The Afterpay Ltd (ASX: APT) share price is having another one of those days, hitting a new record all-time high.

Afterpay shares closed at $100.98 last week, and opened this morning at $101.01. But soon afterwards, Afterpay stepped on the gas, climbing as high as $106.39 a share. The share price has cooled a little since, but is still trading at $106.29 at the time of writing, up 5.23% for the day.

At this share price, Afterpay now commands a market capitalisation of ~$30.3 billion, incidentally more than Coles Group Ltd (ASX: COL) at $24.3 billion today.

But Afterpay shareholders would be used to this by now — 2020 has brought so many ‘new all-time highs’ that it’s becoming a little ‘ho-hum’. It seems ridiculous now, but Afterpay actually started 2020 at the now-modest share price of $30.41.

March famously saw this company dip as low as $8.01 a share. With the coronavirus-induced recession looming, investors who had previously ‘drunk the Kool-Aid’ on Afterpay were suddenly worried that a company that had never lived through a recession would be facing a wave of defaults.

However, those fears were quickly forgotten. The Afterpay share price rose more than 250% off of these lows between 23 March and 14 April. Today, the shares are up more than 1,200% since 23 March, and 244% year to date.

So what’s the latest with this buy now, pay later (BNPL) pioneer?

The latest from Afterpay

Everything just seems to have gone Afterpay’s way in 2020. Far from provoking a wave of defaults on Afterpay purchases, the coronavirus pandemic has seen more people than ever embrace BNPL. The coronavirus-induced abandonment of physical cash due to hygiene concerns hasn’t hurt either.

In May, Afterpay announced that the Chinese e-commerce giant Tencent Holdings had taken a 5% stake in the company (which would have already paid off handsomely for Tencent). Not only was this a vote of confidence on Afterpay, but the company also waxed lyrical about the expansionary potential this deal brought to the table. Here’s some of what Afterpay’s co-founders said at the time:

Tencent’s investment provides us with the opportunity to learn from one of the world’s most successful digital platform businesses. To be able to tap into Tencent’s vast experience and network is valuable, as is the potential to collaborate in areas such as technology, geographic expansion and future payment options on the Afterpay platform.

Afterpay’s numbers don’t lie

Back in August, Afterpay reported its earnings from the 2020 financial year (the 12 months ending 30 June). The company reported that underlying sales increased by 112% over the period to $11.1 billion (with a b). Of that $11.1 billion, $4 billion came from the United States, a lucrative key growth market for the company. That was up 330% over 2019’s numbers.

This all helped Afterpay to post a 73% rise in earnings before interest, tax, depreciation and amortisation (EBITDA) to $44.4 million.

But it’s not just the money coming in the door that’s exciting investors. Afterpay’s customer base is also growing at breakneck speed. Over the same period, Afterpay reported a 116% rise in active customers around the world to 9.9 million. Of that number, 5.6 million were Americans, a 219% increase.

After stellar entrances to the US, United Kingdom, and European markets, Afterpay is now focusing on expanding into Canada, Singapore and Indonesia, amongst other countries.

Banks and indexes

In addition, Afterpay announced a partnership with the major ASX bank Westpac Banking Corp (ASX: WBC) back in October. The partnership will result in Afterpay offering Westpac-backed transaction and savings accounts and other banking tools to its Australian customers through its platform. This offering is set to be rolled out soon.

Finally, Afterpay shares are likely benefitting from the company’s recently announced inclusion into some major indexes. As my Fool colleague James Mickleboro covered today, Afterpay is set to join both the ASX 50 and the ASX 20 come 21 December. Any index or fund manager that covers these indexes will have to add Afterpay accordingly. This kind of institutional money can mean significant buying pressure for Afterpay shares.

All of these factors have aligned in 2020, resulting in massive momentum for the Afterpay share price.

More reading

• Why I’m sticking with my Afterpay shares: fundie
• ASX 200 up 0.55%: Altium update, Afterpay jumps, NAB given ACCC approval
• ASX bank shares surge after NAB (ASX:NAB) gets green light to sell MLC
• Why Afterpay, Alcidion, Eagers Automotive, & Pacific Smiles are storming higher
• These are 10 of the best performing ASX tech shares of 2020 so far

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post ASX stock of the day: Afterpay (ASX:APT) hits yet another new all-time high appeared first on The Motley Fool Australia.

