The Webjet Limited (ASX: WEB) share price was out of form in October and tumbled notably lower.

The online travel agent’s shares lost 11.7% of their value over the month. This compares to a 1.9% gain by the S&P/ASX 200 Index (ASX: XJO).

Why did the Webjet share price underperform in October?

Investors were selling Webjet and other travel shares, such as Flight Centre Travel Group Ltd (ASX: FLT), last month amid rising COVID-19 cases globally.

With many countries experiencing second and third waves and recording record high infections, the prospect of global travel markets reopening fully before the successful development of a vaccine became very unlikely.

This could be bad news for travel companies, who may have to contend with lower booking volumes for even longer than expected.

Speaking of which, last month Webjet provided the market with an update on how its businesses are performing in FY 2021.

What did Webjet reveal?

Webjet’s update revealed that bookings are still down significantly from their pre-pandemic levels.

According to the release, the company’s Webjet OTA business recorded monthly bookings of 18,700 during September. This is down from its pre-COVID average of 131,300 per month.

However, it is worth noting that this recovery is stronger than the market average, which implies market share gains. Management advised that Webjet OTA’s bookings are 14.2% of pre-COVID levels, which compares favourably to a 7.1% recovery by the rest of the market. This side of the business will reach break-even when levels hit 23% of 2019’s levels.

The company also revealed that its key WebBeds business is improving but remains a long way from becoming breakeven. As of 7 October, its average total transaction value (TTV) stood at 12% of calendar year 2019 levels. Management advised that it needs to surpass 45% of 2019’s levels to become profitable.

One positive, though, was that Webjet’s cash burn has been better than expected thanks to its focus on managing costs. So far in FY 2021, its cash burn is $9 million a month. This compares to $10.5 million a month in FY 2020.

Based on this, current trading conditions, and its strong balance sheet, management believes it has sufficient capital to see it through to 2022.

More reading

• These are the 10 most shorted shares on the ASX
• Are ASX retail investors ‘dumb money’?
• Leading brokers name 3 ASX shares to buy today
• These are the 10 most shorted shares on the ASX
• ASX 200 Weekly Wrap: ASX snaps winning streak… just

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group 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.

The post Why the Webjet (ASX:WEB) share price tumbled 12% lower in October appeared first on Motley Fool Australia.

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A top fund manager has declared the best days of Australian bank shares are behind them.

The big four local banks – Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking GrpLtd (ASX: ANZ) – have been traditionally very reliable sources of excellent dividend yield while maintaining stable share prices.

But this year has seen them slash their dividends due to the COVID-19 recession. 

Plus they have seen their business margins squeezed dry with the Reserve Bank of Australia (RBA) cutting the cash rate to almost zero. 

Nucleus Wealth head of investments Damien Klassen said that, unfortunately, what big banks have experienced overseas is now creeping into the local market.

“Last 5 or 6 years, European bank shares are down 50% while the rest of the market was up 50%… They’re stuck in this unprofitable [trap] because of how low the interest rates are,” he said in a Nucleus Wealth webinar.

“Unless we do actually get that stimulus that gets inflation going… then Australia’s banks are headed in the same direction.”

The hole they are in is rather deep

The only way out is for inflation to pick up and for the Reserve Bank to then lift rates. 

But with the economy in the doldrums after the pandemic, the RBA has admitted this is not a likely prospect for a long time.

Even the current government financial support – like JobKeeper and JobSeeker – is due to taper off over the next few months, adding to the economic pressures.

This adds up to a scene where “the risks look pretty high” for Australian bank shares, according to Klassen.

“A lot of Australians have treated banks as [having] stable dividends and capital growth as well. What more could I want? I’ll just throw everything into it,” he said.

“We don’t think that’s going to be the case for a little while.”

Commonwealth Bank shares are down about 14% in value so far this year. NAB has lost 23%, ANZ has sunk 22% and Westpac is down 26%.

More reading

• What to expect from the NAB (ASX:NAB) FY 2020 result
• 5 things to watch on the ASX 200 on Tuesday
• Westpac (ASX:WBC) reports FY20 result, ASX 200 up 0.4% today
• 3 ASX 200 shares that received broker upgrades last week
• RBA taps bank partners for crypto Australian dollar project

Motley Fool contributor Tony Yoo 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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With almost-zero interest rates and the COVID-19 recession, investing for yield is a difficult game at the moment.

