The Marley Spoon AG (ASX: MMM) share price shot up 5.2% to $2.61 at open today before retreating slightly as the company announced its investment plans to support further growth in 2021. 

Marley Spoon is a leading global subscription-based meal kit provider. The company services customers in Australia, the United States, and across Europe.

At the time of writing, the Marley Spoon share price is trading up 2.42% at $2.54.

Management team

Marley Spoon kicked off its update by touching on previous announcements that saw its CEO and founder, Fabian Siegel, re-commit to his role.

The company expanded its management team by adding Julie Marchant-Houle as CEO of its United States segment in January.

Similarly, Ebony Morczinek joined as CEO of Europe to support the team and head its expansion overseas.

Manufacturing centre progress

As COVID-19 has changed shopping dynamics, Marley Spoon believes the shift to online shopping is just the beginning. In order to capture the increasing volumes in customer’s orders, the company has been building its production capacity.

During the second-quarter of FY21, Marley Spoon will take possession of its new custom-built Sydney manufacturing centre. This in effect, will triple its current capacity to 14,000sq m.

In addition, the company also recently took control of its third Australian manufactory facility in Perth, Western Australia. This month, Marley Spoon launched its Dinnerly brand throughout the region.

Across the Pacific, the company will seek to capitalise on the United States market by increasing production in California next year. Like its Sydney operations, Marley Spoon is planning to triple its manufacturing footprint to 12,000sq m.

Furthermore, the company will employ computer aided manufacturing technology in Europe and the United States during 2021. This will allow increased efficiency and picking quality.

This comes as Marley Spoon focuses to increase investments in the research and development space. Advances in technology platforms and scaling big data infrastructure is expected to bring prediction technology across its value chain.

Revenue guidance reaffirmed

After conducting a capital raise and conversion of bonds during the quarter, Marley Spoon used the proceeds to repay its senior loan facility. This in turn, significantly freed up the company’s balance sheet, making its organic growth strategy more simplified.

As its products continued to be driven by demand, Marley Spoon reaffirmed its FY20 revenue guidance. European reported revenue is anticipated to fall in the middle of its guidance range, representing up to 100% of year-on-year growth.

What did the CEO say?

Welcoming the progress, Marley Spoon CEO Fabian Siegel said:

After an extraordinary growth year in 2020, we have a confident and positive outlook for 2021. With our strengthened balance sheet, we can self-fund investments in technology, capacity and capability to support ongoing solid growth.

With a stronger team than ever, we are well placed to execute on our clear infrastructure investment roadmap and take advantage of the growth opportunities presented to us. We believe we are still in the early days of consumer behaviour switching from offline to online shopping in our category, supporting growth at attractive unit economics in 2021 and the years beyond.

About the Marley Spoon share price

The Marley Spoon share price is up more than 1,000% in the last 12 months. The company reached an all-time high of $3.80 in August, and a 52-week low of 18 cents in December last year.

Marley Spoon has a market capitalisation of $634.9 million.

More reading

• Marley Spoon (ASX:MMM) rival set to list on the ASX

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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The Westpac Banking Corp (ASX: WBC) share price is trading lower on the day of its annual general meeting.

At the time of writing, the banking giant’s shares are down 0.5% to $19.89.

What did Westpac say at its annual general meeting?

At the meeting the bank provided investors with a summary of its performance in FY 2020 and its targets for the future.

Speaking about FY 2020, Westpac’s Chief Executive Officer, Peter King, revealed that he was disappointed with the company’s performance.

He said: “The 2020 financial year was clearly disappointing, with reported profit down 66%. Much of the fall was due to our own issues, including the AUSTRAC penalty. COVID directly impacted us contributing to slower loan growth, lower margins, higher expenses, and a material increase in impairment charges.”

The Chief Executive also touched on the AUSTRAC matter, which weighed heavily on both its performance and the bank’s priorities over the last 12 months.

Mr King commented: “Shareholders are rightly disappointed. This simply should not have happened, and I apologise. I also recognise that the civil penalty and the impact of COVID resulted in lower dividends and this made it hard for many of you.”

“While our failings were not intentional, significant changes and consequences have occurred. This included Board and management changes along with remuneration consequences for those in the chain of responsibility. I and the Executive team also took collective accountability with 2020 short-term variable rewards cancelled,” he added.