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

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

Can you name a company that’s developing drugs for rare inherited illnesses, blocked arteries, and vaccines for infectious diseases you’ve never heard of? Since you clicked on this article, you already know that I’m talking about Moderna, (NASDAQ: MRNA) and not some pharma giant like Pfizer.

That’s right, by late 2025 Moderna should have its hands full with its efforts to move a selection of innovative treatments through their final clinical trials. In fact, its shareholders might be even more bullish about the company than they are today, with its coronavirus vaccine candidate on the verge of regulatory approval. Accurately predicting the future is never easy, but this company’s growth trajectory seems like it could accelerate wildly over the long term, though there might be a few slow patches along the way.

How durable will coronavirus vaccine revenue be?

Any forecast about Moderna’s future has to start by addressing the potential scale of its coronavirus vaccine sales. It still needs to get an emergency use authorization from the Food and Drug Administration (FDA) for mRNA-1273, which is not guaranteed. After that, hopefully, would come full FDA approval. But if the vaccine confers long-term immunity, its sales will be limited. Once most people are protected against the coronavirus, the market will largely dry up. On the other hand, if the vaccine provides a smaller window of protection, the company will have a reliable cash cow for quite some time.

Right now, there’s only enough evidence to say that mRNA-1273’s protection lasts for at least three months, even though it appears to be 94.1% effective at preventing infection. Effectiveness like that bodes well for Moderna’s other projects that use the same scientific approach, harnessing the power of messenger RNA. But until time delivers more complete answers, the conservative assumption for investors to make is that the protection the vaccine provides will be both effective and durable, so individuals only need one set of doses.

Some vaccine developers such as AstraZeneca have committed to selling their COVID-19 vaccines at cost while the pandemic continues. Moderna hasn’t. So it’s possible that the market will react favorably to news that might seem negative, such as if the vaccine is found to provide immunity only for a season or two. Either way, the company is still going to make a large profit in the short term.

Pipeline progress will make Moderna into a monster

Moderna’s development pipeline will be significantly more mature in late 2025 thanks to the progress of trials and the influx of revenue that should hit in 2021. This year so far, it has taken $1.2 billion in revenue from customer deposits for its vaccine, not to mention $232.7 million in revenue derived from public funding for the development effort.

Several of its vaccine programs, among them its cytomegalovirus vaccine, may be on the verge of commercialization at that point — if they aren’t on the market already. In particular, the company’s influenza vaccine will be closely watched, especially if it demonstrates superior efficacy compared to the current market leaders. But as always in the pharma sector, there’s no guarantee that any given treatment will earn regulatory approval. Most don’t.

That said, Moderna’s other projects that could be approaching completion in five years’ time will be even more promising in terms of providing value to shareholders. Its coronary heart disease (CHD) treatment AZD7970, being developed in conjunction with AstraZeneca, aims to treat the leading cause of death in the U.S. Given that existing CHD therapies like Lipitor have raked in billions of dollars, if AZD7970 proves effective, it too could be a blockbuster. Expect Moderna’s stock price to balloon if the project nears completion — the revenue it could make with this drug might surpass its coronavirus vaccine sales in the long run.

Management also has its sights on the oncology market. The “personalized cancer vaccine” currently in development is one of its most ambitious projects, and it’s being investigated in phase 2 clinical trials for head and neck squamous cell carcinoma. Today, the market for cancer vaccines is worth an estimated $4.6 billion, but by 2025, it may be worth as much as $10.1 billion. Eventually, personalized cancer vaccines may be used to treat a wider variety of cancers. If the company’s first program pans out, Moderna will be positioned as a leader in personalized medicine. But, it’ll have to split the proceeds evenly with Merck, its collaborator. More importantly, it’ll also initiate a handful of follow-up trials to investigate whether the vaccine is effective against other cancers.

The new revenue streams from oncology products would both enhance its value and provide more fuel for its broader research and development efforts. But, again, all of that rests on how the ongoing trials turn out, so investors should temper their expectations.

