The Qantas Airways Limited (ASX: QAN) share price has been a positive performer on Friday following the release of its annual general meeting presentation.

In afternoon trade the airline operator’s shares are up 2.5% to $4.54.

Listed below are three key takeaways from today’s annual general meeting that I think investors ought to know about:

The reinvention of Qantas.

Noting that the IATA estimates that global travel demand could take up to four years to fully recover from the pandemic, Qantas’ CEO, Alan Joyce, spoke about the need to reinvent the airline following COVID-19.

He commented: “The only antidote when you’re faced with less revenue is to lower your costs. We have identified $15 billion in cost savings over the next three years, mostly through reduced flying activity. We’re also targeting $1 billion in ongoing cost improvements from Financial Year 23.”

The chief executive advised that Qantas has stopped cash spending on sponsorships, is renegotiating arrangements with travel agents, and reviewing its ground handling operations. The latter could help save up to $100 million a year.

Though, he stressed that the airline needs “to do this without losing sight of the things that make the Qantas Group an Australian icon and one of the world’s best airlines.”

International travel in 2021.

Qantas’ Chairman, Richard Goyder, revealed his frustration that certain domestic borders remain closed, but was encouraged by the New Zealand travel bubble and potentially others to come.

He said: “By contrast, the lifting of some restrictions with New Zealand is very encouraging. So, too, is the potential for travel bubbles with parts of Asia. Both Qantas and Jetstar are keeping a close eye on new markets that might open up as a result of these bubbles – including places that weren’t part of our pre-COVID network.”

“By early next year, we may find that Korea, Taiwan and various islands in the Pacific are top Qantas destinations while we wait for our core international markets like the US and UK to re-open. We’re already doing this domestically – adding new destinations that suddenly make sense – and it’s the kind of flexibility we need to make the most of any cash positive opportunities in the year ahead,” Mr Goyder added.

Domestic recovery behind schedule.

CEO, Alan Joyce, advised that Qantas was expecting the group domestic business to be operating at about 60% of pre-COVID levels by now. However, the continued border closures mean capacity is now below 30%.

This delay has resulted in a $100 million negative impact on earnings for the first quarter of FY 2021. It will also have an impact in the second quarter as well. However, Mr Joyce remains confident the recovery is coming and Qantas is well-placed to ride out the storm.

He commented: “Essentially, this is a timing issue. We know the upswing will materialise – just later than planned. Importantly, we have the liquidity to manage this. And, because our cash flow from continuing operations is positive before one-offs like redundancies, we could continue at this level of flying for a very long time – if we had to.”

“Assuming Queensland opens to New South Wales in coming weeks, we expect Group Domestic capacity to reach up to 50 per cent by Christmas,” he added.

Finally, Mr Joyce believes Qantas is well-positioned to grow its market share in the domestic market. He explained: “Over time, our domestic market share is likely to increase organically from around 60 per cent to around 70 per cent, as our main competitor changes its strategy.“

More reading

• Why Adore Beauty, BlueScope, Qantas, & Webjet shares are charging higher
• 5 things to watch on the ASX 200 on Friday
• 5 ASX 200 events to watch for this week
• 5 ASX 200 shares that just received share price upgrades
• Leading brokers name 3 ASX shares to buy today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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While a lot of focus has been put on the share price gains of successful ASX e-commerce shares, the companies that support them have garnered fewer headlines.

Nonetheless, alongside the rapid rise of e-commerce, the demand for quality logistics facilities to store and transport online goods is growing strongly.

Singapore’s Mapletree Logistics Trust said the rapid growth of e-commerce, particularly in Queensland, was a core reason behind its decision to invest $114 million in a Brisbane distribution centre.

As quoted by the Australian Financial Review (AFR) Mapletree noted:

In Queensland, e-commerce logistics distribution and warehousing has shown strong growth of 5.2 per cent annually, the highest of any state nationally. The COVID-19 pandemic has also spurred a major uptick in online shopping, particularly in the food, beverage and grocery sector. Consequently, surging sales of major supermarket players as well as consumer demand for fast delivery are translating to higher demand for prime logistics space with good connectivity.

