At lunch on Thursday the S&P/ASX 200 Index (ASX: XJO) is running out of steam and threatening to end its winning streak. At the time of writing, the benchmark index is roughly flat at 6,678.1 points.

Here’s what is happening on the market today:

Bega Cheese announces major acquisition.

The Bega Cheese Ltd (ASX: BGA) share price is in a trading halt today whilst it aims to raise a total of $401 million via an underwritten entitlement offer and placement. The proceeds will be used to partly fund the acquisition of Lion Dairy & Drinks for $534 million. Lion Dairy & Drinks is the business behind a wide range of brands such as Dare, Farmers Union, Juice Brothers, Pura, and Yoplait. Management expects the acquisition to be double digit earnings per share accretive in FY 2022.

Virgin Money UK sinks.

The Virgin Money UK CDI (ASX: VUK) share price is sinking lower following the release of its full year results. For the 12 months ended 30 September, the UK-based bank reported a 77% drop in full year underlying pre-tax profit. This decline was driven largely by a sizeable 501 million pound impairment charge in relation to an expected surge in bad loans because of COVID-19. This led to analysts at Macquarie downgrading its shares to a neutral rating this morning. It has a $2.70 price target on its shares.

WiseTech Global reaffirms guidance.

The WiseTech Global Ltd (ASX: WTC) share price is pushing higher on Thursday after it reaffirmed its guidance for FY 2021. The logistics solutions company expects revenue of $470 million to $510 million and EBITDA of $155 million to $180 million. This represents growth of 9% to 19% and 22% to 42%, respectively. However, it is worth noting that the company has warned that the ongoing and longer-term impacts of COVID-19 are still not completely predictable.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Thursday has been the Harvey Norman Holdings Limited (ASX: HVN) share price with a 5.5% gain. This morning Credit Suisse retained its outperform rating and $5.06 price target in response to its trading update yesterday. The worst performer has been the Virgin Money UK with an 8% decline following its full year results release.

More reading

• Is the Harvey Norman (ASX:HVN) share price good value?
• Bega Cheese (ASX:BGA) announces $534 million Lion Dairy & Drinks acquisition
• Why the WiseTech Global (ASX:WTC) share price is climbing higher today
• The real earnings growth driver for ASX bank stocks in FY21 isn’t what you think
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of WiseTech Global. 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 Harvey Norman Holdings Limited (ASX: HVN) share price could still have room to grow according to one leading broker.

Who is positive on Harvey Norman?

A note out of Goldman Sachs this morning revealed that its analysts have retained their buy rating and put a $4.90 price target on this retail giant’s shares following the release of its annual general meeting update yesterday.

That update revealed that Harvey Norman’s aggregated sales revenue increased by 28.2% between 1 July and 21 November compared to the prior corresponding period. This has been driven by strong same store sales growth across almost all regions over the period.

Things were even better on the bottom line. Thanks to margin expansion, the company’s unaudited profit before tax for the period 1 July to 31 October was up a massive 160.1% on the prior corresponding period.

Goldman believes the company’s growth will inevitably slow in the second half but has increased its forecasts to account for stronger than expected sales trends and operating leverage.

It said: “We maintain our expectations that the strong growth seen over 2H20 and into 1H21 is unlikely to be sustained once the industry starts to cycle through the strong base in 2H21.”

“However, we revise sales forecasts to reflect the stronger ongoing sales trend and operating leverage resulting in EBIT revisions of +28.7% in FY21, but less significantly at +3.1% in FY22. Our revised PBT forecasts imply growth of +75.7% over the more significant Nov/Dec period, after +185.9% in Jul/Aug and +136.7% in Sep/Oct,” Goldman added.

Why buy Harvey Norman shares?

The broker sees Harvey Norman as a great option for income investors due to its generous yield.

