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:

Zip Co Ltd (ASX: Z1P)

For a fifth week in a row, this buy now pay later (BNPL) provider’s shares were the most traded on the CommSec platform. Last week Zip’s shares were attributable to a sizeable 5.9% of trades, with approximately 56% coming from buyers. However, the sellers will have been the happier group of investors. Last week the Zip share price fell 10% over the five days due to weakness in the tech sector.

Afterpay Ltd (ASX: APT)

Once again, Afterpay was the next most traded share on the platform. It was attributable to 2.8% of trades on CommSec, with the buying and selling evenly split at 51% to 49%, respectively. The Afterpay share price was out of form last week and fell 1.7% during the period due to the aforementioned weakness in the tech sector. This offset news that its European acquisition has now complete.

Flight Centre Travel Group Ltd (ASX: FLT)

Flight Centre shares were heavily traded last week after the government announced stimulus in the tourism sector. This led to the travel agent’s shares accounting for 2.5% of trades on CommSec. And although only 48% of trades came from buyers, the Flight Centre share price climbed 8.7% over the five days.

Fortescue Metals Group Limited (ASX: FMG)

This iron ore producer’s shares were attributable to 1.7% of trades on the platform last week, with over two-thirds coming from buyers. Investors may have been taking advantage of a pullback in the Fortescue share price to buy shares. Its shares dropped 3.8% last week after iron ore prices softened due to China curbing steel production to combat pollution concerns.

Betashares Nasdaq 100 ETF (ASX: NDQ)

This exchange traded fund (ETF) was popular with investors again last week. NDQ accounted for 1.5% of trades on CommSec over the period. A sizeable 81% of these trades came from buyers. They may have believed that a recent pullback by the Nasdaq 100 was a buying opportunity. The ETF climbed 4.1% during the week.

More reading

• Broker warns of big iron ore oversupply next year: time to panic?
• Leading brokers name 3 ASX shares to sell today
• The Afterpay Ltd (ASX:APT) share price on watch after launch in France, Spain and Italy
• Here’s what Citi thinks about the Afterpay (ASX:APT) share price
• Should you buy BHP, Fortescue, or Rio Tinto shares?

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 BETANASDAQ ETF UNITS and ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS and Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Telstra Corporation Ltd (ASX: TLS) share price continues to dwell in the doldrums. Telstra shares are going for $3.12 a share at the time of writing. At that share price, Telstra is up 3.8% year to date, but down 7.5% over the past 12 months, and down a nasty 40% over the past 5 years.

And we won’t even get into the $7-something price tag Telstra’s T2 tranche floated at back in 1999.

So what’s going on with Telstra shares? And (perhaps more importantly), is the Telstra share price a buy today?

Stability comes at a price

As a telco, there is a lot to like about Telstra on paper. It has an extremely robust and inelastic earnings base, given that in this modern age, customers would probably think hard about choosing between their mobile phone and internet data and almost anything else if push came to shove.

This was evidenced last year by the fact that Telstra kept its dividends steady in a year that saw dividend carnage across many of the ASX’s blue-chip shares.

Speaking of dividends, the company’s shareholder payouts arguably remain its crown jewel. Telstra paid out 16 cents in dividends last year, a level management has already committed to backing up again in 2021. Those consist of 10 cents in ordinary dividends. In addition, the remaining 6 cents in special dividends come from NBN-related payments.

On the current share price, that gives Telstra a forward dividend yield of 5.13%, or 7.33% grossed-up with Telstra’s full franking.

However, Telstra has been struggling in recent years with the ongoing NBN rollout. In its earnings report that the company delivered last month, Telstra reported that its earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 14.7% to $4.1 billion.

Saying that, Telstra also reported that its 5G rollout is going well. It now has the largest 5G network in the country, with more than 50% of the population now covered. 75% of the population is set to be covered by June 2021. That arguably bodes well for Telstra if 5G adoption continues to accelerate (5G margins are a lot better than NBN margins for the company).

Telstra’s T22 cost-cutting program is also back on track after being a COVID-necessitated pause last year. 80% of its cost-cutting metrics are now on schedule or completed.

Is the Telstra share price a buy today?

One broker who thinks the Telstra share price is a buy today is Goldman Sachs. According to CommSec, Goldman rated Telstra shares a ‘buy’ last month, with a price target of $4 a share. That implies an upside of more than 28% on today’s share price (not even including dividends).

On the current Telstra share price, the company has a market capitalisation of $37.05 billion, and a price-to-earnings (P/E) ratio of 20.9.

