ASX lithium heavyweights, Galaxy Resources Limited (ASX: GXY), Pilbara Minerals Ltd (ASX: PLS), and Orocobre Limited (ASX: ORE) marked a fifth straight session of losses on Monday.  

Galaxy and Orocobre have extended the losing streak on Tuesday. However, the Pilbara finally ticked green, bouncing 4.19% to $1.12 at the time of writing. 

Why ASX lithium shares are selling off 

Commodities take a breather 

The broader commodities sector experienced a sharp pullback between 11 to 14 May. During this time, the S&P/ASX200 Materials (INDEXASX: XMJ) index fell 4.80%. Main laggards included heavyweights BHP Group Ltd (ASX: BHP) and also Fortescue Metals Group Ltd (ASX: FMG). 

The weakness across the commodities sector likely dragged ASX lithium shares lower or capping any potential upside. 

Weakness in lithium-related industries 

The Global X Lithium & Battery Tech ETF (NYSEARCA: LIT) is made up of companies involved in the lithium cycle, from mining and refining the material to battery and electric vehicle production. 

The exchange traded fund‘s (ETF) largest positions include Albemarle, the world’s largest provider of lithium for electric vehicle batteries and Ganfeng Lithium, the worlds third largest diversified lithium player. In addition, Contemporary Amperex Technology, a Chinese battery manufacturer. 

After surging as high as US$74.80 by mid-February 2021 from a pre-COVID high of ~US$33, the ETF experienced a sharp 25% selloff. This has brought it back down to the US$50 level. The lithium ETF is currently down approximately 2% year-to-date.

The flat year-to-date performance and recent selloff of the ETF reflects weakness across the lithium. This comes all the way down the supply chain from miners through to battery producers. The weak sentiment could be a factor weighting on ASX lithium shares. 

The bigger picture 

While the share price of ASX lithium shares might be taking a breather, the lithium landscape continues to make headway.

Lithium spot prices are still running hot in 2021. Furthermore, the latest update from Fastmarkets highlights an uptick in both lithium carbonate and hydroxide prices in Asian markets due to tight supply availability. 

Pilbara’s corporate presentation on 11 May highlights the continued tailwinds including the global commitment to achieve carbon neutrality and strong electric vehicles sales in both China and Europe.

The post Why these ASX lithium shares are down for a 5th straight session? appeared first on The Motley Fool Australia.

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It has been another day in the red for the A2 Milk Company Ltd (ASX: A2M) share price on Tuesday. At one stage today, the fresh milk and infant formula company’s shares fell 4% to a multi-year low of $5.12.

When the a2 Milk share price hit that level, it meant it was down almost 75% from its 52-week high.

Where next for the a2 Milk share price?

Opinion is largely divided on whether the a2 Milk share price is a bargain buy or a value trap following its sizeable decline.

Though, one thing that is for sure, is that it may not be as cheap as you think despite shedding 75% of its value.

For example, analysts at Credit Suisse are forecasting the company reporting earnings per share of ~11.2 cents in FY 2021 and then ~17.7 cents in FY 2022. This means the a2 Milk share price is trading at 46x estimated FY 2021 earnings and 29x estimated FY 2022.

As a comparison, the Kogan.com Ltd (ASX: KGN) share price, which has also fallen heavily, is trading at 24x estimated FY 2021 earnings and 22x estimated FY 2022 earnings, according to Credit Suisse’s forecasts.

Based on the above, this would arguably make Kogan the more attractive option for investors. It is no wonder then that Credit Suisse has a sell rating and $5.00 price target on a2 Milk’s shares and a buy rating and $17.93 price target on Kogan’s shares.

What about other brokers?

It is worth noting that Credit Suisse is one of the more bearish brokers when it comes to a2 Milk. This is due to its concerns that Chinese consumers are shifting towards local brands and the daigou channel may never return to what it used to be.

But not everyone is as bearish. Analysts at Bell Potter, for example, have a buy rating and $8.50 price target on the company’s shares. While this is still a long way from its high, based on the current a2 Milk share price, this still implies potential upside of approximately 65% over the next 12 months.

Bell Potter is anticipating a stronger recovery in FY 2022 and is forecasting earnings per share of 28.9 cents. If this is accurate, the company’s shares are currently trading at a much more reasonable 18x estimated FY 2022 earnings.