It explained: “[its target price] now offering a potential total return of 15.7% driven by strong dividend yield support. We forecast HVN is trading at 13.8x PE and offers a 6.5% fully franked dividend yield in FY22. We maintain our Buy rating on HVN and the stock remains a preferred exposure in the discretionary retail sector.”

More reading

• ASX 200 up 0.8%: Fisher & Paykel Healthcare impresses, Harvey Norman’s profits surge
• Harvey Norman (ASX:HVN) share price higher on stellar sales update
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 Weekly Wrap: ASX continues to climb, despite outage
• 5 things to watch on the ASX 200 next week

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. 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 Bega Cheese Ltd (ASX: BGA) share price remains in a trading halt on Thursday whilst it undertakes a capital raising to fund a major new acquisition.

What did Bega Cheese announce?

This morning Bega Cheese announced the launch of a $401 million underwritten entitlement offer and placement to fund the acquisition of Lion Dairy & Drinks for $534 million.

According to the release, this will comprise a 1 for 4.5 pro-rata accelerated non-renounceable entitlement offer of approximately $220 million and an institutional placement of approximately $181 million.

These funds will be raised at an offer price of $4.60 and through the issue of approximately 87 million new shares. This offer price represents a 9.1% discount to its last close price.

What is Lion Dairy & Drinks?

Lion Dairy & Drinks’ core business is the manufacture, marketing, sales and distribution of:

• Milk Based Beverages (Dare, Farmers Union, Big M, Masters, Dairy Farmers)
• Yoghurt (Yoplait, Farmers Union, Dairy Farmers)
• Chilled Juices (Juice Brothers, Daily Juice)
• Cream and Custard (Pura, Dairy Farmers)
• White Milk (Pura, Dairy Farmers, Masters).

Lion Dairy & Drinks also has Australia’s largest national cold chain distribution network supplying food service and convenience stores and a national manufacturing footprint comprising 13 sites.

Management expects the acquisition to create significant value for shareholders.

Bega Cheese’s Executive Chairman, Barry Irvin, commented: “We are delighted to announce this acquisition which we believe will create significant value for shareholders. The acquisition delivers important industry consolidation and value creation with synergies across the entire supply chain. The expanded product range, manufacturing and distribution infrastructure and brand portfolio realises our ambition of creating a truly great Australian food company.”

Financials.

The combined business is expected to generate revenue in excess of $3 billion.

Lion Dairy & Drinks delivered pro forma normalised EBITDA of $56 million (post-AASB 16) excluding synergies for the 12 months to 30 September.

Base case synergies of $41 million per annum are expected. This is primarily from milk network optimisation, indirect procurement, and a corporate reorganisation.

All in all, the deal is expected to be double digit earnings per share accretion in FY 2022.

Bega Cheese’s Chief Executive Officer, Paul van Heerwaarden, concluded: “We are very pleased with the performance of acquisitions made in recent years which are achieving or exceeding our profit targets. The recent company restructure and ERP implementation will allow us to integrate this Acquisition and take advantage of the various synergies and growth opportunities across domestic and international markets.”

More reading

• Is the Harvey Norman (ASX:HVN) share price good value?
• Don’t waste the stock market crash! I’d use Warren Buffett’s strategy to profit from it
• Will Netflix stock crash in 2021?
• Citadel (ASX:CGL) share price flat as scrip offer approved
• Gentrack (ASX:GTK) share price slips following mixed full-year results

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. 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 2020 stock market crash may have left some investors feeling cautious about the idea of buying shares. A weak economic outlook and political risks in Europe may mean that they sell equities and invest in lower-risk assets.

However, investors such as Warren Buffett have previously avoided such a strategy. Instead, he has sought to use a market decline to his advantage. It enables him to buy high-quality companies when they trade at low prices. Over the long run, this can produce impressive returns that lead to outperformance of indexes such as the S&P 500 Index (SP: .INX) and FTSE 100 Index (FTSE: UKX).

