Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of Citi, its analysts have retained their sell rating and cut the price target on this infant formula company’s shares to $7.15. The broker made the move following the release of a2 Milk Company’s disappointing half year results. Citi has reduced its estimates materially over the coming years to reflect the demand issues it is facing in the daigou channel and margin pressures across the business. The a2 Milk Company share price ended the week at $8.99.

Appen Ltd (ASX: APX)

A note out of Macquarie reveals that its analysts have retained their underperform rating and cut the price target on this artificial intelligence data services company’s shares to $16.00. According to the note, the broker wasn’t surprised that Appen fell short of expectations in FY 2020. Looking ahead, Macquarie has concerns that increased competition could weigh on pricing and lead to Appen falling short of expectations again. The Appen share price was fetching $16.69 at the end of last week.

InvoCare Limited (ASX: IVC)

Analysts at Macquarie also have retained their underperform rating and $9.30 price target on this funerals company’s shares. This follows the release of a mixed full year result last week. According to the note, InvoCare fell short of expectations in FY 2020 due to one-offs. And while the broker is expecting a better performance this year, it does have concerns that rising costs could offset this. In light of this and its current valuation, it sees no reason to change its rating. The InvoCare share price ended the week at $11.23.

More reading

• Do brokers think the A2 Milk (ASX:A2M) share price is a buy or sell?
• These were the worst performing ASX 200 shares last week
• Brokers name 3 ASX shares to buy right now
• 3 ways A2 Milk (ASX:A2M) is planning a share price recovery
• ASX 200 rises 0.8%, A2 Milk sinks, Zip drops

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 Appen Ltd. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia has recommended InvoCare 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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Reporting season is now over. There were some ASX shares that were able to double their profit year on year.

It has been quite a stunning 12 months. COVID-19 has really hurt some industries like airlines and travel, whereas other companies have seen high levels of growth.

The below three businesses were all able to (at least) double their profit compared to the prior corresponding period:

Adairs Ltd (ASX: ADH)

The home furnishings business was able to report that it delivered record sales and profitability despite 43 Melbourne stores being closed for half the period. Sales and underlying earnings before interest and tax (EBIT) exceeded the December 2020 guidance after adjusting for the $6.1 million repayment of the jobkeeper wage subsidy.

The ASX share showed that group sales increased by 34.8% to $243 million, with group online sales increasing to $90.2 million, representing 37.1% of overall sales. Mocka sales, which are 100% online, grew 44.4% and Adairs online sales went up 95.2%.

Not only did sales grow quickly, but the gross margin improved by 500 basis points, which helped the underlying group earnings before interest and tax (EBIT) grow by 166% to $60.2 million.

Statutory net profit after tax (NPAT) rose 233.4% to $43.9 million.

Nick Scali Limited (ASX: NCK)

The furniture retailer ASX share also saw strong levels of growth in the first half of FY21.

It reported that sales revenue went up by 24.4% to $171.1 million. The gross profit margin improved by 180 basis points to 64%.

Nick Scali reported that its profit margins improved by a very large amount. Both the EBITDA and EBIT margins increased by 1,270 basis points, to 35.2% and 33.6% respectively.

This helped the ASX share grow its underlying net profit after tax by 99.5% to $40.5 million. The operating cash flow before interest and tax went up 222.3% to $53.5 million.

Nick Scali said that the sales order growth for the group in January 2021 was up 47% compared to the same period last year, representing the largest month of written sales orders in the company’s history. January is traditionally the company’s largest trading month and the sales order bank at the end of January was at an all-time high (which was a further increase on December 2020).

Costa Group Holdings Ltd (ASX: CGC)

The horticultural business is the third ASX share in this article that managed to (at least) double its profit.

Costa said that in 2020 it recovered from drought challenges. The international segment performance was “well up” on the previous year. The Australian category saw sustained momentum through the second half of 2020, which drove earnings. Management pointed to the balance sheet strength and strong cashflow position, which highlights resilience.

