The mania over gaming vendor GameStop Corp (NYSE: GME)’s wild share price rise and subsequent fall is fading almost as quickly as it began.

But the wider implications of the Reddit army’s ability to influence share markets isn’t likely to go away soon.

In case you’re just tuning in (from, say, Mars) the Reddit army is the cohort of retail investors using social media groups like WallStreetBets to coordinate their investment plans. Their initial targets were short sellers, mostly hedge funds, who hope to profit when a company’s share price falls.

In an oversimplified nutshell, short selling is generally done by selling borrowed shares with the intent to buy them back later at a lower price. The short seller then returns the shares and pockets the difference, minus the borrowing fee paid.

As one of the most shorted shares, GameStop was one of the stocks the Reddit crowd snapped up, driving the price through the roof. Hedge funds were forced to cover their positions, buying shares and further fuelling the price gains.

By the time the GameStop share price peaked last week, on 27 January, it was up 1,915% in 2021.

Then reality hit. And the losses started hitting hard.

The GameStop share price crashed 42% again yesterday (overnight Aussie time). And it’s down another 8% in overnight trading. Investors who bought at the 27 January high are now nursing losses of 85%.

Ouch!

GameStop’s permanent implications

According to Andrew Macken, fund manager of Montaka Global Investments (quoted by the Australian Financial Review):

This is a new world now. No-one imagined a GameStop could happen. This will have permanent implications for how short portfolios are managed within the professional long short industry.

Macken’s solution? He’s now mostly shorting exchange-traded fund (ETF) indexes instead, reducing the stock specific risks that could see a shorted share rise by the likes of 1,915%.

So, what kind of presence do retail investors have on the ASX? According to Morgan Stanley analyst Chris Nicol, online retail investors represented 11% of the market’s total turnover and 9% of total trades in January.

Short sellers digging in

While some short sellers took a bath during the Reddit army’s attack on their positions, hedge funds as a whole aren’t throwing in the towel.

As Bloomberg reports:

On the short side, they’re targeting some of last year’s best performers — those with businesses that will be less robust once people return to their pre-pandemic routines — as well as industries that may languish because of altered consumer tastes or habits, such as movie-theater operators like AMC.

Addressing the unprecedented run higher in shares like GameStop and entertainment and movie company AMC Entertainment Holdings Inc (NYSE: AMC), Hampton Road Capital Management founder John Thaler said:

You’ve had a very unhealthy abandonment of discipline around valuation. If something happens to pop the bubble, these investors will retreat and it will have a cascading effect — with losses begetting more losses.

South Korea’s short selling ban puts sharemarket on thin ice

South Korea imposed a ban on short selling during the COVID-driven share market meltdown last March. While that may have saved some short-term investor pain, many analysts fear that, in the end, this could cause more harm than good.

As Bloomberg reports:

A growing number of fund managers and traders are worried that South Korea’s pandemic-imposed ban on short-selling, the world’s longest-such restriction, has artificially propped up the country’s stock market rally.

Jeon Kyung-Dae is the chief investment officer for equities at Macquarie Investment Management Korea. Jeon highlights that with Korea’s ban on short selling “bearish bets on overvalued stocks are now being delayed and accumulated… That means there will be a short-term shock in Korea equities when the short-selling is available for all stocks.”

Vince Lorusso is a fund manager at Changebridge Capital in the US city of Boston. According to Lorusso, who runs an equity long-short exchange-traded fund:

We don’t see a lot of evidence that banning short selling improves market liquidity or reduces volatility. To ban short-selling would take away a valuable market tool for price discovery and a range of other things.

Could the Reddit army turn about-face?

Could the Reddit army turn about-face and opt to short sell themselves?

According to Bloomberg, “some options experts say the message-board masses could exploit this so-called gamma squeeze in reverse, by weaponizing puts to power a sell-off”.

The ‘gamma squeeze’ in question here has to do with the options markets. During the massive run up in the share prices of stocks like GameStop, many retail traders were buying call options. A call option gives you the right but no obligation to buy a certain number of shares at a predetermined price within a set time frame.

With call options on shares like GameStop and AMC soaring, dealers were forced to buy the shares to hedge their exposures. That only drove the share prices higher.

The same, some analysts worry, could happen in reverse if the retail army buys put options on a certain share. A put option gives you the right, but no obligation, to sell a certain number of shares at a predetermined price within a set time frame.