Competitors will challenge Moderna in the mRNA market

Moderna isn’t the only company that’s working on mRNA medicines. The coronavirus vaccine Pfizer and BioNTech developed uses that technology too, for example. Now that the approach has been proven effective in the context of infectious diseases, these companies could prioritize developing additional rival products. That could threaten Moderna’s profit margins, and it might crimp its revenue growth.

Nonetheless, in five years, I anticipate Moderna will be sitting on more than one gold mine. Investors looking for an opportunity to buy should take note: Don’t expect this stock to be trading at a discount anytime soon.

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

More reading

• The most popular coronavirus stock may lose half its value by 2023
• Is Moderna stock a hold?
• CSL (ASX:CSL) share price on watch after hints of ‘far more robust’ vaccine
• Which ASX travel shares performed the best in November? 
• 3 key advantages Moderna holds over Pfizer and AstraZeneca

Alex Carchidi 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.

The post Where will Moderna be in 5 years? appeared first on The Motley Fool Australia.

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

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Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Tribeca Investment Partners’ Alpha Plus portfolio manager Jun Bei Liu reveals why her fund will be staying the course with Afterpay and how investing is an art, not an exact science.

 

The Motley Fool: What’s your fund’s philosophy?

Jun Bei Liu: The fund’s called Tribeca Alpha Plus. It is a long-short fund. We have the ability to buy good quality companies and at the same time we can short companies where we feel the share price would fall. The fund size is about $830 million, and it has been around for over 15 years.

We’re very much focused on that fundamental research where we look to engage with companies and talk to the management and the like. What’s also unique about this fund is that we’re very return-oriented. 

We’re not a buy-and-hold type of fund because we do believe return is generated through active investing, especially where we can short as well. When we do make 100% in the stock within a short timeframe, we will look to take profits and then we will look to move to the next business where they will give us the special amounts of return. 

So very much active and follow where the return is.

MF: So there’s no predetermined mindset for growth or value shares, it’s just whatever opportunities are available?

JBL: That’s a really good question. We are very much neutral. So I like to buy, be it a growth company or a value company or somewhere in between, [with] as much flexibility as possible to generate returns for our investors. 

I find it interesting in the marketplace, [often] I think that “value” term is very ill-defined. For example, as recently as March when the market had a sell-off, pretty much all companies were “value”. We thought Afterpay Ltd (ASX: APT) was a value company at $10.

It’s all about whether you get the future earnings correct and then estimate where you can make money. Because as an investor I always want to buy things cheaper than what I can sell them for. 

MF: That’s a good point — back in March, pretty much everything was value.

JBL: That’s right. What’s interesting, you speak to a lot of fund managers and you would know that most of the Australian market really do struggle with growth companies, they just struggle with in terms of how do you value them and what is the right multiple and what to do. Whereas if you compare that with the American investors, they’re quite different because they’re used to that being part of tech in the index, and then they know how to value those businesses. 

It’s just the maturing process. Our investors are becoming more sophisticated now and actually now, we have a lot more tech and growth companies listed. So hopefully we’ll see more of them, more innovation, and then we’ll get better at valuing those businesses.

COVID-19 crash 

MF: How has COVID-19 affected the fund?

JBL: Our fund has performed incredibly well. Our [benchmark] index is the S&P/ASX 200 Index (ASX: XJO). It’s managed to pull almost a flat performance for this calendar year, [despite] the tremendous volatility and uncertainty in the middle of the year. We have outperformed the index close to 9% by this calendar year. So we’re very, very pleased with the results. 

This market, because of the volatility and because there’s uncertainty and different earning expectations for the positive recovery, it’s actually representing a phenomenal environment for active management. I think next year will be the same because the positive recovery will be very different for different companies and sectors, and so that means there will be a lot of earnings hits and misses. So if you get your stock right, you can actually generate a lot of returns.

Buying and selling 

MF: What do you look at closely when considering buying a stock?

JBL: There’s a number of things. It all depends on where the stock falls into. 

If we look at a company that generates really high growth, we look for the addressable market and we look for their execution. Execution as in terms of earnings momentum, new customer gains or new merchant adds… That execution is very important. That gives us confidence that they will be able to capitalise on the overall addressable market opportunity. 

However, for businesses such as Treasury Wine Estates Ltd (ASX: TWE) for example, clearly we look for very different things. Because of the trade conflict or the tariffs being posted by China and the like, the share price pretty much collapsed. You can’t value a business like that on the earnings at this point. 

