The Splitit Ltd (ASX: SPT) share price is pushing higher again on Wednesday.

In afternoon trade, the buy now pay later provider’s shares are up 1.5% to $1.40.

Why is the Splitit share price pushing higher?

Investors have been buying the company’s shares on Wednesday after it provided a bit more colour on its deal with Google in Japan.

In case you missed it, on Monday Splitit revealed that Google customers will be able to use instalment plans to make purchases from the Google Store in Japan. This is the first time this payment method has been an option to its customers.

In the coming weeks, customers purchasing Google’s new 5G phone, the Pixel 5, or Nest devices from the Google Store, will be able to split their payments into equal monthly instalments.

Splitit’s CEO, Brad Paterson, commented: “This is one of the strongest case studies yet of our unique offering. We are working with Google in its effort to provide the best possible experience for its customers, and the seamless integration of Splitit into Google Store Japan means they never have to leave the platform.”

What did Splitit announce today?

This morning the company clarified a few details, advising that its agreement with Google Japan is for an initial 12 month term.

This will then be automatically renewed unless either party gives notice to terminate at least 180 days before the expiry of the then-current term, or the agreement is otherwise terminated for cause or insolvency.

It also spoke about the impact the deal could have on the company and its brand image in the country.

Management explained: “As noted in the Announcement, at this point in time, the economic materiality of the Agreement with Google is unknown due to the variable nature of revenues which are dependent on customer uptake of specific products. Splitit, however, expects that partnering with Google in Japan may have a material impact on Splitit’s brand and business development prospects.”

The latter appears to have gone down well with investors today. They may be hoping that this leads to other deals in a country where an estimated 68% of adults have a credit card.

More reading

• Why PointsBet, Santos, Sayona, & Splitit shares are charging higher today
• Here’s why the Splitit (ASX:SPT) share price is surging 7% higher today
• ASX sector of the year: BNPL goes from strength to strength
• Here are 6 of the top performing ASX fintech shares of 2020
• Here’s how ASX buy now, pay later (BNPL) shares have performed in 2020

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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A law firm is investigating the potential of suing Tyro Payments Ltd (ASX: TYR) on behalf of its customers and shareholders.

The fintech is currently dealing with a technical outage that’s seen many of its small business customers unable to process credit and debit card payments.

The disruption is now into its 9th day, with some desperate clients defecting to alternative payment terminal suppliers like Commonwealth Bank of Australia (ASX: CBA) or Square Inc (NYSE: SQ). 

Legal firm Bannister Law on Wednesday announced it has started an investigation into potential claims that businesses can make for any losses suffered.

“Some businesses have been left with the woefully inadequate situation of accepting cash payments only, losing essential revenue. In this difficult time, they require every cent to survive and pay their overheads,” the firm stated.

Bannister Law urged any impacted Tyro clients to contact it with information.

Small business owners left with “bricked” Tyro terminals have expressed their anger on social media.

“We are going bankrupt yet all you can say [is] sorry for the inconvenience! I would like to know how you plan your business?” one customer said.

“We need compensation for all the losses!”

Tyro shareholders could also join legal action

Not only are its customers suffering, the existential crisis has sent the Tyro share price tumbling almost 13% since the saga started on Tuesday 5 January.

Bannister Law is thus also calling for any aggrieved shareholders to contact it to explore potential claims.

Late Wednesday morning, Tyro revealed that the fault lay within the software of some of its terminals supplied by a company named Worldline.

“This issue caused a subset of those terminals to lose connectivity with our network, meaning they could neither transact nor be updated remotely,” Tyro told its customers.

About 30% of Tyro customers have been left with dead terminals, which equates to 10,000 businesses.

With the fault unable to be fixed remotely, the fintech has started the labour-intensive process of physically collecting all the dud devices then returning them after repair.

“We are collecting approximately 2,000 terminals a day for repair and return via the fastest possible delivery method,” the company stated.

“Based on the quantity of terminals being collected daily, and the time to return fixed terminals, we expect to have the majority of impacted customers back to normal operations by the end of this week, with the remainder operational over the course of the following week.”

Not good times for the once high-flying fintech

The Motley Fool reported earlier this week some Tyro clients were having to deal with theft due to the payment terminal outage.