Many investors, especially older ones who don’t wish to expose themselves to excessive risk, rely on yield for their day-to-day living.

But the low interest environment doesn’t seem like it’s disappearing anytime soon. Meanwhile growth shares have taken off, even after the coronavirus crash in March.

Some experts have therefore suggested growth shares might have become the new way to nab regular income.

Nucleus Wealth head of investments Damien Klassen is one of them, saying income investors will be “needing more growth assets” than they are used to.

But the higher risk of growth shares will mean closer daily scrutiny of the portfolio.

“We think you’re going to need higher levels of portfolio management,” he said in a Nucleus Wealth webinar.

“If you just took a ‘set and forget’ [approach] and just went ‘Yep, I’m just going to dump my money into a 60-40 portfolio and see you in 20 years’ time’, we think your returns are going to be relatively poor.”

Evergreen Consultants founder Angela Ashton agreed.

“It’s definitely nowhere near as easy as it used to be… Capital gains, in an attack sense, is a better place to be.”

But she warned that growth is not as reliable and consistent as traditional sources of yield.

“The fact that you can’t count on it, year after year, to be a set level is obviously an issue. Whereas yield [investing] had that characteristic.”

Capital gains tax discount vs franking credits

The big psychological tug for yield investors is the preservation of investment capital. If they switch over to growth stocks, they will have to sell down regularly to attain income.

Klassen pointed out an obscure benefit that could help them get over the mental hurdle.

“For a lot of people, capital gains will end up being taxed lower than income,” he said.

“So if it’s a matter of saying I’m picking up a little bit of extra capital gains but then I’m selling a few assets every year in order to meet my living standards, then there might actually be tax advantages rather than disadvantages.”

He said the reluctance to sell down is “a mindset” that has to change for income investors in the brand new world.

Ashton said a lot of retirees hate depleting their capital.

“But the reality is, a lot of people have to… People should expect to eat into their capital to maintain their standard of living usually.”

No choice but to go growth

Before the global financial crisis in the late 2000s, defensive investments both protected capital and generated yield, according to Ashton. 

But those days are now gone.

“I’m not sure if you remember, but during the GFC you could still get a 5-year term deposit yielding 7%,” she said.

“The defensive part of your portfolio — now you really have to think about whether you want it to be defensive or generate income. If it’s to generate income, it’s probably not all that defensive.”

So with this dilemma, yield investors were forced onto dividend shares. But even dividends have been slashed after COVID-19.

“Australian equities have been the highest dividend yielders in the world for over 100 years. That’s not so much the case anymore.”

More reading

• What to expect from the NAB (ASX:NAB) FY 2020 result
• Here’s what the US election means for investors
• Here’s why the Blackmores (ASX:BKL) share price jumped 11% higher in October
• What to expect from the Woolworths (ASX:WOW) Q1 update this week
• 2 ASX dividend shares with 4% yields

Motley Fool contributor Tony Yoo 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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Hot on the heels of the release of a full year result by Westpac Banking Corp (ASX: WBC) on Monday, later this week National Australia Bank Ltd (ASX: NAB) will be releasing its own.

Ahead of the release on Thursday, I thought I would take a look to see what is expected of the banking giant in FY 2020.

What to look for with the NAB result?

According to a note out of Goldman Sachs, it is expecting the banking giant to post cash earnings before one-offs of $3,988 million in FY 2020. This will be a 31.9% decline on the prior corresponding period.

The broker has also forecast a fully franked final dividend of 30 cents per share. This will bring its full year dividend to 60 cents.

And following its recent remediation update, it now expects its second half CET1 ratio to come in at 11.75%. This will mean 13.4% for the full year.

What else should you expect?

Goldman Sachs is going to be looking for signs of a turnaround in home loans in recent months following a slowdown late in the financial year.

It commented: “NAB’s housing momentum continued to slow in Aug-20, while its business trends have stabilized. Across the group, we currently forecast flat housing and non-housing loans growth and so will be looking out for signs of a turnaround in the momentum of the franchise, which might come off the back of the recent Federal Budget and the federal government’s evolving stance on responsible lending.”

Another thing to keep your eye on is the bank’s underlying cost performance and any commentary on its post-COVID expectations.