That could see options dealers having to sell shares that are already under pressure, turbocharging any losses.

According to Cem Karsan, founder of Aegea Capital Management LLC, “Put buying en masse would add to dealers’ short put positioning and could create much more severe structural leverage imbalance to the downside.”

In case you’re wondering, the most shorted share on the S&P/ASX 200 Index (ASX: XJO) this week was Webjet Limited (ASX: WEB), with a short interest of 14.2% on Monday.

More reading

• 2 reasons AMC will have a hard time bouncing back
• Short sellers doubling down on these ASX stocks despite the GameStop saga
• GameStop, AMC trades temporarily blocked on Square’s Cash App
• RBA stimulus to fuel ‘raging bull market’ in ASX shares. Should you go all in?
• Did Robinhood lose its investor base forever?

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post To short or not to short? GameStop (NYSE:GME) ripple effect endures appeared first on The Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) was back on form last week and charged notably higher. The benchmark index jumped 3.5% over the five days to end the period at 6,840.5 points.

Unfortunately, not all shares were able to climb higher with the market last week. Here’s why these were the worst performing ASX 200 shares last week:

Worley Ltd (ASX: WOR)

The Worley share price was the worst performer on the ASX 200 last week with an 8.3% decline. Investors were selling the engineering company’s shares following the release of a trading update. That update revealed that Worley’s performance has been impacted very negatively by COVID-19. As a result of these COVID headwinds and a stronger Australian dollar, Worley revealed that it expects to report half year aggregated revenue of $4.4 billion to $4.5 billion and underlying EBITA of $200 million to $210 million. This is down materially on the $5,998 million and $366 million, respectively, it reported in the prior corresponding period.

Northern Star Resources Ltd (ASX: NST)

The Northern Star share price wasn’t far behind with a 7.6% decline over the five days. This appears to be related to the company’s merger with Saracen Mineral, which completed last week. The transaction will create a new top 10 global gold major with immediate production of 1.6 million ounces per annum and a pathway to 2 million ounces. A decent pullback in the spot gold price last week also weighed on its performance.

Unibail-Rodamco-Westfield CDI (ASX: URW)

The Unibail-Rodamco-Westfield share price was out of form last week and dropped 7.4%. This decline appears to have been the result of profit taking after a strong rise a week earlier. That rise was driven indirectly by a short squeeze initiated by traders from Reddit in the United States. The shopping centre operator had a high level of its shares held short last month.

Service Stream Limited (ASX: SSM)

The Service Stream share price was a poor performer and dropped 6.8% over the period. This also appears to have been driven by profit taking after a strong gain by the essential network services company’s shares last week. That followed news that it had won a major contract with telco giant Telstra Corporation Ltd (ASX: TLS).

More reading

• ASX 200 rises 1%, Zip soars, REA reports
• Short sellers doubling down on these ASX stocks despite the GameStop saga
• Why the Wesfarmers (ASX:WES) share price has soared 24% in a year
• RBA stimulus to fuel ‘raging bull market’ in ASX shares. Should you go all in?
• Why Douugh, Janus Henderson, Northern Star, & Orocobre are dropping lower

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Service Stream 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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There are some top exchange-traded funds (ETFs) that are producing top returns and may be worth considering.

One of the benefits of ETFs is that they can provide diversification across a large number businesses or assets in a single investment.

Here are two ETFs that may be worthy considerations:

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

This particular ETF isn’t talking about castles and moats with water. It’s about finding businesses that research firm Morningstar believes possess sustainable competitive advantages, or ‘wide economic moats’.

For Morningstar, and the ETF, to make into the ETF’s portfolio, the target companies must be trading at attractive prices relative to Morningstar’s estimate of fair value. Morningstar uses an extensive equity research process to come to that conclusion.

The businesses that are in this portfolio are entirely from the US, though the underlying earnings of those companies can come from many different countries.

However, there is diversification through the different sector weightings. At the end of January 2021, healthcare was 19.5% of the portfolio, information technology was 18.7% of the portfolio, financials was 17.3% of the portfolio, industrials was 11.7% of the portfolio, consumer staples was 10.6% of the portfolio and consumer discretionary was 7.4%. Other sectors with smaller allocations include communication services, materials, energy and utilities.