Outlook.

Westpac has been encouraged by the quick economic recovery since the height of the pandemic and expects it to continue in 2021.

Though, Mr King acknowledges that not all of the bank’s customers will recover as quickly.

“The Government’s support has played a critical role in helping Australian families and keeping businesses afloat and we expect the economic recovery to continue through next year. Nevertheless, some customers will find conditions difficult. The gradual unwinding of Government support must be offset by increased activity if we are to minimise the impacts on customers,” he commented.

The Chief Executive concluded by confirming the bank’s aim to simplify its business and create value for shareholders.

He said: “At the same time, we are working hard to resolve our issues and simplify the business. We are underway but have much more to do. As CEO, my role is to build sustainable long-term value for shareholders, and I am personally committed to see this through.”

“Shareholder value is created by a strong customer franchise; strong relationships; and by being there for customers when they need us. Right now, that means supporting customers and the economy through this pandemic,” Mr King concluded.

More reading

• 2 ASX dividend shares with attractive yields
• 5 things to watch on the ASX 200 on Friday
• Morgans picks the best ASX stocks to buy for 2021
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises on Monday

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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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Non-bank lender Plenti Group Ltd (ASX: PLT) shares are edging higher today after the company announced it has secured a new $100 million warehouse loan facility. At the time of writing, the Plenti share price has inched 0.97% higher to $1.04.

The new facility will allow the company to make further inroads into renewable energy lending and personal loans.

What’s driving the Plenti share price?

The Plenti share price is responding favourably to news that the company’s new $100 million facility will support the rapid growth of its loan portfolio. 

The company expects the majority of new renewable energy and personal loan originations to be funded by the new facility, while its marketplace platforms continue to provide important sources of capital and funding diversification.

As the company’s loan portfolio scales, the facility is expected to be upsized, subject to funder approval.

Plenti says the facility has an 18-month availability period, and has a funding cost of approximately 3.0% per annum on a fully drawn basis. This is significantly lower than the company’s existing funding sources for renewable energy and personal loans. 

Without naming the institutions, Plenti advised that senior funding was provided by a major domestic bank, with mezzanine funding coming from two new domestic investors.

The company also announced it has upsized its existing automotive loan warehouse facility from $150 million to $275 million.

Commenting on the new warehouse facility, Plenti CEO and founder Daniel Foggo said:

This facility marks another important milestone for Plenti. As well as adding further impetus to our exceptional growth, it makes our business more resilient by materially improving the economics on new loans, while further diversifying our funding sources.

About the Plenti share price

Plenti first listed on the ASX on 23 September 2020 at an offer price of $1.66. 

On its ASX debut, the Plenti share price had a shocker, closing the day at $1.30 and down 21% from its listing price.

In November, the company delivered healthy first-half results, beating forecasts on its prospectus on all key financial metrics. Plenti reported revenue of $26 million, representing growth of 41% on the prior corresponding period, and 2% ahead of prospectus forecast, driven by strong loan portfolio growth.

It also achieved record loan originations of $167 million for the half, 33% above the first half of FY20 and 7% ahead of its prospectus forecast. 

However, that didn’t stop investors from offloading Plenti shares. After rising to $1.30 in November, the Plenti share price has plummeted again to the current levels, which are its lowest levels to date.

Plenti commands a market capitalisation of $174 million.

More reading

• Plenti (ASX:PLT) share price soars 5% after solid first half results

Motley Fool contributor Eddy Sunarto 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 Australian dollar surged to a fresh two and a half year high and is at a point that will provide a decent tailwind to some ASX stocks.

The Aussie hit US75.33 cents – it’s highest level since June 2018. Some economist believe that the currency will leave a distinct mark on our economy and corporate earnings once it crosses the US75 cent level.

While CSL Limited (ASX: CSL) may have called off clinical trials for its COVID‐19 vaccine, optimism that a successful drug will be available soon is lifting risk appetite.

Why the Australian dollar surged to new highs

Our dollar tends to appreciate when sentiment is positive, and the rebound in China’s economy along with the strong iron ore price completes the trifactor for the Australian dollar.

The Aussie battler has surged around 32% since hitting the lows of around US57 cents in March as the pandemic caused markets to crash. It’s sitting on gains of around 7% this calendar year.