The food business generated revenue of $1.16 billion for 2020, which was up 11.2%. Underlying EBITDA grew by 47.2% to $144.8 million. Underlying net profit after tax went up by 108.4% to $59.4 million.

In terms of its outlook, Costa said that demand and pricing across produce categories generally remains strong in 2021. Management said that there is continued focus on its competitive advantages in yield, geographical spread, quality and cost of production.

More reading

• These were the best performing ASX 200 shares last week
• These ASX retail shares are smashing sales expectations
• Leading broker tips Costa (ASX:CGC) share price to rocket higher
• Why these ASX shares just raced to 52-week highs or better
• ASX 200 drops 0.2%, Costa soars, BOQ is buying ME Bank

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are a number of quality exchange-traded funds (ETFs) that are worth thinking about as long-term investments.

ETFs can be an easy way to get exposure to a large number of different businesses in a single investment, giving useful diversification.

Here are two ETFs that may be worth considering:

iShares S&P 500 ETF (ASX: IVV)

Berkshire Hathaway’s Warren Buffett himself has said that investors would do well by simply investing in a S&P 500 fund.

The S&P 500 is an index of 500 of the biggest and most profitable businesses that are listed in the US.

It’s an index that has been around for decades and has proven can generate good investment returns. Many US businesses are global leaders in their respective industries.

Looking at the ETF’s current top holdings, its biggest 10 exposures right now are: Apple, Microsoft, Amazon, Alphabet, Facebook, Tesla, Berkshire Hathaway, JP Morgan Chase, Johnson & Johnson and Visa.

But it’s not like the global quality stops there. As you look through the list you’ll see more and more recognisable names like: Walt Disney, Nvidia, Proctor & Gamble, Mastercard, PayPal, Home Depot, Bank of America, Intel, Netflix, Adobe, Salesforce, Broadcom, Walmart and Nike.

The performance of this ETF has outperformed the ASX over the last decade, with a net return per annum of 16.4%.

One of the key selling points of this ETF is that it has an annual management fee cost of just 0.04%. which means that nearly all of the gross returns made by this ETF stay in the hands of the investor.

According to Blackrock, the ETF currently has a price / earnings ratio of almost 29 times.

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

This is an ETF that focuses on high quality businesses with wide economic moats, or sustainable competitive advantages, according to Morningstar’s equity research team.

A business only makes it into the portfolio of this ETF if, after a rigorous equity research process, the Morningstar analysts believe that the target company is trading at an attractive value compared to Morningstar’s estimate of fair value.

The ETF has a diverse portfolio, with five different sectors having a weighting of more than 10%. Those sectors are: healthcare, IT, financials, industrials and consumer staples.

Looking at the actual holdings, it has almost 50 positions right now. In order of weighting, the largest positions are: Charles Schwab, John Wiley & Sons, Wells Fargo, Corteva, Bank of America, US Bancorp, Cheniere Energy, Intel, Blackbaud, Aspen Technology, Zimmer Biomet and Constellation Brands.

VanEck Vectors Morningstar Wide Moat ETF only has a management fee of 0.49%, which is considerably lower than many other global fund managers based in Australia.

The performance of the ETF has been strong over the last five years, with a net return per annum of 17.1%, which is better than the S&P 500 return of 14.4% per annum.

More reading

• 2 top ETFs to buy and hold
• 2 high quality ETFs for ASX investors to buy in February
• Got money to invest? Here are 3 ASX shares to buy
• Got cash to invest? Here are 3 ASX shares to buy
• 2 top ETFs to buy next week

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended iShares Trust – iShares Core S&P 500 ETF and 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 looking to boost your portfolio with exchange traded funds (ETFs), then you might want to consider the two listed below.

Due to their focus on the tech sector, they have recently pulled back from their all-time highs. This could make it a good time to consider them as long term investments:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

If you’re interested in gaining exposure to the rapidly growing Asian tech sector, then you can achieve this with the BetaShares Asia Technology Tigers ETF.