More reading

• ASX 200 Weekly Wrap: Calm restored to the ASX 200
• 2 high yield ASX dividend shares to buy next week
• 2 ASX dividend shares with 5% fully franked yields
• 3 blue chip ASX shares with dividend yields over 5% today
• Telstra (ASX:TLS) share price and others caught in Greensill insolvency

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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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Soaring commodity prices have resulted in a surge of capital flood into mining exploration expenditure through 2020 and into 2021, according to Bell Potter. 

Bell Potter released a research report on 12 March which highlighted the allocation of fresh funds into drilling activities and new discoveries. While small-cap ASX shares are speculative in nature, the broker sees significant upside in explorers that are taking a step closer to becoming producers.

Bell Potter rates these ASX shares as a ‘speculative buy’

Chalice Mining Ltd (ASX: CHN) 

Chalice Mining’s assets currently comprise two new and significant discoveries, the Julimar Nickel-Copper-PGE project in Western Australia and the Pyramid Hill gold project in Central Victoria. The company also owns a number of minor exploration projects and royalty interests relating to other metals. 

In late January, Bell Potter noted that the latest drilling infills confirmed a “very significant global scale PGE-Ni-Cu-Co [PGE, nickel, cobalt and copper] deposit with extremely favourable logistics and important shallow oxide zones”. The broker looked forward to ongoing work which will continue to extend and better define mineralisation.

A speculative buy rating with a $5.60 valuation was maintained on 28 January. At the time of writing, the Chalice share price is trading 1.14% higher at $4.45.

Liontown Resources Ltd (ASX: LTR)

Liontown is a battery metals exploration and development company with three core projects.

The company is currently progressing through a definitive feasibility study on its Kathleen Valley lithium project in Western Australia. Kathleen Valley is noted as the only independent, globally significant, spodumene-related, hard rock lithium resource in Australia. An updated pre-feasibility study announced in early October 2020 highlighted strong economics for the project with a net present value of $1.12 billion and development capital costs of ~$325 million. 

The Moora project is still undergoing significant drilling activities for gold, PGE, nickel and copper mineralisation. This project is in its early days but finding success with multiple gold anomalies defined. 

The Buldania lithium project in Western Australia is a relatively new project where work will focus on expanding the existing mineral resource. 

Bell Potter believes that the Kathleen Valley lithium project is the key support for its current valuation. It also believes further exploration success at Moorna could “elevate this project beyond its current early-stage ranking” and the project’s proximity to Chalice Mining’s “world-class Julimar discovery, adds further appeal”.

The broker retained a speculative buy rating with a 55 cent valuation back on 3 March. As of writing, the Liontown share price is trading 0.54% higher at 46.75 cents.

More reading

• Chalice Mining (ASX:CHN) share price tanks 11% in 2 days
• The Liontown (ASX:LTR) share price is surging 17% today. Here’s why
• Why Afterpay, IOUpay, Liontown Resources, & Redbubble are racing higher

Motley Fool contributor Kerry Sun 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 King Island Scheelite Limited (ASX: KIS) share price is rocketing in mid-afternoon trade following a completed capital raise.

At the time of writing, the mining company’s shares are swapping hands for 26.5 cents, up 17.78%.

What’s driving the King Island Scheelite share price higher?

The King Island Scheelite share price pushes higher as investors appear to welcome the company’s efforts to become debt-free.

In today’s release, King Island Scheelite advised that it has completed a placement to raise $5.6 million. This will see 28 million new ordinary shares issued, which the company offered at 20 cents apiece.

The company said the placement falls under listing rule 7.1, which allows a further 15% of its shares to be issued without shareholder approval.

Swiss investment company DACHS Capital AG took up the bulk of the offer, with 20 million shares subscribed. The remaining balance of 8 million shares was allocated to Australian professional investors through MAC Equity Partners – the lead manager.

King Island Scheelite said that it would use the funds to repay its entire debt of $4.7 million, including any interest accrued. Previously the company had racked up an interest bill when acquiring some fixed property next to the Dolphin mine site.

The left-over monies from the placement will be put towards working capital to progress operations at the Dolphin mine.

Words from management

King Island Scheelite executive chair Johann Jacobs commented:

DACHS Capital AG became a shareholder in the company in early January 2021 and we are extremely pleased that they have shown the confidence in KIS to increase their investment and become a substantial shareholder.

We look forward to a strong long-term association with our new shareholders as we develop the Dolphin project and resume tungsten mining operations in Tasmania.