Buying cheap shares after a stock market crash

The stock market crash has caused a wide range of companies to trade at relatively low prices. Certainly, some sectors have recovered in recent months. However, others such as financial services companies, energy businesses and leisure stocks continue to trade at prices that are lower than their historic averages.

Warren Buffett has always sought to buy companies when they offer a wide margin of safety. In other words, when they trade for less than they are worth. This is often caused by temporary weak operating conditions that could give way to an improving outlook over the long run. Therefore, buying cheap shares that have the potential to recover could lead to impressive capital returns that are ahead of the wider index.

Focusing on quality stocks

Of course, not all shares will recover after a stock market crash. Some businesses may fail to evolve in line with consumer tastes. Or, weak operating conditions may mean that their poor financial positions are exposed.

Therefore, Warren Buffett has sought to purchase high-quality stocks after a market decline. For example, they may be businesses with low debt levels that mean they can outlast their sector peers during a period of challenging operating conditions. Similarly, they could be companies with wide economic moats that enable them to outperform sector peers in a weak market and as the economic outlook improves.

As such, focusing on strong businesses with a competitive advantage could be a means of improving an investor’s prospects after a stock market crash. It may reduce risk and improve long-term returns.

Buffett’s long-term view

Recovering from a stock market crash can take a prolonged period of time. For example, it took many companies several years to fully recover from the effects of the global financial crisis.

As such, investors such as Warren Buffett have been successful because they allow their holdings a long period of time to fulfil their potential. This can mean disappointing returns in the short run if the market experiences further volatility and declines. However, a patient approach can be beneficial to an investor’s returns in the long run. It could lead to market outperformance and a higher portfolio value in the coming years.

More reading

• Will Netflix stock crash in 2021?
• Citadel (ASX:CGL) share price flat as scrip offer approved
• Gentrack (ASX:GTK) share price slips following mixed full-year results
• Straker Translations (ASX:STG) share price flat after half year results release
• The Nitro (ASX:NTO) share price is down 20% in a month. Time to invest?

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

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

The clock is ticking on 2020, and Netflix Inc (NASDAQ: NFLX) investors can’t complain. Shares of the leading premium streaming service provider have risen 49% through Tuesday’s close, fueled by another year of healthy growth and a platform that has made the most of the new normal by entertaining a growing number of folks who are spending more time at home than usual.

Next year might not be as kind. Rivals are starting to heat up, and a recent price hike may make Netflix more expendable. The emergence of viable vaccines and treatments for COVID-19 may find us hungry for a return to entertainment outside of the home. We also can’t dismiss the reality that Netflix stock isn’t cheap by most conventional measuring sticks. This year has been great for shareholders. We may not be saying the same thing about 2021. 

The crown

Netflix has historically moved higher on odd-numbered years. It was the S&P 500 Index‘s (SP: .INX) biggest gainer in 2013 and 2015 with triple-digit gains each time. It trounced the market with its 55% pop in 2017. Last year’s 21% gain was pedestrian by previous odd-year standards, and actually lost to the market’s nearly 30% return. 

There will be challenges in 2021. Let’s start with the 800-pound Dunder Mifflin fan base in the room. Netflix will lose The Office in January. The cult-fave sit-com will stream exclusively on NBC’s fledgling Peacock platform after this year. It lost Friends to HBO Max earlier this year.

Netflix no longer corners the market on premium streaming success. Several major media stocks including Walt Disney Co (NYSE: DIS), Apple Inc (NASDAQ: AAPL), Comcast Corporation (NASDAQ: CMCSA), and AT&T Inc. (NYSE: T) have jumped into the market in the past 13 months, and that includes Disney+, which has amassed 73.7 million subscribers in its first year of service. There’s no denying that Netflix still wears the crown when it comes to being the ultimate streaming kingmaker. It’s no surprise that The Queen’s Gambit and the latest season of The Crown were trending in November. Netflix has a huge advantage over the competition in both the size of its digital audience and the data it has collected on their streaming preferences. 