“My wife has just had her first refusal to pay from a customer ($190 cut/colour service) with [the] customer saying that it is the salon’s fault that she is unable to make payment,” said one person on Facebook.

“Fortunately we have CCTV footage, a name, a phone number and a possible place of work for this person. Recovery of this amount will further add to the time wasted by your service not working.”

Tyro was granted a banking licence back as a private company back in 2015, and had since built up to be the largest provider of payment terminals outside the major four banks. The company listed on the ASX in 2019.

Tyro also landed in hot water last month after it was found to have sent 150,000 illegal spam messages during the last 2 years.

More reading

• Loan deferrals down, big four ASX banks up?
• Here are the US shares ASX investors are buying in 2021 so far
• Why Altium, Clover, PolyNovo, & Tyro shares are dropping lower
• Angry Tyro (ASX:TYR) customers jump ship
• 3 top ASX share picks for 2021

Tony Yoo owns shares of Square. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Square. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. 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 A2 Milk Company Ltd (ASX: A2M) share price has come under pressure again on Wednesday and is dropping lower.

In afternoon trade, the infant formula and fresh milk company’s shares are down 1.5% to $10.42.

This latest decline means the a2 Milk share price is now down 48% from its 52-week high.

Why is the a2 Milk share price under pressure?

The a2 Milk share price has fallen heavily since the release of a disappointing update last month.

That update revealed that the company has experienced a significant decline in sales in the important daigou channel. So much so, it was forced to downgrade both its first half and full year guidance.

In respect to the latter, a2 Milk now expects revenue to be in the range of NZ$1.4 billion to NZ$1.55 billion in FY 2021. The mid point of this guidance range is down 18% to 22.3% from its previous guidance range and down 15% from FY 2020’s revenue of NZ$1.73 billion

And with the company’s margins suffering because of this, the company was forced to downgrade its earnings guidance.

It now expects an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 26% to 29% for FY 2021. This is down from 31% previously.

Based on the mid point of both guidance ranges, this represents EBITDA of NZ$405.6 million in FY 2021. This would be down a sizeable 26.2% from FY 2020’s EBITDA of $549.7 million.

That’s old news, why are its shares down today?

Given that this guidance downgrade happened last month, investors may be wondering why its shares are underperforming today.

Well, today’s decline appears to be attributable to a bullish broker changing its mind on the stock.

According to a note out of Goldman Sachs, its analysts have downgraded a2 Milk’s shares to a neutral rating and cut the price target on them to $12.09.

The broker has downgraded its estimates to reflect the update and suspects that its shares could underperform until its earnings momentum begins to recover.

More reading

• Why the a2 Milk (ASX:A2M) share price is sinking lower again
• These are the 10 most shorted shares on the ASX
• Why a2 Milk, AVZ Minerals, Nanosonics, & Premier Investments are dropping lower
• Here’s why the A2 Milk (ASX:A2M) share price was hammered in 2020
• These are the 10 most shorted shares on the ASX

Motley Fool contributor James Mickleboro 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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The Praemium Ltd (ASX: PPS) share price jumped up over 11% following this morning’s release of the company’s December 2020 quarterly update. 

Praemium offers a managed accounts platform that supports financial advisers, investment managers, institutions, accountants and product providers to administer their investments across more than 500,000 accounts.

Let’s take a closer look at today’s results.

Record breaking inflows boost the Praemium share price

The Praemium share price took off after the company announced $1.1 billion of inflows for the quarter ended December 2020. Compared to the December 2019 quarter, this is a whopping gain of 128%.

Praemium’s funds under administration (FUA) increased 10% during the quarter to reach $34.3 billion. FUA in Australia hit $16.4 billion, a 10% rise, while international FUA shot up 13% hitting $3.9 billion.

For the third year in a row, the International Adviser Awards in London awarded Praemium the winner of Best International Platform.

Strategic enhancements and company expansions

During the quarter, Praemium progressed a number of initiatives to enhance its Australian and International platforms as well as the company’s recently acquired Powerwrap platform. 

These enhancements include launching Qualis Capital, expanding API functionality, launching margin lending for international SMAs (separately managed accounts) and growing the company’s reporting capabilities. 