A strong local dollar is not good for our economy as it makes our exports more expensive. But on the flipside, local importers will get a profit boost.

ASX retail stocks the biggest winners

This means the rally in the retail sector may not be over as some, not all, will see margins increase thanks to the exchange rate.

The retailers that benefit most as those that source products directly from overseas and carry their own brands.

ASX stocks best placed to benefit from the exchange rate

UBS noted that those with extensive private label products include the Wesfarmers Ltd (ASX: WES) share price, Premier Investments Limited (ASX: PMV) share price, Super Retail Group Ltd (ASX: SUL) share price and Adairs Ltd (ASX: ADH) share price.

Automotive parts suppliers like the Bapcor Ltd (ASX: BAP) share price and GUD Holdings Limited (ASX: GUD) share price also stand to benefit.

But the broker noted that the positive currency tailwind may be muted by any hedging contracts these companies have in place.

ASX share price correlation to the Australian dollar

What’s interesting is that when USB studied the correlation between share price and currency movements, the Harvey Norman Holdings Limited (ASX: HVN) share price stood out.

Shares in the electronics and furniture retailer generated a 0.25% market-relative return when the AUD/USD rate increased by 1%. If other currencies are factored in, the market-relative return drops to 0.08%.

That may not sound like much, but the Harvey Norman share price is the most sensitive to currency movements of all stocks covered by UBS.

Foolish takeaway

I say that’s interesting because this isn’t what I was expecting. Many of the brands Harvey Norman carries are bought from local distributors. This means Harvey Norman pays in Australian dollars and it’s the distributors that typically wear the currency fluctuations.

But correlation is not causation. There are many factors that can influence share price movements. Something to think about if you are investing solely for the exchange rate.

More reading

• Why the IGO (ASX:IGO) share price shot up 18% in early trade today
• Australian ETFs just smashed multiple records
• 5 things to watch on the ASX 200 on Friday
• ASX 200 drops on Thursday
• JB Hi-Fi (ASX:JBH) share price lifts today on broker rating upgrade

Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia owns shares of and has recommended Bapcor, Premier Investments Limited, and Super Retail Group Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended ADAIRS 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 Woolworths Group Ltd (ASX: WOW) share price has been a positive performer in 2020.

Since the start of the year, the retail conglomerate’s shares are up a solid 9%.

Can the Woolworths share price go higher from here?

One broker that believes Woolworths shares are fully valued now is Goldman Sachs.

This morning the investment bank reiterated its neutral rating and $39.90 price target.

This price target implies potential upside of 1% over the next 12 months excluding dividends and approximately 3.5% including them.

What did Goldman Sachs say?

Goldman Sachs recently met with Woolworths’ management and notes that there were a few key takeaways from the meeting.

One was that inflation has started to ease but continues in categories other than fresh. This has led to downtrading in categories like red meat, but premiumisation continues in categories like beer, wine, and spirits.

Pleasingly, competition remains rational, with most retailers passing through inflation to customers. Woolworths hasn’t seen much of a shift towards value, except in certain demographics and geographies. Promotional programs are back to prior levels

In respect to its online business, Goldman advised that management noted good take-up of the subscription model with reasonable retention. Work is being undertaken to unlock more delivery windows and capacity. Its micro fulfilment centres are in the early stages but are showing good signs so far.

Another key takeaway was the improving performance of its BigW business. It notes that the closure of speciality stores during lockdowns led to customers coming back into BigW. Management expects BigW to gain some of the share that it had lost in recent years.

So why isn’t Woolworths a buy?

Given this positive feedback, investors may be wondering why Woolworths is not being rated as a buy. 

The reason for this is its current valuation, particularly in comparison to rival Coles Group Ltd (ASX: COL).

The broker commented: “WOW is delivering a consistent performance across online and in-store and also looks well positioned as further capacity is made available for online. The prospect of capital management over the next 12 months should also provide support for the stock, despite its elevated P/E multiple versus COL.”

It currently has a buy rating and $20.50 price target on Coles’ shares. 

