The 2020 stock market crash has left many shares trading at relatively cheap prices. Ongoing risks such as the coronavirus pandemic and political uncertainty in Europe mean that the valuations of some companies have failed to rebound to their 2019 levels.

As such, there may be buying opportunities available on a long-term basis. Over time, the valuations of today’s cheap stocks could improve. In doing so, they could aid an investor in building a retirement nest egg from which to draw a passive income in older age.

Cheap stocks after the 2020 stock market crash

The 2020 stock market crash has caused investors to re-evaluate their views on a number of sectors. For example, companies operating in industries that are being directly impacted by a weak economic outlook have seen their valuations come under severe pressure. They include sectors such as banking, energy and travel & leisure, where the profit growth potential of many businesses is likely to disappoint in the short run.

While some cheap stocks have weak financial positions and lack competitive advantages over their peers, others may currently be undervalued. Investors may have devalued companies operating in unfavourable sectors without understanding their recovery potential, for example. This may provide long-term investors with an opportunity to use the 2020 market crash to their advantage, in terms of buying high-quality companies at a discount to their intrinsic values.

A stock market recovery

Today’s cheap stocks could deliver strong recoveries from the 2020 stock market crash. Ultimately, an improving economic outlook that provides more prosperous operating conditions is likely to come into existence over the coming years. The world economy has, after all, always recovered from its periods of decline to post positive GDP growth. And, with large amounts of fiscal and economic stimulus having already been announced in major economies, the outlook for the world economy could improve significantly in the coming years.

With undervalued shares having significant capital appreciation potential, they may offer a sound means of generating a retirement nest egg. Their appeal on a relative basis seems to be high. A sustained period of low interest rates could be ahead. This may mean that the returns on cash and bonds fail to beat inflation by a substantial amount. And, with high house prices being present in many economies, the prospects for property investors may be less attractive than for those investors who buy cheap stocks after the stock market crash.

A long-term outlook

Clearly, a recovery after the market crash may take some time for today’s cheap shares. However, by taking a long-term view and holding high-quality companies through a likely bull market, an investor could improve their retirement prospects. They could even outperform the stock market through using its volatility to their advantage in the coming years.

More reading

• Healius (ASX:HLS) share price jumps 6% on update and $200m share buyback plan
• Commonwealth Bank (ASX:CBA) share price higher on divestment update
• What’s wrong with the Zip (ASX:Z1P) share price?
• 3 quality SaaS ASX shares to buy
• 3 reasons why Xero (ASX:XRO) shares are doing so well

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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The Healius Ltd (ASX: HLS) share price is charging higher on Wednesday following the release of an update.

At the time of writing, the healthcare company’s shares are up 6% to $3.85.

What did Healius announce?

This morning Healius provided investors with an update on its performance so far in FY 2021 and its plans for some of the funds raised from its medical centres sale.

In respect to the former, management revealed that Healius’ performance has been strong and its volumes are improving.

Pathology.

The Pathology business continued its strong revenue growth in October and November. This was driven by a mix of COVID-19 testing volumes and the on-going recovery of non-COVID-19 revenues.

Community COVID-19 testing remains broadly within a band of 7,000 to 10,000 per working day, whereas commercial COVID-19 testing is continuing to grow.

Its non-COVID revenues are trending up to be flat year-on-year.

Imaging.

The Imaging business has delivered sustained growth in revenues in all states in October and November. This was driven by both volumes and average fee growth, other than in Victoria and South Australia.

In Victoria, activity is returning rapidly with the easing of restrictions and revenue was above the prior corresponding period in November.

In South Australia, the COVID-19 related shutdown temporarily impacted revenues in November. Though, revenues are still ahead year to date.

Day Hospitals.

Day Hospitals revenue was materially ahead of the prior corresponding period in October and November.

Management notes that Montserrat is delivering good returns with Westside at record levels. The Adora Fertility business is also performing well with record cycles in November.

On-market buyback.

Last month the company completed the sale of its medical centres to BGH Capital. This led to the company receiving proceeds of $483 million.

This morning the company has announced a new capital management plan which aims to facilitate strategy, optimise shareholder returns, and manage uncertainties.