For ASX investors, there are several real estate investment trusts (REITs) that hold a portfolio of logistics facilities that could stand to benefit from the growing demand for quality warehouse space.

Among them is APN Industria REIT (ASX: ADI).

What does APN Industria REIT do?

APN Industria is managed by APN Funds Management. The Australian REIT (AREIT) owns a portfolio of 32 quality industrial and business park assets located in Sydney, Melbourne, Brisbane and Adelaide. which is valued at $826 million.

Industria’s portfolio, valued at $826 million, provides tenants with practical spaces to meet their business needs.

How has the APN Industria share price been performing

APN Industria’s share price was trending steadily higher for 5 years, right up until the 21 February panic selling began. That saw it drop from its all time high of $3.21 per share all the way down to $1.74 on 23 March, a loss of 46%.

The share price has regained 52% from that low, and is up again today, but remains down 9% year-to-date. That compares to a 6% loss for the All Ordinaries Index (ASX: XAO).

But with the booming e-commerce trade driving demand for quality facilities, I believe APN Industria could retest its all-time high share price as we head into 2021. The AREIT also pays a 6.5% annual dividend yield, unfranked.

More reading

• Looking to invest in ASX real estate shares? Read this first
• Could industrial REITs be the best ASX shares to buy for dividends?

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Lark Distilling Co Ltd (ASX: LRK) share price is flying high today on the release of its first quarter FY21 update.

The news has sent its share to an all-time high of $1.55, up 14.8% during afternoon trade. In comparison, the All Ordinaries Index (ASX: XAO) has dropped to 6,369 points, down 0.2%.

Let’s see how the whisky producer performed for first quarter of the new financial year.

Strong Q1 performance

For the period ending September 30, Lark reported a robust result, despite restricted trading conditions related to COVID-19.

Net sales growth increase to $2.28 million, representing 78% of year-on-year growth (YoY). This was underpinned by its online division which jumped to a record 400% YoY. The limited release program of its Sherry Sherry, Wolf Release, and Rum Cask contributed to the standout performance.

The overall positive result was offset by a decline in the hospitality segment. Revenue fell to roughly $300,000 due to state-wide lockdown. However, it is anticipated the reopening of borders on October 28.

Total value of whisky under maturation was $107 million, reflecting an 8% lift on the prior period. The company focused its sales and marketing efforts on the launch of Lark Symphony No1, and recruited a sales representative. The new appointment will seek to drive sales and improve Lark’s service of the independent liquor trade.

The company had a healthy cash on hand balance of $12.5 million, supported by the capital raise undertaken in September. Most of the proceeds will be used to fund the inventory build of Lark’s whisky under maturation before FY23.

Nomination award

Lark has been nominated as ‘worldwide whisky producer of the year’ in one of the industry’s most illustrious awards. The International Whisky and Spirits Competition winner will be announced on 18 November in London.

Commenting on the nomination, Lark managing director Geoff Bainbridge said:

It is an incredible achievement for a little distillery at the bottom of the world to step onto the global stage and bring home two golds, five silvers and the coveted nomination for Worldwide Whisky Producer of the Year. We are immensely proud of the quality of product we produce here in Tasmania and are honoured to be recognised by the global industry and the International Whisky and Spirits Competition in 2020.

Lark share price summary

The Lark share price has performed solidly in the past 6 months, gaining 94% from the 78 cents reached in April. At a market capitalisation of $95 million, and a raft of upbeat announcements, the sky’s the limit.

More reading

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• Why the Carbon Revolution (ASX:CBR) share price soared 14% higher today
• The ResApp (ASX:RAP) share price is soaring 10% today. Here’s why.
• WISR (ASX:WZR) share price jumps higher on strong trading update
• Why did the Forbidden Foods (ASX:FFF) share price tumble 5% today?

