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.

The Nasdaq Composite (NASDAQ: .IXIC) was the stock market leader throughout most of 2020, powering ahead to much greater gains than its fellow major benchmarks. In particular, high-growth stocks that were able to hold up well despite the recessionary conditions in the broader economy stood out as big winners and rewarded their shareholders handsomely.

However, that narrative has changed lately. As of 11 a.m. EDT on Thursday, the Nasdaq was down another 1.7%, building on losses that have taken the index into correction territory even as other benchmarks were at or near record highs. Moreover, it seems as though the Nasdaq is falling even though Fed chair Jerome Powell told investors Wednesday that the economy appeared to be in solid shape.

There’s one possible answer for this apparent disconnect. If investors are actually paying attention to a common way of valuing high-growth stocks, then the Fed’s nonchalance about a key impact that a stronger economy could bring might explain the near-panic among shareholders of those stocks.

More damage in Nasdaq high-growth stocks

To be clear, Thursday’s declines weren’t monumental by themselves. Tesla Inc (NASDAQ: TSLA), for instance, was down just 3%. MercadoLibre Inc (NASDAQ: MELI) saw a 4% slump, while Zoom Video Communications Inc (NASDAQ: ZM) lost 3% and Atlassian Corporation (NASDAQ: TEAM) took a 5% hit.

However, those declines are just the latest in a series of drops for these stocks and many like them. Tesla is trading about 25% lower than its all-time highs from just a couple months ago. Zoom has given up roughly 40% from its record levels late last year. The move seems to reveal skepticism about whether the growth stocks have seen their shares rise too far, too quickly.

What the Fed has to do with high-growth stocks

It might seem as though the Federal Reserve’s actions wouldn’t necessarily have any impact on high-growth stocks. Investor interest in these companies has been so high that access to capital hasn’t been a problem. Many of them have more than enough cash to make it through tough times in the future, and some of them are even cash-flow positive and can sustain themselves simply by maintaining current business levels.

However, the recent rise in interest rates due to inflationary fears has been troubling to investors. One potential impact is that if you value a company based on the discounted value of its future financial results, then higher interest rates make the performance that comes further into the future less valuable. With rates at zero, it almost doesn’t matter from a valuation standpoint whether a company makes money now or five years from now, and low rates reward companies that defer smaller profits now in favour of larger profits later. That’s been the basis for the huge run-ups in these stocks.

Higher interest rates reverse that trend. Suddenly, companies will get rewarded for producing results now rather than later. Valuations on companies that will take years to play out will take a hit.

Seize the opportunity

For long-term investors, that actually might be good news. It would signal that the Nasdaq stock price declines aren’t about fears that companies aren’t going to be able to live up to their full potential. Rather, it just reduces the value put on those same strong future results.

If you can get the same strong business at a discount, you should jump at the chance. That’s the advantage long-term investors have, and now’s the time to look closely at some of the stocks the rest of the market is giving up on.

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

More reading

• We’re betting on ASX growth shares: global fund
• Don’t fall into the ‘rotation trap’
• How to invest in the Nasdaq Index on the ASX
• Elon Musk reviews title and decides ‘Technoking of Tesla’ is more fitting
• ASX investors still can’t get enough of GameStop (NYSE:GME) shares

Dan Caplinger owns shares of MercadoLibre. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Atlassian, MercadoLibre, Tesla, and Zoom Video Communications. The Motley Fool Australia has recommended Zoom Video Communications. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The drop in the market could soon be met with a circa $19 billion wall of capital as investors collect their second biggest dividend checks in history.

The S&P/ASX 200 Index (Index:^AXJO) tumbled 1% in morning trade. If it closes in the red, this will mark its third consecutive day of losses.

Naysayers believe that the latest sell-off is an ominous sign and the start of a long-awaited market correction.

ASX dividend bonanza

But not all experts are convinced. In fact, Bell Potter’s high-profile institutional dealer Richard Coppleson believes the market drop could be short-lived due to a “dividend bonanza”.