The King Island Scheelite share price has gained more than 500% over the past 12 months and 150% year-to-date.

More reading

• Is the Telstra share price (ASX:TLS) a buy today?
• Surge in mining exploration to benefit these small-cap ASX shares: broker
• Broker warns of big iron ore oversupply next year: time to panic?
• Why the Coles (ASX:COL) share price is still down 15% in 2021
• Why ASX e-commerce shares could keep running higher in 2021

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.

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ASX iron ore shares have been on the nose recently and a warning by Goldman Sachs today will only add to the gloom.

Iron ore prices have been under pressure since China announced new curbs on steel mills to cut pollution.

This is why the BHP Group Ltd (ASX: BHP) share price, Rio Tinto Limited (ASX: RIO) share price and Fortescue Metals Group Limited (ASX: FMG) share price have been backing away from their recent peaks.

But that’s not the only thing that could keep ASX miners on a back foot.

Oversupply risk clouding ASX iron ore shares

“The GS commodities team now see a recovery in Brazilian exports and a Chinese environmental policy driven slowdown in steel production to narrow the seaborne iron ore deficit in 2021 (9Mt deficit vs. 27Mt deficit previously),” said Goldman.

“They now forecast a clear surplus in 2022 (23Mt surplus vs. 8Mt deficit previously), followed by a more sizeable 49Mt surplus in 2023.”

Is this the time to be dumping these ASX shares? It’s a fair question given that the major ASX miners have zoomed ahead of the S&P/ASX 200 Index (Index:^AXJO) over the past year.

When gloomy outlook leads to earnings upgrades

But despite Goldman’s oversupply warning, the broker actually lifted its valuation on the sector.

This is because it believes the market will hold up reasonably well even with the excess supply. Goldman increased its price forecast for the steel making commodity by US$15 to US$135 a tonne for 2021 as prices have been stronger than it expected coming into this calendar year.

It left its 2022 price estimate unchanged at US$95 a tonne and modestly lifted its long-term price assumption to US$65 from US$62 a tonne.

Falling prices but reasonably positive outlook

“In the near term, ongoing strong demand from China (infra, property) and RoW, and mill margin strength, should limit the sustainability of any iron ore sell-off in the next few months,” said the broker.

“China’s environmental policies should provide more support for higher grade ore vs. lower grade 58% ore.”

Foolish takeaway on ASX iron ore shares

As far as warnings go, this one seems to have more good than bad news. But I get the distinctive feeling that brokers are slowly falling out of love with iron more miners.

It was only yesterday that I reported that Macquarie Group Ltd (ASX: MQG) cut its exposure to iron ore from its model portfolio.

This was done to make space for ASX miners that produced metals needed in electric vehicles.

Goldman has a “neutral” recommendation on all the ASX iron ore producers, except for BHP.

“We maintain our Buy on BHP due to strong FCF, production growth and 30% EBITDA exposure to our bullish view on met coal, copper and oil,” added Goldman.

The broker’s 12-month price target on the BHP share price is $53.40 a share.

More reading

• Why Advance Nanotek, BHP, Limemade, & Metcash shares are sinking
• Should you buy BHP, Fortescue, or Rio Tinto shares?
• Chinese factory output is up an astonishing 35%
• Struggling to ride the wave of constant investing news?
• Why the Magellan (ASX:MFG) share price leapt 5% today

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Macquarie Group Limited, and Rio Tinto Ltd. Connect with me on Twitter @brenlau.

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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The Coles Group Ltd (ASX: COL) share price is having a pretty decent day today. Coles shares are currently trading for $15.69 after rising 1.29% in intra-day trading so far. That’s a bit better than what the broader S&P/ASX 200 Index (ASX: XJO) is doing today, being up 1.03%.

But zooming out, the picture is a little more divergent. Since the dawn of the year, the ASX 200 is up a reasonably healthy 2.5%

But over the same period, the Coles share price is down a nasty 15.03%, taking into account today’s rise. Yep, Coles shares started the year at $18.50.

Zooming even further out, and the picture is even worse for Cole shareholders. The supermarket giant was swapping hands for more than $19.20 a share in mid-August last year. That means the current Coles share price is down nearly 19% from those highs.

On the surface, it’s hard to know exactly why investors are shunning Coles. Sure, it’s arguably not the most exciting company in the country. But it’s a stable, dividend-paying consumer staples company. That has a lot of appeal for many investors in its own right, you would think.