Looking at the largest holdings at the end of January 2021, they were: John Wiley & Sons, Charles Schwab, Corteva, Cheniere Energy, Wells Fargo, Blackbaud, Intel, Bank of America, Biogen and Constellation Brands.

In terms of the annual management fee, its yearly cost is 0.49%.

After those fees, VanEck Vectors Morningstar Wide Moat ETF’s net fees have been an average of almost 15% per annum over the last three years and an average of 17.1% per annum over the last five years.

Betashares Nasdaq 100 ETF (ASX: NDQ)

This ETF is about giving investors exposure to 100 of the biggest non-financial businesses listed on the NASDAQ, which is a stock exchange in the US.

You’ll find many of the world’s biggest technology companies within the holdings of this ETF. On 4 February 2021, the biggest ten positions in the portfolio were: Apple, Microsoft, Amazon, Tesla, Alphabet, Facebook, Nvidia, PayPal, Netflix and Intel.

But there are many other businesses in the ETF’s holdings which are among the global leaders in their category such as Adobe, Cisco Systems, Broadcom, PepsiCo, Qualcomm, Costco, Starbucks, Advanced Micro Devices, Booking Holdings, Intuitive Surgical, Activision Blizzard, Mondelez International, Zoom, Modern and Docusign.

Looking at the sector allocation of the portfolio, just under half is invested in IT shares, then there’s 19.2% allocated to consumer discretionary and 18.6% is invested in communication services. Other sectors in the portfolio include healthcare, consumer staples, industrials and utilities.

The ETF has an annual management fee of 0.48% per annum, which is lower than many active fund managers.

The net returns of the ETF have been better than the ASX. Over the last year the net return has been 25.8%, over the last three years it has produced average returns per annum of 25.7% and since inception the ETF has returned an average of 21.25% per annum.

More reading

• 2 fantastic ETFs to buy for strong potential returns
• 3 compelling ASX tech shares to buy
• 2 outstanding ETFs for ASX investors to buy in February
• 2 top ETFs to buy for February 2021
• 2 great ASX growth shares to buy

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF. 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 S&P/ASX 200 Index (ASX: XJO) went up by 1.1% today to 6,841 points.

Here are some of the highlights from the ASX:

REA Group Limited (ASX: REA)

The real estate business announced its FY21 half-year result today for the period to 31 December 2020.

It said that revenue was down 2% to $430.4 million. However, operating expenses fell by 13% to $145.8 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 9% to $290.2 million, including associates. Net profit after tax (NPAT) went up 13% to $172.1 million and earnings per share (EPS) increased by 13% to 130.7 cents.

The REA Group board decided to increase the interim dividend by 7% to 59 cents.

The ASX 200 share said that the residential property market has shown continued signs of recovery with national residential listings increasing by 4% for the half, including an increase in Sydney listings of 19%. However, in Melbourne the lockdowns caused first quarter listings to decline by 44%. There was a rebound of listings in the following three months, leading to an overall decrease in the Melbourne market of 11% for the half.

REA Group said that it had been concentrating on costs, with all cost categories showing a decrease due to a combination of ongoing cost management initiatives, COVID-19 related savings and the deferral of some marketing spend in the second half.

In January, national residential listings were flat, with an increase in Melbourne of 12% and a decline in Sydney of 1%. The company continues to see strong levels of buyer enquiry, underpinned by low interest rates and healthy bank liquidity.

REA Group CEO Owen Wilson said: “We have delivered a remarkable first half result, particularly given the Melbourne market came to a virtual standstill during the lockdown. I am proud of the way our teams focused on the things we could control to deliver outstanding customer support and product enhancements to help consumers navigate the disruptions.

“Australia’s property market appears to be on the march again, showing signs of a strong recovery in November and December. This was fuelled by the easing of COVID-19 restrictions, combined with increasing consumer confidence, record low interest rates and healthy bank liquidity.”

The REA Group share price went up 1.6% today.

Splitit Ltd (ASX: SPT)

The Splitit share price dropped 2% after announcing an agreement for growth with Goldman Sachs.

Splitit said that it has signed a three-year US$150 million receivables warehouse facility with the US investment bank.

This doubles the size of Splitit’s existing credit facilities, supporting US and European growth.

Splitit said that this gives the potential for gross margin expansion by reducing the use of existing shorter term, higher cost funding.