Among the fund’s holdings you will find the likes of Alibaba, Baidu, JD.com, Meituan Dianping, Samsung, Tencent, and Pinduoduo.

My first focus will be on Pinduoduo. It is an e-commerce platform that offers a wide range of products from daily groceries to home appliances. Its platform connects distributors with consumers directly through an interactive shopping experience, allowing shoppers to team up to buy items at lower prices. At the end of September, it was serving 731 million active buyers.

Another company included in the fund is Alibaba. It is the Amazon of China and at the end of September had 757 million annual active customers. Across its Alibaba, Taobao, and Tmall brands, the company is estimated to control a sizeable 56% of China’s e-commerce market. It also has a presence offline with a growing network of grocery stores, hypermarkets, and department stores.

A third company in the fund is Meituan Dianping. Its apps connect consumers with local businesses for food deliveries, hotel bookings, movie tickets, and many other services. During the second quarter of FY 2020, the company was making 24.5 million food deliveries per day. Meituan had 476.5 million users at the end of September.

Over the last 12 months, the BetaShares Asia Technology Tigers ETF generated a return of 64% for investors.

Betashares Nasdaq 100 ETF (ASX: NDQ)

The Betashares Nasdaq 100 ETF aims to track the performance of the NASDAQ-100 Index. The NASDAQ-100 comprises 100 of the largest non-financial companies listed on the world-famous NASDAQ market. This includes many companies that are at the forefront of the new economy.

Among its top ten portfolio holdings are Google parent Alphabet, Amazon, Apple, Facebook, Intel, Microsoft, Netflix, Nvidia, PayPal, and Tesla. But it doesn’t stop there, there is also a whole range of exciting companies such as Booking Holdings, Intuit, and MercadoLibre in the fund. 

MercadoLibre is an operator of ecommerce platforms in the Latin America market. It is best known for the MercadoLibre Marketplace, which is an automated ecommerce platform that enables businesses and individuals to list merchandise and conduct sales and purchases online. It is often referred to as Latin America’s Amazon.

The company also has MercadoPago, which is a financial technology solution platform facilitating transactions on and off its marketplaces (much like PayPal). And finally, there’s the MercadoShops solution, which is Latin America’s answer to Shopify.

Over the last 12 months, the Betashares Nasdaq 100 ETF has generated a return of 20%.

More reading

• Why this ASX tech ETF is in the buy zone
• 2 excellent ETFs for ASX investors to buy now
• 2 of the best ETFs for ASX investors to buy today
• 2 great ASX growth shares to buy
• Nasdaq at record high! Here’s what it means for the ASX 200

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 BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS. 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 a growth investor, then you’re in luck. The ASX is home to a number of companies that could grow strongly in the future.

Two to consider buying are listed below. Here’s why they are highly rated:

Altium Limited (ASX: ALU)

The first ASX growth share to look at is Altium. It is an electronic design software provider aiming to dominate the market it operates in.

And thanks to the quality of its Altium Designer software and cloud-based Altium 365 platform, which give it a clear lead over the competition, it looks well-placed to achieve this.

Due to the proliferation of electronic devices because of the Internet of Things and artificial intelligence markets, this is a great market to dominate. It is expected to grow materially over the next decade.

One broker that is a fan of Altium is Credit Suisse. It has an outperform rating and $35.00 price target on its company’s shares.

Pushpay Holdings Group Ltd (ASX: PPH)

Another ASX growth share to look at is Pushpay.

This leading donor management and community engagement platform has a focus on the niche but lucrative faith sector. For example, in FY 2020, it delivered a 32% increase in revenue to US$129.8 million.

But management isn’t settling for that. It has set itself a target of winning 50% of the medium to large US church market in the future. This equates to US$1 billion in revenue, which is almost 8 times greater than FY 2020’s revenue.

