PointsBet Holdings Ltd (ASX: PBH) shares are inching lower in early trade despite the company announcing its iGaming platform has launched in Michigan. At the time of writing, the PointsBet share price is trading 0.14% lower at $14.03. 

Let’s take a closer look at the news from the online bookmaker this morning.

PointsBet’s iGaming outlook

The PointsBet share price is failing to respond following news the company’s subsidiary, PointsBet Michigan LLC, has launched its iGaming platform in the state. This came after PointsBet received authorisation from the Michigan Gaming Control Board. 

iGaming is the act of betting on the outcome of an event – typically sports events – online.  

PointsBet has ongoing and upcoming iGaming markets in New Jersey, Pennsylvania, Michigan, and West Virginia.

According to PointBet’s release, the combined iGaming revenues from the 4 states in the quarter ended 31 March 2021 was US$770 million. If consistent, revenue from the states will equate to $3 billion annually.  

PointsBet launched its sports wagering product in Michigan in January. It plans to launch its iGaming platform in New Jersey in June.

The company states that New Jersey’s iGaming industry had a compound annual growth rate of 25% between 2014 and 2018. It also said iGaming revenues from the state grew by 101% last year.

According to PointsBet, profits from iGaming in the United States have increased dramatically over the last 3 years due to the repealing of the Professional and Amateur Sports Act. The Act effectively banned sports betting throughout most of the United States.

Commentary from management

PointsBet’s group CEO and managing director Sam Swanell commented on the news, saying:

Over the past 18 months we have assembled a highly experienced iGaming team which has built our in-house proprietary iGaming platform and administrative tools and I am thrilled today to announce the inaugural launch in Michigan.

The launch of iGaming not only complements our existing sports wagering products, but also removes the disadvantage we have had with customer acquisition, retention and cross sell compared to those operators with iGaming.

PointBet share price snapshot

Despite today’s disappointing reaction, the PointsBet share price has been performing well on the ASX lately. Currently, the company’s shares are up by almost 19% year to date. They are also up by a whopping 235% over the last 12 months.

PointsBet has a market capitalisation of around $2.6 billion, with approximately 207 million shares outstanding.

More reading

• Young investors OK with ASX shares peddling gambling, tobacco, porn
• Why Dubber, PointsBet, Starpharma, & Westpac shares are storming higher
• ASX 200 up 0.25%: Westpac result impresses, PointsBet jumps
• Leading brokers name 3 ASX shares to buy today
• Leading broker tips PointsBet (ASX:PBH) share price to shoot higher

Motley Fool contributor Brooke Cooper 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 Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post PointsBet (ASX:PBH) share price slumps despite US iGaming launch appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/33t66Al

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.

Berkshire Hathaway‘s (NYSE: BRK.A) (NYSE: BRK.B) annual shareholder meeting and its marathon question-and-answer session have once again come and gone, offering investors another glimpse into the extraordinary mind of legendary investor Warren Buffett. Some of the questions that came up in Saturday’s livestream dealt with moves Berkshire made during the early stages of the pandemic last year — including what led the company to exit most of its banking positions while loading up on Bank of America (NYSE: BAC). After months of speculation, Buffett gave a little bit of insight into what drove his decision making.

Too much exposure

Prior to the pandemic, Berkshire owned a slate of bank stocks, and Buffett seemed to have a bullish stance toward the sector. However, as stay-at-home orders and economic shutdowns spread across the country and banks braced for heavy loan losses, Buffett seemed to do a 180 and exited many of his holdings.

Berkshire eliminated its stake in investment bank Goldman Sachs and eventually JPMorgan Chase, America’s largest bank by assets. Berkshire also sold its position in regional banks like PNC Financial Services Group and M&T Bank. And Buffett appears to be looking for an exit on former favorite Wells Fargo, selling shares gradually for the past several quarters.

While all of this was going on, Buffett and Berkshire pumped more than $2 billion of stock into Bank of America and increased the company’s stake to 11.9% of outstanding shares, a move that required special regulatory approval.

While we don’t yet know what moves Buffett has made in 2021, he doesn’t appear to have done much, since the cost basis of Berkshire’s bank, insurance, and finance stocks after the first quarter was just slightly higher than it was at the end of 2020.

During the Q&A part of Berkshire’s shareholder meeting, Buffett was asked why he had sold most of his bank stocks last year.