Part of this will see the company undertake an on-market share buy-back of up to $200 million in 2021. This remains subject to the Healius share price and market conditions.

It has also revised its dividend payout ratio to a target of 50% to 70% of reported net profit after tax.

More reading

• Brokers name 3 ASX shares to buy right now
• Why the Healius (ASX:HLS) share price edged higher today

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 Commonwealth Bank of Australia (ASX: CBA) share price is edging higher following the release of an announcement.

At the time of writing, the banking giant’s shares are up slightly to $81.96.

What did Commonwealth Bank announce?

This morning Commonwealth Bank provided an update on the sale of its equity interest in BoCommLife Insurance and other divestments.

According to the release, the China Banking and Insurance Regulatory Commission (CBIRC) has granted approval for the divestment of the bank’s 37.5% equity interest in BoCommLife to MS&AD Insurance Group, the parent company of Mitsui Sumitomo Insurance.

Management revealed that the final sale proceeds are expected to be $886 million and the divestment of the equity interest in BoCommLife is expected to complete by 31 December.

Non-cash gain revisions.

Commonwealth Bank also announced that it has revised the calculation of non-cash gains and losses on disposal of previously announced divestments. This includes BoCommLife, CFS, CFSGAM, CommInsure Life and Ausiex.

The revisions include the finalisation of accounting adjustments for goodwill, foreign currency translation reserve recycling, and updated estimates for transaction and separation costs.

The total increase in unaudited post-tax statutory earnings related to the completion of BoCommLife and other divestments is expected to be approximately $840 million. This will be recognised as a non-cash item in the first half result.

Management advised that the capital impact of these divestments is a pro-forma uplift to its Common Equity Tier 1 (CET1) ratio of 29 basis points. This is based on its risk weighted assets as of 30 September.

Finally, it explained that the completion of the divestment of CommInsure Life is now currently expected to occur via a statutory asset transfer in the second half of FY 2021. As a result, the completion of the BoCommLife divestment does not affect the completion timing of the CommInsure Life divestment.

More reading

• Here are the ASX bank shares rated as a buy today
• Which ASX 200 sectors performed the best in November? 
• Banks rejoice: House prices to return to 2019 levels
• ASX 200 rises on Tuesday
• CBA (ASX:CBA) and the ASX banks just had an amazing month

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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Zip Co Ltd (ASX: Z1P) shares have been far from inspiring lately, slumping to a 6-month low of $5.29 on Tuesday. The Zip share price has now fallen to levels not seen since before the company announced its entry into the United States via the acquisition of US-buy now, play later (BNPL) player QuadPay back in June. With the S&P/ASX 200 Index (ASX: XJO) just 6% away from its pre-COVID highs and a recovery in tech shares, what is wrong with the Zip share price?  

It’s not just Zip 

Zip isn’t the only BNPL company that’s experiencing significant underperformance. As a matter of fact, all BNPL players except Afterpay Ltd (ASX: APT) and Humm Group Ltd (ASX: HUM) have been sold off recently with similar price charts. 

The Splitit Ltd (ASX: SPT) share price fell 6% on Tuesday and is down almost 40% from its August highs. The $1.10 level also marks a 6-month low for Splitit shares. Similarly, the Sezzle Inc (ASX: SZL) share price is at 6-month lows and trading at nearly half its August high of $11.35. Even the newest BNPL addition to the ASX, Laybuy Holdings Ltd (ASX: LBY) has fallen below its initial public offering (IPO) price of $1.41 per share to close at $1.30 on Tuesday. 

Afterpay holding on 

The Afterpay share price is the only BNPL company on the ASX not to fit the broader narrative of being at a 6-month low and a 30-50% discount to its August highs. 

This week, big brokers reiterated their stance on Afterpay shares with Credit Suisse initiating an outperform rating and $124.00 price target and Goldman Sachs retaining its neutral rating with a $99.90 price target. The brokers anticipate a strong growth outlook, especially in US operations. 

One of the key differences between Afterpay and its competitors is the company’s focus on international expansion. It launched into Canada in August with a number of large merchants now live, integrating or signed. Furthermore, it has its eyes set on the rest of Europe via the acquisition of Pagantis. Afterpay cites it is on track to complete the acquisition by the end of the 2020 calendar year, which will grant it an immediate licence to operate in Spain, Fance, Italy and Portugal, as well as pending licence passport applications in Germany and Poland. 