Pushpay looks well-positioned to achieve this thanks to its industry-leading platform, which was bolstered by the acquisition of US$87.5 million church management system provider Church Community Builder last year.

This has led to the launch of ChurchStaq, which is the combination of its Pushpay and Church Community Builder software. It brings together digital giving, donor development, church apps, and church management software (ChMS) to deliver a fully integrated engagement platform.

Goldman Sachs is positive on Pushpay and believes it is well-placed for long term growth. The broker has a buy rating and ~$2.59 price target on its shares.

More reading

• 3 explosive ASX growth shares to buy next week
• 3 fantastic ASX shares to buy for strong returns
• One year on and 50% up, the All Technology Index is booming
• Top brokers name 3 ASX shares to buy today
• 3 outstanding ASX growth shares to buy today

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 PUSHPAY FPO NZX. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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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Negative leads from Wall Street are likely to pressure our market on Monday and outperforming ASX resource shares could take the brunt of the sell-off.

The S&P 500 Index closed the week with a 0.5% loss while the Dow Jones Industrials Index fell 1.5%. The  S&P/ASX 200 Index (Index:^AXJO) will probably kick off the trading week on a negative footing but it’s commodities-linked shares that will be in the hotseat.

This is because metals and oil took a big hit on Friday as the US dollar jumped, reported Bloomberg.

US dollar jump to knock ASX resource shares

The impact of the strengthening greenback can be seen against the Australian dollar, which tumbled from over US79 cents on Thursday to around US77 cents.

The Bloomberg Commodity Index that holds a basket of 23 commodities dropped the most since April.

A stronger US dollar is typically bad news for commodity prices, which as set in the US currency.

Another headwind hitting ASX shares

But the exchange rate isn’t the only headwind buffeting commodities. The rise in government bond yields due to inflation worry is also being blamed.

If inflation does become a problem as credit markets are anticipating, then central banks may be forced to restrict the flow of cheap capital into the financial system.

It’s the flood of near-free cash that has sent risk assets skyrocketing through 2020. This doesn’t only include shares but commodities like copper.

Early signs of panic-selling

In fact, the copper price is trading at a more than eight year high and some experts believe it could hit a new price record.

While there’s more than a tinge of panic-selling across the board, these latest developments spell trouble for ASX mining and energy shares.

This spells trouble for the BHP Group Ltd (ASX: BHP) share price, Fortescue Metals Group Limited (ASX: FMG) share price, Woodside Petroleum Limited (ASX: WPL) and OZ Minerals Limited (ASX: OZL) share price – just to name a few.

Many of these stocks have been outperforming of late on the belief that high commodity prices will leave them flushed with cash. Some of this enthusiasm is likely to unwind on Monday.

3 reasons to buy ASX resource shares during the sell-off

However, the bigger question is whether ASX resource shares have hit a peak and its time for investors to cut and run.

I believe any sell-off represents another opportunity to top us, as it has been for a while now. My optimism is premised on a few factors.

Firstly, the rise in inflation expectations is due to economic growth. Growth is never a bad thing for equities.

Secondly, if inflation does become a problem, hard assets like commodities tend to be a good hedge against rising prices. After all, the costs of goods can’t rise sustainably if raw material prices are falling.

Finally, ASX resource shares are not generally overvalued. I am not saying they are cheap as several are trading at one-year highs of more, but they are certainly not in bubble territory.

As long as the volatility doesn’t scare you, the next few weeks could be a good buying opportunity.

More reading

• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• Forget the ASX 200! Another market crashed this week
• ASX 200 sinks 2.4%, Afterpay plunges, AMP jumps
• Here are 3 ASX 200 diamonds in the spotlight while the market sank today

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

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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We’re about to enter the final month of the first quarter of 2021. There are some ASX shares that a number of brokers like.

It can be worth paying attention to what brokers think because they’re constantly looking at all the stocks on the share market to decide if they can find opportunities.

Sometimes one broker might think that BHP Group Ltd (ASX: BHP) is a buy whilst another might believe that it’s a sell.