“I like banks generally, I just didn’t like the proportion we had compared to the possible risk if we got the bad results that so far we haven’t gotten,” Buffett said. “We overall didn’t want as much in banks as we had.”

The Oracle of Omaha added: “The banking business is way better than it was in the United States 10 or 15 years ago. The banking business around the world — in various places — might worry me. But our banks are in far, far better shape than 10 or 15 years ago. But when things froze for a short period of time, the biggest thing the banks had going for them was that the Federal Reserve was behind them, and the Federal Reserve is not behind Berkshire. It’s up to us take care of ourselves.”

What to make of this

Buffett is one of the greatest investing minds of all time, if not No. 1, so it’s important to realize that it will be difficult for us to see these moves exactly as he does. And I can certainly appreciate his remark about having too much exposure. Keep in mind, Buffett is managing an equities portfolio of hundreds of billions of dollars, so a few percentage points one way or the other is huge. He needs to think about safety much more than your standard responsible investor (Buffett sometimes refers to himself as Berkshire’s “chief risk officer,” and he did so again on Saturday). But it really is difficult for me to understand all these moves.

Goldman Sachs is not very loan-heavy, so it didn’t really face the same degree of risk as other large banks like Bank of America and JPMorgan Chase. Investment banks also tend to do better in periods of volatility, and Goldman is working to build up its consumer bank and asset and wealth management divisions to generate steadier revenues. Goldman’s stock is nearly 40% higher than it was prior to the pandemic, and many think it’s still trading cheap.

Buffett’s decision to load up on Bank of America and dump JPMorgan as an even bigger mystery to me. JPMorgan not only has a more diversified business, but its earnings power is greater, as well. The bank is also extremely safe. Its reserves for loan losses peaked at $34 billion during 2020, but the bank was prepared for scenarios where its reserves would have peaked at $52 billion. JPMorgan also engineered its way through the Great Recession better than any of the largest banks in America. Buffett officially eliminated Berkshire’s stake in JPMorgan in the fourth quarter of the year. Meanwhile, the stock is up nearly 21% year to date at Tuesday’s prices, and Buffett likely missed out on even more appreciation, considering he sold the bulk of his JPMorgan position in the third quarter of 2020.

Hindsight is, of course, 20/20, but the numbers are also the numbers, and Buffett missed out on huge gains on his former bank holdings that could just be getting started. Banks are potentially poised for a strong multiyear run, with earnings expected to jump in a rising-rate environment. Buffett did say Saturday that he is concerned about “very substantial inflation,” so maybe he thinks too much inflation may kill loan demand, or that rising rates might reveal bad credit quality. However, cyclical stocks like banks and financials tend to perform better during inflation than high-growth tech stocks, which Berkshire has recently made a bigger part of its portfolio than financials.

Is Buffett done with banking?

Buffett has not abandoned the sector altogether. Bank of America is still Berkshire’s second-largest holding behind Apple. Berkshire also still has large positions in American Express, U.S. Bancorp, and Bank of New York Mellon. Buffett also may not be pulling all the strings here — he’s ceded a lot of Berkshire’s investing authority to others who may be making the decisions. It has long been known that two of Buffett’s lieutenants, Todd Combs and Ted Weschler, are much more involved in Berkshire’s portfolio decisions now. In addition, Berkshire recently confirmed that Berkshire’s Vice Chairman Greg Abel is expected to succeed Buffett as CEO when he eventually steps aside.

But with all that has recently happened, it does seem like it could be a while until we see Berkshire buy traditional bank stocks again.

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

More reading

• Invest like Warren Buffett with this ASX ETF
• Why Robinhood is having a go at Warren Buffett
• Berkshire Hathaway reveals Warren Buffett’s eventual successor
• What Warren Buffett learned from investing during a global pandemic
• Warren Buffett hates Bitcoin. Here’s why

Bram Berkowitz 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 Apple and Berkshire Hathaway (B shares) and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), short March 2023 $130 calls on Apple, short June 2021 $240 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, and long January 2023 $200 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Apple and Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Here’s How Warren Buffett Explained Berkshire Hathaway’s Bank Selloff appeared first on The Motley Fool Australia.

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

from The Motley Fool Australia https://ift.tt/33e2nGm

The MoneyMe Ltd (ASX: MME) share price has been a strong performer on Wednesday.

At the time of writing, the digital credit company’s shares are up 6% to $1.43.

This has reduced the year to date decline by the MoneyMe share price to just 2.5%.