UBS cautious on Zip share price 

Last week, UBS Group raised its Zip share price target from $5.50 to $5.70 but retains its sell rating. Zip’s October and November sales numbers were ahead of its expectations with the US tracking well. Despite the UBS upgrading its FY21 and FY22 earnings, it believes that current price levels limit value proposition, hence the sell rating. 

More reading

• Which shares will benefit from trillions of dollars in new global stimulus?
• Zip and Creso Pharma were among the most traded shares on the ASX last week
• Why G8 Education, Metcash, Woodside, & Zip shares are dropping lower
• ASX 200 rises on Monday
• The sector that’ll explode in February: fundie

Lina Lim 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’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. 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 is about three software as a service (SaaS) ASX tech shares that could be worth a spot on your watchlist.

Here they are:

Volpara Health Technologies Ltd (ASX: VHT)

According to the ASX, Volpara has a market capitalisation of around $350 million.

Volpara is a digital health company focused on early detection of breast cancer by improving the quality of screening using artificial intelligence (AI).

In its recent FY21 half-year result it reported that its annual recurring revenue (ARR) increased by approximately 27% to NZ$19.9 million with subscription revenue rising by 71% to NZ$8.8 million.

Around 27% of women in the US had one of Volpara’s products applied on their images and data, compared to 25.8% at the end of the prior corresponding period.

In that same result, the SaaS ASX share’s gross profit margin improved from 89% to 92% and its average revenue per user (ARPU) grew 4.5% to US$1.16.

Volpara aims to continue to have a high retention rate, increase ARPU, win new customers, upsell with existing customers and perhaps make acquisitions.

Xero Limited (ASX: XRO)

According to the ASX, Xero has a market capitalisation of $20.3 billion.

Xero is a cloud accounting software company for small and medium business customers. It provides a number of automation and time-saving tools for business owners, bookkeepers, accountants and other professionals. The tools and numbers are provided in a easy-to-understand way.

Xero’s subscribers pay for their subscription every month, giving them access to their numbers anywhere at any time.

The SaaS ASX share’s FY21 interim result showed a 21% increase in the operating revenue, a 19% rise in subscribers, a 15% increase in annualised monthly recurring revenue and an 86% rise of earnings before interest, tax, depreciation and amortisation (EBITDA). The gross profit margin improved by another 0.5 percentage points to 85.7%.

In the UK, total subscribers rose by 19% to 638,000. Australian subscribers went up 21% to 1.01 million. ‘Rest of the world’ subscribers went up by 37% to 136,000. Its subscriber churn was very low during the period at just 1.11%.

Two of the biggest improvements were that its net profit after tax (NPAT) grew by approximately NZ$33 million to NZ$34.5 million and free cashflow jumped NZ$49.5 million to NZ$54.3 million.

Altium Limited (ASX: ALU)

According to the ASX, Altium has a market capitalisation of $4.76 billion.

Altium is an electronic PCB software business that helps engineers design the products, devices and vehicles of the future.

The SaaS ASX share has an array of large, global customers including Tesla, Space X, Amazon, Apple, Google, Disney, Cochlear Limited (ASX: COH), Broadcom, Qualcomm, John Deere and Honeywell.

Altium is pivoting its business towards the cloud with a product called Altium 365 which will allow teams to collaborate easier. Aside from providing a better service for customers, this will also create direct and indirect monetisation opportunities for Altium whether it’s based on transactions (like the Airbnb model) or premium services (such as the Amazon Prime model).

However, according to management, Altium’s move to the cloud is from a position of strength and does not force its customers to change either their licensing model or the way they use Altium’s existing software.

In FY20 Altium reported a 17% increase in Altium Designer subscribers, with revenue rising by 10% to US$189.1 million and EBITDA going up by 13% to US$75.6 million. The EBITDA margin increased to 40%, up from 38.9%.

In FY21 Altium is expecting to grow revenue by 6% to 12% in a range between US$200 million to US$212 million.