Goldman explained: “Our FY20E expense (ex notables) forecast of A$8,242 mn implies cost growth of 1.1%. NAB acknowledged its ‘broadly flat’ expenses target for FY20E (ex- notable items) will become increasingly challenging in part reflecting the cost required to support customers in response to Covid.”

“As such we will be particularly interested to hear management commentary around its future outlook and see whether they extend their three-year cumulative cost savings target of >A$1 bn (A$934 mn to date),” it added.

Goldman Sachs has a conviction buy rating and $20.89 price target on NAB’s shares.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Westpac (ASX:WBC) reports FY20 result, ASX 200 up 0.4% today
• RBA taps bank partners for crypto Australian dollar project
• 3 reasons the Afterpay (ASX:APT) share price smashed the market in October
• 6 major events for ASX shares this week

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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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Let’s not bury the lead huh?

The answer is: Nothing.

(Yes, you can stop reading now, if you want. But don’t.)

I’m sorry to be the bearer of bad news to the commentators who’ll breathlessly cover the election’s impact on markets.

I’m sorry to be the bearer of bad news for those ideologues – on both sides – who desperately want the result to be some sort of proof of their own political preference.

But let me be clear:

It. Won’t. Matter.

Which isn’t the same as saying ‘there won’t be volatility‘.

It’s not even the same as ‘the market won’t take a particular view for a while’ either.

But, for investors – defined properly as people who buy stakes in companies with a view to holding for the long term – have nothing to fear, or cheer, from this election.

Let’s count the ways.

First, we can’t know who’ll win.

Yes, yes. You know who you think deserves to win.

But that’s not going to change the result.

Yes, yes. The pollsters have a view on who they think will win.

But then, that doesn’t explain Trump 2016 or Morrison 2019, does it?

You can take a punt on who you think will win, if you want. But what are you really punting on?

And that takes me to my second point:

We can’t know how the winner will impact the market.

The research suggests there is very, very little correlation between the party that wins the White House and the subsequent performance of the share market.

And then, it’s not like 2020 is an ordinary year.

2021 will hopefully be less dramatic, but the economic recovery, when (not if!) it comes, will be largely independent of the affiliation of the occupant of the Oval Office.

If, right now, you’re mentally starting with the ‘yeah, buts’, I’m going to respectfully suggest you’re trying to make the facts fit your narrative, rather than the other way around.

If you’re a Trump fan, you’re telling me how much he’s done for the economy.

If you’re a Biden supporter, you’re telling me that Trump’s success is either because of the Obama legacy or is less impressive than his supporters say.

(If you are in one of those two groups, a reminder that I can’t hear you, no matter how loudly you shout!)

So, if we don’t know who’ll win… and we can’t know how the eventual winner will impact the stock market…

Doesn’t it make sense to stop trying?

Yeah, I thought so, too.

It’s kinda like the impact of ‘ethical investing’ – wanting it to be true just can’t make it so.

You know – when you want something to be true so badly that you engage in a little magical thinking so you don’t have to confront the reality?

Yes. That.

So, if history suggests that the office-holders in the US don’t give us a sense of where the market will go (and even if it did, we don’t know with any certainty who’ll win), what should we focus on?

I’m glad you asked.

The answer is deceptively simple. In fact it’s so simple some people just can’t help but try to make it harder.

Just. Invest.

I know, right?

That’s what they pay me the big bucks for – stating the bloody obvious.

Except that, if it was obvious, everyone would already do it.

There is a huge gulf between what ‘everyone knows’ and what ‘everyone does’.

“I know I should just invest long term, but what stocks should I buy before the election” is something I hear more than I’d like.

Humans just can’t help trying to make this investing caper more complicated than it needs to be.

And it drives me a little nuts.

Seriously, there’s nothing better, in my experience, than the combination of time, and regular dollar-cost-averaging.

Nothing.

Now, that doesn’t mean you can’t improve your results – you are just really unlikely to do it, sustainably, trying high risk speculation.

Instead, I’d be looking for quality businesses. Trading at attractive prices.

The ones that are likely to either grow more quickly than the market assumes, or the ones the market is leaving for dead that, well, aren’t dead.