Why is the MoneyMe share price charging higher?

Investors have been buying MoneyMe shares following the release of an update this morning.

Pleasingly, that update was positive enough to offset broad weakness in the tech sector following a selloff on Wall Street’s Nasdaq index overnight.

According to the release, MoneyMe was on form again during the month of April and delivered record originations of $47 million for the month. This is up 693% over the prior corresponding period.

Management advised that the strong performance in originations was achieved through existing products, excluding its recently launched Autopay innovation.

In light of this, the company has revised its expectations for gross customer receivables to exceed $300 million in FY 2021. This will be up at least 225% year on year from $134 million in FY 2020.

This is expected to lead to overall revenue coming in at $58 million to $62 million in FY 2021.

Management commentary

MoneyMe’s Managing Director and CEO, Clayton Howes, was pleased with the company’s performance in April.

He said: “We are pleased to report the strong growth and momentum in MoneyMe. Record originations in April are a direct result of our products continuing to deliver amazing customer experiences, including from automated on-the-spot decisioning and fast settlement geared to the needs of Gen Now.”

“We have a strong product pipeline to support revenue growth. Our lastest product, the recently launched Autopay, is a same day drive away finance innovation we expect to materially add to the growth of MoneyMe. Launched on the 21st of April, Autopay is already transacting sales in dealerships,” he concluded.

More reading

• MoneyMe (ASX:MME) share price rockets 8% on Autopay launch
• Why Corp Travel Management, Imugene, MoneyMe, & Syrah are pushing higher
• MoneyMe (ASX:MME) share price edges higher on positive trading update

Motley Fool contributor James Mickleboro 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.

The post Why the MoneyMe (ASX:MME) share price is charging 6% higher today appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3uoeNHY

The CSL Limited (ASX: CSL) share price is on the move on Wednesday morning.

At the time of writing, the biotherapeutics giant’s shares are up 1.5% to $275.25.

Why is the CSL share price on the move today?

This morning the biotherapeutics company released a presentation ahead of its appearance at the Macquarie Group Ltd (ASX: MQG) conference.

While the presentation didn’t include a trading update for the third quarter of FY 2021, it did provide more colour on its plasma collections.

Plasma is a vital part of the process in the manufacturing of many of its therapies.

Over the last 12 months plasma collections have been under pressure due to COVID-19 related headwinds such as social distancing, lower mobility, and stimulus payments. The latter has reduced the need for some donors to make donations for an extra source of income.

What is the latest?

Management acknowledged that plasma collections have been adversely impact and additional collection costs have been incurred.

However, it has been mitigating this with a comprehensive campaign to raise awareness of the opportunity and need for plasma donation. Importantly, all its centres have remained open during the pandemic after being designated as essential critical infrastructure.

CSL has also continued to expand its footprint, with 25 new centres opening in the United States in the current financial year. This brings its network to over 300 cents, with the vast majority (284) in the United States market.

Pleasingly, management isn’t resting on its laurels and intends to open a further 40 new centres in FY 2022.

Incidentally, a recent note out of Citi reveals that its analysts believe plasma collections will return to 2019 levels in the second half of 2021. If this proves accurate, CSL will be well-positioned to benefit thanks to its expanding network.

Is the CSL share price in the buy zone?

According to the aforementioned note out of Citi from late last month, the CSL share price is good value at present.

Citi currently has a buy rating and $310.00 price target on the company’s shares.

Based on the current CSL share price, this price target implies potential upside of 12.5% over the next 12 months.

More reading

• 2 fantastic ASX 50 shares rated as buys
• Why the CSL (ASX:CSL) share price is seesawing over the past month
• Pssst, I’m a value investor who makes money from growth shares: fundie
• ASX 200 Weekly Wrap: Shares have average week but a great month
• Here’s how the CSL (ASX:CSL) share price performed in April

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 CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is the CSL (ASX:CSL) share price in the buy zone after its update? appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3uktb3Q

ASX travel shares are the talk of the town with the world starting to open up again.

But most stocks in that sector already have high valuations that have post-COVID recovery built in.

That’s despite some, like Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB), having to raise massive capital and debt just to survive.

But one fund manager has called out one ASX travel share he believes is in a better position now than before the pandemic.

Time for adventure

Australian adventure tourism provider Experience Co Ltd (ASX: EXP) intrigues Forager Funds senior analyst Alex Shevelev with its potential.