More reading

• 3 reasons why Xero (ASX:XRO) shares are doing so well
• Why Creso Pharma and these ASX shares just hit 52-week highs or better
• Top ASX shares to buy in December 2020
• Top ASX shares making record all-time highs
• 2 of the best ASX tech shares you can buy today

Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium and VOLPARA FPO NZ. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and Xero. The Motley Fool Australia has recommended Cochlear Ltd. 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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Xero Limited (ASX: XRO) shares have gone up over 70% over the past six months.

In this article are three reasons why Xero has been doing so well over the months and years:

A quick overview of Xero

Xero is a cloud accounting software company for small and medium business customers. It provides a number of automation and time-saving tools for business owners, bookkeepers, accountants and other professionals. The tools and numbers are provided in a easy-to-understand way.

Xero’s subscribers pay for their subscription every month, giving them access to their numbers anywhere at any time.

The cloud accounting businesses provides its services in many countries including New Zealand, Australia, the US, the UK, Singapore, South Africa and Canada.

In the recent FY21 half-year result it reported that there was a 21% increase in the operating revenue, a 15% increase in annualised monthly recurring revenue and an 86% rise of earnings before interest, tax, depreciation and amortisation (EBITDA). Net profit after tax (NPAT) grew by approximately NZ$33 million to NZ$34.5 million and free cashflow jumped NZ$49.5 million to NZ$54.3 million.

Here are three reasons for Xero shares are doing so well:

Strong subscriber growth

An integral part of Xero’s growth is its subscriber growth, which increases its monthly revenue. In FY20 its total subscribers went up by 19% to 2.45 million. However, partly due to COVID-19 impacts, its net subscriber additions declined by 30% to 168,000.

In the UK, total subscribers rose by 19% to 638,000. Australian subscribers went up 21% to 1.01 million. ‘Rest of the world’ subscribers went up by 37% to 136,000. North American subscribers rose by 17% to 251,000 and New Zealand subscribers went up by 13% to 414,000.

Its subscriber churn was very low during the period at just 1.11%. The total lifetime value of subscribers increased by 15% to NZ$6.17 billion.

High and still rising gross profit margin

A gross profit margin explains how profitable a business is after paying for its most essential costs to sell a product. Each business classifies differently what counts as the cost of selling its goods or services in terms of the gross margin.

For the six months ending 30 September 2020, Xero had a gross profit margin of 85.7%, which was an increase of 0.5 percentage points compared to the prior corresponding period.

This means a large majority of the new revenue falls to the next level of Xero’s accounts, which partly explains how a 21% increase in operating revenue led to a 86% increase of the EBITDA.

Platform network effects

Xero doesn’t just provide accounting software for one user to access. It can provide multi-tiered access to everyone in an organisation, from a simple employee payroll access level, all the way up to administrator. Businesses can also invite bookkeepers, accountants, financial advisors and others as well.

Subscribers can get access to a number of different third party applications through the Xero platform, which increases the value of the overall Xero package to the subscriber and can increase loyalty.

The company allows businesses to use Xero’s software as a centre of operations for everything, not just an accounting system.

What’s the Xero valuation?

Xero is purposefully re-investing most of its profit back into growth for the business, somewhat like the Amazon strategy. It isn’t trying to make a profit (yet). The increased profit it made in the FY21 interim report was a result of temporarily lowering spending because of COVID-19. In terms of market capitalisation, it has a market value of just over $20.5 billion. Using Commsec estimates, it’s valued at 126x FY23’s estimated earnings. 

More reading

• 3 quality SaaS ASX shares to buy
• Why Creso Pharma and these ASX shares just hit 52-week highs or better
• Top ASX shares to buy in December 2020
• Top ASX shares making record all-time highs
• 2 of the best ASX tech shares you can buy today

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 Xero. 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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Unfortunately several Australian industries have copped tariffs from China this year, devastating companies that rely on export income from the world’s biggest population.

According to trade experts, Beijing is retaliating against Australia‘s calls for an investigation into the origins of COVID-19, attention on human rights cases in Xinjiang and condemnation on its suppression of free speech in Hong Kong.

“China seems determined to punish Australia and make it an example to other countries,” Lowy Institute senior fellow Richard McGregor told Bloomberg last month.