Coles even reported an 8% rise in revenues and a 12% bump in earnings last month during its half-year earnings report for the six months ending 31 December 2020. Net profits were also up 14.5% over the previous corresponding period. Even Coles’ interim dividend was bumped up a healthy 10% to 33 cents per share.

On current pricing, that gives Coles a trialling, fully franked dividend yield of 3.88% (or 5.54% grossed-up). Objectively, that seems a pretty attractive yield in this era of near-zero interest rates.

Why are Coles shares out of favour?

But it was the immediate aftermath of the delivery of this earnings report that saw the Coles share price collapse. Obviously, negative sentiment still abounds today if we revisit the statistics above. So there must be something in the water here.

Management did offer some nuanced commentary as part of its report, so let’s dig deeper into that:

Depending on COVID-19, vaccine roll out and efficacy, and other factors, sales in the supermarket sector may moderate significantly or even decline in the second half of FY21 and into FY22.

Coles will be cycling elevated sales from COVID-19 in supermarkets late in the third quarter, for the remainder of the second half, and most of FY22 associated with: pantry stocking; people working and eating from home; customers shopping online to avoid physically being in-store; more Australians being in Australia due to border closures.

Coles also pointed out that reduced immigration (and population growth by extension), as well as the reduction in government stimulus measures (such as JobKeeper), might also drag on future sales growth.

So it’s not hard to see why investors weren’t too enchanted by these predictions. Coles is arguably telling shareholders to expect to see sales (and possibly earnings and profits) go backwards across the rest of FY2021 and into FY2022.

Coles also has a proportional dividend policy (aiming to pay out  80-90% of earnings). That might even result in a dividend cut if earnings reduce substantially.

Could it be for these reasons that investors have been shunning the Coles shares of late?

On the current Coles share price, the company has a market capitalisation of $20.98 billion, and a price-to-earnings (P/E) ratio of 20.

More reading

• These 2 ASX shares are the newest “buy” ideas from top brokers
• ASX 200 up 0.8%: Metcash update, tech shares rebound, PointsBet acquisition
• We’ll get 7.8% yield from ASX this year, says investment pro
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 recovers, Evolution Mining acquisition, Afterpay sinks

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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ASX e-commerce shares have largely enjoyed a tremendous run since February 2020. We’ll look at 2 of those high performing ASX shares below.

The broader e-commerce sector, as you’re likely aware, received a tremendous lift from the fallout of the COVID-19 pandemic. With rolling lockdowns and continual social distancing, buying your food and consumer items online suddenly became much more appealing. And much more popular.

So as many bricks and mortar retailers with a limited online presence suffered, the online retail companies broadly boomed.

But investors are now wondering whether that trend has run its course. With vaccines rolling out across the world, will the e-commerce boom fizzle?

What the e-commerce experts said

According to Bloomberg, PayPal Holdings Inc (NASDAQ: PYPL) said “there’s been no slowdown in online shopping even as cities around the world begin to reopen”.

PayPal CEO Dan Schulman said, “Even as people get vaccines and start to go out, their business will forever be changed. I don’t think there’s any going back to what was”.

PayPal’s share price has soared 170% over the past 12 months, giving the BNPL giant a market cap of US$293 billion (AU$378 billion).

Closer to home, Gabby Leibovich knows a thing or 2 about e-commerce as well. As the Australian Financial Review reports, back in 2019 he and his brother sold their company Catch Group to Wesfarmers Ltd (ASX: WES).

Looking back on the pandemic months, Leibovich said:

Who would’ve imagined that all stores in Victoria would be forced to shut for 10 weeks. Like never before, the change was forced upon us, causing an immediate drive to online shopping by so many Australians that have never shopped online before… I have many friends in retail and e-commerce, and it’s fair to say that all of them have experienced tremendous growth over the last 12 months.

That’s the past 12 months covered. But what about the future?

Leibovich added, “Once the genie is out of the bottle, it will never go back in… As e-commerce revenue multiplies, companies’ valuations skyrocket, and investors are now valuing e-commerce companies more than they ever did before.”

Two leading ASX e-commerce shares

There are a number of quality e-commerce shares trading on the ASX. Two of the best performers have been online retailer Kogan.com Ltd (ASX: KGN) and home delivery food service Marley Spoon AG (ASX: MMM).

Kogan’s shares are up 3.5% in intraday trade today bring the 12 months gains to 266%. That compares to a gain of 37% on the S&P/ASX 200 Index (ASX: XJO) during that same time. Year-to-date the Kogan share price is down 28%. At the current price of $13.89 per share, Kogan has a market cap of $1.5 billion.