He wrote in his daily Coppo Report that total dividends declared from last month’s reporting season is the second highest on record at $26.9 billion.

The largest was two years ago when ASX shares handed out $27.8 billion in the half year.

Biggest weekly dividend payout from ASX shares

Most of these dividends will be paid in the week starting 22 March. There are 75 ASX companies that are slated to pay out $12.3 billion next week alone.

These include ASX dividend kings like the BHP Group Ltd (ASX: BHP) share price, Fortescue Metals Group Limited (ASX: FMG) share price and Telstra Corporation Ltd (ASX: TLS) share price.

The week after will see another 48 ASX shares return $6.3 billion to shareholders. There’s every chance that most of this cash could find it’s way back into the market. I mean where else would investors park the cash in this near zero-rate environment?

ASX shares would look particularly enticing if the market was to pull back further, in my view.

April is a good month for ASX shares

It’s also worth pointing out that the month of April tends to be a positive period for the ASX. In the past six years, our market has only fallen once in April, according to Coppleson.

This was back in 2015 when the ASX 200 retreated 1.7%. However, the index rallied substantially every April from 2016. The “worst” positive April was in 2019 when the top 200 benchmark added 2.3% for the month.

As you may have guessed, the best April was last year when the ASX 200 surged 8.8%. This was following the bottom of the COVID-19 bear market.

Foolish takeaway

The ASX dividend shares recovery is also a bullish signal for investors in itself. Companies will only increase their dividends if they are feeling confident about their trading outlook.

ASX company boards know it’s a cardinal sin to cut dividends and will only do so if their backs are to the wall.

They could have held off increasing their dividends if they thought more tough times were ahead. But most didn’t.

This isn’t to say that we won’t be facing more market turbulence ahead. Remember the saying “sell in May, go away”?

But those with a longer investment horizon should be feeling upbeat enough to put their cash to work if share prices weaken further.

More reading

• Fortescue (ASX:FMG) share price lower after raising US$1.5 billion
• Nasdaq slumps 3% overnight, ASX 200 tech shares under pressure today
• 5 things to watch on the ASX 200 on Friday
• ASX 200 drops, Webjet reveals B2B plan, Cimic wins again
• Could the run be over for the Fortescue (ASX:FMG) share price?

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Telstra Limited. Connect with me on Twitter @brenlau.

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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The Zip Co Ltd (ASX: Z1P) share price has come under pressure on Friday morning.

At the time of writing, the buy now pay later provider’s shares are down 4% to $8.11.

This means the Zip share price is now down 44% from the 52-week high of $14.53 it reached in February.

Why is the Zip share price sinking today?

Investors have been selling Zip and other ASX tech shares today after a very disappointing night of trade on Wall Street’s tech-focused Nasdaq index.

According to CNBC, the Nasdaq tumbled 3% lower overnight after bond yields surged higher.  

Apple, Amazon, and Netflix shares all fell more than 3%, while Tesla crashed almost 7% after the US 10-year Treasury yield jumped 11 basis points to a 14-month high of 1.75%.

In addition to this, the 30-year Treasury yield climbed 6 basis points to hit the 2.5% level for the first time since August 2019.

Why is this bad news for Zip?

There are a couple of reasons why this is bad news for the company and is weighing on the Zip share price.

The first is that rising bond yields impact valuations, particularly those that trade on lofty multiples like Zip and Afterpay Limited (ASX: APT). This is because as the risk-free rate increase, investors become less willing to pay over the odds for equities.

Another reason why rising bond yields could be bad news for Zip is the potential impact to the cost of its funding, which could weigh on margins.

It is partly for this reason that last week UBS downgraded Zip’s shares to a sell rating with a $6.40 price target.

Though, it is worth noting that not everyone is as bearish. Last month Morgans put an add rating and $12.10 price target on the company’s shares.

Based on the current Zip share price, this price target implies potential upside of 49%. It was pleased with its half year results and particularly its growth in the United States.

Time will tell which broker made the right call.