However, we can’t just ignore that Netflix did raise its monthly rate last month for US subscribers. The 8% increase may not seem like much — and the market initially applauded the late-October move — but Netflix growth took a hit the last time it boosted its prices. The early 2019 pricing increase and Netflix subsequently falling woefully short of its account growth targets in back-to-back reports explain why the stock lost to the market last year. Since then we’ve seen the arrival of Disney+, Apple TV+, HBO Max, and Peacock. Will a royal flush beat a full house?

The bullish counterargument here is that Netflix finds a way. Streaming services are also reasonably cheap enough that most consumers are subscribing to several services. Netflix is a hit factory through thick and thin, and it has thrived this year even as we’re several months deep into a recession. 

I’m not selling my shares of Netflix, but I’m heading into 2021 with a guarded approach. Revenue and subscriber growth should decelerate next year. Unlike the big gains of 2013, 2015, and 2017, it wouldn’t be a shock to see the stock underperform the market the way it did in 2019. An outright crash seems unlikely. Streaming is here to stay. However, the year ahead could prove challenging to the top dog in this suddenly crowded market.

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

More reading

• I have too many tech shares: Do I sell, buy or hold?
• Here’s why Netflix will one day be a cash cow
• ASX stock of the day: Nine (ASX:NEC) share price surges on sporting venture

Rick Munarriz has positions in Disney, Netflix, Apple, and AT&T. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple, Netflix, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Comcast and recommends the following options: long January 2021 $60 calls on Walt Disney and short January 2021 $135 calls on Walt Disney. The Motley Fool Australia has recommended Apple, Netflix, and Walt Disney. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Citadel Group Ltd (ASX: CGL) announced today that its shareholders have approved the all-scrip offer from private equity group, Pacific Equity Partners, as an alternative to the all-cash $5.70 per share takeover offer. At the time of writing, the Citadel share price is trading flat at $5.67.

About the Citadel takeover

In September, investors scrambled to buy up the Citadel share price after the company announced it had received a takeover approach from Pacific Equity Partners (PEP).

The proposed offer at the time was for an all-cash price of $5.70 per share, a 43% premium on the Citadel share price at that time. The offer valued Citadel’s equity at $448.6 million and enterprise value at $503.1 million. The Citadel share price jumped by 35% on the news that day. 

However, the terms of the bid also gave shareholders the option to take a scrip alternative to enable them to retain an indirect interest in the business. In this alternative proposal, they can choose either all-cash, all-scrip or a combination of the two.

Today’s voting results have validated shareholders’ wish for the alternative scrip proposal.

Management backing

The company’s directors have been supportive of the offer and recommended that shareholders vote in favour of the scheme.

Citadel board chair, Peter Leahy, said this about the takeover offer:

The PEP offer is an attractive transaction which provides an all-cash option for Citadel shareholders. The Citadel board has unanimously concluded that the scheme represents a compelling outcome for our shareholders, customers, suppliers, and staff.

It is worth noting that the cash offer price of $5.70 is a significant discount to where the Citadel share price was trading in November 2018. At that point the company’s shares were trading at over $9. Furthermore, it’s actually lower than the company’s February high of $5.92. 

Next steps

An all-scrip scheme is unusual for a private equity buyout, however under the terms of this scheme, shareholders can elect to take scrip in Pacific Group Topco Limited,  a private holding group set up to own Citadel’s shares. 

The Citadel directors have today reiterated their recommendation that Citadel shareholders approve the offer, in the absence of a superior proposal, and subject to the independent experts continuing to conclude that the scheme is in the best interest of Citadel shareholders.

More reading

• Don’t waste the stock market crash! I’d use Warren Buffett’s strategy to profit from it
• Will Netflix stock crash in 2021?
• Gentrack (ASX:GTK) share price slips following mixed full-year results
• Straker Translations (ASX:STG) share price flat after half year results release
• The Nitro (ASX:NTO) share price is down 20% in a month. Time to invest?