So what we look at, in that case, is essentially ‘what do you pay for’? 

We worked out [that] we became very comfortable in terms of the asset backing… The majority of value is sitting in premium wine, and we know these are highly sought after by consumers globally and we know this inventory will carry value really well, and they will be able to sell those. At the same time, I’m not really paying for ongoing earnings really, not paying for a brand franchise at all. 

So this is on the value end, where we look at ‘what am I paying at the current price’? I can work out my downside is reasonably limited and while there’s uncertainty about the trade [conflict with China], I don’t need it to resolve for me to take a position in this company. 

So yeah, it’s quite different depending on the sector, but ultimately I like brand. I like a company with a unique business franchise. I like a company that has a pull strategy where its customers, its suppliers needed this business to generate returns for everyone involved. If something’s special and unique, a strong business franchise is very important. 

Brand is something that is incredibly difficult to build, and if you have a longstanding brand, it becomes incredibly valuable in today’s world. And especially, if you talk to any luxury brands, it’s just almost impossible for competition to build a brand from ground up.

So these are what we’re looking for. Balance sheet is important for some businesses. It’s important because it ensures you have enough capacity to support your growth. And for some mature businesses, cash flow is very, very important as well, because that just demonstrates the clear earnings that’s been coming through.

MF: Rather than having a single fixed formula, context has a lot to do with your decisions, it sounds like.

JBL: Yeah, that’s right, because we find investing is an art. 

If you’re not flexible and just have a fixed formula, it doesn’t work with a dynamic world like today where we have experienced so many unprecedented things like the pandemic or the negative interest rates or that unprecedented monetary support and fiscal support and money printing. 

I think it’s a really interesting point because in the olden days, people used to look to book value. But that was during a time when book value was incredibly important because there were a lot of businesses dominated by heavy assets. So that’s why that’s the value. But today’s world, because of technological advancement, most of the CapEx are actually spent on intellectual property or intangibles. 

The world is changing. You have to be very adaptable and really find what’s going to be the future and those intellectual properties, they’re not going to disappear. And those combined CapEx on those intangibles are increasingly becoming more valuable. You’ve got to adapt and move with the world.

MF: What triggers you to sell a share?

JBL: When we love a stock, we do a lot of research and then we understand the value proposition for the customer. The biggest question is always ‘why do you exist’? But when we do sell, we have seen some cracks where we ask that question. 

When a company’s unable to deliver on its previous promises, and not because of short-term disruption. Because we can look through the short-term disruption because things go wrong in businesses and then good companies pull through and then they become stronger and better. 

But sometimes, it’s more structural issues that have changed for the business. Say the industry dynamic is changing quite rapidly, especially say it’s a high-growth business and the like, industry dynamics changed, new entrants have gone into the market with aggressive behavior or they’re taking more share. 

Over time, when we start seeing changes in the underlying business assumptions for our investment thesis, we do question. And then that’s when we make the decision to sell.

But of course, sometimes when we have made returns, because as I told you we’re an active investor, when we generate enough returns, we do look to trim. We will take some profits and move it to the next one that’s going to give us double all of that.

Because ultimately we manage a portfolio with limited capital. So we have to recycle the capital to keep delivering and outperforming the market.

What’s coming up?

MF: Where do you think the world is heading at the moment?

JBL: I think the world is actually looking pretty good. It’s probably the best time in many years, in terms of economics, in terms of corporate earnings and the like. Of course, right now it’s not — but the best time as in looking forward the next 12 to 18 months. 

Yes, we are in a recession. The pandemic has affected earnings globally, has affected all of that. But the corporates have rebounded their earnings now. The lowest of the earnings we saw was really in August this year. If anything, very encouragingly, we are seeing earnings upgrades compared to earnings downgrades has been the best in 20 years almost. It’s been incredible. 

So interestingly this is actually creating an earnings growth profile or economic growth profile for the next couple of years of very strong growth, which we haven’t seen for a very long time, to be honest, here in Australia. 

Normally the equity market does very well supported by earnings growth and earnings upgrades. 