“They want to show there’s a cost for political disagreements.”

The fortunes of Treasury Wine Estates Ltd (ASX: TWE) is the most prominent example. The Chinese Ministry of Commerce last month declared that Australian wines were being dumped into the country, to justify slapping a 169.3% deposit rate.

Treasury’s share price, which had already sunk when China started its anti-dumping enquiry, plummeted.

Australian barley farmers are similarly feeling the pinch as a major export market instantly disappeared.

“The tariffs and trade restrictions introduced over the past year have pulled out the rug from beneath many Australian businesses, dissuading businesses from pursuing trade with China,” said IBISWorld senior industry analyst Liam Harrison.

China knows it has leverage with these trade blocks, according to Harrison. The country is Australia’s largest export partner, with 35.3% of goods and services heading there.

“Australian industries have invested heavily in expanding their trade with China since the China-Australia Free Trade Agreement was signed in December 2015.”

Now IBISWorld has identified 5 other sectors China could target if tensions escalate.

Any ASX shares that are involved in these commodities would need to be evaluated with these risks in mind.

Dairy

Both the milk and cream processing sector and the milk powder industry are “highly vulnerable” to hefty Chinese tariffs.

ASX-listed companies like A2 Milk Company Ltd (ASX: A2M), Bega Cheese Ltd (ASX: BGA) and Keytone Dairy Corporation Ltd (ASX: KTD) could see their stock prices sink if that happened.

Harrison said slugging dairy would mean trade hostilities have stepped up to a very severe level.

“Australian dairy products are highly popular, and there are few substitute markets for baby formula that Chinese parents are willing to trust,” he said.

“Action against this market would likely cause significant backlash from Chinese consumers, and could result in weakened support for continuing trade restrictions against Australia.”

Australian baby powder exports skyrocketed during the COVID-19 pandemic, to reach 18,726 tonnes year-to-date to the end of September.

Honey

Australian honey is valued in Asian countries, especially the top-notch Manuka type.

China receives more than a quarter of Australia’s exports, but the industry is vulnerable to a trade ban as other honey-producing nations are readily available.

Manuka honey comes from a type of tea tree that’s only seen in New Zealand and south-east Australia, according to Harrison.

“The beekeeping industry in New Zealand would stand to benefit from reduced competition if China imposes tariffs on Australian honey,” he said.

“For Chinese consumers, plentiful supply of cheaper honey would likely replace the lower availability of manuka products.”

Fruit

According to IBISWorld, Australia’s “citrus, nut and other fruit” industry sends more than 45% of its exports into China. More than 30% of total exports for apples, pears and stone fruits also head to the giant Asian nation.

“Fruit farmers across Australia have already suffered major setbacks, including sweltering heats early in the year, severe bushfires and now a shortage of fruit-pickers due to COVID-19 travel restrictions,” said Harrison.

“Losing China as an export market could be devastating to an already weakened industry.”

Companies like Costa Group Holdings Ltd (ASX: CGC) are involved in this area.

Pharmaceuticals

Australian medicines and supplements are popular in China, but the moat is very narrow.

“Our largest advantage in providing to this market is our relative geographic proximity,” said Harrison.

“Many industry products have a range of alternative suppliers, such as the US, Canada and various markets across Europe, leaving the Australian industry particularly vulnerable to trade restrictions.”

The local pharmaceutical industry derives more than 50% of its revenue from export markets.

Brands like Blackmores Limited (ASX: BKL) and Mayne Pharma Group Ltd (ASX: MYX) are exposed to a Chinese tariff escalation on pharmaceuticals.

Mining

If you own iron ore mining shares, you would never know China was picking on Australia at the moment. Prices for the metal have soared, and so have the stock prices.

Both iron ore and bauxite are heavily reliant on Chinese exports, but fortunately Australia has a thick moat with few competitors.

“Australian iron ore is very high quality, and there are currently few markets which can produce the quality, and particularly the quantity, of resources needed to fuel China’s steel manufacturing industry,” Harrison said.

“A recent downgrade in production by Brazilian producer Vale has also weakened China’s potential for alternative markets for iron ore.”