However, given the incredibly high level of uncertainty it is facing, only time will tell which broker made the right call.

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The PPK Group Limited (ASX: PPK) share price is having a bumper day on Tuesday. This comes after the technology and mining equipment company announced a technological breakthrough.

At the time of writing, PPK Group shares are fetching $12.10 apiece, up 8.52% for the day. In earlier trade, the company’s shares reached a new record high of $12.90 before partially retreating.

What’s pushing PPK Group shares higher?

Investors are fighting to get a hold of PPK shares after the company announced an update regarding a revolutionary lithium-sulphur battery.

According to its release, PPK Group’s 48%-owned subsidiary, Li-S Energy has developed a new lithium-sulphur battery using boron nitride nanotubes (BNNT) technology. The scientific discovery was achieved along with its partner and fellow shareholder, Deakin University.

Previously, PPK Group highlighted the significant potential of BNNT however, the material could only be produced in small quantities. To help solve this problem, BNNT Technology, a 50% subsidiary of PPK Group used breakthrough Deakin University technology.

Since then, BNNT Technology yielded 5 kilos of BNNT across a 5-day period from a single production module. The result achieved above 95% purity. This signifies a strong advance in technology as just 2 years ago, only 1 kilo of BNNT per year could be produced.

PPK stated that lithium sulphur (Li-S) batteries are next-generation batteries with a significantly higher energy capacity than existing lithium-ion batteries. However, they have a severe limitation with lifetime performance, typically failing over very few charge and discharge cycles.

In response to this, Deakin’s Nanotechnology research team has developed (BNNT) to improve the performance of Li-S batteries. So far, the material retains a high-energy capacity and avoids significant degradation on more than 450 charge/discharge cycles. The research team is looking at further increasing the product’s cycle capacity.

Li-S has now lodged two key patents covering the function of BNNT and the technology within. According to PPK, covered by the new patents, Li-S has the commercial opportunity to create large-scale manufacturing of lithium-sulphur batteries.

Over the coming years, Li-S plans to finalise the design and scale-up production of the new batteries. Such applications include charging an electric vehicle after 1,000 kilometres of driving, off-grid solar/battery street lighting and more.

Li-S Energy and BNNT Technology are both joint ventures between Deakin and PPK Group. Li-S Energy recently completed a capital raise of $20 million to support the ongoing development of Deakin’s technology.

Management commentary

PPK executive chair, Robin Levison commented:

For me personally, this is a really exciting moment for PPK. What we see here is a real-life tangible application of BNNT to facilitate a genuine technological breakthrough with global commercial potential. This new type of lithium sulphur battery demonstrates how the unique attributes of this truly amazing product can be realised in practice.

Li-S CEO Dr Lee Finniear went on to add:

We have achieved a significant innovation breakthrough with our Li-S battery technology at a time when the world is demanding better batteries and more efficient energy storage devices. The commercialisation journey for Li-S Energy Limited has begun and is on track to showcase this Australian company as a recognised leader in this exciting industry.

Lead Deakin researchers Alfred Deakin Professor Ying (Ian) Chen and Dr Baozhi Yu noted:

These results are the culmination of 10 years of research into the development of lithium sulphur batteries and how that is influenced by advanced nanomaterials. The belief and investment in the research program from Li-S Energy have now enabled us to bring our research toward a commercial reality.

PPK Group share price review

Over the last 12 months, the PPK Group share price jumped by more than 200%, with year-to-date performance above 100%. 

Based on valuation grounds, PPK Group commands a market capitalisation of roughly $1 billion, with approximately 89 million shares outstanding.

The post Why the PPK Group (ASX:PPK) share price hit a record high today appeared first on The Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) is on course to record a solid gain. In afternoon trade, the benchmark index is up 0.7% to 7,070.4 points.

Four ASX shares that have failed to following the market higher today are listed below. Here’s why they are tumbling lower:

ELMO Software Ltd (ASX: ELO)

The ELMO Software share price is down 3.5% to $4.74. Investors have been selling the HR and payroll platform provider’s shares after it narrowed its FY 2021 guidance range. It now expects annualised recurring revenue (ARR) to be between $83 million and $85 million. This compares to its previous guidance of $81.5 million to $88.5 million. Some investors appear to have been betting on the company achieving the high end of its previous range.