More reading

• Revealed: 4 least profitable industries in Australia
• Is the new CBA BNPL service bad news for Afterpay and Zip shares?
• Is the Zip (ASX:Z1P) share price a buy now or buy later?
• ASX 200 dips, CBA launches BNPL, Fonterra reports
• How much have investors made (or lost) on Zip (ASX:Z1P) 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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Coles Group Ltd (ASX: COL) share price is edging lower today despite the release of a positive announcement.

In morning trade the supermarket giant’s shares are down almost 1% to $15.45.

What did Coles announce?

This morning Coles increased its green credentials by releasing its Climate Change Position Statement and announcing targets to reduce greenhouse gas emissions.

According to the release, the supermarket operator has committed to delivering net zero greenhouse gas emissions by 2050.

In addition to this, before then, the company intends to power its entire business by 100% renewable electricity by the end of FY 2025.

Another commitment is for Coles to reduce its combined Scope 1 and 2 greenhouse gas emissions by more than 75% by the end of FY 2030 from a FY 2020 baseline.

Coles’ CEO, Steven Cain, said: “We have already reduced Scope 1 and Scope 2 greenhouse gas emissions by 36.5% since 2009 and have been a leader in securing renewable energy. Our new targets for Scope 1 and 2 emissions commit us to an accelerated reduction in greenhouse gas emissions that exceed the climate change ambitions of the Paris Agreement and will help sustain Australia for generations to come by working together with our customers, suppliers and members of the community.”

Is the Coles share price in the buy zone?

The Coles share price has underperformed this year and was down 16% year to date prior to today.

One broker that is likely to see this share price weakness as a buying opportunity is Morgan Stanley. Last month its analysts put an overweight rating and $20.25 price target on the company’s shares.

Based on the current Coles share price, this price target implies potential upside of 31% for its shares over the next 12 months.

The broker is also forecasting a 57 cents per share fully franked dividend in FY 2021. This represents an attractive 3.7% yield currently.

More reading

• Is Coles (ASX:COL) a dependable ASX share to buy right now?
• 2 quality ASX dividend shares to buy today
• Why the Coles (ASX:COL) share price is still down 15% in 2021
• 2 ASX dividend shares to buy with yields above 4%
• ASX 200 Weekly Wrap: Calm restored to the ASX 200

Motley Fool contributor James Mickleboro 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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The Fortescue Metals Group Limited (ASX: FMG) share price is trading lower today following an announcement.

At the time of writing, the iron ore producer’s shares are down 1% to $20.06.

What did Fortescue announce?

This morning Fortescue released two announcements relating to raising funds via a bond offering.

The first announcement revealed that the mining giant had launched a bond offering of US$750 million of senior unsecured notes.

Whereas the second announcement revealed not only the successful completion of this bond offering, but the doubling of the amount raised.

According to the release, Fortescue successfully completed a US$1,500 million offering of senior unsecured notes at an interest rate of 4.375 per cent, maturing in April 2031.

The company notes that the transaction was launched at US$750 million but due to strong demand was upsized to US$1,500 million.

Why is Fortescue raising funds?

Fortescue has advised that the proceeds from the offering will be applied to the repayment of its US$750 million 2022 Senior Unsecured Notes.

In addition to this, the funds will be used for general corporate purposes, which may include the repayment of debt.

Fortescue’s Chief Executive Officer, Ms Elizabeth Gaines, was pleased with the success of the offering.

She said: “Fortescue continues to deliver outstanding operational and financial performance which underpins our ongoing support from the US Debt Capital Markets. Our balance sheet is structured on low cost, investment grade terms, maintaining flexibility to support ongoing operations and the capacity to fund future growth.”

This sentiment was echoed by Fortescue’s Chief Financial Officer, Mr Ian Wells.

He said “The successful completion of this offering will refinance our earliest debt maturity, extend our weighted average maturity on terms consistent with our existing debt and further optimises Fortescue’s capital structure. Our disciplined capital allocation framework provides for investment in future opportunities and the continued delivery of value to our investors.”