If several brokers think that an ASX share is a buy then it could be worth thinking about:

Baby Bunting Group Ltd (ASX: BBN)

Baby Bunting is an ASX retail share that sells a wide variety of baby and infant products. It’s currently liked by at least five brokers.

One of the brokers that likes Baby Bunting is Ord Minnett, which was impressed with the retailer’s FY21 half year result – it was stronger than the broker was projecting.

The next few months of earnings are likely to be good, but with a slower growth rate compared to the prior corresponding period.

Ord Minnett is excited by the ASX share’s organic sales growth and growing online sales. It also likes the potential of the store rollout in the coming years. Baby Bunting also recently announced that it was planning to expand to New Zealand with a physical store network.

In the actual report, Baby Bunting reported total sales growth of 16.6% to $217.3 million, with comparable store sales growth of 15%. Total online sales from the ASX share went up 95.9%.

The gross profit margin improved by 41 basis points to 37.4%. The pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) rose 29.7% to $18.5 million, pro forma net profit after tax (NPAT) grew 43.5% to $10.8 million and statutory NPAT rose 54.7% to $7.5 million.

Comparable store sales growth for the first six weeks of the second half of FY21 was 18.5%.

Idp Education Ltd (ASX: IEL)

IDP Education describes itself as a global leader in international education services.

This ASX share is liked by at least five brokers.

One of the brokers that likes IDP is UBS. The recent result was much stronger than the broker was expecting and it believes that IDP definitely now counts as a high-quality business.

Whilst COVID-19 restrictions impacted earnings, the broker was impressed with the amount of remote learning with elevated levels of online enquiries.

UBS thinks that the structural theme that the ASX share benefits from is still on track and it will become stronger by the end of the year.

In the actual result, IDP Education reported that total revenue fell 29% to $269.1 million, EBITDA fell 33% to $68 million, EBIT dropped 43% to $47.3 million and NPAT declined 45% to $29.7 million.

The board of directors declared an 8 cents per share unfranked dividend, representing approximately 75% of the first half net profit after tax (NPAT).

The company said that it’s well positioned internationally as an industry leader with further investment planned in student placement, data science and international English language tests (IELTS).

More reading

• ASX 200 drops, Appen sinks, Nine jumps
• Why Bega, Blackmores, IDP Education, & SeaLink shares are zooming higher
• ASX 200 down 0.45%: Woolworths rises, Blackmores jumps, Appen sinks
• Why the IDP Education (ASX:IEL) share price is rocketing 17% higher
• 2 ASX shares rated as strong buys by brokers

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

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There were some small ASX shares that released their results at the end of reporting season, revealing some big upcoming dividend payments.

Businesses that are small are sometimes priced at a lower earnings multiple than if they were large, despite being earlier on in their growth journey. A lower earnings multiple/share price boosts the dividend yield for investors.

Here are two small ASX shares that just reported big dividends:

360 Capital REIT (ASX: TOT)

This business is a real estate investment trust (REIT) that’s operated by 360 Capital Group Ltd (ASX: TGP). 360 Capital REIT just reported its FY21 half-year result.

It was previously generating earnings by making real estate loans, but all direct real estate loans ($42.4 million) have now repaid as a result of active management.

360 Capital REIT revealed that it has sold a further six apartments in Gladesville, 19 of 23 apartments have now been sold at an average premium of 21.3% to the purchase price.

The small ASX dividend share has made a number of equity investments into real estate related assets including Peet Limited (ASX: PEET), Irongate Group (ASX: IAP) and PMG in New Zealand. The PMG investment may find New Zealand investments that can be pursued.

As a result of COVID-19, the REIT ceased its lending activities and shifted management’s focus to converting outstanding loan positions and assets to cash. Management decided to be conservative with the cash to preserve capital, which impacted earnings.

It said that its operating earnings per share (EPS) was down 76% to 1.1 cents.