The CEO of Splitit, Brad Paterson, said: “This large committed facility from Goldman Sachs is a key pillar of our merchant sales volume growth strategy. Demand from merchants in the US and Europe for our funded model has never been stronger, and couple with our existing strong balance sheet, we now have the foundations in place to accelerate our growth plans whilst also driving improved margins.”

Major market movers

There were some large movements in the ASX 200 today. The News Corp (ASX: NWS) share price went up 13.2% after reporting its own result.

Other big gains were the Zip Co Ltd (ASX: Z1P) share price rising by 8%, the Virgin Money UK (ASX: VUK) share price grew by 7.1%, the EML Payments Ltd (ASX: EML) share price rose 7.1% and the Nearmap Ltd (ASX: NEA) share price went up 7%.

At the red end of the ASX 200, the Janus Henderson Group (ASX: JHG) share price fell 5.6% after making an announcement.

More reading

• ASX stock of the day: Temple & Webster (ASX:TPW) goes from strength to strength
• Short sellers doubling down on these ASX stocks despite the GameStop saga
• Why the Wesfarmers (ASX:WES) share price has soared 24% in a year
• RBA stimulus to fuel ‘raging bull market’ in ASX shares. Should you go all in?
• Why Douugh, Janus Henderson, Northern Star, & Orocobre are dropping lower

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 EML Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. The Motley Fool Australia has recommended EML Payments and REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Race Oncology Ltd (ASX: RAC) share price rocketed 20.98% today, closing the day at $2.48 per share.

Race Oncology Ltd (RAC) is an Australian pharmaceutical company with developments in the cancer field. The company produces a chemotherapy drug called Bisantrene, which has been the subject of more than 40 phase II clinical studies.

Today’s gains cap off a big week for the Race Oncology share price, which has boosted more than 45% in the past 5 days.

While there was no news out of Race Oncology today, its quarterly report was released on 27 January 2021. We take a closer look at the company’s recent performance. 

A summary of the Race Oncology financials

In its most recent quarterly report for the period ended 31 December 2020, Race Oncology reported cash and equivalents of $5.58 million, compared with $5.66 million at 30 September 2020. 

Net outflows were supported by a $262,000 cash injection received from conversion of options and receipt of the $387,000 R&D tax rebate. 

Operating activities totalled $728,000, a decrease of $115,000 from the prior quarter.

Race Oncology currently has a market capitalisation of $275.7 million with 129.5 million shares outstanding.

Race Oncology announces new ‘three pillar’ strategic plan

Race Oncology also used the quarterly update to announce the company’s new ‘three pillar’ strategic plan.

The concept behind the plan is to maximise the potential down-streaming from activities related to the company’s Bisantrene treatment. This includes license applications or corporate sales to scaled pharmaceutical companies.

The company believes the new strategy will “significantly expand” opportunities for Bisantrene while protecting its legacy applications.

Commenting on the new strategy, Race Oncology CEO Phillip Lynch said:

The team was excited to share the new Three Pillar strategy at the recent Annual General Meeting. It is the result of a comprehensive review of our core asset, assessing the competitive and commercial environment, and aligning on a goal to actively pursue Bisantrene’s potential as a potent inhibitor of FTO and precision oncology agent. This decision has the potential to unlock significant value for shareholders and the team is progressing the required assessments to ensure we maximise the probability of success.

FTO stands for fat mass and obesity-associated protein. The company continues to investigate Bisantrene’s use as an FTO inhibitor.

The Race Oncology share price has exploded more than 780% higher over the past 12 months.

More reading

• 2 fantastic ETFs to buy for strong potential returns
• Brokers name 2 ASX blue chips to buy
• ASX stock of the day: Temple & Webster (ASX:TPW) goes from strength to strength
• 2 reasons AMC will have a hard time bouncing back
• What to expect from the Qantas (ASX:QAN) first half result

Motley Fool contributor Gretchen Kennedy 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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If you’re wanting to add some diversification to your portfolio in 2021, then you might want to look at exchange traded funds (ETFs).

ETFs are a great way to achieve this because they give investors easy access to a large and diverse number of different shares through a single investment.

With that in mind, listed below are two ETFs which are highly rated. Here’s what you need to know about them:

BetaShares Global Cybersecurity ETF (ASX: HACK)

The BetaShares Global Cybersecurity ETF aims to track the performance of an index providing investors with exposure to the leading companies in the growing global cybersecurity sector.