Putting that aside, interest rates are low and all the central bankers have talked about not increasing the interest rates any time soon. That’s good for the market because that ensures enough liquidity in the market to support their value. 

Also you’ve got the government support in place. Yes, in Australia, March we may see some fading, but there’s still fiscal support around the world to support employment. For our market, it’s good to see our housing market is doing quite well. Iron ore price is pretty good. So that just means fiscally, there will be a much better fiscal position. And then we think there’ll be more targeted government spend to continue that support for the economy. 

So all in all, I think the equity market looks positive for the next couple of years. It is a good time to be fully invested. But look, I think ultimately returns will be dictated by active management, which is on the stock level rather than by the overall index.

MF: Is your fund fully invested or do you have some cash in hand?

JBL: Oh I don’t hold cash in hand. I hold probably, I don’t know, probably hold 50 basis points cash in hand… Because I always believe cash is not a productive asset. You’re not carrying any interest rate. 

My mandate is to be fully invested in the equity market, but the fact is that also I can short as well. So I can always find cash if I need to buy something. I’m very positive on the equity market — I just believe there’s opportunities everywhere. I don’t need a strong equity market to find those opportunities because they can be short or they can be long.

Overrated and underrated shares

MF: What’s your most underrated stock at the moment?

JBL: We talked about Treasury Wine and its points… We just believe there’s a lot more upside in this business given its brand, given this strong brand franchise. 

I don’t know when we’ll move past the trade issue. However, I do believe that we can make cheap money. This company is just not going to stay here at this price for very long.

MF: Yeah, it can’t get any worse for them, can it.

JBL: That’s how we saw it. The downside is very limited. 

70% of its value now is sitting in those wines, finished wine sitting in the cellar, and the rest are those farmlands in Napa Valley and South Australia. China [dispute] might still be going on for some time… But look, it’s a global brand. 

If anything, it might be actually really great for this business — it might be a pinnacle moment for this business to actually really diversify. Previously China had such strong demand and they haven’t had enough stock to supply other reaches — and now they do. 

So once China returns, this will be a truly global business.

MF: What do you think is the most overrated stock at the moment?

JBL: The truth is I don’t really want to get into talking about which company I short. You don’t make any friends. 

I think in terms of overrated sectors, in November, there was a massive rally across some of the travel agents. Now we do like some stocks in travel, but we just thought these stocks have rallied very hard and they’re no longer cheap. They used to be cheap. 

But at this point, we do need the earnings to return pretty quickly to really justify the current share price. Those earnings, we’re probably not going to see international travel until mid next year according to Qantas Airways Limited (ASX: QAN). 

Domestic will probably return sooner. However, international is pretty important and it just means that earnings expectation may be now already too high for the next calendar year. 

Looking back

MF: Which stock are you most proud of from a past purchase?

JBL: Yeah, well, very hard to talk about this year and not talk about Afterpay. We actually have been a shareholder of Afterpay for a very long time and we’ve been a supporter of the business. And gosh, it’s been a rollercoaster ride, this stock. 

When the world was falling apart in March, we had seen an incredible amount of opportunity. We absolutely saw it as a value opportunity at the time. And then we essentially bought more of the stock around that base when it hit around $10. [Ed: it is now $105.99]

We’ve done very well. We just thought it’s an incredible business. One thing about those high-growth innovative businesses or an innovator of a sector is that many of them fail and rarely do you get one that actually makes it. And if they do, they’re your 10 baggers. 

So Afterpay is the one that we watched for many years and followed for a long time. They have really shown the validity of its business model and its franchise and the value it’s offering its customers, retailers, consumers is incredible. Their ability to also build into other markets… is incredible. This is real.

They have invented this sector, and then this is a sector where you actually see a lot of corporate and institutions’ interest now into that space. We take a very long-term view with this business and short term sell-off is really providing buying opportunities. 

Yeah, that’s the one we’re very proud of.

MF: Are you concerned at all about the low barrier to entry for potential rivals?

JBL: No, not at all. But this is how industry matures. Interestingly, we actually haven’t seen this taking place for so long because not many companies have invented their own area, their own niche. Afterpay invented this space and then, because of how successful they are, they attract competitors. 

But also don’t forget, this is a star in an industry generating an incredible amount of return in certain markets. What this does is that it actually attracts a lot of institutional interest and publicity. It actually helps to grow the sector and helps to mature the sector.