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. 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 Gentrack Group Limited (ASX: GTK) share price has slipped slightly in opening trade this morning after the software company released mixed full-year results for the 2020 financial year.

Gentrack builds software for energy utilities, water companies and airports, mainly in Australia and New Zealand. The company’s platform aims to develop, integrate and support billing and customer management solutions. At the time of writing, the Gentrack share price is trading 1.42 lower at $1.39.

What did Gentrack announce?

Gentrack reported growth in a number of metrics, but fell short other areas. For the period ending 30 September, revenue declined 10% to $100.5 million over the prior corresponding period (pcp). The company attributed the revenue slump to the impact of COVID-19 which saw delays in projects, particularly its airport programs.

Annual recurring revenue (ARR) saw an 4.9% uplift, which Gentrack registered $81.3 million over the comparable period. Its utilities business did the heavy lifting, representing $70.9 million of the group portfolio, with its airport division coming in at $10.4 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) plummeted 51% to $12.1 million.

Statutory net profit after tax came at a loss of $31.7 million. This included a partial write-down of $34.5 million mostly related to its blip and utilities segment due to COVID-19 uncertainly.

Gentrack recorded a cash balance of $16.8 million at the end of September, reflecting an increase of 263% from the year before.

The board advised that due to the net profit after tax loss, it will not pay a final dividend to shareholders.

Management commentary

Commenting on the results, Gentrack CEO Gary Miles said:

The results reflect a tough year for our utilities and airports customers. Pleasingly, the revenue mix and shift in annual recurring revenues is positive.

We see opportunities in our markets and our strong net cash position sets us up to accelerate our technology investment and lead the industry as it transforms to the cloud and clean technologies. This year, we’ve also played a key role in enabling our customers to adapt to COVID, keeping their mission critical systems operational and ready to support customer hardship at this time.

FY21 outlook

Looking ahead to the new FY22 year, Gentrack opted not to provide investors with a guidance. However, it did reveal that it expected EBITDA run rate for FY21 to be well below H2 FY20. This in turn could hit the company’s bottom line with a possible break-even depending on its ongoing product investment strategy.

Management said that it continued to see opportunities in cloud technology and would seek to compete in this space.

Furthermore, the company will deliver an update on progress at its annual general meeting in February.

About the Gentrack share price

The Gentrack share price has been trading lower this year, sitting around 65% below its high of $4.02 last November. However, the Gentrack share price is up 25% since the start of the month.

The company has a market capitalisation of $139 million and a price-to-earnings (P/E) ratio of 12.8.

More reading

• Ask a fund manager: Totus Capital’s Sam Granger reveals the methods behind his outperforming High Conviction Fund

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. 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 Straker Translations Ltd (ASX: STG) share price is trading flat on Thursday following the release of its half year results.

At the time of writing the translation platform provider’s shares are fetching $1.59.

How did Straker perform in the first half?

For the six months ended 30 September, Straker delivered a 9% increase in revenue to NZ$14.8 million.

The vast majority (93%) of this revenue is classed as recurring, with its annualised repeat revenue increasing 32% to NZ$28.1 million.

A reduction in the company’s gross margin due to COVID-19 induced pricing pressures and acquisitions, led to its gross margin falling from 54.4% to 51.1%.

Nevertheless, Straker recorded positive adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of NZ$0.04 million, compared to a NZ$0.24 million loss a year earlier. Management advised that this was driven by acquisition synergies and COVID-19 related cost reductions.

Cash used in operating activities was NZ$0.4 million, down from NZ$1.5 million a year earlier. Management believes this reflects the improved operating performance of the business.

This led to Straker finishing the period with cash on hand of NZ$7.7 million, which management believes provides more than enough capital to fund its operations.

The company’s CEO and Co-Founder, Grant Straker, commented: “We are very pleased with the progress we have made over the last half year. Although the COVID-19 pandemic disrupted momentum and margins in the first quarter, we have over the last few months seen a resumption of growth and this culminated in September with our largest ever sales month.”