Marley Spoon shareholders have also enjoyed a great 12 months, with shares up an eye-popping 936%. Year-to-date the Marley Spoon share price has slipped 4%. At the current price of $2.64 per share, Marley Spoon has a market cap of $661 million.

More reading

• ASX quarterly rebalance: HUB24 joins ASX 200, Brainchip into ASX 300
• This fundie refuses to invest in gambling and fossil fuels
• Can ASX BNPL companies like Afterpay (ASX:APT) compete with Paypal?
• ASX 200 Weekly Wrap: Calm restored to the ASX 200
• 2 amazing ASX tech shares to buy right now

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 PayPal Holdings and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended PayPal Holdings. 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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On Monday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below. Here’s why these brokers are bearish on these ASX shares:

Flight Centre Travel Group Ltd (ASX: FLT)

According to a note out of Morgan Stanley, its analysts have downgraded this travel agent’s shares to an underweight rating with a $17.50 price target. The broker made the move on valuation grounds, noting that its shares are now trading above their pre-pandemic levels after adjusting for its capital raising. And while it expects Flight Centre’s earnings to rebound in FY 2022, it believes there are better value options for investors in the travel and tourism sector. The Flight Centre share price is fetching $19.09 today.

Goodman Group (ASX: GMG)

A note out of Goldman Sachs reveals that its analysts have retained their sell rating but lifted their price target on this property company’s shares to $12.90. Following a detailed review of its half year results, the broker has upgraded its earnings estimates for the coming years. Nevertheless, its estimates are still below consensus and the broker feels its shares are expensive at current levels. The Goodman share price is currently trading notably higher than this price target at $17.61 on Tuesday afternoon.

Vicinity Centres (ASX: VCX)

Analysts at UBS have retained their sell rating but lifted their price target on this shopping centre focused property company’s shares to $1.54. According to the note, the broker believes that valuations could come under pressure as income profiles and yields are adjusted to account for its lower growth profile. Especially given how city retail properties continue to face difficult trading conditions because of domestic and international border restrictions and working from home initiatives. The Vicinity share price is trading at $1.71.

More reading

• These 2 ASX shares are the newest “buy” ideas from top brokers
• Share market on watch over AstraZeneca vaccine fears
• The Flight Centre (ASX:FLT) share price is up 40% in six months: Can it go higher?
• These are the 10 most shorted shares on the ASX
• The JobKeeper payment is ending. So what will happen next?

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

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PropTech Group Ltd (ASX: PTG) shares have reached an all-time high after the company advised it has signed a letter of intent with Harcourts International.

At the time of writing, the PropTech share price is soaring 17.65% to 50 cents. In earlier trade, the company’s shares reached an intraday high of 54 cents, surpassing their previous all-time high of 52 cents reached in December last year. 

PropTech Group provides a range of property analysis technologies, sales management and software-as-a-service tools targeted at property investors and real estate agencies across Australia, New Zealand and the United Kingdom. Its brands include MyDesktop, VaultRE and Real Estate Investar.

Let’s take a look at what the company announced today.

Potential deal with Harcourts

The PropTech share price is on the rise after the company declared this new deal, if successful, will see the VaultRE product on track to cement “its position as the clear market leader” in the ANZ region.

In its announcement, PropTech advised that Harcourts is the largest real estate group in New Zealand and is also growing fast in Australia. It makes up the second-largest property franchise group in the Australia/New Zealand region. 

If the agreement is successful, Harcourts would join Ray White and Raine and Horne in using VaultRE, PropTech’s CRM software. Together, the companies make up Australia and New Zealand’s three largest franchise real estate groups.

Harcourts has proposed that VaultRE will be the only CRM software endorsed across its Australasian network.

The agreement would see PropTech taking control of Harcourts’ existing proprietary software. Then, while providing support across both platforms, transitioning Harcourts’ 600 Australian and New Zealand offices onto its VaultRE software.

Management commentary 

Joe Hanna, CEO and Managing Director of PropTech Group, said the company is honoured to potentially work with Harcourts:

The PropTech Group’s mission is to streamline inefficient workflows in high-performing real estate agencies by investing in product improvement, rapid innovation, and AI solutions. We look forward to bringing our market-leading tools to the Harcourts’ network to migrate their 600 plus offices in New Zealand and Australia to the VaultRE platform.