More reading

• Could the run be over for the Fortescue (ASX:FMG) share price?
• Top brokers name 3 ASX shares to sell today
• 2 strong blue chip ASX shares rated as buys by brokers
• Hydrogen far from ‘fool cells’: EV trends and the major ASX players
• Why the Monadelphous (ASX:MND) share price is in focus

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.

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The two quality ASX shares in this article want to become global leaders in their respective categories.

Businesses that have big goals and focused management have a good shot of producing outsized returns for investors.

These two quality ASX shares could be worth a look for the long-term:

City Chic Collective Ltd (ASX: CCX)

City Chic is a business that is aiming to create a ‘world of curves’. It’s rated as a buy by the broker Morgan Stanley, which has a share price target of $4.75 for the retail business.

The brokers of Macquarie Group Ltd (ASX: MQG) also rate City Chic as a buy. One point for Macquarie was that the company can utilise the Avenue platform in the US and that American sales could rebound after COVID-19 impacts subside.

City Chic had a positive first half of FY21 with continued elevated levels of online sales – there was growth of 42% off a high base, with 73% of total sales coming from the online channel. In FY20, 65% of sales were through online. In the first half of FY20, 53% of sales were from online.

The company saw double digit growth in the first six months of FY21 with total sales rising 13.5% to $119 million and statutory net profit after tax (NPAT) going up 24.8% to $13.1 million.

One highlight was the entry into the UK market with the acquisition of market-leading plus-size brand Evans for $41 million. The ASX share only bought the online assets and wholesale business of Evans. In the financial year to August 2020, the Evans website had 19 million visits and generated £23.1 million of sales, whilst the wholesale business made £3 million of sales.

It’s looking to expand the UK presence, grow in Europe with marketplace partnerships and continue to look for other acquisition opportunities.

Xero Limited (ASX: XRO)

Xero is another ASX share that has a very strong future.

The quality ASX share is building a global subscriber base in many different countries.

Its half-year result showed strong growth – Australian subscribers grew by 21% to 1.01 million, UK subscribers went up 19% to 414,000, New Zealand subscribers rose 13% to 414,000, North American subscribers grew 17% to 251,000 and the ‘rest of the world’ subscribers went up 37% to 136,000. Rest of the world numbers saw notable growth in South Africa and Singapore.

One of the reasons why Xero may be able to do so well over the long-term is that subscribers tend to stick around for a while – which creates good economics with a software as a service (SaaS) model as Xero’s gross profit margin is so high at 85.7%. Reported monthly recurring revenue churn was 1.11% in the period.

Xero is investing heavily for long-term growth and addressing customer needs. It spent almost $140 million on product development in the first half of FY21 – up 29% year on year.

The company is also making acquisitions that it believes will improve the offering for subscribers or accountants. Planday and Waddle are just two of the names it has bought in recent times.

Xero finished its FY21 half-year presentation with the following statement:

Xero is a long-term orientated business with ambitions for high-growth. We continue to operate with disciplined cost management and targeted allocation of capital. This allows us to remain agile so we can continue to innovate, invest in new products and customer growth, and respond to opportunities and changes in our operating environment.

More reading

• A2 Milk (ASX:A2M) share price tumbles on NZ recession fears
• 3 top ASX shares rated as buys by brokers
• Xero (ASX:XRO) share price down 23%, is it a buy?
• 2 of the best ASX growth shares to buy immediately
• ASX 200 jumps, Pointsbet reveals acquisition, Metcash drops

Motley Fool contributor Tristan Harrison 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 Australia owns shares of Xero. 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 broader S&P/ASX 200 Index (ASX: XJO) has been chopping back and forth as rising bond yields weigh on market sentiment. While big names might be going nowhere, here are some ASX shares in the small end of town that have been breaking out into record highs. 

ASX shares beating the market and running into record highs 

Andromeda Metals Ltd (ASX: ADN)

The Andromeda share price has run into record all-time highs this week. This comes after the company’s Great White Kaolin Project signed its first binding offtake agreement for 5,000 tonnes per annum of its premium ceramic grade product. The small-cap ASX share briefly touched 45 cents on Wednesday, up from 28 cents at the start of the year and 5 cents back in September 2020. 