After the end of the reporting period, the majority of the business’ available capital had been deployed into investments that provide recurring income in line with 360 Capital REIT’s strategy and objectives.

The small ASX dividend share has forecast a FY21 distribution guidance of 6 cents per security, which translates to a yield of 6.9% at the current 360 Capital REIT share price.

Pengana Capital Group Ltd (ASX: PCG)

Pengana is a fund manager that just reported its funds under management (FUM) increased by 15% in the six months to 31 December 2020.

It reported that underlying profit before tax grew 17.1% to $9.2 million and normalised EPS grew 13% to 5.96 cents per share.

The small ASX dividend share said that there was a significant improvement in net flows. Pengana also said that there was also strong investment performance, with all strategies outperforming their respective benchmarks for the period.

As part of the result release, management said that it still has significant further capacity in its various international equity strategies and a major growth opportunity in the Pengana Private Equity Trust (ASX: PE1). It also said it has an opportunity to diversify further over time by adding new strategies.

In terms of the dividend, the board of Pengana decided to declare a fully franked interim dividend of 5 cents per share, which was an increase of 25%.

At the current Pengana share price, that means that the grossed-up dividend yield is now 6.8%.

More reading

• Pengana (ASX:PCG) share price on watch on 25% growth of HY21 dividend
• 2 small ASX dividend shares with big yields
• 3 ASX dividend shares with higher yields
• 2 secret ASX dividend shares with large yields
• 3 small ASX dividend shares with big yields

Motley Fool contributor Tristan Harrison 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 Bubs Australia Ltd (ASX: BUB) share price could be worth looking at after reporting its FY21 half-year results to the market.

What is Bubs?

Bubs is a business that sells a number of different dairy products. A key division is the goat milk infant formula. It also has a growing organic cow milk infant formula range. It sells adult goat dairy products as well as a vitamins and minerals range for children.

FY21 half-year result

Bubs reported that its total revenue declined by 33% to $18.3 million, whilst statutory earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 174% to a steeper loss of $14.4 million.

There was an inventory provision of $3.1 million and the need to sell excess bulk powder inventory at a loss due to COVID-19 driven softening demand and the prioritisation to conserve cash.

Bubs said that the Bubs goat infant formula product gross margin was 34%, which was consistent with FY20.

The infant formula business said that there was significant COVID-19 disruption to the daigou channel caused by international border closures and increased air freight costs. However, it said that the corporate daigou sales momentum continues to recover.

How is Bubs trying to grow the share price and profit?

Whilst Bubs is seeing a decline in sales with daigou, there are other areas that are growing strongly:

1: Local sales in supermarkets and pharmacies

Bubs highlighted that it’s the clear lead challenger in domestic supermarkets and pharmacies. Total infant formula category scan sales in the Australian grocery and pharmacy retailers have been heavily impacted by the demand shock in the daigou channel. Despite that contraction for the entire industry, Bubs is still achieving high scan sales growth itself.

Looking at scan value sales data, the sales across Coles Group Ltd (ASX: COL), Woolworths Group Ltd (ASX: WOW) and Chemist Warehouse were up 55% for the 26 weeks to 3 January 2021.

The company tripled its market share compared to the prior corresponding period, rising to 3.5% of the total infant milk formula category for the period. It has a 28.6% market share of the total goat infant formula segment.

2: Direct Chinese sales

Whilst daigou channel sales were lower, the Bubs goat formula total direct sales to China rose 36% in gross revenue terms.

Management said that this demonstrated there was strong Chinese demand for Bubs premium products.

Bubs said that integrated social marketing campaigns were successfully driving consumer engagement, e-commerce traffic and user acquisition on cross-border e-commerce marketplaces. One example of this success is the Bubs goat milk formula gross merchandise value (GMV) on Tmall, operated by Alibaba. There was a 121% increase in offtake sales on Tmall Global year on year.

The was a 24% year on year increase of Bubs goat infant formula gross revenue to the Chinese CBEC channel.