James Hardie Industries plc (ASX: JHX)

The James Hardie Industries share price is down 4% to $40.44. This follows the release of the building materials company’s fourth quarter results. James Hardie reported a 20% increase in sales to US$807 million and a 44% jump in adjusted net income to US$124.9 million for the quarter. This led to its full year sales increasing 12% to US$2,908.7 million and adjusted net income rising 30% to US$458 million. As strong as this was, it appears as though some investors were expecting better.

Redbubble Ltd (ASX: RBL)

The Redbubble share price is down over 6% to $3.36. This is despite there being no news out of the ecommerce company today. This latest decline means that the Redbubble share price is now down 54% from its 52-week high. Weakness in the tech sector and concerns over its valuation have been weighing on its shares.

St Barbara Ltd (ASX: SBM)

The St Barbara share price is down over 8% to $1.88. Investors have been selling the gold miner’s shares after it downgraded its production guidance and increased its cost guidance. Due to issues at its Leonara and Simberi operations, the company expects to be between 330,000 and 360,000 ounces in FY 2021. This compares to its previous guidance of 370,000 to 380,000 ounces. As for costs, the miner’s all-in sustaining costs (AISC) is now expected to be A$1,547 to A$1,695 per ounce, up from between A$1,440 and A$1,520 per ounce.

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If you’re a fan of small cap shares, then I would suggest you take a look at the ones listed below.

Here’s why these three ASX small cap shares could have bright futures ahead of them:

Audinate Group Limited (ASX: AD8)

The first small cap share to look at is digital audio-visual networking technologies provider, Audinate. It is best known for its industry-leading Dante audio over IP networking solution. This solution is used widely across a number of industries and is currently dominating the competition. This appears to have positioned it perfectly for growth once the pandemic passes and large gatherings and events begin again. The company has also made some acquisitions in the video side of things and is looking to replicate its success in audio in this lucrative market as well.

Universal Store Holdings Limited (ASX: UNI)

Another small cap to watch is Universal Store. It is a fashion retailer which aims to deliver a frequently changing selection of on-trend products to a target 16-35 year old fashion focused customer. It has been a very positive performer during the pandemic and reported impressive growth during the first half of FY 2021. For the six months ended 31 December, Universal Store delivered a 23.3% increase in sales to $118 million and a 63.6% increase in underlying net profit after tax to $21.1 million. The company followed this up in the third quarter with further strong growth, setting itself up for a bumper full year profit result.

Whispir Ltd (ASX: WSP)

A final small cap share to watch is Whispir. It is a software-as-a-service communications workflow platform provider. Whispir provides an industry-leading software platform that allows governments and businesses to deliver actionable two-way interactions at scale using automated multi-channel communication workflows. Demand has been increasing strongly, leading to stellar recurring revenue growth in recent years. However, it is still only scratching at the surface of its total addressable market (TAM). At the end of the third quarter, Whispir’s ARR stood at $50.3 million, which was up 20.3% over the prior corresponding period. This compares to its TAM of US4.7 billion in the just United States. 

More reading

• 3 exciting ASX growth shares rated as buys
• 2 small cap ASX shares to keep your eyes on
• 3 exciting small cap ASX shares to watch in May
• 2 highly rated ASX tech shares for growth investors
• 2 exciting small cap ASX shares to watch

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 recommends Whispir Ltd. The Motley Fool Australia owns shares of and has recommended AUDINATEGL FPO. The Motley Fool Australia has recommended Whispir 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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Australia’s leading investment platform provider CommSec has released data on the most traded ASX shares on its platform from last week.

Here’s the data:

A2 Milk Company Ltd (ASX: A2M)

This infant formula company’s shares were the most traded on CommSec last week and attributable to 2.8% of trades. And although the a2 Milk share price sank 21% lower following its fourth guidance downgrade of FY 2021, almost two-thirds of the volume came from buyers. Unfortunately for these buyers, the company’s shares continue to slide and hit a multi-year low earlier today.

Zip Co Ltd (ASX: Z1P)

This buy now pay later (BNPL) provider’s shares were popular again last week. They accounted for 2.5% of trades, with 62% coming from the buy side. Despite this buying pressure, it wasn’t enough to stop the Zip share price sinking 6.8% over the five days. This was driven by weakness in the tech sector.