The company supplies experiences like sky-diving, rafting, canyoning, kayaking, helicopter and boat tours, snorkeling and diving, and hot air ballooning.  

Shevelev said the business went off the rails a tad before the coronavirus pandemic arrived.

“We had a management team that went on an acquisition spree in far north Queensland,” he told a Forager video.

“A lot of those investments have had to be curtailed by the current management team, and they’ve [now] really got the business in good shape.”

The Experience Co share price has remained flat since the start of the year, when it was trading for 24 cents. On Tuesday, the stock dropped 1.82% to sit at 27 cents at market close.

That’s now roughly the same level as just before the COVID market crash in March 2020.

With the vaccine rollout bungled in Australia, Shevelev anticipated the world outside of New Zealanders could start arriving in Australia next year.

“The willingness of travellers to come to Australia will be a factor, but really that should start to restart sometime in 2022 and should give those businesses a cleaner 2023 financial year.”

Despite the delays in inbound international tourism, Shevelev liked what the Experience Co executive was currently doing.

“They’ve got a focused plan and a strategy to recover again to earnings that were higher than pre-COVID.”

An intriguing Kiwi business

Shevelev also mentioned New Zealand company Tourism Holdings Ltd as another travel share with huge post-pandemic potential. In fact, the stock is Forager’s biggest travel holding currently.

From mid-2018 to the COVID-19 crash, its shares tumbled from NZ$6.76 to NZ$2.49.

According to Shevelev, there was one massive factor in its misfortunes.

“The US business was unable to sell the vehicles at quite the prices that they wanted because of an oversupply of vehicles.”

After the pandemic arrived, people wanted to avoid public transport. Countries like Australia and the US saw demand for second-hand cars surge.

“A lot of people had sought second-hand vehicles in the US – and that market really cleared up,” he said.

“It has an excellent management team. The business is really primed to actually take share and to recover to better levels of earnings than was expected prior [to COVID] because… they’ve really taken advantage of the downturn.”

More reading

• Experience Co (ASX:EXP) share price jumps 6% on latest update

Motley Fool contributor Tony Yoo owns shares of Webjet Ltd. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia owns shares of EXPERNCECO FPO. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Here’s one ASX travel share now stronger than before COVID appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3eTfnH4

The Incitec Pivot Ltd (ASX: IPL) share price will be in focus this morning. This comes after the company announced an off-take agreement with Perdaman Chemicals and Fertilisers Pty Ltd (Perdaman).

The Incitec share price was trading at $2.65 at the market close yesterday.

What did Incitec Pivot announce?

This morning, Incitec Pivot advised its wholly-owned subsidiary Incitec Fertilisers has entered into an off-take agreement with Perdaman to receive granular urea fertiliser. The 20-year agreement will see up to 2.3 million tonnes per year of urea from Perdaman’s proposed urea plant at Karratha in Western Australia.

The agreement is subject to several requirements before the deal is formally executed. Incitec noted that the most important condition was on Perdaman securing finance to build its new plant.

Should everything go to plan, the offtake agreement will provide Incitec with a long-term domestic supply of urea. This will enable the company to target Australian consumption as well as expand sales into global markets.

Incitec Pivot managing director and CEO Jeanne Johns commented:

The investment by Perdaman in a new, world-scale plant will make it one of the most energy efficient plants in the world utilising low emissions technology.

We are pleased to support such a significant domestic manufacturing project that will use Australian gas to produce urea fertiliser, essential for our Australian and international agricultural markets.

More on Perdaman

Founded in 2006, Perdaman is a West Australian-based multinational group that specialises in a range of markets. This includes fertiliser production to help farmers produce crops, ownership and management of shopping centres, production and distribution of pharmaceuticals, recruitment services and advanced energy solutions.

Its chemicals and fertilisers business focuses on the production of urea, the most commonly traded nitrogenous fertiliser. Urea is non-toxic and contains safe, high nitrogen content that can be easily transported and stored.

Incitec share price review

In 2021, Incitec shares have lifted to record a gain of 16%. The company share price reached a 52-week high of $2.98 in late March.

On valuation grounds, Incitec Pivot commands a market capitalisation of around $5.1 billion, with close to 2 billion shares outstanding.

More reading

• Looming grocery price shock to impact on these ASX shares
• ASX 200 Weekly Wrap: ASX sees 7,000 points once more
• These were the worst performing ASX 200 shares last week
• Top brokers name 3 ASX shares to buy today
• Why 88 Energy, Chorus, Incitec Pivot, & Santos shares are sinking

Motley Fool contributor Aaron Teboneras 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.