With cybercrime on the rise, demand for cybersecurity services is expected to increase strongly in the future. And given how this side of the market is heavily under-represented on the ASX at present, BetaShares believes this ETF give investors an easy way to invest in the sector.

Included in the fund are both global cybersecurity giants and emerging players from a range of global locations. Among its holdings you’ll find Accenture, Cisco, Cloudflare, Crowdstrike, and Okta.

In respect to the latter, Okta provides large enterprises with workforce identity solutions. Its customer identity and access management (CIAM) solutions ensure an organisation’s remote workforce is who they claim to be and that they only have access to the business applications they need to perform their job.

Demand for its offering has been growing rapidly over the 12 months as more and more people work from home.

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

Another ETF to look at is the VanEck Vectors Morningstar Wide Moat ETF. This fund gives investors a slice of 48 US-based stocks which are judged to have sustainable competitive advantages or “moats”.

Historically, companies with moats have generated strong returns for investors. This is why investing in companies with moats is a key investment tenet for Warren Buffett.

Among the ETF’s holdings you will find global blue chips such as Amazon, American Express, Boeing, Coca-Cola, Microsoft, Pfizer, and Yum! Brands. Over the last 10 years the ETF has outperformed the ASX 200 index materially with an average total return of 18% per annum.

More reading

• 2 great ETFs to buy for growth potential
• 2 top ETFs to buy for February 2021
• These top ETFs could be great options for ASX investors right now
• How to buy US shares from Australia right now
• 2 quality ETFs to buy that are making big returns

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of BETA CYBER ETF UNITS. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF. 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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If you’re wanting to add a few blue chip shares to your portfolio this month, then you might want to check out the ones listed below.

Here’s why these ASX blue chip shares are highly rated:

Cochlear Limited (ASX: COH)

Cochlear is one of the world’s leading implantable hearing device manufacturers. Thanks to its portfolio of high quality devices and its high level of investment in research and development, Cochlear has been growing its sales and earnings at a consistently solid rate over the last decade.

The good news is that with populations around the world getting older, its target demographic is expanding each year. This, and the industry’s high barriers to entry, bode well for its growth over the next decade or two.

One broker that is positive on the company is Macquarie. Late last year the broker put an outperform rating and $241.00 price target on its shares. This compares to the latest Cochlear share price of $208.11.

Telstra Corporation Ltd (ASX: TLS)

A second ASX blue chip share to consider is Telstra. Due to its improving outlook thanks to the early success of its T22 strategy and the easing NBN headwinds, Telstra has been tipped to return to growth in the not so distant future.

Before then, Telstra could make some radical changes that will see it split into three separate businesses. Management expects this to allow the company to take advantage of potential monetisation opportunities and unlock value for shareholders.

Goldman Sachs is positive on the company and currently has a buy rating and $3.80 price target on its shares. The broker is also forecasting a 16 cents per share fully franked dividend in FY 2021 and beyond.

Based on the current Telstra share price, this would provide investors with a generous 5.1% fully franked dividend yield.

More reading

• 4 most trusted ASX companies (and the 4 least trusted)
• Telstra (ASX:TLS) dumps NRL, AFL streaming
• Why investors should look beyond the Reddit army to these ASX fundamentals
• ASX 200 Weekly Wrap: Reality (and GameStop) finally hits ASX
• ASX 200 ends 0.6% down, Kogan falls 8.5%, Service Stream soars 10%

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 Cochlear Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Cochlear 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 Temple & Webster Group Ltd (ASX: TPW) share price continues to deliver for shareholders. At the time of writing, TPW shares are up a healthy 8.76% to $11.05 a share. That gives this ASX growth star a market capitalisation of $1.33 billion and a price-to-earnings (P/E) ratio of 94.66.

Even though it has seen a hefty jump in valuation today, the Temple & Webster share price is still a ways from the 52-week high of $14.05 a share we saw back in October.

So who is Temple & Webster? And just how much has this company grown over the past few years?

Furniture at your door

Temple & Webster is an online marketplace dedicated to furniture, decor, and all things ‘home’. The company launched in 2011. 

According to the company, its name comes from William Temple and John Webster, who were “convict artisans” commissioned to make fine furniture for Governor Lachlan Macquarie in colonial Australia in the early 1820s.

Unlike furniture/homewares retailers such as Harvey Norman Holdings Limited (ASX: HVN) and Nick Scali Limited (ASX: NCK), which happen to be Temple & Webster’s competitors, this company is online only.