More reading

• This dividend share has the most franking credits on the ASX
• Woolworths (ASX:WOW) opens new Sydney store customers can’t go to
• Goldman says buy the Metcash (ASX:MTS) share price ahead of next week’s results
• Why healthcare, tech and consumer staples shares underperformed the ASX 200 in November
• ASX 200 Weekly Wrap: ASX 200 on track for a top month

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths 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 is on the move on Friday after the release of an announcement.

At the time of writing, the payments company’s shares are up 3% to $5.32.

What did Zip announce?

This morning the buy now pay later provider announced a partnership with social media giant Facebook.

According to the release, the agreement will allow small and medium-sized Australian businesses to use Zip Business to pay for advertising on the global social platform.

The company notes that the service, which is currently in testing, will enable small businesses that are advertising on the platform to reach the millions of Australians now shopping online, drive sales, and invest in growth, without impacting their cash-flow.

Management believes the partnership is the next exciting step in the development of Zip Business. This follows a recent agreement with eBay Australia.

The full service will commence with a controlled, staged roll-out, starting with Facebook pre-paid advertisers.

Zip’s Co-Founder and COO, Peter Gray, commented: “With 14 million Australians using Facebook every day, the social network is an increasingly important advertising channel for small businesses. Providing Zip as a payment option makes Facebook advertising even more accessible and valuable to business owners and helps smooth their cash-flow.”

“Small businesses are a crucial part of the Australian economy, making up almost 98 percent of the business sector. For many of these businesses, cash-flow is a primary concern, and 92 percent of small businesses believe they would have generated more revenue in the previous year if their cash-flow was better.”

“Partnering with Facebook is an important step not only in the expansion of Zip Business, but in helping small business owners to capitalise on recent growth in the ecommerce sector and to get ahead,” he concluded.

This sentiment was echoed by Facebook Australia and New Zealand Director, Paul McCrory.

He said: “Small to medium businesses are the heartbeat of the Australian economy. When businesses succeed the entire community benefits. We are excited to launch the buy now pay later advertising payments integration, that will help businesses access capital to grow. This innovation, coming directly from Australia, holds great potential to ensure small business thrives.”

More reading

• Facebook allegedly crossed a line in buying up the competition
• Could this be why the Zip (ASX:Z1P) share price is underperforming?
• What’s wrong with the Zip (ASX:Z1P) share price?
• These 2 FAANG leaders will drive the Nasdaq in 2021
• Zip and Creso Pharma were among the most traded shares on the ASX last week

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 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 IGO Limited (ASX: IGO) share price has blasted up 18% early today as the miner returns to trade for the first time since Monday. The IGO share price is trading higher at $6.01 at the time of writing.

Why is the IGO share price rocketing up?

Shares in the Aussie company have been in a halt this week after unveiling a US$1.4 billion (A$1.9 billion) acquisition. IGO will acquire a 49% stake in Tianqi Lithium Energy Australia Pty Ltd from China-listed Tianqi Lithium Corporation.

IGO’s venture into lithium meant the company needed to raise some significant funds from shareholders. IGO announced a $766 million capital raise comprising an institutional entitlement offer and an institutional share placement.

IGO today announced the placement raised approximately A$446 million, while the entitlement offer raised $261 million. The offer price represented a 9.7% discount to IGO’s 7 December 2020 closing price of $5.095 per share.

The diversified mining and exploration company’s shares are set to return to trade after what has been a busy period. The IGO share price has slumped 17.3% lower in 2020 having started the year at $6.17 per share.

All eyes will be on the Aussie mining group’s shares after the bold strategic move announced earlier in the week.

What’s the deal with IGO’s acquisitions?

The $1.9 billion price tag will net IGO a 24.99% indirect interest in the Greenbushes Lithium Mining and Processing Operation (Greenbushes) and a 49% indirect interest in the Kwinana Lithium Hydroxide Plant (Kwinana).

This represents a bold push into the potentially lucrative lithium market with IGO tilting towards the sector for future growth.

The IGO share price has climbed 121.5% in the last 5 years with a current market capitalisation of $3.01 billion. Prior to the open, the mining group’s shares were yielding 2.16% p.a. with a 19.5 price to earnings (P/E) ratio.

Foolish takeaway

The IGO share price will be one to watch upon its return to trading today, particularly the case given a recent price target upgrade from leading broker, Jarden.

There are a number of other S&P/ASX 200 Index (ASX: XJO) shares on the move in early trade including CSL Limited (ASX: CSL) after the company scrapped further trials of a potential COVID-19 vaccine candidate this morning.