Betashares Nasdaq 100 ETF (ASX: NDQ)

The Betashares Nasdaq 100 ETF was attributable to 2.2% of trades on CommSec last week, with 84% of the volume coming from buyers. As with Zip, weakness in the tech sector weighed heavily on the popular ETF last week. This led to the Betashares Nasdaq 100 ETF falling 2.7% over the period.

Afterpay Ltd (ASX: APT)

Afterpay shares were attributable for 2.1% of trades on the platform last week, with 59% coming from buyers. Unfortunately, the aforementioned selloff in the tech sector led to the Afterpay share price sinking 9.5% over the five days.

Fortescue Metals Group Limited (ASX: FMG)

This iron ore producer’s shares accounted for 1.5% of trades on CommSec last week. On this occasion, the buying and selling was largely even, with buyers accounting for 52% of the volume. The Fortescue share price fell 1% last week after a pullback in iron ore prices towards the end of the week.

More reading

• South32 (ASX:S32) increases capital returns by $258m and sets climate goals
• Why Zip (ASX:Z1P) and this beaten down ASX tech share could be buys
• Why the Zip (ASX:Z1P) share price is down almost 25% this month
• These ASX tech shares are down 50% from their 52-week highs
• Can China really crash the iron ore price?

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 AFTERPAY T FPO, BETANASDAQ ETF UNITS, and ZIPCOLTD FPO. The Motley Fool Australia has recommended A2 Milk and BETANASDAQ ETF UNITS. 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 Bitcoin (CRYTPO: BTC) price has recovered from its 7-day slide, eking out a 0.5% gain over the past 24 hours. One Bitcoin is currently worth US$45,029 (AU$57,729)

That’s well below the record high of US$64,829, reached on 14 April. But it still represents a gain of 55% year-to-date.

The Musk effect

Although Bitcoin’s recent woes can’t all be pinned on Tesla Inc (NASDAQ: TSLA) founder Elon Musk, the world’s third-richest man has certainly had an impact on the value of the world’s largest crypto.

Last week he said that Tesla would stop taking payment in Bitcoin. That fuelled speculation the company might sell some of the US$1.5 billion worth of the crypto it recently bought. He was concerned about the huge carbon footprint associated with Bitcoin mining, which uses almost as much energy as the entirety of Australia.

Musk has since moved to calm Bitcoin investor angst. He wrote that Tesla won’t sell any of its Bitcoin holdings. But his company also won’t use it for transactions until the mining “transitions to more sustainable energy”.

How to squeeze more from your Bitcoin holdings

Investing in Bitcoin remains a risky proposition. The price swings can be fast and furious. Outsized potential gains and equally large potential losses often come in a matter of weeks or even days.

But for those investors with a cast-iron stomach for risk, there’s the opportunity to earn a yield on your crypto holdings.

That’s right, there are crypto savings accounts that will pay you interest on your borrowed Bitcoin.

As Bloomberg reports, various fintech companies will pay yields of 2–6% (or more) to borrow your Bitcoin.

Just don’t lose sight of the increased risks you’d be taking on.

Firstly, the crypto you’ve lent out could fall hard over a period of days, without offering you any immediate recourse to sell.

Also, the interest you’re getting is paid in Bitcoin (or occasionally other cryptocurrencies). So if the price does fall dramatically while you’ve lent it out, the 2–6% interest you’ve received won’t be nearly enough to cover the losses.

Then there’s the creditworthiness of the fin-tech companies themselves. If you’re going to lend to any entity, whether you’re lending dollars or Bitcoin, you want to be pretty confident you’ll be getting that back along with the interest owed.

Still, the extra yield in today’s near zero interest rate world is enticing a growing number of crypto holders to lend some out.

If you’re considering that, long-time Bitcoin investor and analyst Dan Held has the following advice (quoted from Bloomberg), “Never risk your whole stack, and don’t risk what you can’t lose. These are private companies with no federal backing.”

Parker Lewis, head of business development at Bitcoin financial-services company Unchained Capital, echoes that sentiment. “If you do decide to lend Bitcoin, you better be able to quantify the costs because you’re trading the greatest asymmetry that has ever existed for counterparty and credit risk.”