More reading

• Zip and Creso Pharma were among the most traded shares on the ASX last week
• 3 reasons the A2 Milk (ASX:A2M) share price could be a buy
• Why the Keytone Dairy (ASX:KTD) share price is up 8% today
• These are the 10 most shorted shares on the ASX
• Why Cashrewards, Doctor Care Anywhere, Kogan, & Treasury Wine are pushing higher

Motley Fool contributor Tony Yoo owns shares of A2 Milk. The Motley Fool Australia owns shares of and has recommended A2 Milk, Blackmores Limited, COSTA GRP FPO, and Treasury Wine Estates 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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As this crazy year draws to a close, it is worth reflecting on some of the best performing shares on the ASX.

There have been some surprising success stories to come out of 2020: little-known tech companies like Nitro Software Ltd (ASX: NTO) and Megaport Ltd (ASX: MP1) have lit up the market. But few companies have delivered the same level of shareholder returns as that of corporate bookmaker Pointsbet Holdings Ltd (ASX: PBH).

Prior to the outbreak of COVID-19, 2020 had been shaping up as a banner year for Pointsbet. Its strategy to target the expanding American gambling market had been delivering some tangible success. Pointsbet had been an early mover in many of the US states that were beginning to relax their restrictions surrounding online sports betting. According to its first half FY20 results, Pointsbet had gained access to a sports betting market worth $5.2 billion in the US alone.

The success of the company’s strategy was reflected in the Pointsbet share price. After listing for $2 in June of last year, Pointsbet shares surged to a high of $6.65 by mid-January, and looked set to go absolutely ballistic in 2020.

But then coronavirus happened.

The impact on Pointsbet’s business was particularly devastating. Sports leagues across the world came to a grinding halt. With almost nothing for its clients to bet on, it looked like the company’s revenues were drying up. The Pointsbet share price was savaged in the March market crash, falling as low as $1.10.

Despite the risks posed to Pointsbet’s business, the company continued to follow through on its expansion plans in the United States. Over the last few months, the company has launched operations in the US states of Illinois and Colorado, and signed a new 5 year exclusive partnership with US media giant NBC Universal.

Pointsbet share price game changer

The NBC Universal deal was particularly well received by the market, with the Pointsbet share price skyrocketing close to 90% on the day of the announcement. And no wonder, NBC Sports has the largest audience of any sports media organisation in the US and its broadcast network reaches every TV household in the country.

Pointsbet will now have its brand integrated across NBC Sport’s portfolio of sports-focused cable networks, streaming platforms, and other sports digital media. This includes providing betting odds in free-to-play games and fantasy leagues.

The deal with NBC also gives Pointsbet access to Telemundo, a leading Hispanic media company in the US. Pointsbet has tailored its product to specifically address the Hispanic population, and is one of only two sports betting applications in America to offer full Spanish language functionality.

Cashed up

Pointsbet took advantage of the positive investor sentiment generated through the NBC deal and successfully raised over $350 million from both institutional and retail investors. According to its first quarter FY21 investor presentation, Pointsbet now has over $430 million in total corporate cash and cash equivalents on its balance sheet.

The future for Pointsbet is still hard to determine. Despite the prospect of a major coronavirus vaccine rollout buoying equity markets globally, the worsening situation in the US may continue to stifle economic growth there for months to come.

However, the company has at least proven itself to be a resilient operator throughout the COVID-19 crisis. And its ability to execute on its expansion plans despite the market headwinds has lifted the Pointsbet share price to new highs in 2020.

More reading

• Why the Afterpay (ASX:APT) share price and these ASX stocks could get a boost next week
• Why has the PointsBet (ASX:PBH) share price gone nowhere since August?
• The 13 ASX shares that could have doubled your money in 2020
• Why Afterpay, Goodman, MedAdvisor, & PointsBet shares are dropping lower
• PointsBet (ASX:PBH) share price on watch after US update

Rhys Brock owns shares of MEGAPORT FPO, Nitro Software Limited, and Pointsbet Holdings Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia has recommended MEGAPORT FPO, Nitro Software Limited, and Pointsbet Holdings 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 Link Administration Holdings Ltd (ASX: LNK) share price could be on the move today after the release of a business update.