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It isn’t just Adore Beauty Group Limited (ASX: ABY) shares that have landed on the ASX on Friday following the completion of an IPO.

Also hitting the bourse today has been the CleanSpace Holdings Limited (ASX: CSX) share price. And what a start it has had!

At the time of writing the CleanSpace share price is trading at $7.16. This is a massive 57% higher than its listing price of $4.41.

The CleanSpace IPO.

CleanSpace is a Sydney-based company which designs, manufactures, and sells workplace respiratory protection equipment (RPE) for healthcare and industrial end markets.

It was founded in 2009 by a team of biomedical engineers and launched its first respirator for use in industry in 2010.

CleanSpace’s IPO raised a total of $131.4 million. Though, just $20 million of this was primary capital through the issue of 4.5 million new shares at $4.41 per share.

The remaining $111.4 million is for existing shareholders to realise part of their long-term pre-listing investment in CleanSpace. Approximately 90% of the shares held by existing shareholders will now be escrowed voluntarily with a staged release for up to 23 months.

Based on the 77 million shares on issue and its share price gain today, CleanSpace now has a market capitalisation of $550 million.

What will it spend the proceeds on?

Management notes that the company has funded its operations and growth from shareholders’ funds, government loans, and operating cashflow in the past.

It now intends to fund the business and its growth plans partially from the proceeds of the offer and from operating cashflow.

Those plans involve the company growing its current position and markets while positioning for, and exploring, a broad range of additional growth opportunities.

It is also aiming to build on the adoption of CleanSpace products in the healthcare and industrial markets, expand awareness, enter new international markets, and continue to expand and advance its product portfolio.

More reading

• Why the Iluka (ASX:ILU) share price nearly halved today
• Are these 2 ASX commodity shares ready to ride 2 booming trends?
• Is the Megaport (ASX:MP1) share price in the buy zone today?
• The 10 ASX stocks worst hit by a Biden US presidential election win
• ASX 200 down 0.3%: NAB announces provisions, BlueScope impresses, Webjet higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Australia’s top brokers have been busy adjusting their estimates and recommendations 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:

CSL Limited (ASX: CSL)

According to a note out of Credit Suisse, its analysts have retained their outperform rating but trimmed the price target on the biotherapeutics company’s shares to $325. The broker notes that CSL is now offering upwards of US$700 per month for plasma donations in an effort to overcome the tough market conditions caused by the pandemic. This could weigh on immunoglobulin margins due to higher production costs. Nevertheless, the broker remains positive on the company’s medium term growth prospects and stays firm with its outperform rating. I agree with Credit Suisse and would be a buyer of CSL’s shares.

Megaport Ltd (ASX: MP1)

A note out of UBS reveals that its analysts have upgraded this leading elastic interconnection services provider’s shares to a buy rating with an improved price target of $16.45. This follows the release of its first quarter update earlier this week. UBS notes that Megaport’s new ports growth was strong during the three months. As this is a leading indicator of growth, it bodes well for the future. It also believes the structural shift to cloud will continue and expects Megaport to benefit from it. I think UBS is spot on and Megaport would be a good option for investors looking for exposure to the cloud.

Webjet Limited (ASX: WEB)

Another note out of UBS reveals that its analysts have retained their buy rating and $4.95 price target on this online travel agent’s shares. This follows the release of a trading update at its annual general meeting. UBS is pleased with its cost cutting and believes it leaves the company well placed for profitable growth once travel markets recover. While I think UBS makes some good points, I’m not in a rush to invest just yet.