Some insights from the CEO

Commenting on Praemium’s impressive quarterly performance, CEO Michael Ohanessian had this to say:

We have ended 2020 on a high. Record inflows across the business have lifted us to over $34 billion in FUA, helped along by buoyant market conditions. A 69% year-on-year increase in global FUA is a fantastic result in a year of tremendous disruption.

The outstanding performance of the business in the December quarter is a testament to the efforts of the Praemium team through a very difficult year. The effort to strengthen our resilience, improve our efficiencies and enhance client support have placed us in a very strong position going into the new year.

Although it’s been a rocky road along the way, the Praemium share price has risen roughly 38% over the past six months. The company’s market capitalisation presently rings in at $343 million.

At the time of writing, the Praemium share price is up 11.48% to 68 cents.

More reading

• Why Oil Search, Praemium, Premier Investments, & Universal Store are storming higher

Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Praemium Limited. The Motley Fool Australia has recommended Praemium 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 Optiscan Imaging Limited (ASX: OIL) share price is climbing higher today after a positive announcement on a product order.

At the time of writing, the Optiscan share price is up 4.3% higher to 12 cents. In comparison, the All Ordinaries Index (ASX: XAO) is currently down 0.1% at 6,932 points.

Quick take on OptiScan

Based in Australia, OptiScan develops endomicroscopic imaging technologies for medical markets.

Its confocal imaging technology can be used for both cancer screening and tumour margin detection in cancer surgery. The company’s technology enables real-time, in vivo imaging at the cellular level, providing a digital biopsy. This benefits patients by allowing medical professionals to monitor the early-stage of disease, and reduce waiting times for pathology results.

OptiScan is used by leading research institutions and hospitals in North America, Europe, Asia and Australia.

What did OptiScan announce?

OptiScan advised that it received orders worth $350,000 from its partner, Carl Zeiss Meditec AG (CZM), to support its Convivo system.

CZM is a European medical technology company that employs cutting edge solutions in diagnosing and treating patients. The Convivo system allows real-time feedback on tissue microstructure through digital pathology consultation, powered by OptiScan’s miniaturised point scanning confocal technology.

While OptiScan did not release further details on the contract, it noted that the latest order would expand its current revenue streams.

What did management say?

OptiScan CEO and chair Darren Lurie welcomed the progress, adding:

We are also very pleased that OptiScan continues to diversify its revenue streams and cash flows.

Receipts in the December 2020 quarter included $570k from the final payments for the 2 (two) FIVE2 (ViewnVivo) systems sold to China based customers, the BioMedTech Horizons Program grant to support the University of Melbourne’s Melbourne Dental School trial and payments from CZM.

OptiScan share price snapshot

The OptiScan share price has been tracking higher over the past 12 months, reaching as high as 16.5 cents in December.

After the company’s shares hit a low of 1.3 cents last March, this is a gain of 823% on the current price.

More reading

• What’s with the Legend Mining (ASX:LEG) share price today?
• The Neuren (ASX:NEU) share price is falling today despite positive news
• Why the Cann Group (ASX:CAN) share price is moving today
• Why the IMEXHS (ASX:IME) share price soared 6% higher today
• Why the DroneShield (ASX:DRO) share price is surging higher

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

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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Altium Limited (ASX: ALU)

According to a note out of Credit Suisse, its analysts have retained their outperform rating but cut the price target on this electronic design software company’s shares to $35.00. This follows the release of Altium’s guidance for the first half of FY 2021. While the broker appears disappointed with its weaker than expected update, it remains positive on its long term growth trajectory. In addition to this, the broker notes that management is positive on its second half prospects and spoke about its significant deal pipeline. The Altium share price is trading at $28.51 on Wednesday.

Bapcor Ltd (ASX: BAP)

Analysts at Citi have retained their buy rating and $8.85 price target on this auto parts retailer’s shares. According to the note, the broker believes that Bapcor could benefit from a semiconductor shortage which is forcing car manufacturers to cut their production. It expects this to lead to stronger demand for used cars, which should support demand for auto parts. Citi is also a fan of the company due to its defensive qualities. The Bapcor share price is fetching $7.85 this afternoon.