More reading

• Aussie dollar breaking to new 30-month high will boost these ASX stocks
• CSL (ASX:CSL) share price on watch after terminating COVID-19 vaccine trial
• Australian ETFs just smashed multiple records
• 5 things to watch on the ASX 200 on Friday
• ASX 200 drops on Thursday

Ken Hall 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.

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With the borders of most states and territories reopening and Victoria’s coronavirus outbreak now a thing of the past, the future is finally starting to look much rosier for all Australians. There is even reason to hope that there could be a solid rebound in domestic tourism this summer.

So, is it finally time to start investing in the tourism sector?

Shares in most ASX tourism companies have taken a substantial hit this year. And despite better local news over the last couple of months, most ASX tourism shares are still languishing at or near their 52-week lows.

Travel agent Flight Centre Travel Group Ltd (ASX: FLT) shed close to 70% of its value back in March and, despite a small rise over the last month or so, at $16.87 it is still well short of the 52-week high of $40.77 it reached prior to the COVID-19 crisis. Online travel site Webjet Limited (ASX: WEB) has fared more or less the same.

But at least one major broker is feeling bullish about Australia’s largest airline. Earlier in December, Goldman Sachs reiterated its buy rating for Qantas Airways Limited (ASX: QAN), and put a 12 month target of $7.05 on the company’s shares. That represents a significant 37% upside to the current Qantas share price of just $5.16.

What does Goldman like about Qantas shares?

Goldman Sachs released its note in response to a Qantas market update on 3 December 2020. In the update, Qantas stated that domestic demand was rebounding in response to border re-openings, with domestic flight capacity at 68% of pre-COVID levels for the month of December. As an indication of the strength of demand, Qantas revealed it had sold more than 200,000 fares for flights to Queensland from New South Wales and Victoria within 72 hours of the announcement that borders between these states would be re-opening.

Goldman believes this strong rebound could signal higher than anticipated capacity throughout the second half of FY21.

Qantas freight has also been performing well, due to the uptick in e-commerce sales during lockdowns. The airline added additional freight transportation services between the international hubs of Los Angeles, Hong Kong and Sydney, and it also revealed that several passenger aircraft were now being used to carry freight. Qantas is also looking into the logistics of using its aircraft to transport COVID-19 vaccines at low temperatures.

But it wasn’t all rosy. International flights continue to remain grounded, most likely until at least July 2021, and Qantas admits that international travel could take years to fully recover. Qantas also forecast that revenues for the full year FY21 would be down by at least $11 billion compared to pre-COVID levels.

However, Goldman Sachs stated that the revenue expectations outlined by Qantas in its market update were broadly in line with its own earlier estimates. The broker still feels confident that the domestic aviation industry can recover strongly now that the eastern states have reopened. It feels that as the broader domestic economy recovers from the effects of the pandemic, Qantas can reaffirm its position as market leader in corporate and premium travel, while Jetstar can reclaim pole position in the low-cost market.

More reading

• Qantas faces union in court over 2,000 sackings
• Leading brokers name 3 ASX shares to sell today
• Will the Qantas (ASX:QAN) share price go higher with reopened borders?
• This ASX travel share is already too expensive: fundies
• Regional Express (ASX:REX) share price soars to 13-year high

Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. 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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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.

After paying a record $5 billion fine to the Federal Trade Commission last year to settle allegations that Facebook Inc (NASDAQ: FB) violated user privacy, the social media juggernaut is now in hot water with the regulatory agency yet again. But things are even more serious this time around, with a coalition of 46 attorneys general joining forces with the FTC to file two separate lawsuits against Facebook for alleged violations of antitrust laws.

These are extremely serious charges, and Facebook is now facing substantial regulatory risks as the prosecutors call to break up the company.

But his emails

Facebook has a long history of quickly scooping up small social media start-ups right as those companies start to gain popularity. The most notable of these acquisitions have been the $1 billion acquisition of Instagram and the $19 billion purchase of WhatsApp. (Those price tags are based on the initial offers but changed by the time the deals closed due to fluctuations in Facebook stock.)