More reading

• Is the Megaport (ASX:MP1) share price in the buy zone today?
• ASX 200 down 0.3%: NAB announces provisions, BlueScope impresses, Webjet higher
• Why Adore Beauty, BlueScope, Qantas, & Webjet shares are charging higher
• 1 ASX 200 share to buy before an effective COVID vaccine announcement
• 5 things to watch on the ASX 200 on Friday

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 MEGAPORT FPO. 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 Webjet Ltd. The Motley Fool Australia has recommended MEGAPORT FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Iluka Resources Limited (ASX: ILU) share price crashed by nearly half on Friday, but investors shouldn’t panic.

The ILU share price fell over 47% to its lowest point in five years of $5.23 during lunch time trade. This makes the mineral sands miner the worst performer on the S&P/ASX 200 Index (Index:^AXJO) by a country mile!

The loss is far worse than the 4% to 5% drop in the Southern Cross Media Group Ltd (ASX: SXL) share price and Regis Resources Limited (ASX: RRL), which are the second and third worst ASX 200 performers today.

Iluka share price fall doesn’t worry investors

But shareholders of Iluka aren’t worried. The reason behind the sharp drop is linked to the spin-off of its royalties business.

The Deterra Royalties (ASX:DRR) share price started trading on the ASX today with Iluka’s shareholders receiving one DDR share for every one ILU share they hold.

The DDR share price is currently trading at $4.77 and if you combined the value of both stocks, shareholders are actually sitting on a small gain.

When down is really up for the ILU share price

That’s a good outcome given that mining stocks are mostly trading lower. The BHP Group Ltd (ASX: BHP) share price shed 1.4% to $35.96 and the Newcrest Mining Limited (ASX: NCM) share price tumbled 2.6% to $30.77 at the time of writing.

The divestment is creating value for the Iluka share price as Deterra is worth more as a stand alone.

Deterra is the largest mining royalty company. It will receive royalty payments from BHP’s South Flank iron ore operations in Western Australia, reported Reuters.

Deterra plans to pay out all of its net profit as dividend to shareholders. But it isn’t ruling out acquiring other royalties generating assets – particularly outside of iron ore for diversification purposes.

What’s next for the Deterra share price

“Although we won’t be limiting our geographic scope, we will be more likely to be focused on opportunities in Australia than offshore,” Reuters quoted Deterra’s chief executive Julian Andrews as saying.

“We will have a fairly broad mandate so we won’t be restricting the types of commodities that we look at,” he said.

More often than not, streaming companies have tended to focus on precious metals.

Should you buy shares in Deterra?

Iluka received a royalty payment of $85 million from BHP in 2019. This is expected to increase substantially, thanks to the high iron ore price and BHP’s planned expansion of the project. Deterra’s royalties are based on a percentage of the ore produced.

The Deterra spin-off couldn’t come at a better time for ASX investors. Record low interest rates and the COVID‐19 pandemic have made it harder to find stocks with attractive and sustainable yields.

I think the 2021 outlook for the Iluka share price and Deterra share price is positive.

More reading

• Are these 2 ASX commodity shares ready to ride 2 booming trends?
• Is the Megaport (ASX:MP1) share price in the buy zone today?
• Why Iluka, Link, Resolute, & Temple & Webster shares are tumbling lower today
• The 10 ASX stocks worst hit by a Biden US presidential election win
• ASX 200 down 0.3%: NAB announces provisions, BlueScope impresses, Webjet higher

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Iluka Resources Ltd., and Newcrest Mining Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Buddy Technologies Ltd (ASX: BUD) share price is bucking the wider selling trend today, up 3.4% in afternoon trading. This comes following the company’s late morning ASX announcement that initially saw shares leap 7%.

Meanwhile the All Ordinaries Index (ASX: XAO) is sliding, down 0.3%.

Today’s gains see Buddy’s share price up 53% year-to-date. Shares have now rebounded 510% from 16 March, following a 67% drop during the wider COVID market rout.

What does Buddy Technologies do?

Founded in 2006, Buddy provides cloud-based technology to make its customers’ work and living spaces smarter via Buddy’s IoT (internet of things) connected devices.