Its online store offers products as diverse as wall art, lighting, rugs, board games, gym equipment, turntables, and bird cages. That’s all in addition to every piece of furniture you can think of, including beds, lounges, and dining tables.

The company offers payment through a range of buy now, pay later (BNPL) providers like PayPal Holdings Inc (NASDAQ: PYPL), Zip Co Ltd (ASX: Z1P), Humm Group Ltd (ASX: HUM), and (of course) Afterpay Ltd (ASX: APT).

Why are Temple & Webster shares so popular?

Even though today’s market moves have propelled Temple & Webster almost 9% higher, there has been no major news out of the company that might provoke such a decisive gain.

My Fool colleague James Mickleboro postulated this morning that a possible reason could be a half-year earnings report from property classifieds giant REA Group Ltd (ASX: REA). REA spoke positively about the Australian housing market in its update, which investors may have determined might mean higher demand for Temple & Webster’s products. 

But Temple & Webster has a very strong track record of its own. Temple & Webster shares are up more than 186% over the past 12 months, and up more than 1,700% over the past 5 years. Needless to say, this company has been growing fast.

Just this week, the company delivered its earnings results for the 6 months to 31 December 2020. Temple & Webster reported year-on-year revenue growth of 118% to $161.6 million, assisted by active customer growth of 102%. That helped the company post earnings before interest, tax, depreciation, and amortisation (EBITDA) of $14.8 million, which was up a staggering 556% year on year.

Temple & Webster is one of the few ASX companies that have enjoyed a boon from the pandemic and associated lockdowns. Furniture was one of the few areas left that investors might have assumed online retailers would not disrupt — 2020 and COVID-19 turned that logic on its head.

Excitement over the company’s future, as well as the REA report this morning, is probably the reason behind the Temple & Webster share price outperformance today. It will be interesting to see what 2021 brings!

More reading

• Brokers name 3 ASX shares to buy right now
• ASX 200 up 0.75%: REA Group and News Corp impress, big four banks charge higher
• Why Magellan, News Corp, REA Group, & Temple & Webster shares are racing higher
• Why the REA Group (ASX:REA) share price is pushing higher
• 2 fast-growth ASX tech shares that are being sold off

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Temple & Webster Group Ltd, and ZIPCOLTD FPO and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia has recommended Humm Group Limited, PayPal Holdings, REA Group Limited, and Temple & Webster 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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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.

Shares of AMC Entertainment Holdings (NYSE: AMC) have been on a wild ride recently, as the theater chain’s stock is caught up in the buying frenzy induced by online discussions on a Reddit forum. Despite this, the fundamental outlook for the company hasn’t changed all that much in the past few weeks — and certainly not enough to justify the frenzied buying.

The substantial increase in the stock price in recent days has allowed management the option to offer more shares to the public and raise much-needed capital. That financial lifeline will be crucial for AMC, which is burning through available cash at a pace of $130 million per month as it continues to manage the operational difficulties created by the coronavirus pandemic. AMC recently raised nearly $1 billion in additional debt issuance, which gave CEO Adam Aron enough confidence to say that bankruptcy is not an imminent threat any longer.

However, just because bankruptcy is not on the horizon at the moment doesn’t mean that AMC now on its way to again producing its pre-pandemic revenue and profit levels. The company still faces issues a resolution of the pandemic is unlikely to solve.

Here are two specific reasons why AMC is going to have a hard time bouncing back. 

1. People have upgraded their home-entertainment systems 

Some people like to watch a movie at an AMC theatre instead of at home because of the vast difference in the quality of the viewing experience. AMC theaters have massive wide screens with the latest and loudest surround-sound audio technology that makes your comfortable reclining theater seat rumble.

However, as people were forced to hunker down at home to avoid being exposed to the coronavirus, some upgraded their home-entertainment systems. Indeed, sales of TVs in the U.S. increased by 20% year over year in 2020.

Some regular movie goers also noticed the difference in cost and convenience between theaters and home viewing was becoming significant. Movie ticket pricess, parking fees, child-care costs, concession costs, travel to the theater, and the occasional irritations in the theater with fellow viewers all contribute to make watching a movie at home more acceptable. If you have the latest big-screen TV with a high-quality sound bar, the difference between your home setup and that of the theatre just narrowed. For some, that is enough to keep them at home. 