The company has highlighted the Great White project as the world’s largest known high-purity halloysite-kaolin resource. Its most recent pre-feasibility study has determined a net present value of $736 million, earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $2.06 billion and a 26-year mine life for the project. 

To further advance the project into production, the company is currently undergoing its definitive feasibility study, evaluating potential offtake partners and pending assessment with regards to its mining proposal from the South Australian Government. 

Alcidion Group Ltd (ASX: ALC)

The Alcidion share price has gone from strength to strength after the company recorded one of its strongest sales periods to date. This ASX share has delivered more than 50% year-to-date returns after closing at 30 cents on Thursday.

The company’s half-year results announced on 25 February highlighted a 36% increase in revenue to $11.1 million and a step closer to profitability with an EBITDA loss of $912,000 compared to a $1.7 million EBITDA loss in 1H20. 

Alcidion digitally enables healthcare organisations through its flagship product, Miya Precision. This provides clinicians with actionable insights that directly impact patient care through the consolidation of information from various systems. 

Uniti Group Ltd (ASX: UWL) 

Uniti is a diversified telecommunications services provider focused on three core business areas including wholesale & infrastructure, communications platform as a service and consumer & business segments.  

The company has delivered rapid growth through strategic acquisitions and organic growth in its core fibre infrastructure. Its half-year results announcement revealed a 148% increase in revenue to $54.6 million while EBITDA surged 307% to $29.3 million.

Uniti successfully completed a series of acquisitions in 2020 to help bolster its outstanding growth figures. These acquisitions included HarbourISP effective 1 November 2020, OptiComm on 20 November 0220 and Telstra Velocity on 24 December 2020. The acquisitions have established greater scale, network, reach, capability, locked in revenue and business opportunities for Uniti. 

Uniti believes it is now positioned for accelerated organic growth, driven by the delivery of current contracted premises and improved penetration across its entire fibre premises portfolio. The company also highlighted its improved earnings as a way for the business to self-fund organic growth opportunities moving forward. 

The Uniti share price closed at a record high of $2.43 on Thursday, marking ~40% year-to-date returns for this ASX share. 

More reading

• International Women’s Day: The female CEOs of the ASX
• These small cap ASX shares could be ones to watch in 2021
• Why the Alcidion (ASX:ALC) share price is jumping 8% to a 52-week high today
• Alcidion (ASX:ALC) share price hits 52-week high on record sales
• The Uniti (ASX:UWL) share price is up 20% in 2021: Can it go higher?

Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Alcidion Group Ltd. The Motley Fool Australia has recommended Alcidion Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Nasdaq Composite (NASDAQ: .IXIC) took a beating overnight as rising bond yields continued to threaten the roaring equity markets. S&P/ASX 200 Index (ASX: XJO) tech shares are tipped to follow the lead of the United States when the market opens today.

Let’s take a closer look. 

Yields rising to highest levels since January 2020

Benchmark US government yields pushed higher overnight to close at a 14-month high of 1.73%. Yields have more than tripled from August 2020 lows of 0.50% and almost doubled year to date from 0.90%.  

Rising bond yields reflect a sign of optimism as stimulus and pent-up consumer demand could lead to a rise in inflation. This comes as the US is dishing out its US$1.9 trillion stimulus package which plays into the rising inflation narrative.

The roaring equity markets have become addicted to record-low and near-zero interest rates. Record low-interest rates have meant that investors must take on more risk to maintain the same return. This translates to a flow of funds from low-risk assets such as bonds into higher-risk assets such as equities. 

Expanding vaccination campaigns and a reopening global economy has now put the issue of rising inflation back on the table. Subsequently, rising inflation has brought the topic of possible interest rate hikes to the fore, putting pressure on the tech-heavy Nasdaq.

Some countries have already opted to raise interest rates in response to growing inflationary pressures. These include Ukraine, Brazil, Georgia and Turkey.