More reading

• 3 explosive shares that defy PE ratios
• Bitcoin’s next step forward aims to address adoption hurdles
• Why these 3 experts aren’t worried about the tumbling Bitcoin price
• Bitcoin suffers largest correction since March 2020
• Why I’m loving this ASX bank share at the moment: fundie

Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Bitcoin and Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Commonwealth Bank of Australia (ASX: CBA) has released a report finding Australia’s spending habits are continuing to recover from COVID-19.

The news comes as the Commonwealth Bank share price closes in on a landmark price tag of $100 per share.

At the time of writing, the CBA share price is up 0.44%, with shares in the bank swapping hands for $98.22. Earlier today, it hit yet another all-time high, trading at $98.62.

According to the Commonwealth Bank, Australia’s spending intentions increased in April.

Let’s take a closer look at the latest in CBA’s series of economic reports.

CBA finds Australia’s spending intentions are increasing

Each month, the Commonwealth Bank Household Spending Intentions report uses CBA and Alphabet Inc‘s Google (NASDAQ: GOOGL) data to create a snapshot of future Australian spending.

In comparison to April 2020, spending intentions were up in all categories tracked by CBA last month.

CBA chief economist Stephen Halmarick commented on the findings, saying:

This comes as no surprise as we know that April 2020 was the low-point for spending as the first wave of COVID-19 restrictions hit Australians.

A year later, the economy has recovered strongly from COVID-19 impacts, with employment above pre-pandemic levels and household spending intentions on the rise as consumers once again feel confident about their economic prospects…

We expect the residential property market to be a key source of support for Australia’s economy in 2021, driven largely by the very low level of interest rates.

The expectation that the housing market will support much of Australia’s economic recovery comes from Australians’ increasing interest in purchasing houses, alongside growing housing prices. The CBA expects housing prices to jump by 14% by the end of next year.

The bank said the 2021 Federal Budget painted a “brighter economic picture”, while Halmarick stated: 

The Budget’s targeted support programs aim to put more people into jobs and ensure the economic recovery is widespread.

Where Australia is spending money

The Commonwealth Bank reported that Australians intended to spend more on homes, retail, travel, health and fitness, entertainment, education, and vehicles in April compared to the same time last year.

When compared to data from 2 years ago, Australians intended to open their wallets more for houses, entertainment, and vehicles.

Perhaps unsurprisingly, we’re spending less on door-to-door sales, duty-free goods, movie theatres, live music, and videotape rental stores than in pre-pandemic years.

Instead, Australians are spending more on eating out, bowling alleys, and digital entertainment such as books and movies compared to 2019.

While we’re dishing out the dollars much less on travel than we did in 2019, we’re spending more on camper trailers and caravans, buying and renting motorhomes, and staying at caravan parks or camping grounds.

CBA share price snapshot

2021 has been a fantastic year on the ASX for the CBA share price.

Currently, shares in the bank are up 17.6% year to date. The CBA share price has also lifted 67.2% over the last 12 months, having recovered well from the COVID-19 induced recession. 

It has a price-to-earnings (P/E) ratio of 26.25 and a market capitalisation of around $173.4 billion. CBA has approximately 1.7 billion shares outstanding.

More reading

• Exec jailed for ASX share market manipulation
• Leading brokers name 3 ASX shares to sell today
• 3 explosive shares that defy PE ratios
• Why the Commonwealth Bank (ASX:CBA) share price is in the spotlight today
• Is there more upside to the CBA (ASX:CBA) share price following recent results?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares). The Motley Fool Australia has recommended Alphabet (A shares). 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 Latitude Consolidated Ltd (ASX: LCD) share price is having a stellar day today. Latitude Consolidated shares are up a chunky 32.20% at the time of writing to 7.8 cents a share. That comes after Latitude closed at 5.9 cents per share last Friday and opened at 7.2 cents per share this morning. Latitude shares were actually in a trading halt yesterday, which the company requested yesterday morning before market open.

Well, shares have resumed trading today, and with gusto.

So what’s going on with the Latitude Consolidated share price?

There’s gold in them hills

Well, it seems as though today’s decisive share price movement is the result of an update Latitude gave the markets this morning just before open. In this update, the gold miner informed investors that it now expects that its Murchison Gold Project houses 13.1 million tonnes of gold ore. The concentration is at 2.6 grams per tonne. Murchison is located in the Murchison goldfields in Western Australia. That gives it a reserve estimate of 1,115,000 ounces of gold.