Buddy trades under the LIFX brand and is a leading provider of smart lighting solutions. The company’s Wi-Fi enabled lights are currently used in nearly 1 million homes and sold in over 100 countries.

The company’s platforms include Buddy Cloud, allowing access to storage and data from any environment, and Buddy Ohm. Buddy Ohm is intended to improve operations, savings and sustainability by providing real time building operational data.

What’s behind the Buddy share price climb?

This morning Buddy Technologies announced that its LIFX Clean light has passed United States efficacy testing. The tests were conducted by US firm, Q Laboratories, an FDA registered testing facility that specialises in disinfectant efficacy testing.

LIFX Clean is the world’s first antibacterial and germicidal smart light. The results exceeded managements expectations, showing the installing the lights in ceiling fixtures will “have a material kill rate on bacteria at kitchen of bathroom counter height”.

The tests revealed a kill rate of 75% of the tested organisms at a distance of 122 centimetres.

Regulatory compliance has now been passed for Australia, New Zealand, the United States, the United Kingdom and the European Union. The US, Australian and New Zealand markets are slated for launch in December this year.

Addressing the results, Buddy Technologies CEO, David McLauchlan said:

When we launched LIFX Clean, we pitched the product as being ideal for near-field surface and surrounding air disinfection. As our expanded testing has shown, we now have a demonstrable use case of LIFX Clean in ceiling lights cleaning typical height surfaces. This is expected to open up entirely new sales opportunities and provide appealing point of sale messaging to our major retail partners.

At the time of writing, the Buddy share price is sitting at 6.1 cents per share.

More reading

• Why the Buddy (ASX:BUD) share price is up today

Motley Fool contributor Bernd Struben 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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For long-term investors, investing in ASX commodity shares can be a bit dicey. That’s because the price of commodity stocks tends to rise and fall in step with the price of the commodities they grow or dig from the ground. And commodity prices are generally much more volatile than those of services or finished goods.

Interestingly, the share prices of companies that provide the proverbial picks and shovels – the logistics – required to source, store and transport commodities to their end users, are prone to similar ups and downs as the commodity shares they service.

Atop that, agricultural shares are subject to weather conditions. And miners are exposed to the quality and life expectancy of their mines, alongside their ability to uncover fresh resources. In the latter case, when they get it right and uncover ‘the motherlode’, stand back and watch their share prices rocket. Likewise, if they get it wrong and uncover little but dirt, their share prices are likely to plummet.

Just pull up the long-term price chart of most any ASX hard or soft commodity shares. You’ll inevitably see boom periods and bust periods for the listed miners and agricultural companies and the shares that service them. Both of which may last several years or more.

With that in mind, the 2 shares we look at below might not be ones you hold for life, but rather 6 to 12 months before reassessing.

So what was that about 2 booming trends?

Growing demand and tightening supply

First up is copper. Or ‘Dr Copper’ to be precise.

If you’re not familiar with this term, copper is said to have a PhD in forecasting the outlook for the world economy. That’s because it’s used extensively in infrastructure and building construction for plumbing, roofing and wiring, among others. When the global economy is in growth mode, the price copper tends to reflect this.

Not only is copper resistant to corrosion, it’s also highly conductive. That makes it a core element in electric vehicles and home battery setups.

As the world increasingly moves towards sustainable energy sources, copper miners should benefit. More immediately, developed nations the world over are launching, or preparing to launch, huge new infrastructure programs to lift their economies from their COVID-19 driven recessions.

This has already seen demand in China grow more than 30% year-on-year as the nation engages in a fresh building boom. And China doesn’t have a lot of domestic copper supply, making it reliant on imports from Australia, among other nations.

And the growth in demand comes as the supply tightens. Global copper production is forecast to fall more than 1% due to mining disruptions caused by the pandemic.

No surprise then that the price of copper, currently at US$6,923 per tonne is near 2-year highs. Not only is the price up 50% from its 23 March 2020 lows, it’s up 12% since 2 January, well before anyone had heard of the coronavirus.