PropTech share price snapshot

The PropTech share price was out of action for most of last year, having entered a voluntary trading halt in early March and resuming trading on 24 November 2020. Since resuming trade, PropTech shares have surged by nearly 80%. Currently, the PropTech share price is also up by around 19% year to date.

The company has a market capitalisation of around $23.7 million with approximately 122 million shares outstanding.

More reading

• Leading brokers name 3 ASX shares to sell today
• 3 reasons why the Redbubble (ASX:RBL) share price could be a buy
• Why Advance Nanotek, BHP, Limemade, & Metcash shares are sinking
• The Afterpay Ltd (ASX:APT) share price on watch after launch in France, Spain and Italy
• Why the Bellevue (ASX:BGL) share price is charging higher today

Motley Fool contributor Brooke Cooper 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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There are a number of reasons why investors may want to be interested in the Redbubble Ltd (ASX: RBL) share price.

What’s Redbubble?

In Redbubble’s own words, its community of ‘passionate creatives’ sell uncommon designs on high-quality, everyday products such as apparel, stationery, housewares, bags, wall art and other categories.

It operates two websites, one is Redbubble.com and the other is TeePublic.com. Through these two e-commerce platforms, artists are able to profit from their creativity.

Who thinks the Redbubble share price is a buy?

One broker that thinks Redbubble shares are a buy is Morgans, which has a share price target of $6.64.

Fund manager Joseph Kim from Montgomery Investment Management is also a fan of the business. Mr Kim said:

The opportunity set for Redbubble is compelling. The business already has a global presence with its main markets being North America and Europe. Should the company build a recognisable brand, the potential to be a global e-commerce marketplace for aspiring artists presents significant upside. Recent interest in both social and mainstream media point to growing brand awareness, which helps perpetuate the flywheel effects.

It’s important to note Redbubble’s recent success has required continuous investment – not just in the website itself, but also the supply chain infrastructure with fulfillers and shippers – including product quality control. This has helped the business meet the surge in demand, while benefiting financially from the operating leverage that comes with higher sales.

Rising profit margins

Redbubble has seen its operating leverage increasing, as Mr Kim alluded to.

In the first half of FY21, its marketplace revenue jumped 96% to $352.8 million, whilst earnings before interest, tax, depreciation and amortisation (EBITDA) grew 1,028% to $48.8 million and earnings before interest and tax (EBIT) grew 2,270% to $41.8 million.

Aside from the EBITDA and EBIT margins – which just went positive – the other margins also improved materially.

The gross profit margin (on marketplace revenue) grew 4.1 percentage points to 40.8%. The gross profit after paid acquisition/marketing (GPAPA) improved 2.6 percentage points to 28.3%.

As Redbubble’s profit margins increased, the bottom line can improve much faster than just the revenue growth. This could help the Redbubble share price.

Focused management and a focused business

The Redbubble management have spoken about the focus of the business to maintain and improve its market position and strengths.

Michael Ilczynski, the CEO of Redbubble, said:

The strategic priority for the group now is to ensure we extend the market leadership we have established. We intend to invest in both the artist and customer experiences, to improve loyalty and retention and to ensure long-term growth.

Redbubble has four areas that it’s focused on.

It’s focused on artist acquisition, activation and retention. Another key initiative is user acquisition and transaction optimisation. The next focus is customer understanding, loyalty and brand building. The final focus is further physical product and fulfilment network expansion.

E-commerce and growing product offering

Redbubble says that it’s an emerging winner in a rapidly shifting landscape, with the company pointing out that on-demand technology and user-generated content has enabled rapid scaling. Broker Morgans believes Redbubble will be a long-term beneficiary of the e-commerce shift.

The ASX share also says that it’s benefiting from the virtuous cycle of a growing community of artists which is fuelling strong demand for unique content.

As the company adds another category of products to its offering, it opens up a larger total addressable market. The addition of masks last year unlocked millions of dollars of revenue.

Is there much upside for the Redbubble share price?

To reach Morgans’ price target of $6.64, that represents a potential increase of 11% over the next 12 months.

More reading

• Will the ASX share e-commerce boom last?
• Will the Kogan (ASX:KGN) share price outperform in 2021?
• Nasdaq slumps overnight, ASX 200 shares to open weaker
• Why Afterpay, IOUpay, Liontown Resources, & Redbubble are racing higher
• Top ASX shares to buy in March 2021

Motley Fool contributor Tristan Harrison 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 3 reasons why the Redbubble (ASX:RBL) share price could be a buy appeared first on The Motley Fool Australia.

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