Kogan.com Ltd (ASX: KGN) is a good example of the former. Nine Entertainment Co Holdings Ltd (ASX: NEC) was a good example of the latter. (I own shares of Kogan, for the record)

No, neither was a guaranteed winner, but investors seemed to miss the compound growth – past and potential future – of Kogan, even before the coronavirus pandemic. The company was adding customers and growing sales at a rate of knots. It had turned profitable, and had (and still has) very attractive economics. But investors were too shy to pay up.

Nine was about as different from Kogan as you’ll find. Sales weren’t growing. The industry was challenged. And, well, COVID-19 hit during that time.

Yet, in our view, Nine had been left for dead, share price-wise. It was beaten down. Unloved. Which smelled like opportunity. Turns out it was, and we recommended our members sell for a 57% gain in a little over 18 months.

Kogan, by the way, is up 471% and 210% since each of our two recommendations. It’s still a Buy, too.

Each could have gone badly, by the way. We possess no perfect crystal ball.

But we’ve found – both by experience and the results of our scorecard – that getting the process right is likely to lead to impressive results, on average.

Neither of those successes relied on US (or Australian) politics or legislation. Nor have any of our losers (we have some of those) come down to the vagaries of political whim.

Elections come and go. They rarely, if ever, matter, unless you’re betting specifically on a policy one or the other party might enact. In which case, you might as well bet on the smokey in the fifth at Randwick.

Instead, my advice is simple:

Ignore the noise. Tune out the politics.

Save, hard.

Invest, regularly.

Buy the best investments you can find. And if you’re not sure, either find a trusted adviser (cough, cough), or buy the index.

By far, the two worst things you can do, in my view, are either ‘nothing’, or ‘speculate’.

Leave that to the political pollsters and pundits.

Fool on!

More reading

• Is the Adore Beauty (ASX:ABY) share price in the buy zone?
• Are these small cap ASX shares the next Kogan (ASX:KGN) and Nearmap (ASX:NEA)?
• Why Redbubble, Kogan, Marley Spoon and 1 other ASX share are surging
• Temple & Webster (ASX:TPW) share price barnstorms back with 11% rise
• 3 explosive ASX growth shares to buy with $3,000

Scott Phillips owns shares of Kogan.com ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com 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.

The post Here’s what the US election means for investors appeared first on Motley Fool Australia.

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The Blackmores Limited (ASX: BKL) share price was among the best performers on the S&P/ASX 200 Index (ASX: XJO) last month with a strong gain.

The health supplements company’s shares jumped 11.6% over the period.

Why did the Blackmores share price jump higher in October?

Investors were scrambling to buy the company’s shares last month following the release of an update at its annual general meeting.

That update revealed that Blackmores continues to expect to report a rebound in its profits in FY 2021 following a very disappointing time in the previous financial year.

In FY 2020, Blackmores posted a 3% decline in revenue to $568 million and a 66% reduction in net profit after tax to $18.7 million.

And while there was some impact from COVID-19, it is worth noting that its performance was already faltering pre-pandemic. For example, its first half profit was down 47% on the prior corresponding period in FY 2020.

According to its recent update, management is anticipating full year profit growth in FY 2021. This is despite additional cost variances arising from Braeside manufacturing ownership in the first half of the year.

Though, it is worth noting that the company is expecting this growth to come predominantly in the second half of the year.

What else got investors excited?

In addition to this improving outlook, investors appear to have been pleased with management’s confidence in its renewed strategy. It expects this strategy to put the company back on a path to sustainable, profitable growth and in a position to restore future dividends.

Another positive that caught the eye of the market was its cost cutting.

Blackmores advised that it has completed its restructuring, which is set to deliver $15 million of gross annualised savings from the second half. It has also initiated a Leading Value Position (LVP) savings program, which will contribute to cost of goods sold savings of $10 million in FY 2021.

Combined with its decision to offload its Global Therapeutics business to McPherson’s Ltd (ASX: MCP) for $27 million, investors appear to be finally warming up to this beaten down former market darling.

More reading

• These were the 5 best performing ASX shares last week
• ASX 200 Weekly Wrap: ASX 200 has another shocker as US election approaches
• Top brokers name 3 ASX shares to sell next week
• These were the best performing shares on the ASX 200 last week
• Why the Blackmores (ASX:BKL) share price is rocketing 12% higher today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores 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.

The post Here’s why the Blackmores (ASX:BKL) share price jumped 11% higher in October appeared first on Motley Fool Australia.