“COVID-19 is accelerating the transition of the translation industry to an outsourced and automated model and we are benefitting from this trend. Our technology and service proposition continues to gain recognition around the world, as our recently announced contract with IBM highlights and this interest is filling the sales pipeline. We are seeing particularly strong engagement with global enterprise customers who value our global reach as much as they value the speed, accuracy and service that our platform delivers,” he added.

Outlook.

The company believes its growth can continue in the second half and beyond, particularly given its recent game-changing agreement with IBM.

Mr Straker said: “Straker is well placed to continue to grow for the remainder of the current financial year and beyond. Core repeat revenue is strong. The relationships we have established with new enterprise customers through acquisitions and through the follow up by our sales teams positions us for organic growth.”

 “We continue to expect revenue from the recently announced IBM agreement to positively impact the Q4FY21 financial results and expect it to yield a significant contribution in FY22,” he added.

The chief executive also revealed that the company has acquisitions in its sights and discussions are ongoing.

He explained: “Meanwhile, with COVID-19 accelerating the consolidation of the global translation industry, we have resumed talks with several potential acquisition targets where we can drive immediate margin improvements as we integrate our technology and share support office costs.”

Before concluding: “We are looking ahead with confidence and look forward to providing an update at the end of the third quarter, if not before.”

More reading

• Bailador (ASX:BTI) share price jumps 12% on Straker update
• ASX 200 surges again on Wednesday
• Why CBA, Straker, Woodside, & Xero shares are surging higher
• Why the Straker Translations (ASX:STG) share price is rocketing 37% higher today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Straker Translations. 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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After surging to a 52-week high of $3.66 in late October, the share price of ASX mid-cap technology company Nitro Software Ltd (ASX:NTO) has come off the boil more recently. The Nitro share price has slid more than 20% lower this month and is down 2.14% to $2.74 in opening trade today.

It joins a growing list of companies, including the likes of Megaport Ltd (ASX:MP1) and Whispir Ltd (ASX:WSP), whose share prices all stormed to new highs this year, but have struggled to maintain their momentum as COVID-19 restrictions ease across the country.

About the company

Nitro develops a suite of software solutions that allow individuals and businesses to streamline and digitise document workflows. Companies can create, edit, sign and store important documents entirely online, reducing the need for traditional forms of hardcopy file management. Not only does this simplify workflows, but it can massively reduce printing costs for large companies, and even make them more environmentally friendly.

Despite facing stiff competition from US tech giant Adobe Inc, Nitro excelled during 2020. The COVID-19 pandemic disrupted its sales pipeline early on, but Nitro was able to tailor its product offering to meet the unique demands of the “new normal” of remote working. It made the extremely canny decision to make its eSignature solution free throughout 2020 to help support companies as they transitioned to working from home.

Results for the most recent quarter, ending 30 September 2020, were positive across just about all financial metrics. Cash receipts from customers increased by 17% quarter-on-quarter to $11.6 million, and subscription annualised recurring revenues (ARR) was ahead of prospectus forecasts. The company also ended the quarter with a strong balance sheet, comprising $44.4 million in cash and no debt.

Nitro remains bullish on the outlook for the remainder of this calendar year. Full year revenue is expected to be in line with its prospectus forecast at $40.5 million. Subscription ARR is anticipated to be between $26 million and $27 million, well ahead of the $24.4 million forecast in the prospectus.

Is the Nitro share price a buy?

Nitro is a favourite of our analysts here at Motley Fool. They’ve twice recommended it to our Extreme Opportunity subscribers. The first time was back in February, when Nitro shares were trading at around $1.70, and the second time was in early September.

Our analysts like the company’s rapid subscription growth, strong sales pipeline, and the savvy way it launched its new eSignature product. They were also impressed with how well the company adapted to working under COVID-19 restrictions.