The post Why the Incitec (ASX:IPL) share price is in the spotlight today appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/33gbd6Q

The Coles Group Ltd (ASX: COL) share price looks very compelling right now for a number of reasons.

Coles is the one of the biggest supermarket businesses in Australia along with Woolworths Group Ltd (ASX: WOW).

Why is the Coles share price a good one to think about?

Dividend yield

The supermarket industry is not a high-growth area. So, the dividend forms an important part of the returns.

Coles pays out an attractive amount of its profit each year as a dividend to investors.

At the current Coles share price, it offers a grossed-up dividend yield of 5.25%.

That dividend yield is after a solid increase to the FY21 half year dividend of 10% to 33 cents per share. That compares to the earnings per share (EPS) of 42 cents. Coles has an annual target dividend payout ratio of 80% to 90%.

Strong e-commerce sales

Whilst other ASX shares in the e-commerce space have captured more of the investor attention, like Redbubble Ltd (ASX: RBL) and Kogan.com Ltd (ASX: KGN), Coles has itself generated a lot of e-commerce growth.

In the FY21 half-year result it reported that e-commerce sales to household consumers went up by 61%. It has made strategic investments into the user experience and capacity, leading to significant improvements in ‘perfect order rate’ and customer satisfaction. E-commerce sales contributed $1 billion of sales revenue for the half.

Online is a category that Coles can continue to grow in over the long-term. Its online penetration is still relatively low but growing.

Smarter selling and improved offering

Coles is going through a bit of a transformation phase to be more efficient as a business and more attractive for customers.

In terms of costs, it’s looking like it’s on track to deliver cost savings of more than $250 million in FY21.

Coles is trying to improve its end to end flow of fresh goods to store with a more efficient supply chain providing greater shelf life for customers.

The supermarket business is looking to protect profit with “dynamic” markdowns (such as using artificial intelligence to optimise markdowns in meat) and loss prevention (such as entry gates and public view monitors).

One of the main things that it’s looking to improve is its own brand product range and market share. This can lead to lower costs for customers (and better loyalty) as well as better margins for Coles.

It’s also making progress on both of its Ocado and Witron automation projects.

What about the Coles share price valuation?

Coles is now cycling against the strong COVID sales of March and April a year ago in 2020. It recently reported its third quarter sales in FY21 were down 5.1% year on year. However, in the first four weeks of the fourth quarter, sales were up 4%.

The Coles share price went through a dip after reporting its FY21 half-year result. Thanks to that decline, the Coles share price is now valued at 22x FY21’s estimated earnings according to Commsec.

More reading

• 2 buy-rated ASX dividend shares for income investors
• 3 reasons why Coles (ASX:COL) is a top ASX dividend share
• Vicinity (ASX:VCX) sees improvements as it struggles back to COVID-normal
• 2 of the best ASX 200 blue chip shares to buy today
• ASX 200 Weekly Wrap: Shares have average week but a great month

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 Kogan.com ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 3 reasons why the Coles share price could be a buy appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2QLCQ57

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.

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) and Twilio (NYSE: TWLO) are both very important tech companies, but most people might only recognize the former even exists.

Alphabet, the parent company of Google, is the highly visible leader of multiple markets. Google is the world’s top search engine, Gmail is the largest email platform, and Chrome is the most popular web browser. Android is also the leading mobile operating system, and YouTube is the world’s largest streaming video platform with more than 2 billion logged-in monthly users.

Twilio’s cloud-based platform operates behind the scenes by processing text messages, calls, and other communication services within mobile apps. Outsourcing those features to Twilio is generally cheaper, less time-consuming, and easier to scale than creating those features from scratch. Companies like Lyft, Airbnb, and MercadoLibre all use Twilio’s services.

Alphabet’s stock price rallied nearly 130% over the past three years as the growth of its core advertising business supported the expansion of its sprawling digital ecosystem. Yet Twilio’s stock price skyrocketed over 720% as its streamlined communications tools locked in more mobile apps.

Twilio generated more explosive gains than Alphabet, but can it maintain that momentum and remain a better investment over the next few years? Let’s take a fresh look at both companies and see if we can find an answer.

How fast is Alphabet growing?