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The Woolworths Group Ltd (ASX: WOW) share price will be one to watch on Wednesday when it releases its highly anticipated first quarter update.

Ahead of the release, I thought I would take a look to see what the market was expecting from the retail conglomerate.

What is the market expecting from Woolworths during the first quarter?

According to a note out of Goldman Sachs, it expects the company to report revenue of $17.5 billion for the quarter. This will be a 9.8% increase on the prior corresponding period.

The key driver of this growth is expected to be is supermarket business. This is thanks to a successful collectibles promotion, the outperformance of its online channel, and strong demand because of the pandemic.

Goldman Sachs is forecasting comparable store sales growth for the key Australian Food segment of 9%.

Supporting this growth will be its Endeavour Drinks and New Zealand supermarkets businesses. Goldman is forecasting first quarter comparable store sales growth of 18% for Endeavour Drinks and 8.5% comparable store sales growth for its New Zealand supermarkets.

Another highlight is expected to be the Big W business. The broker expects it to deliver 24% growth during the first quarter.

What does Goldman Sachs think of Woolworths?

Ahead of the result release, Goldman Sachs is sitting on the fence with its recommendation. The broker has a neutral rating on the company’s shares on valuation grounds.

It explained: “Our 12-month target price is derived from a 50:50 EV/EBIT-based SOTP and DCF methodology. Our SOTP, based on FY21E EBIT, results in a valuation of A$37.50 (prior A$37.30) and our DCF valuation is at A$41.10 (prior A$40.30). Our revised blended target price is at A$39.30 (prior A$38.80). We are Neutral on WOW.”

Though, the broker will no doubt be updating its recommendation (for the better or worse) following this release. So stay tuned for that.

More reading

• Why I would buy Woolworths (ASX:WOW) and these shares for a retirement portfolio
• ASX 200 Weekly Wrap: ASX 200 has another shocker as US election approaches
• Are Coles (ASX:COL) or Woolworths (ASX:WOW) shares a better ASX dividend buy today?
• Could this HomeCo (ASX:HMC) REIT IPO be the biggest in 2020?
• ASX 200 Weekly Wrap: ASX snaps winning streak… just

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths 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.

The post What to expect from the Woolworths (ASX:WOW) Q1 update this week appeared first on Motley Fool Australia.

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Later today the Reserve Bank of Australia is widely expected to cut the cash rate at its November monetary policy meeting.

According to the latest cash rate futures, the market has priced in an 84% probability of a cut to a record low of zero.

Unfortunately, this means income investors and savers are going to have to contend with even lower rates in the near term.

Fortunately, the Australian share market is home to a wide range of companies that share their profits with shareholders in the form of dividends.

For example, two ASX dividend shares with yields above 4% are named below:

BWP Trust (ASX: BWP)

BWP is a real estate investment trust with a focus on commercial assets. The majority of its assets are leased to home improvement giant, Bunnings Warehouse. In FY 2020, BWP reported like-for-like rental growth of 2.4% and an occupancy rate of 98%. This led to it delivering a 1% increase in profit before gains on investment properties to $117.1 million despite the COVID crisis.

It also allowed the company to pay its distribution as normal. BWP paid shareholders a full year distribution of 18.29 cents per unit, up 1% year on year. Based on the current BWP share price, this represents a 4.5% yield.

Rural Funds Group (ASX: RFF)

Rural Funds is an agriculture-focused property group that owns a number of properties across five agricultural sectors. These high quality properties and are leased on long term agreements to some of the biggest operators in the industry such as wine giant Treasury Wine Estates Ltd (ASX: TWE). At the last count, Rural Funds’ weighted average lease expiry (WALE) stood at 10.9 years.

This gives management great visibility on its future earnings and has allowed it to provide guidance even during the pandemic. In FY 2021, the company intends to increase its distribution by 4% to 11.28 cents per share. Based on the current Rural Funds share price, this equates to a 4.75% yield.

More reading

• Why I would buy Woolworths (ASX:WOW) and these shares for a retirement portfolio
• Top ASX shares to buy in November 2020
• 3 ASX 200 shares that every investor should own
• How ASX investors can capture these ‘billionaire trends’
• Why market crashes are useful for buying ASX dividend shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. 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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On Monday the S&P/ASX 200 Index (ASX: XJO) started the week on a positive note. The benchmark index rose 0.4% to 5,951.3 points.