The US Federal Reserve has attempted to curb the concerns of rising interest rates by reaffirming that no hikes are likely until at least 2023. 

Tech and growth shares most vulnerable to rising interest rates 

Tech and growth shares are most vulnerable to higher interest rates. Most of these companies are expected to deliver significant growth in the medium to long term. From a valuation perspective, these futures earnings would be worth less today when discounted by higher interest rates.

This compares to value shares in sectors such as financials, commodities and real estate that are less vulnerable to rising rates. 

This could explain why the Nasdaq took a 3% dive overnight, compared to the S&P 500 Index (SP: .INX) that lost 1.48% and the Dow Jones Industrial Average Index (DJX: .DJI) which fell only 0.46%. 

US banks such as Wells Fargo & Co (NYSE: WFC) and Bank of America Corp (NYSE: BAC) finished the overnight session in the green. Meanwhile, US tech heavyweights Facebook Inc (NASDAQ: FB), Apple Inc (NASDAQ: AAPL), Amazon.com Inc (NASDAQ: AMZN), Netflix Inc (NASDAQ: NFLX), Microsoft Corporation (NASDAQ: MSFT) and Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG) all fell between 1.90% to 3.50% 

This could influence the way the ASX 200 plays out today, with potential weakness across tech shares and greater resilience across cyclical stocks such as the big four banks.

More reading

• 5 things to watch on the ASX 200 on Friday
• ASX 200 drops, Webjet reveals B2B plan, Cimic wins again
• ASX 200 down 0.15%: Westpac asset sale, Webjet update, gold miners jump
• ASX 200 dips, CBA launches BNPL, Fonterra reports
• Why the Elders (ASX:ELD) share price is outperforming the ASX today

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. Kerry Sun 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 Alphabet (C shares), Amazon, Apple, Facebook, Microsoft, and Netflix and recommends the following options: short March 2023 $130 calls on Apple, long January 2022 $1920 calls on Amazon, short January 2022 $1940 calls on Amazon, and long March 2023 $120 calls on Apple. The Motley Fool Australia has recommended Alphabet (C shares), Amazon, Apple, Facebook, and Netflix. 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 Webjet Limited (ASX: WEB) share price pushed higher on Thursday after releasing an update on its transformation plans.

The online travel agent’s shares overcame the market weakness to rise 1% to $6.24.

Can the Webjet share price keep climbing?

In response to its update, this morning Goldman Sachs released a note discussing its plans.

The good news for shareholders is that the broker liked what it saw and has reiterated its buy rating and $7.36 price target on Webjet’s shares.

Based on the current Webjet share price, this price target implies potential upside of 18% over the next 12 months.

What did Goldman say about the update?

Goldman took away a number of positives from the update. This includes its cost reduction plans and the long term opportunity that its WebBeds business has.

It commented: “Webjet hosted an investor presentation focused on the Bed banks business, discussing the longer term opportunity and the roadmap towards achieving c. 20% cost efficiency at full scale. The presentations provided comfort, in our view, regarding the growth opportunity for Webbeds in terms of market share improvements and permanent cost efficiencies while also discussing the longer term vision in terms of technology adoptions and targets.”

The broker notes that its cost efficiency is expected to be achieved through systems simplification, the implementation of a new ERP, and leveraging blockchain technology.

What about WebBeds’ growth opportunity?

Goldman Sachs was pleasantly surprised by management’s total transaction value (TTV) aspirations for the WebBeds business.

The company is targeting a much greater share of the market than the broker was expecting, which would lead to more than double the TTV its analysts were forecasting.

It explained: “Webjet also quantified the TTV aspirations for the Webbeds business at A$10bn, which would represent c. 14.2% market share of the current addressable market. Our longer term forecasts currently imply only TTV of A$3.9bn for the Webbeds business, offering significant upside to our outlook if the group starts delivering to its aspirational targets.”

However, no changes are being made to the broker’s forecasts just yet. It intends to sit tight and see how things develop.