2. Studios are skipping theatrical releases and going straight to streaming  

During the scramble that ensued at the onset of the pandemic, studios with movies slated to be released either delayed them or instead released them straight to streaming. Comcast‘s Universal Studios, for instance, put its film Trolls 2 on demand for rental simultaneous to its release in theaters (which were mostly closed and couldn’t show it) last April. In September, Disney released its film Mulan straight to its Disney+ streaming service for a premium fee in the U.S. and offered its most recent Pixar production Soul for free to members of Disney+ in December. The results of these experiments appear to have been positive, because other media companies have jumped on board with similar release strategies. AT&T‘s Warner Media said that all its 2021 movies would be released simultaneously in theaters and for a limited time on its streaming service HBO Max.

These changes could spell big trouble for AMC, which makes much of its revenue from short-term exclusive access to new releases that attract movie enthusiasts to its theaters. Indeed, AMC’s share price fell after Warner Media’s announcement, and the company’s fighting to regain the initial exclusivity window before movies are released to other platforms.

What this could mean for investors 

Overall, AMC will have a difficult time bouncing back from the devastating consequences of the pandemic. People have gotten accustomed to entertaining themselves at home, and media companies have made adjustments to deliver entertainment to their living rooms. Add to those negatives the fact that the rollout for coronavirus vaccines has been slower than anticipated.

New variants of the COVID-19 disease are emerging, and the reality may be that the difficult economic effects of the pandemic last well into 2022. Investors who were hoping for a quick recovery for AMC’s revenue and profits might be disappointed in the way things are turning out.

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

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Parkev Tatevosian owns shares of Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Comcast. The Motley Fool Australia has recommended Walt Disney. 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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With earnings season now underway, I have been looking at what is expected from some of Australia’s most popular companies.

On this occasion, I’m going to take a look at airline operator Qantas Airways Limited (ASX: QAN).

What is the market expecting from the Qantas half year result?

Unsurprisingly, given the impact that COVID-19 is having on the travel industry, the market is expecting Qantas to report a significant loss for the first half of FY 2021.

According to a note out of Goldman Sachs, its analysts are forecasting an operating loss of $65 million for the half. This is down from an operating profit of $1,896 million a year earlier.

On the bottom line, the broker is forecasting a loss before tax of $1,171 million. This is a touch larger than the market consensus estimate for a loss before tax of $1,103 million.

And as you might expect given the circumstances, no interim dividend is forecast to be declared.

What else should you look out for?

Given that the loss is inevitable and largely factored in, investors may be wondering what else to pay attention to. Well, the good news is there’s plenty to stay tuned for according to Goldman Sachs.

Firstly, it has suggested investors look out for an update on recent travel restrictions.

It commented: “The key focus of investors will be the impact of the recent domestic border restrictions on movements from Victoria and NSW. How has the airline adjusted scheduled domestic services, and what is the outlook for re-opening?”

It is also hoping management will provide clarity of its financial performance.

Goldman explained: “QAN indicted that its capacity had returned to 68% of pre-covid levels in December. How did the airline perform, including passenger volumes, load factors, yields and ultimately operating margins?”

In addition to this, the broker is keen to hear about the outlook for the Loyalty business and the company’s liquidity and balance sheet.

In respect to the latter, Goldman said: “In December QAN indicated that it had A$3.6bn in available liquidity. With the recovery in passenger activity what was the draw down on customer credits (A$3.2bn as at 30 June) and loyalty points (A$2.5bn), and how much of this has been recovered through recent sales?”

“QAN indicated that the balance sheet repair process would begin in 2H21. Is this still likely in the face of recent border closures? With mobility again restricted, what is QAN’s outlook for cash burn rates in the second half (2H21)?” it added.

Is the Qantas share price good value?

Goldman Sachs believes the Qantas share price is great value at present and that investors should look beyond the short term pain for potential long term gains.

It has just retained its buy rating and $7.05 price target. This compares very favourably to the current Qantas share price of $4.72.

More reading

• Here’s why the Qantas (ASX:QAN) share price is soaring today
• ASX 200 down 0.7%: AGL & Origin sink lower, Qantas pushes higher
• 4 most trusted ASX companies (and the 4 least trusted)
• Alliance Aviation (ASX:AQZ) share price surges 13% higher on Qantas (ASX:QAN) deal
• The latest ASX stocks to be hit by broker downgrades

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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