Alphabet generated 80% of its revenue from Google’s advertising business last year. Its ad growth decelerated in the first half of the year as the coronavirus pandemic spread, but it partly offset that slowdown with the growth of Google Cloud, which benefited from robust demand for cloud services throughout the crisis. Google’s advertising business recovered in the second half of the year as more businesses reopened.

Alphabet’s revenue rose 13% to $182.5 billion in 2020 as its net income increased 17% to $40.3 billion. Its full-year operating margin expanded, from 21% to 23%, as it reined in its spending.

In the first quarter of 2021, Alphabet’s revenue rose another 34% year over year as its advertising business recovered against easy comparisons to the previous year. Google’s total ad revenues increased 32% to $44.7 billion as Google Cloud’s revenue grew 46% to $4.05 billion.

Its operating margin expanded again, from 19% to 30%, and its net income surged 162% to $17.9 billion. Wall Street expects its revenue and earnings to rise 30% and 51%, respectively, this year.

Alphabet’s future looks bright, but there are still a few challenges ahead. It still faces regulatory challenges in several markets, tough competition in the advertising market from Facebook, Amazon, and other platforms; and it still trails far behind Amazon Web Services (AWS) and Microsoft Azure in the cloud infrastructure market. Apple‘s latest privacy changes to iOS could also affect its targeted ad sales.

How fast is Twilio growing?

Twilio’s revenue rose 55% to $1.76 billion in 2020. It posted a full-year net expansion rate of 137%, which means its existing customers spent 37% more money on its services.

However, Twilio’s net loss still widened from $307 million to $491 million. On a non-GAAP basis, which excludes its stock-based compensation and acquisition-related expenses, its net income rose 62% to $35.9 million.

Twilio will post its first-quarter earnings on Wednesday, May 5, and it previously guided for 44%-47% year-over-year revenue growth. Analysts expect its revenue to rise 39% for the full year, but for its non-GAAP earnings to dip into the red again as it ramps up its spending and faces three major challenges.

First, new A2P (application to person) fees from carriers, which are charged whenever an app accesses the SMS network, will weigh down Twilio’s gross margins. Its growing dependence on acquisitions to boost its revenue could exacerbate that pressure.

Second, it still faces competition from similar platforms like Vonage‘s Nexmo, Bandwidth, and MessageBird. Those competitors could all make it tough for Twilio to raise its prices and offset the impacts of its A2P fees and inorganic growth strategies.

Lastly, Twilio relies heavily on big stock-based bonuses and secondary offerings to preserve its cash. As a result, its number of outstanding shares has increased by a whopping 70% over the past four years.

The valuations and verdict

Alphabet trades at 25 times forward earnings and less than seven times this year’s sales — which makes it a reasonably valued stock in the frothy tech sector. Twilio trades at 26 times this year’s sales, making it a much more speculative stock, and the ongoing dilution of its shares could keep its valuations elevated.

If I had to choose one over the other, I’d pick Alphabet because its core business is more stable and its stock is cheaper. I still admire Twilio’s business, but investors shouldn’t pay the wrong price for the right company — especially as higher bond yields potentially spark a rotation from growth to value stocks.

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

More reading

• Here are the US shares that ASX investors were buying last week
• Why Alphabet stock jumped 14% last month
• How high can Microsoft’s and Alphabet’s margins go?
• Seven West (ASX:SWM) share price wobbles on market update
• Retail just changed. Forever…

Leo Sun owns shares of Amazon, Apple, and MercadoLibre. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, 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 Airbnb, Inc., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, MercadoLibre, Microsoft, and Twilio and recommends the following options: long January 2022 $1920 calls on Amazon, short March 2023 $130 calls on Apple, short January 2022 $1940 calls on Amazon, and long March 2023 $120 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, and Twilio. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Better buy: Alphabet vs. Twilio appeared first on The Motley Fool Australia.

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

from The Motley Fool Australia https://ift.tt/3nLUmC6

The Ramsay Health Care Limited (ASX: RHC) share price was a relatively poor performer on Tuesday.

The private hospital operator’s shares edged 0.25% lower to $66.93 following the release of a presentation.

This compares to a 0.55% gain by the S&P/ASX 200 Index (ASX: XJO).

Is the Ramsay share price in the buy zone?

According to a note out of Goldman Sachs, it believes the Ramsay share price is in the buy zone.

This morning the broker retained its conviction buy rating and $75.00 price target on the company’s shares.