“While the upside suggested by WEB implies significant upside to our long term forecasts, we make no changes to our earnings forecasts until we see clear evidence of a recovery taking shape. Our 12 month target price on WEB is at A$7.36 and we are Buy rated.”

More reading

• 5 things to watch on the ASX 200 on Friday
• ASX 200 drops, Webjet reveals B2B plan, Cimic wins again
• Webjet (ASX:WEB) share price edges higher on strategy update
• ASX 200 down 0.15%: Westpac asset sale, Webjet update, gold miners jump
• Why Webjet (ASX:WEB) got kicked out of ASX All Tech index

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet 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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There’s a handful of small cap ASX shares that have very high growth potential.

That doesn’t mean that large market cap ASX shares can’t generate good returns too – just look at CSL Limited (ASX: CSL) over the last decade – but small businesses are starting from a much smaller base and may be able to deliver more compound returns over the next five or ten years as plans turn into fruition.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is a healthcare software business that was founded in 2009. Its software is used by screening clinics to provide feedback on breast density, compression, dose and quality, while its enterprise-wise practice-management software helps with productivity, compliance, reimbursement and patient tracking.

It wants to increase its average revenue per user (ARPU) and market share over time. It is doing this through acquisitions and with organic growth. The acquisition of CRA Health could accelerate growth because of its higher ARPU and its integration with major electronic health record and genetics companies. Volpara recently won its biggest contract thanks to CRA Health.

On Thursday, the small cap ASX share announced some positive news from Europe. Its DENSE trial, based in the Netherlands, started collecting patients data 10 years ago and is the first randomised controlled study on the clinical utility of breast MRI supplemental screening for women with extremely dense breasts. The study used VolparaDensity software to assess breast density.

The first results from DENSE, released in December 2019, showed a significant reduction in interval cancers in those women being selected for breast MRI using VolparaDensity, but with a relatively high false-positive rate.

The results released this week, involving more than 3,000 women, show that the false-positive rate has been significantly reduced. Though the incidental cancer detection rate was lower than that of the first round, the false-positive rate was only 26.3 versus 79.8 per 1,000 screening examinations.

The Volpara CEO said that this makes the new protocols much more viable and that there’s a real benefit to women.

Bubs Australia Ltd (ASX: BUB)

Bubs has been through some tough times over the last six to nine months due to COVID-19, however, it’s now reporting that it’s going through a recovery.

The infant formula small cap ASX share said that it’s now the number one goat formula brand in Chemist Warehouse and the number two in Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) supermarkets. Combined retail scan sales grew by 55% at the checkout at Coles, Woolworths and Chemist Warehouse in the first half of FY21.

In that result, Bubs goat infant formula gross revenue direct to China increased by 36%, partly offsetting the large disruption to the outbound daigou channel (with revenue down 57% here).

One of the main areas where Bubs sees major potential growth is export markets outside of China. In the first six months of FY21, non-Chinese export revenue went up 44%, with sales momentum expected to continue across new South East Asian markets.

The company has been working on other initiatives to grow its business over the next 12 months and beyond. For example, it has selected YP Corporation to be its nominated distribution partner for South Korea, which is a US$431 million infant formula market. YP serves all major e-commerce channels along with mother and baby stores, department stores and hypermarkets.

Bubs executive Chair Dennis Lin said:

We can say that we expect to achieve modest half on half gross revenue growth in the second half of FY21. We are confident we are well placed with strong foundations, brand share growth and a robust balance sheet to go forward with a sustainable and profitable expansion strategy to emerge as a leader challenger brand once the crisis subsides and market dynamics stabilise.

More reading

• Why Corporate Travel Management, Silver Lake, Volpara, & Vulcan are pushing higher
• Here’s why the Volpara (ASX:VHT) share price is storming higher
• 3 ASX Healthcare shares feeling a little under the weather
• Afterpay (ASX:APT) and another ASX growth share to buy right now
• Here’s why the Volpara (ASX:VHT) share price is surging 7% higher

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends VOLPARA FPO NZ. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO and CSL Ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended BUBS AUST FPO and VOLPARA FPO NZ. 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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