Bubs said it plans to enter more than 1,000 online-to-offline stores in the second half of FY21.

3: Non-Chinese exports

The infant formula business said that there is significant sales momentum across new Asian markets, with export gross revenue outside of China increasing 44% year on year.

Countries where it’s now being sold include Hong Kong, Vietnam, Malaysia and Singapore. It’s planning to launch in South Korea in the second half of FY21.

South Korea is an important market because it’s the world’s second largest goat infant formula market. It has selected YP Corporation as the nominated distribution partner. It has deep experience in the mother and baby category. It also has a high market penetration in major online e-commerce platforms as well as offline stores.

Bubs share price movement

The Bubs share price has more than halved since the 52-week high in May 2020.

Bubs has a number of strategies to drive growth further in the second half of FY21 and it is targeting a return to a more aggressive growth profile in FY22.

More reading

• The Bubs (ASX:BUB) share price is rising today on solid results
• Why AMP, Bubs, BWX, & Lynas shares are pushing higher
• 2 small cap ASX shares that are growing quickly
• Got cash to invest? Here are 3 ASX shares to buy
• Leading brokers name 3 ASX shares to sell 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 BUBS AUST FPO. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The A2 Milk Company Ltd (ASX: A2M) share price has been pummelled since releasing its FY21-half year result.

As part of the update, the company gave the market its latest thoughts about where the revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) margin will end up by the end of the year.

FY21 expectations

Management said that revenue is going to be at the low end of its previous estimation range because of the impacts to the daigou channel sales and the fact it’s taking longer to recover than expected.

As a consequence of lower revenue, higher levels of brand investment/marketing, longer daigou/reseller support, movements in foreign currency and an adverse channel mix relative to what was anticipated in December.

Accordingly, the company is now expecting group revenue to be “in the order of $1.4 billion” and the group EBITDA margin for FY21 of between 24% to 26% (excluding Mataura Valley Milk acquisition costs).

Despite lowering guidance, A2 Milk said that this new guidance assumes the actions being taken to re-activate the daigou/reseller channel will deliver a significant improvement in quarter on quarter from the FY21 third quarter to the fourth quarter.

What did some brokers think of the A2 Milk share price?

Quite a few of the brokers said that the result was disappointing and below their expectations.

Broker Citi is particularly bearish about the infant milk company with an A2 Milk share price target of $7.15. The HY21 net profit of $120 million was 8% lower than what Citi was estimating it would be.

Citi has decreased its profit expectations for FY21, FY22 and FY23 by between 25% to 30% with demand adding to numerous ongoing issues confronting the company. The main reason for Citi’s profit expectation decrease is due to a slower daigou recovery as well as lower margins because of higher levels of incentives to reactivate the channel.

Other issues that Citi pointed to included higher production costs and adverse foreign currency movements, which is likely to affect margins. The broker thinks that margins are going to be hurt.

Ord Minnett is another broker that has turned more negative on the infant formula business because of the various challenges and longer recovery.

One broker does have a slightly more positive outlook for A2 Milk, though it fully acknowledges the difficulties. Morgans has a share price target for A2 Milk of $10.40. The broker thinks that A2 Milk can still deliver over the longer-term once channels can return to normal.

Looking at Morgans’ estimate for FY22, the A2 Milk share price is valued at 27x FY22’s estimated earnings.

At the current value, Ord Minnett thinks that A2 Milk shares are priced at 31x FY22’s estimated earnings.

More reading

• 3 ways A2 Milk (ASX:A2M) is planning a share price recovery
• ASX 200 rises 0.8%, A2 Milk sinks, Zip drops
• Why a2 Milk, Service Stream, TPG, & Zip shares are tumbling lower
• Why the a2 Milk (ASX:A2M) share price is crashing 20% to a multi-year low
• ASX 200 up 0.85%: A2 Milk & Zip shares hammered, Afterpay to raise $1.25bn

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. 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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