This windfall comes from the Turnberry mineral resource in Murchison, a shallow gold deposit that has yet to be mined. The company’s estimates now evaluate Turnberry as housing 610,000 ounces of gold.

So how did Latitude get here? Here’s how the company said it happened:

[The] previous modelling of the resource was performed in a manner so as to produce a low tonnage, high grade estimate... Although this approach was strategically valid and also reflective of the gold price environment at the time, it resulted in a large number of mineralised intersections present in drilling being left out of the historical Mineral Resource estimates.

Here’s some of what Latitude Consolidated CEO Tim Davisson had to say on the announcement today:

We continue to build on our large, existing high-grade gold resource and this 125% upgrade at Turnberry is a fantastic outcome for Latitude. In short order, we have been able to clearly demonstrate the true scale and growth potential of our high-grade gold projects in the prolific Western Australian gold producing region of the Murchison.

About the Latitude Consolidate share price

Latitude is a small-tier gold miner and exploration company. Today’s share price move means that Latitude Consolidated shares are now up 150% year to date. They’re also up a healthy 650% over the past 12 months. At the current share price, Latitude Consolidated has a market capitalisation of $57.27 million.

More reading

• Australians are opening their wallets, says CBA report
• Up 8% this week, brokers are bullish about the Aristocrat (ASX:ALL) share price
• Here’s why Centuria Capital (ASX:CNI) shares are falling 6% today
• Why the BARD1 (ASX:BD1) share price is on the rise today
• Why Aristocrat Leisure, Creso Pharma, Nuix, & Resolute are charging higher

Motley Fool contributor Sebastian Bowen 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 Aristocrat Leisure Limited (ASX: ALL) share price continues to ride the momentum of yesterday’s upgraded half-year earnings.

Reaching a new record high of $40.63 this morning, the Aristocrat share price is up 3.8% at the time of writing, trading at $40.41.

What do brokers say about the Aristocrat share price?

First off the blocks is Citi, which maintains its buy rating and has increased its target price from $40.60 to $44.50. The broker says that the gaming and gambling machine company’s recovery has been much faster than expected.

Citi believes Aristocrat’s business is being propelled by the reopened and stimulated United States economy. This has prompted the broker to pull forward its recovery forecast, upgrading FY21 net profit estimates by 12%. 

Credit Suisse had a similar reaction, with Aristocrat’s first-half operating earnings well ahead of its estimates. As a result, the broker upgraded its FY21 net profit estimates for the company by 24%. 

Despite retaining an outperform rating and increasing its target price from $38.00 to $41.25, the broker said that this positive situation might be temporary given the amount of stimulus injected into US and Australian economies. 

Morgan Stanley said that the company’s first half profit of $412 million was a significant 43% ahead of its forecasts. The broker believes Aristocrat’s update suggests that its land-based business is recovering well ahead of expectations, while its digital business must have also grown against the prior corresponding period. Despite the strong update, the broker retained its target price of $38.00 and an overweight rating. 

UBS notes that the outright gaming machine replacement market is still down 40% to 45%, meaning Aristocrat’s increase in market share should be taken positively.

The broker believes that around 90% of participation gambling machines are switched on despite potential disruptions in the US. The strong update has given the broker the confidence that Aristocrat could deliver $1.1 billion in profit for FY22. 

UBS retained a buy rating while lifting its target price from $35.50 to $42.50. 

Macquarie was the only broker to retain a neutral rating while lifting its target price from $32.00 to $39.00. The broker’s net profit forecasts were slightly less optimistic than UBS, forecasting $843 million in FY21.

Macquarie believes the catalyst for the upgrade was more margin-driven than anything revenue-related. 

More reading

• Why Aristocrat Leisure, Creso Pharma, Nuix, & Resolute are charging higher
• Here’s why the Macquarie (ASX:MQG) share price sank 5% today
• Is there more upside to the CBA (ASX:CBA) share price following recent results?
• Why the Nuix (ASX:NXL) share price just hit its lowest level ever
• Could the ANZ (ASX:ANZ) share price have an edge against other banks?

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie 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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