The booming copper price has been a boon for OZ Minerals Limited (ASX: OZL) shareholders.

Oz Minerals owns and operates the Prominent Hill copper-gold mine and the Carrapateena advanced exploration copper-gold project, both in South Australia. It also has operations in Brazil and an exploration project in Sweden.

Oz Minerals’ share price is up 167% from the 23 March lows, more than 3 times the increase in the price of copper. Year-to-date the share price is up 51%. By comparison the S&P/ASX 200 Index (ASX: XJO) is down 8% in 2020.

Now you won’t see another 167% share price leap over the next 7 months. But with strong demand for copper and a sliding global supply, I believe Oz Minerals is well-placed to ride this booming trend into 2021.

Moving on…

Selling ‘picks and shovels’ to Australia’s agricultural industry

After suffering through a difficult drought, Australia’s agricultural industry is enjoying the fruits of above average rainfall across much of the east coast. This is forecast to result in the biggest wheat harvest in 4 years.

As Bloomberg reports:

New South Wales is now set for a record season, according to IKON Commodities, which recently lifted its national forecast to over 30 million tons, more than double last year… Barley crops are also set to benefit from the rains, with output poised to rise more than 25% from last year, IKON said.

GrainGrowers chair Brett Hosking says, “It’s looking really exciting at the moment on the east coast of Australia. Even if they weren’t coming off a drought, they’d be looking at a really good harvest.”

That’s great news for the farmers, their communities, and an Australian economy that can use any boost it can get.

From an investors’ perspective, one way you can gain exposure to the forecast surge in wheat and barley output is via Graincorp Ltd (ASX: GNC).

The company has an integrated supply chain, starting from accumulation and storage which links up to road and rail freight options as well as port facilities. In other words, a lot of GrainCorp’s revenue comes from storing and transporting grains.

The GrainCorp share price is up 27% from its 25 March lows, and down 1% year-to-date.

With a bumper crop set to come in on the east coast, I believe the current share price of $3.68 per share could represent a good entry point to ride this second booming trend.

More reading

• Is the Megaport (ASX:MP1) share price in the buy zone today?
• The 10 ASX stocks worst hit by a Biden US presidential election win
• ASX 200 down 0.3%: NAB announces provisions, BlueScope impresses, Webjet higher
• 5 things to watch on the ASX 200 on Friday
• Coca-Cola Amatil (ASX:CCL) share price jumps on M&A speculation

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Adore Beauty Group Limited (ASX: ABY) share price has been a very strong performer after completing its IPO this morning.

At one stage today, the online beauty retailer’s shares were up as much as 10% to $7.42.

The Adore Beauty share price has since dropped back from there and is currently fetching $7.00, which is up 3.7% from its IPO price of $6.75.

The Adore Beauty IPO.

This morning Adore Beauty listed on the Australian share market having raised $269.5 million at a price of $6.75 per share through its IPO.

This gave the company a market capitalisation of $635.3 million, which certainly is a far cry from its humble beginnings.

Adore Beauty was created in a garage in Melbourne 20 years ago and funded by a $12,000 loan from family.

Today, the company is expecting to generate revenue of $158.2 million in calendar year 2020, with gross profit of $50.8 million and net profit after tax of $3.5 million.

Based on the latter, the company’s shares have a forward price to earnings ratio somewhere in the range of 185x. This is a notable premium to Kogan.com Ltd (ASX: KGN) and Temple & Webster Group Ltd (ASX: TPW).

What is Adore Beauty’s business model?

Adore beauty generates its revenue through online sales of third-party beauty and personal care products to Australian and New Zealand consumers.

Over the last few years the company has attracted and retained a large and active customer base. Management notes that it has grown over 278% over the past four years to over 590,000 Active Customers today.

