advantage of opportunities that have emerged from the challenges of the last twelve months. EROAD is now stronger than ever before, better positioned to capture the increasing growth opportunities in telematics.”

Outlook

EROAD has reiterated the guidance it previously provided for FY 2022. Management explained: “It is anticipated that the percentage revenue growth in FY22 will strengthen from that delivered in FY21, but not be at the level experienced in FY20.”

In New Zealand, the company expects to add a similar number of units to that seen prior to FY 2021 (~9,000 p.a). Its New Zealand Ehubo sales will be complemented with Clarity Dashcam sales.

Whereas in North America, EROAD expects increased unit growth in FY 2022 as the economy returns to pre-COVID conditions. This should be supported by Clarity Dashcam sales.

In Australia, it expects growth during the next two years to come predominantly from an Enterprise pipeline of 15,000 to 20,000 vehicles.

Finally, management advised that it continues to accelerate new product delivery for future growth in FY 2023 and FY 2024. This will see the company spend 24% to 27% of revenue on research and development during FY 2022. Positively, despite this, EROAD anticipates that its EBITDA margin will be maintained for FY 2022 and improve at the end of the financial year.

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The Inghams Group Ltd (ASX: ING) share price is on course to finish the week with a very strong gain.

In early trade, the poultry producer’s shares are up 10% to $3.46.

Why is the Inghams share price racing higher?

Investors have been bidding the Inghams share price higher today following the release of a trading update and its guidance for FY 2021.

According to the release, based on its assessment of consensus estimates, and taking into account its current operating performance, management believes its forecast EBITDA may exceed, and forecast statutory NPAT may materially exceed, the market’s expectations in FY 2021.

This could be bad news for short sellers. The Inghams share price has consistently been among the most shorted list on the ASX this year. At the last count, 8% of its shares were held short.

What is Inghams forecasting?

For the 12 months ending 25 June, Inghams is forecasting statutory EBITDA of $438 million to $448 million and statutory net profit after tax of $80 million to $87 million. This is based on a post AASB16 basis.

On an underlying pre AASB16 basis, the company expects to report EBITDA of $203 million to $213 million and net profit after tax of $96 million to $103 million.

Management advised that this has been driven by the benefits derived from operational efficiencies implemented throughout the year. It also notes that trading conditions have improved since COVID-19 restrictions eased over the last six months.

However, it has warned about the consensus estimates that it is judging its performance against.

It advised: “The Company has formed its view on consensus based on a review of the most recently available analyst research. The Company also notes that analyst estimates available through recognised third-party data providers and systems appear to incorporate forecasts for the Company based on a mixture of both pre and post AASB16 estimates, and therefore may not be reliable indicators of market expectations.”

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Financial advisers assess the risk of an investment differently depending on external “noise” like their own mood that day or how hungry they are.

That’s according to the new report Under The Microscope: ‘Noise’ and Investment Advice, that technology firm Oxford Risk released this week.

Oxford’s research gave different financial advisers the same product to assess for an imaginary client.

Worryingly, they gave “remarkably different judgements” on the risk. Moreover, asset allocation advice was “scattershot”.

“Humans are wonderful at many things. But they are inefficient and unreliable decision makers, especially where many moving parts are involved – as in risk capacity,” said the report author Dr Greg Davies.

“Humans are prone to ‘noisy’ errors – unduly influenced by irrelevant factors, such as their current mood, the time since their last meal, and the weather.”

The report, in fact, found the financial advice provided was “closer to totally random than totally consistent”.

Noises that influence investment advice

There were certain characteristics of advisers that correlated to the risk advice they gave. The report said these were the most influential:

• Married advisers recommend slightly lower risk levels than advisers who are single
• University-educated advisers have lower risk capacity assessments on average
• Salaried advisers give higher recommended risk levels than those on commission or fee-based

“Advisers who are single tend to recommend more cash,” read the report.

Remarkably, the number of years in the industry doesn’t have a measurable impact.

“Interestingly, how experienced the adviser is, or how many clients they serve seems to make no significant difference to the advice delivered.”

The research concluded the personality of the professional, understandably, also has an influence.

“Advisers who themselves are more tolerant to risk tend to pass it on to their clients.”

Even in instances in the study when multiple advisers came up with the same risk judgment, they didn’t agree on the asset allocations the client should have.

“Advisers who have higher composure do recommend significantly more equity for each risk level,” the report stated.

“This makes a lot of sense as these advisers are likely to be much less anxious about short-term volatility and more focussed on long-term risk vs return.”

Oxford Risk supplies software to financial advisers and institutional investors to help them override behavioural biases.

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A little-known ASX tech share is ripe for the picking currently, according to one analyst.

Totus Capital investment analyst Tim Warner conceded Dicker Data Ltd (ASX: DDR) is not a fashionable tech business — but that’s the appeal.

“Dicker Data is not the high-flying glamorous tech company that continuously burns cash with the future ‘promise’ of one day being profitable,” he posted on Livewire.

“It is quite the opposite. Dicker Data has been in business since 1978 (yes, that is before the first PC was even released)… Since listing on the ASX in 2011, revenues have grown circa 7 times to $2 billion, and profits by circa 13 times.”

The company is a distributor of hardware and software. It acts as the “middleman” between big global vendors and Australian technology retailers.

Dicker leads the distribution game in Australia with a 29% market share, according to Warner.

This ASX tech share jumped from a COVID-19 crash low of $4.40 in March 2020 to more than $12 in February.

“With the COVID-19 induced work from home phenomena, the demand for hardware and software from businesses to facilitate their employees to work from home surged through the first half of 2020,” said Warner.

Shares are trading at a 30% discount

However, the stock price has come off the boil in recent months as it’s been swept up in the general sell-off of ASX tech shares. Dicker Data was selling at $10.48 at market close on Thursday.

Totus Capital has jumped on this opportunity, buying more Dicker shares.

“At current, there is a period of flux in the perception of Dicker Data’s business value, due to the uncertainties around being a perceived COVID beneficiary as well as its supply chain suffering from global chip shortages,” he said.

“However, we believe this is creating an opportunity to buy a high quality business at an attractive price.”

Why Dicker Data shares are attractive

Warner listed 5 reasons why the distributor has excellent prospects: long-term past success, high return on equity, owner-operator culture, industry growth and an irresistible valuation.

Dicker Data has recorded 19% revenue growth per year and 26% profit before tax growth for the decade since June 2010, he said.

The Motley Fool reported last week that AIM chief investment officer Charlie Aitken thought return on capital is the best measure of business performance.

Dicker passes this test well, according to Warner.

“Dicker has consistently generated high returns on equity, averaging 38% over the last 10 years,” he said.

“DDR benefits from typical scale economies, allowing it to compete on price with other global distributors such as Ingram Micro and Synnex Corporation (NYSE: SNX). However, it differentiates against its competitors through its value-added service, driven by its technical expertise and performance-based culture.”

The co-founders, chief executive David Dicker and ex-wife Fiona Brown, are still on the board with substantial ownership. The other directors also have holdings that add up to about $14 million.

“A testament to their conviction in the long-term success of the business is that the key management personnel have not been issued shares or options — and have built their equity stakes by buying shares on-market (buying as recently as April 2021 at levels above $10 per share).”

At the time of Warner’s commentary earlier this week, Dicker Data shares were going for $9.40.

“You are buying a high-quality business on a forward PE multiple of less than 25 times that has a proven track record of success,” he said.

“You will get paid a 4% fully franked dividend whilst you back a shareholder-aligned management team to capitalise on multiple industry tailwinds.”

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