This price target implies potential upside of 12% over the next 12 months.

What did Goldman say?

Goldman notes that Ramsay has provided an update which revealed that Australian organic revenue grew 8.2% during the third quarter. This compares to historic levels of 3% to 5%.

However, one slight negative was that volumes are still being skewed towards surgical and day-patient caseloads, putting near-term pressure on its sales mix.

Positively, though, Goldman believes there are positive signs around the recovery in non-surgical volumes. Furthermore, COVID costs are now tracking -50% below the first half average, which it estimates releases upwards of 7% to 8% of APAC EBIT on an annualised run-rate.

Overall, Goldman Sachs is positive on its outlook and continues to expect Ramsay to outperform the market’s current expectations in FY 2021 and FY 2022.

It commented: “Following an encouraging start to CY21, we expect to see positive trends continuing into FY22: 1) elevated utilisation profile: 2) improving cost absorption; 3) tapering of cash ‘covid costs’; 4) improving sales mix (non-surgical); and 5) improving surgical mix (higher-acuity).”

“Overall, we make no changes to our sales/EBITDA/EPS forecasts and remain +2% and +9% above Bloomberg consensus in FY21 and FY22 respectively, as we factor in the recovery of margin-accretive caseload, delivery of a backlog, and a tapering of PPE/Covid costs. Our 12-month target price remains A$75, based on our target NTM EV/EBITDA multiple of 10.2x, methodology unchanged, and reiterate Buy (on CL),” it concluded.

The Ramsay share price is up approximately 7% since the start of the year.

More reading

• The Ramsay (ASX:RHC) share price is sliding on third quarter update
• 2 high quality ASX 50 shares for your retirement portfolio
• 2 buy-rated ASX healthcare shares
• 3 fantastic ASX shares to buy this month
• Ramsay (ASX:RHC) share price rises on acquisition speculation

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Broker tips Ramsay Health Care (ASX:RHC) share price to shoot higher appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3tslHux

A fund manager has told investors to shirk off the recent price plunge for Redbubble Ltd (ASX: RBL) shares.

Shareholders have nervously watched the art merchandise marketplace’s price go from $5.95 at the start of the year to now $4.05 – a 32% drop in just 4 months.

During the month of April alone, the stock price dived more than 18%. 

Ouch.

In a video to clients, Frazis Capital portfolio manager Michael Frazis said the recent quarterly results were “solid” and “in line” with expectations.

“Redbubble is a COVID beneficiary. Those companies are going to be all under pressure, across the board.”

The company is “still executing” and growing, according to Frazis. 

Redbubble also has the advantage of operating a two-sided marketplace, where revenue comes from both the merchant and end customer.

For the quarter ending 31 March, Redbubble’s marketplace revenue increased 54% to $103 million and gross profit was also up 55%.

But the figure that had investors panicked was that its EBITDA/marketplace revenue margin fell to 2.1% for the quarter, compared to 13.8% in the first half. 

According to colleague James Mickleboro, that nosedive was never explained.

Are you an investor or trader?

Frazis’ fund bought into Redbubble at around $3. It has been as high as $7.35 in the past year.

Investors should commit to such growth businesses for the long term, according to Frazis.

“If you’re more a fast, [short-]term follow-the-money trader kind of person, maybe now’s the time you just flick all of those and go into travel stocks and airlines,” he said.

“That’s not what we do. We will stay in this one for the long term.”

Frazis did remind viewers that Redbubble only takes up 2.5% of his fund, so admitted holding is easier said than done for individuals who have a larger stake.

While the share price sunk after the quarterly results last month due to the shrinking margins, other brokers seem to agree with Frazis.

Morgans downgraded its rating from “buy” to “hold”, but still has a price target of $4.88, which is higher than the current level.

RBC Capital kept the faith, retaining a “buy” rating. But it did downgrade the price target to $5.60.

More reading

• Why the Redbubble (ASX:RBL) share price sank 18% lower in April
• Is there still upside to the JB Hi-Fi (ASX:JBH) share price?
• Could the Resmed (ASX:RMD) share price face a similar selloff to Kogan?
• This broker thinks you should buy the Kogan (ASX:KGN) share price dip
• 2 excellent ASX growth shares that are rated highly

Motley Fool contributor Tony Yoo owns shares of REDBUBBLE FPO. 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.

The post What to do with Redbubble (ASX:RBL) shares: fundie appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3vMbJpj