Will the market be able to build on this on Tuesday? Here are five things to watch:

ASX 200 expected to rise.

The Australian share market looks set push higher again on Tuesday following a rebound on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 17 points or 0.3% higher this morning. In late trade on Wall Street, the Dow Jones is up 1.1% and the S&P 500 is up 0.7%. However, the Nasdaq is struggling to bounce back and is currently down 0.3%.

Reserve Bank meeting.

The Reserve Bank is due to meet this afternoon to discuss the cash rate. The central bank is widely expected to cut rates at this meeting. The only real unknown is by how much. The economics team at Westpac Banking Corp (ASX: WBC) have forecast a cut down to 0.1%. Whereas the current cash rate futures have priced in an 84% probability of a cut to zero.

Gold price rises.

Gold miners including Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a good day after the gold price climbed higher. According to CNBC, the spot gold price is up 0.75% to US$1,893.40 an ounce. Investors have been buying gold after the pandemic worsened and ahead of a chaotic couple of days because of the U.S. election.

Oil prices rebound.

Energy shares such as Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) could be on the rise today after oil prices rebounded. According to Bloomberg, the WTI crude oil price is up 2.45% to US$36.67 a barrel and the Brent crude oil price has risen 2.4% to US$38.83 a barrel. This follows a tough week for oil prices last week which saw them drop to five-month lows.

Westpac given buy rating.

Analysts at Goldman Sachs have retained their buy rating but trimmed their price target on Westpac’s shares slightly to $19.50 following its full year results. Although the broker notes that Westpac is facing a number of revenue headwinds, it holds firm with its buy rating on valuation grounds. It points out that Westpac’s shares are “trading more than one standard deviation cheap[er] versus the sector on PPOP multiples (17% discount vs. 7% long-run average discount).”

More reading

• What is the best US election outcome for ASX shares?
• Westpac (ASX:WBC) reports FY20 result, ASX 200 up 0.4% today
• Why the CSR (ASX:CSR) share price is climbing today
• Top brokers just upgraded the ResMed (ASX:RMD) share price and this other ASX stock
• 3 ASX 200 shares that received broker upgrades last week

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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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According to one top broker, the Openpay Group Ltd (ASX: OPY) share price could be undervalued right now.

What did the broker say?

A note out of Shaw and Partners reveals that its analysts have recently retained their buy (high risk) rating and put a $5.00 price target on the buy now pay later provider’s shares. This price target implies potential upside of 92% over the next 12 months.

This follows the release of a first quarter update which showed that Openpay delivered a 245% jump in active plans to 1,060,000 and a 95% increase in total transaction value to $68 million.

Key drivers of this growth were a 145% lift in active customers to 372,000 and a 35% rise in active merchants to 2,229. In respect to the latter, the broker points out that one of Openpay’s new merchants was fast-growing online retailer, Kogan.com Ltd (ASX: KGN).

It also notes that while its merchant growth has slowed in recent quarters, this is largely due to the company targeting larger enterprises.

What else did the broker like?

Shaw and Partners was pleased with the company’s very low bad debts, which were down to a market-leading 1.6%. This compares to normalised industry levels of ~3%.

It was also pleased with its focus on the UK market and its performance in the country. It notes that the company is “pursuing [the] UK channel whilst other largely homogenous BNPLs pile into the US.”

In addition to this, it is pleased with the company moving into new vertical channels and the way it differentiates itself from Afterpay Ltd (ASX: APT).

It commented: “[Openpay is] moving into new vertical channels with agreements with Pentana (1,900 car dealer deployment) and MSL/Stack Sports (sports memberships). This compares to the crowded BNPL space where most of the incumbents, unlike OPY, merely replicate the APT model.”

What about the future?

Shaw and Partners is expecting a strong second quarter for FY 2021, particularly given its deal with Kogan and Woolworths Group Ltd (ASX: WOW).

“2Q21 shaping up to be potentially massive period given (1) underlying seasonal growth expected to be significant given Xmas trading; (2) recent wins from Kogan, JD Sports Australia and Just Group all contributing; (3) WOW deal now “live”; (4) Pentana / MSL still to be fully implemented; and (5) VIC re-opening,” it concluded.

More reading

• Will the Openpay (ASX:OPY) share price reverse on positive update?

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 Kogan.com ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Kogan.com 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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