CSL Limited (ASX: CSL)

A note out of UBS reveals that its analysts have retained their buy rating and $346.00 price target on this biotherapeutics giant’s shares. According to the note, the broker’s research shows that CSL has opened 21 new plasma collection centres since the start of the financial year. It believes this will help mitigate some of the plasma collection headwinds it is facing because of the pandemic. And while UBS still expects plasma collections to fall meaningfully, it remains positive on the company and appears to expect other areas of the business to pick up the slack. The CSL share price is trading at $271.51 today.

More reading

• ASX 200 down 0.3%: Altium sinks, Premier Investments rockets, energy shares rise
• Why Afterpay, Altium, Mesoblast, & PolyNovo shares are dropping lower
• Is the Altium (ASX: ALU) share price in the buy zone after its update?
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 drops lower

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 and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Bapcor. 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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Will the S&P/ASX 200 Index (ASX: XJO) see a share market bubble in 2021?

2020 was certainly a year of surprises. Many investors believed that the onset of the coronavirus pandemic would result in (at least) a year of severe haemorrhaging for ASX shares. That, of course, did take place back in March and April. But ASX shares quickly rebounded and ended up finishing the year essentially flat. That’s a deal I’m sure most investors would have taken with both hands back in March.

Over in the United States, the reaction was even more positive. The S&P 500 Index (INDEXSP: .INX) was up more than 16% for 2020 despite America being arguably one of the hardest-hit countries around the world. In the latter half of 2020, things turned exuberant across these 2 markets. We had a number of ‘winners’ from the pandemic booking massive share price moves.

Take buy now, pay later (BNPL) pioneer Afterpay Ltd (ASX: APT). Afterpay appreciated more than 300% in 2020, driven by the shunning of cash that the pandemic brought forward, as well as several other tailwinds. These include its partnership with Chinese e-commerce giant Tencent Holdings, as well as a series of stellar earnings reports.

Over in the US we saw similar, if not more potent, trends. Growth stocks like Tesla Inc (NASDAQ: TSLA) and Square Inc (NASDAQ: SQ) exploded in value, driven by a cocktail of both sentiment and results. We also saw frenzied speculation in both ‘vaccine stocks’ like Moderna Inc (NASDAQ: MRNA), and ‘pandemic losers’ like Hertz Global Holdings Inc and Carnival Corp (NYSE: CCL) in almost equal measure. IPOs like AirBnb Inc (NASDAQ: ABNB) saw stock prices double on initial trading.

2021: bubble or boom?

Such behaviour is often described as the early signs of a stock market bubble. So is that what 2021 might eventually bring us?

According to reporting in the Australian Financial Review (AFR), one investor is warning that we are in a bubble “that will eventually burst”. That investor is Roger Bootle, chair of Capital Economics. Mr Bootle quotes another legendary investor, Jeremy Grantham, who has recently warned investors of “bubble-like conditions”, calling the current state of the US markets “more overvalued that the eve of the great crash of 1929”.

Bootle agrees with Grantham that “while the economy has floundered, the share market has continued moving upwards so that it is now far higher than it was before the pandemic hit.”

Pop?

So when will this bubble burst? Well, that’s the $64 trillion question. Like many commentators, Bootle says that the emergence of inflation, which will result in interest rates finally rising above zero, is likely to be the catalyst. But Bootle points out that Grantham stated that “investors are playing chicken with interest rates”.

Even so, Bootle has hypothesised that central banks around the world might wait for inflation to pick up substantially before raising said rates:

I suppose that governments and central banks would initially try to take other measures to restrain inflation in the hope that they could avoid raising interest rates. But in the end this would not succeed. At some point in the future there lies not only an upsurge in inflation but also an increase in real interest rates, feeding through into bond yields. As and when this happens, it would undermine equity valuations.

He says that this initial stage will give asset prices (like ASX shares) an even bigger boost before the inevitable rise in rates brings things back to earth. That might or might not happen in 2021, but Bootle is pretty confident it’s a ‘when’, not an ‘if’.

Not such a Happy New Year from this commentator!