The company has long maintained that those services have only been able to grow to dominance under Facebook’s wing, thanks to having access to the tech giant’s deep pockets and Mark Zuckerberg’s ruthless business acumen. That may all be true, but it’s also true that acquiring a would-be competitor for the explicit purpose of undermining competition is illegal.

Zuckerberg knows this. Over the summer, a separate congressional investigation unearthed emails from 2012 between Zuckerberg and former CFO David Ebersman where the executives contemplated acquiring Instagram and Path. Ebersman was skeptical of the rationales, and Zuckerberg said that Facebook was really trying to buy time while acknowledging that part of the reason would be to neutralize a potential competitor. Realizing that he may have gone too far, the CEO soon added, “I didn’t mean to imply that we’d be buying them to prevent them from competing with us in any way.”

This exchange is quoted directly in the FTC’s legal complaint, along with another 2008 email where Zuckerberg asserted that “it is better to buy than compete.” Facebook had initially tried to challenge Instagram directly, but failed to gain traction with users, so the company fell back on that strategy of acquiring instead of competing.

A similar episode played out with WhatsApp, which was becoming incredibly popular, perhaps unstoppably so, in emerging markets where the messaging service was displacing traditional SMS texting.

“Just as with Instagram, WhatsApp presented a powerful threat to Facebook’s personal social networking monopoly, which Facebook targeted for acquisition rather than competition,” the FTC wrote.

Facebook says that the feds want “a do-over”

The FTC and attorneys general are seeking to break up Facebook by forcing it to divest both Instagram and WhatsApp, an extraordinary move that would be a daunting task for acquisitions that have long since been integrated into the conglomerate. There are other aspects to the lawsuits, including allegations that Facebook also leveraged its core platform to hurt competition, but the proposed divestitures are a particularly big ask.

“Years after the FTC cleared our acquisitions, the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day,” Facebook fired back in a statement.

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

More reading

• These 2 FAANG leaders will drive the Nasdaq in 2021
• Here’s how world’s 10 richest made $1.5 trillion from COVID-19
• Facebook just spent $1 billion to monetize messaging
• Facebook to acquire Kustomer in $1 billion deal
• How the biggest companies are the worst investments

Evan Niu, CFA has no position in any of the stocks mentioned. 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 Facebook. The Motley Fool Australia has recommended Facebook. 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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Buying cheap shares to make a passive income stream may not sound like an appealing idea to some investors. For example, they may think that today’s cheap stocks are priced at low levels because of their weak business models or poor financial outlooks.

While in some cases that may be true, in others it is far from the truth. Some low-priced shares can offer affordable dividends, growth potential and may contribute to a dependable passive income stream over the long run.

Identifying high-quality cheap shares

Assessing which cheap shares are high-quality companies may be a prudent first step in creating a long-lasting passive income. A good starting point to achieve this aim may be a company’s annual report. It provides guidance on the financial position of a business, as well as other facts and figures that may shine a light on the reliability of its dividend. For example, a company that has low debt levels and a dividend that is covered more than once by net profit may offer a robust passive income outlook.

Furthermore, a company’s latest investor updates paint a picture of its overall strategy. This may be especially relevant at the present time, when a number of industries are experiencing major changes. If company management has a flexible strategy that can adapt to what could be a very changeable period in the coming months, it may stand a better chance of delivering improving financial performance. This could mean that it has investment potential versus other cheap shares.

Dividend growth potential

Annual reports and investor updates can provide insight into the dividend growth prospects of cheap shares. For example, a business that pays out a small proportion of profit as a dividend may be able to raise shareholder payouts in future without necessarily increasing profitability. Similarly, a company with a sound strategy that is set to enter a new market may be able to produce improving financial performance that results in strong dividend growth.

Dividend growth could become increasingly important in the coming years. The scale of monetary policy stimulus enacted in recent months suggests that a period of higher global inflation would not be a major surprise. As such, cheap shares that can produce dividend growth may become more valuable in the eyes of investors. This may mean they offer capital growth prospects, as well as an attractive passive income outlook.

Diversifying to create a passive income stream

Of course, some cheap shares could deliver poor returns in the coming years. Even if they have solid financial positions, a competitive advantage and sound dividend prospects, unforeseen events may hold back their financial prospects.

As such, it is crucial to diversify across a wide range of businesses. This could lead to less risk, as well as higher returns in the long run.

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Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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