This is just the natural curve of the competition coming, but the market is enormous. The US, yes, they’ve gone there. They’ve done really well. It’s already bigger than Australia. But in the US, it’s still at 1% of the market share for that whole industry. And then there’s other markets that are still very, very new. 

My view is that there’s still a massive runway before you’re actually hitting the maturity points where you start seeing the return get grinded away.

MF: Have you sold off any of it or are you still holding on?

JBL: Holding on, absolutely. We do take some profit trim as they go because, obviously, we only have limited capital to move into other things, but it’s absolutely still one of the top holdings in the fund.

Today, there will be an announcement that they will go into the ASX 50. Afterpay is a real business. This company has demonstrated its business model. It is a little bit different from the rest of say, Zip Co Ltd (ASX: Z1P) and Sezzle Inc (ASX: SZL) and the others.

If you look at Afterpay on the earnings space, it’s actually never been cheaper because it’s growing into its earnings now. And of course, the share price has done well — you’ll see a bit of stabilisation at the current level. 

But look, you don’t buy these stocks for the next six months, right? You don’t buy this stock for the next six months of earnings. You buy it because it’s a global business. That’s how I see it.

MF: Has COVID-19 changed your investment methods going forward?

JBL: I think COVID-19 has really shown the incredible human spirit, to be honest — how positive the equity market can be. Actually how efficient the equity market can be. 

In terms of changing investment strategy? Look, we haven’t because, as I told you before, we’re highly adaptable. So we just go after wherever the return is. So by the end of March, we were buying retailers. We’re buying tech. 

And then we’re buying Sydney Airport Holdings Pty Ltd (ASX: SYD) and the like. And right now, we look at the opportunities that we still see. We do see an incredible amount of opportunity in those blue chips that share price has yet to return to the previous levels. 

So for us, it’s more stock-led. We think that COVID-19 has really definitely put structural pressure on some of the sectors, whether it’s e-commerce or the way we shop, the way we eat or how we visit supermarkets. Things are changing. I think some of them will remain. 

I don’t expect Zoom Video Communications Inc (NASDAQ: ZM) to disappear completely when we return to normal because all of us have found how efficient it is. Travel will return, absolutely. But I just think that the level of corporate travel might be different because it’s just much more efficient to do it over Zoom.

Human spirit needs will still return to normal, but some sub-segments may be impacted more structurally.

More reading

• ASX 200 up 0.55%: Altium update, Afterpay jumps, NAB given ACCC approval
• ASX bank shares surge after NAB (ASX:NAB) gets green light to sell MLC
• Why Afterpay, Alcidion, Eagers Automotive, & Pacific Smiles are storming higher
• What’s lifting the Transurban (ASX:TCL) share price today?
• Why the Fortescue (ASX:FMG) share price is up 28% in December

Tony Yoo owns shares of AFTERPAY T FPO, Qantas Airways Limited, and Sydney Airport Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Zoom Video Communications. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Zoom Video Communications. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why I’m sticking with my Afterpay shares: fundie appeared first on The Motley Fool Australia.

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The Zelira Therapeutics Ltd (ASX: ZLD) share price is breaking new records today. This comes after the company announced a new licencing agreement with Alternative Solutions LLC.

Alternative Solutions is a licenced grower, manufacturer and distributor of medical cannabis products in the District of Columbia (Washington DC), United States.

During late morning trade, the Zelira share price hit an all-time high of 14 cents. However, its shares have since pulled back slightly, up 16% to 12 cents at the time of writing. In comparison, the All Ordinaries Index (ASX: XAO) is edging 0.4% higher to 6,911 points.

What did Zelira announce?

According to the release, Zelira advised it has entered an exclusive licencing deal with Alternative Solutions to expand market presence for its HOPE products.

Under the terms of the agreement, Alternative Solutions will manufacture and distribute HOPE products in Washington DC. The expanded medical cannabis market will see sales begin in the second quarter of 2021.

In return, Zelira will receive an upfront fee and ongoing royalties from product sales within Washington DC. The company did not provide any further details regarding the financial aspects of the contract.