More reading

• The Accent Group (ASX:AX1) share price just got hit by a broker downgrade
• 5 reasons inflation might bite ASX investors in 2021
• Goldman Sachs says sell Premier Investments (ASX:PMV) shares into today’s big rally
• ASX 200 down 0.3%: Altium sinks, Premier Investments rockets, energy shares rise
• Big brokers still love the Afterpay (ASX:APT) share price

Sebastian Bowen owns shares of Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Square and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Carnival. The Motley Fool Australia owns shares of AFTERPAY T 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 Accent Group Ltd (ASX: AX1) share price is lagging behind the consumer discretionary sector after it was downgraded by Morgan Stanley.

The AX1 share price is trading flat at $2.41 during lunch time trade when the sector gained 0.4%.

Big gains by the Premier Investments Limited (ASX: PMV) share price, JB Hi-Fi Limited (ASX: JBH) share price and Harvey Norman Holdings Limited (ASX: HVN) share price is pushing the sector ahead of the S&P/ASX 200 Index (Index:^AXJO).

Time to take profit on the AX1 share price?

The Accent Group share price is probably held back by Morgan Stanley after it urged investors to take profit now.

The broker downgraded the footwear retailer to “equal weight” from “overweight” as it believes Accent’s growth momentum is slowing.

“AX1 has executed strongly over the last 12 mths in unusual conditions,” said Morgan Stanley.

“Whilst near-term momentum should continue, we think EPS [earnings per share] growth will decelerate from +28% in FY21 to +3%in FY22 as conditions normalize.”

Strong trading update fails to inspire

The downgrade follows a bullish trading update by Accent. Management is expecting earnings before interest, tax, depreciation and amortisation growth of around 40% to 45%.

The earnings boost is supported by good top-line growth, cost savings from rent abatements and wage subsidies and accelerating like-for-like store sales growth.

But Morgan Stanley believes all the good news is priced in even as it lifted its 12-month price target on the AX1 share price to $2.60 from $2 a share. The lift in the price target is due to the better-than-expected trading update.

Earnings momentum running out of puff

However, the broker doesn’t believe the good times can be sustained – at least not at the same pace. Results in the current financial year will be great due to a “pull-forward” in demand for its shoes.

This refers to consumers rushing to buy sports equipment during the COVID-19 lockdown. This means fewer will need to buy shoes over the next several months.

Also, the subsidies and stimulus during the pandemic will taper off. As the vaccine is rolled out and when consumers start holidaying again, they will be spending less on sports equipment too.

Good news already reflected in the AX1 share price

“AX1′ strong momentum is now reflected in the share price, increasing +42% over the last 12 months, meaningfully outperforming the XJO -1%,” noted the broker.

“We see limited valuation upside with the stock trading on 18xFY22 P/E or a ~25% premium to the five-year average multiple of 14.5x.”

More reading

• 5 reasons inflation might bite ASX investors in 2021
• Goldman Sachs says sell Premier Investments (ASX:PMV) shares into today’s big rally
• ASX 200 down 0.3%: Altium sinks, Premier Investments rockets, energy shares rise
• Why Oil Search, Praemium, Premier Investments, & Universal Store are storming higher
• Here’s why the Premier (ASX:PMV) share price just hit an all-time high

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia has recommended Accent Group. 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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2020 was a year characterised by some of the lowest inflation figures Australia has ever seen. Together with a rising share market since 23 March, it proved a lucrative combination for investors.

In fact, from 23 March to today, the S&P/ASX 200 Index (ASX: XJO) is up roughly 47%.

But with record low interest rates, quantitative easing (QE) programs and record budget deficits around the world, many investors are starting to worry about inflation, perhaps in the not-too-distant future.

As history has repeatedly told us, you can’t put too much extra currency into the economy without it starting to lose value. You might wonder why inflation would be bad news for share investors, since many companies will be able to pass any inflationary costs straight onto consumers.

But the reason is that higher inflation normally comes hand in hand with higher interest rates. And higher interest rates are very bad news for share prices across the board.

So will we see inflation in 2021?

One commentator thinks we might. According to reporting in the Australian Financial Review (AFR) this week, Morgan Stanley’s global head of economics Chetan Ahya has just released a note outlining 5 reasons why “inflation is set to rise much more than people are expecting”.