Pleasingly, the company still has a long growth runway. Frost & Sullivan estimates that beauty and personal care products sales in Australia (both online and offline) reached $10.9 billion in 2019.

Furthermore, the research firm estimates the online penetration rate of the beauty and personal care market in Australia is just 7.3%. This lags international markets such as the United States and the United Kingdom, with estimated online penetration levels of 15.4% and 12.7%, respectively.

Adore Beauty believes that online penetration of the beauty and personal care market in Australia will continue to increase, and that COVID-19 may accelerate the rate of online penetration going forward.

What now?

The company intends to use the proceeds of its IPO to support its growth strategy and future growth opportunities.

This includes growing its brand awareness, strengthening its offering, and expanding into new markets and adjacent categories.

Time will tell if it can live up to the high expectations that are implied by its high PE ratio.

More reading

• Why Iluka, Link, Resolute, & Temple & Webster shares are tumbling lower today
• Why you should pay attention when management buy (or sell) ASX shares
• Why it makes sense to invest in ASX shares
• MyDeal (ASX:MYD) share price rockets 120% higher following IPO
• Why Aerometrex, Healius, Megaport, & Temple & Webster shares are pushing higher

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 and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group 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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This year had been shaping up as a breakout for ASX technology company Megaport Ltd (ASX:MP1). Despite challenges posed by COVID-19, Megaport reported total revenues of $58 million for FY20, an uplift of 66% year-on-year. And, after executing two successful capital raisings during the year, Megaport ended FY20 with a cash position nearing $170 million.

In navigating the tough market conditions in FY20, Megaport seemed like it had the cash reserves to execute on its growth strategy in FY21.

However, the company’s share price tells a slightly different story. After surging to a new 52-week high of $17.67 in late August, the wind has gone out of its sails more recently. And, after the release of the company’s September quarter cash flow report on Wednesday, its share price was savaged. It dropped almost 15%, making it the worst-performing stock on the S&P/ASX 200 Index (ASX: XJO) that day.

What does it all mean?

So, is this a signal that it’s time to jump ship? Or is it instead a chance to snap up shares in a growing company for a bargain?

First, let’s take a look at what Megaport actually does, and then we’ll review the details of the recent quarterly update.

Megaport develops customisable ‘on-demand’ network services to corporate clients. It helps clients expand their network connectivity beyond the limits of traditional infrastructure by leveraging cloud-based technology. It also gives companies the flexibility to manage their bandwidth usage: customers can scale up their bandwidth when demands are high, and then reduce consumption during off-peak times. This allows companies to be more efficient with their data usage, cutting operational costs.

Expanding network connectivity and managing bandwidth usage has been a high priority for many companies this year, as COVID-19 restrictions have forced them to adopt remote working arrangements. So, it’s no real wonder that Megaport enjoyed significant growth in FY20.

Is there a problem?

Well, the real issue for Megaport might simply be that it has grown too fast. Short-term investors, who had become accustomed to certain levels of growth, felt let down by the figures in Megaport’s most recent quarterly report. But, for longer-term investors, there was actually plenty to like in the update.

Although quarter-on-quarter revenues only grew a modest 2% to $17.3 million, Megaport still reported a record quarterly increase in customer numbers. Most of that growth came from the US, where the company has been rapidly expanding its presence. Of the 19 new data centres the company added globally during the quarter, 10 were in the US.

Additionally, the company increased its investment in intellectual property due to the development of a new product, Megaport Virtual Edge, which it plans to launch in the second half of FY21. The Virtual Edge will expand Megaport’s network capabilities and increase security and performance for customers.

What’s ahead for the Megaport share price?

Despite short-term investors jumping ship, Megaport remains an exciting company to watch over the next 12 months for those with a longer-term outlook.

It is executing on its expansion plans and rapidly increasing customer numbers. Monthly recurring revenues in the second quarter should benefit from investments made during the September reporting period, which could signal that a share price recovery is just around the corner.

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Rhys Brock owns shares of MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. 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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