If you agree with our Foolish analysts, now might be a good time to pick up shares of Nitro while the price is dipping. Who knows how far it could climb next year!

More reading

• 2 exciting mid cap ASX shares to buy
• Why the Whispir (ASX:WSP) share price is storming higher
• These ASX shares have more than doubled in value in 2020
• The Whispir Ltd (ASX:WSP) share price is now 35% off its 52-week high. Time to buy?
• Nitro (ASX:NTO) share price jumps up 5% on presentation

Rhys Brock owns shares of MEGAPORT FPO, Nitro Software Limited, and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO and Whispir Ltd. The Motley Fool Australia has recommended MEGAPORT FPO, Nitro Software Limited, and Whispir Ltd. 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 Australian Competition and Consumer Commission (ACCC) has settled a case against Telstra Corporation Ltd (ASX: TLS) for “unconscionable conduct”.

The telco has agreed to the filing of court proceedings to potentially impose penalties totalling $50 million. The Federal Court will now decide what the exact penance will be.

Telstra admitted staff at 5 retail stores signed up 108 Indigenous customers to post-paid mobile phone contracts that they didn’t understand and couldn’t afford.

The sales staff used “unfair selling tactics and took advantage of a substantially stronger bargaining position” during those sign-ups.

“Many of the consumers spoke English as a second or third language, had difficulties understanding Telstra’s written contracts, and many were unemployed and relied on government benefits or pensions as the primary source of their limited income,” stated the ACCC.

“Some lived in remote areas where Telstra provided the only mobile network.”

Vulnerable customers devastated with debt

The average debt each customer racked up was more than $7,400. Many faced financial hardship with Telstra even referring some to debt collectors.

In many of the cases, the ACCC stated sales staff manipulated credit checks to allow those customers to sign contracts they otherwise would be barred from. This included inputting that the customer was employed when they weren’t.

Telstra chief Andrew Penn apologised for the conduct.

“While it was a small number of licensee stores that did not do the right thing, the impact on these vulnerable customers has been significant and this is not ok.”

“Early this year I visited the NT, SA and WA to meet with some of the affected communities and customers to apologise and hear first-hand of the impact of these sales practices on them.”

The dodgy sales tactics were admitted at Telstra-licenced stores in Alice Springs (NT), Casuarina (NT), Palmerston (NT), Arndale (SA) and Broome (WA) between January 2016 and August 2018.

“Even though Telstra became increasingly aware of elements of the improper practices by sales staff at Telstra licensed stores over time, it failed to act quickly enough to stop it, and these practices continued and caused further, serious and avoidable financial hardship to Indigenous consumers,” said ACCC chair Rod Sims.

“This case exposes extremely serious conduct which exploited social, language, literacy and cultural vulnerabilities of these Indigenous consumers.”

‘Extreme anxiety’ about going to jail

Sims said the personal toll on the affected customers was immense.

“For example, one consumer had a debt of over $19,000. Another experienced extreme anxiety worrying they would go to jail if they didn’t pay, and yet another used money withdrawn from their superannuation towards paying their Telstra debt,” Sims said.

“Telstra is Australia’s largest telecommunications provider. It has clearly failed to meet community expectations for appropriate business behaviour.”

The telco has since waived the debts, fully refunded payments and instituted mechanisms to reduce the chance that such sales tactics could be used.

The company has also agreed to expand its Indigenous telephone helpline and upgrade its digital literacy program for customers in remote areas.

“This case is a reminder to all businesses to ensure that they comply with Australian Consumer Law in their dealings with all consumers, especially vulnerable consumers in regional or remote communities,” said Sims.

Penn said Telstra wanted to be “a responsible business” and do right by the community but it had failed this time.

“We need to acknowledge when that happens, and today is unfortunately one of those times,” he said. 

“Disappointingly these customers did not receive the standard of care or service they should expect from us, and we did not then act quickly enough to fix the issues once they became known.”

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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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