What did Link announce?

Ahead of its business update event, the administration services company released a presentation which included a summary of how it is performing so far in FY 2021.

According to the release, Link has started FY 2021 positively, thanks largely to its resilient revenues. Management notes that 84% of its revenue is classed as recurring.

In light of this, the company is on track to deliver revenue of $594 million for the first half. This represents a 4.8% decline on the prior corresponding period’s revenue of $624 million.

Link also revealed that its top five Retirement & Superannuation Solutions (RSS) clients have either renewed or an on track to renew their contracts. It has also experienced continued strong member growth. And with macroeconomic conditions improving, management appears optimistic that this will continue.

It also revealed that the key PEXA business is performing very positively. Since June, monthly transactions have continued to grow as PEXA’s digital platform and networks drive further penetration across Australia.

Another positive is that its Global Transformation Program is on track and further upside from the program is now expected. It has made a 50% increase to its FY 2022 target, lifting it from $50 million to $75 million.

In respect to earnings, management advised that it is expecting its operating net profit after tax before amortisation (NPATA) to come in at $57 million for the first half. This will be down 29.6% from the $81 million it achieved in the prior corresponding period.

FY 2022 momentum.

Looking ahead, the company believes it is well-placed for FY 2022 and beyond.

It advised that it has good momentum going into FY 2022 and notes that its RSS business has won a major contract with Hostplus. Furthermore, its Pepper European Servicing capabilities are expected to strengthen its Banking and Credit Management.

More reading

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

The post Link Administration (ASX:LNK) share price in focus following business update appeared first on The Motley Fool Australia.

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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.

Earlier this fall, credit-rating agency S&P Global boosted its rating on Tesla Inc‘s (NASDAQ: TSLA) debt, citing the electric-car maker’s growing cash reserve relative to its debt. But the BB- rating still left the company’s bonds in the “junk” category. This, however, is likely to change soon.

Despite this recent rating upgrade on Tesla’s debt, it’s already out of date. Since then, Tesla reported better-than-expected third-quarter results with a huge jump in free cash flow. In addition, the company announced a $5 billion equity sale on Tuesday morning — a move that gives the company significant financial strength. 

On top of this capital raise bringing more surety to the eventual repayment of Tesla’s bonds, it reinforces the company’s ability to maintain its lead in the fast-growing electric-vehicle market.

A well-timed equity raise

This stock sale couldn’t have been better timed. Shares have soared over the past year, rising more than 840%. Further, the growth stock hit an all-time high on Monday, giving Tesla a market capitalisation greater than $600 billion. This means a $5 billion capital raise would only dilute Tesla shareholders’ ownership by less than 1% yet will increase the company’s total cash position by 34%, based on its reported $14.5 billion cash position at the end of Q3. 

Not only will Tesla’s cash beef up its balance sheet, but it also positions the company to more confidently invest in growth opportunities. The automaker said earlier this year that it planned to double its annual capital expenditures over the next two years as Tesla continues expanding with new factories and begins vertically integrating more battery design and manufacturing. 

Tesla has taken advantage of its soaring stock price several times this year. The company has now raised capital three times in 2020.

An enviable position

With trailing-12-month revenue of about $28 billion and analysts estimating that these sales will grow 46% next year, Tesla has already carved out a strong leadership position in the fast-growing electric-vehicle market. A 34% increase to its cash position, however, will make it more difficult than ever for competition to catch up.

Tesla didn’t necessarily need more cash. In Q3 alone, quarterly free cash flow was $1.4 billion — up from $371 million in the year-ago quarter. In addition, the company said in the quarterly update that it “should have sufficient liquidity to fund our product roadmap, long-term capacity expansion plans and other expenses.”

But given Tesla’s skyrocketing stock price, it seems prudent to significantly increase cash reserves, as it results in minimal dilution with the stock at this level.

Not only will Tesla now be better prepared for any unexpected challenges after it closes its $5 billion equity raise, but management can act more aggressively and with more agility when it comes to investing in the many growth opportunities in front of the company.

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

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

The post Tesla is nearly unstoppable following a $5 billion capital raise appeared first on The Motley Fool Australia.

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

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