Inflating expectations

They are as follows:

1. Private sector risk appetite – Mr Ahya points out that he expects the US economy to grow by a whopping 5.9% in 2021. He also points to the recently-acquired Democratic control of the US Congress as a likely reason why we might see further fiscal stimulus.
2. ‘Soft’ unemployment – Ahya reckons that most of the job losses around the world that came as a result of the pandemic will “rebound rapidly once the economy fully opens”.
3. Going for growth – Ahya notes that global policymakers such as central banks like the Reserve Bank of Australia (RBA) and the US Federal Reserve intend to “run the economy red hot” in order to rapidly return to full employment as soon as possible.
4. Reigning in tech and trade – Ahya tells us that the US government, in particular, is aiming to ‘reign in’ the tech sector. Amazon.com, Inc (NASDAQ: AMZN) and Facebook Inc (NASDAQ: FB) are already facing anti-trust action. Tech is a famously ‘deflationary’ industry, so turning away from this sector could result in inflationary pressure. He also notes that deflationary ‘free trade’ policies are unlikely to resume given ongoing tensions between the US and China in particular.
5. Shifting targets – Ahya reckons that the new ‘average inflation’ targets that central banks are adopting will allow inflation to run higher than what investors have seen in the past before a commensurate rise in interest rates. The report points out that Morgan Stanley economists expect US inflation to hit 2% at the end of 2021 and to “overshoot” 2% by 2022.

What higher inflation would mean for global share markets

Finally, Mr Ahya points out that if inflation rises more than expected and exceeds 2.5%, “we could see a sharp swing in expectations for Fed policy, with attendant financial market volatility“.

Something to watch out for in 2021 and beyond for ASX investors!

More reading

• Goldman Sachs says sell Premier Investments (ASX:PMV) shares into today’s big rally
• ASX 200 down 0.3%: Altium sinks, Premier Investments rockets, energy shares rise
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 drops lower
• Are the recent US elections turbocharging the ASX 200?

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and Facebook and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon and Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Premier Investments Limited (ASX: PMV) share price is topping the leader board but Goldman Sachs thinks you should dump the stock now.

The PMV share price surged over 15% to $25.90 this morning and is the best performer on the  S&P/ASX 200 Index (Index:^AXJO).

The apparel and stationery retailer is miles ahead of the Cimic Group Ltd (ASX: CIM) share price, which is in second spot.

The Oil Search Ltd (ASX: OSH) share price is in third position and both of these jumped by over 5% each.

PMV share price surges on trading update

The rocketing Premier share price comes on the back of a bullish trading update released this morning.

Management said that total sales jumped 5% in the first 24 weeks of 1H21 ended 9 January 2021 to $716.9 million. Online sales were the standout as that jumped 60% over the same time last year to $146.2 million.

The group expects interim earnings before interest and tax (EBIT) to jump by as much as 85% to between $221 million and $233 million.

Looking fashionable

Like-for-like (LFL) sales was also outstanding. This key retail measure that compares sales of stores opened for at least a year jumped 26.2% in Australia and 18% globally.

The group’s online sales commands a significantly higher EBIT margin than the EBIT margin of the retail store network.

Management also highlighted outstanding sales and gross margin growth in Peter Alexander, Just Jeans and Jay Jays in both Australia and New Zealand.

Better than expected but still not enough

The total sales figure exceeded Goldman Sachs’ first half forecast of $664 million but that wasn’t enough to impress the broker.

“This is a significantly stronger profit than expected, demonstrating a strong sales surge driving expanded gross margin and operating leverage as consumer spending recovered across some apparel categories,” said Goldman.

“Operating costs are likely to have benefited from temporary benefits at start of this financial year (e.g. Jobkeeper), but this was expected to be more muted in 1H21 versus 2H20 and likely much less important than the operating leverage impact from strong comparable store sales growth provided in this update.”

Is the PMV share price a buy or sell?

Goldman Sachs reiterated its “sell” recommendation on the PMV share price with a 12-month price target of $19.20 a share.

If the broker is right, the Premier share price will need to crash by more than a quarter to reach fair value.

More reading

• ASX 200 down 0.3%: Altium sinks, Premier Investments rockets, energy shares rise
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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Goldman Sachs says sell Premier Investments (ASX:PMV) shares into today’s big rally appeared first on The Motley Fool Australia.

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