Currently, Washington DC has an agreement with 32 other states within the country for approved medical cannabis programs. The mutual exchange allows patients who are registered in the authorised states to legally buy medical cannabis in Washington DC.

In addition, Zelira holds a licencing agreement with Ilera Healthcare LLC and Advanced Biomedics LLC for Pennsylvania, and Louisiana, respectively.

Management commentary

Zelira managing director and CEO Dr Oludare Odumosu commented on the licencing agreement:

Our partnership with Alternative Solution, a leader in the Washington DC market, is a strategic move in line with our mission of working with market leaders in approved markets to expand access to HOPE across the USA. We are particularly excited about this partnership because Washington DC is a gateway state with over 24 million visitors passing though the US capital in a year. Washington DC’s reciprocity is a strategic move that allows approved patients from 32 states to legally access HOPE in DC.

Alternative Solutions CEO Mr Matt Lawson-Baker added:

Alternative Solutions is thrilled to be partnering with Zelira to bring the HOPE product line to the Washington DC medical cannabis market. Providing access to this medicine in the Nation’s capital will give many families and patients the treatment they deserve through a legal regulated medical cannabis program.

About the Zelira share price

The Zelira share price has performed strongly over the year, gaining more than 500% for patient shareholders. At the time of writing, Zelira shares are up by 16.16%, giving the company a market capitalisation of $117 million.

More reading

• Why the Botanix (ASX:BOT) share price is soaring up today
• ASX 200 Weekly Wrap: ASX 200 hits a 6! Thank iron ore
• Hydrix (ASX:HYD) share price falling despite positive AGM update
• Vulcan (ASX:VUL) share price rises 20% and breaks new record. Here’s why.
• Why ‘ASX dividend king’ Soul Patts (ASX:SOL) is a top income share for 2021

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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With so many shares to choose from on the ASX, it can be hard to decide which ones to buy.

The good news is that brokers across the country are doing a lot of the hard work for you.

Three top shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Appen Ltd (ASX: APX)

According to a note out of Citi, its analysts have retained their buy rating but slashed their price target on this artificial intelligence solutions company’s shares to $32.60. This follows the company’s guidance downgrade last week after its largest clients switched their focus to other projects because of COVID-19. While this was disappointing and ended its earnings upgrades streak, Citi remains positive on the company. It believes it is well-placed to benefit from the higher spending on artificial intelligence and has opportunities to expand its addressable market. The Appen share price is trading at $25.38 this afternoon.

BHP Group Ltd (ASX: BHP)

Analysts at Ord Minnett have retained their buy rating and lifted their price target on this mining giant’s shares to $50.00. The broker made the move after increasing its iron ore price forecasts notably higher due to current supply constraints and strong demand from China. This is expected to lead to stronger than expected free cash flow for BHP in the near term. In light of this, it is forecasting a ~$2.39 dividend in FY 2021. Based on the current BHP share price of $42.64, this represents a fully franked 5.6% dividend yield.

Wesfarmers Ltd (ASX: WES)

A note out of Credit Suisse reveals that its analysts have retained their outperform rating and lifted the price target on this conglomerate’s shares to $55.83. The broker has been looking at the household goods sector and believes the market is underestimating the boost to spending in this area due to more working from home. This has led to Credit Suisse lifting its sales forecasts for the Bunnings and Officeworks businesses. The Wesfarmers share price is fetching $51.03 on Monday.

More reading

• These are 10 of the best performing ASX tech shares of 2020 so far
• 2 of the best ASX tech shares to buy and hold
• ASX 200 Weekly Wrap: ASX 200 hits a 6! Thank iron ore
• Top brokers name 3 ASX shares to buy next week
• Westpac (ASX:WBC) tips Australian dollar to hit 80 US cents in 2021

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen Ltd. The Motley Fool Australia owns shares of Wesfarmers 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 Pilbara Minerals Ltd (ASX: PLS) share price remains in a trading halt at $0.88 per share today after the company announced a $240 million equity raising to support a large acquisition.

Why is the Pilbara Minerals share price in a trading halt?

All eyes are on Pilbara Minerals after the ASX 200 miner entered a trading halt on Friday.

The company has received creditor approval to raise capital for its planned US$175 million acquisition of Altura Project. Pilbara Minerals recently entered into a share sale agreement with Altura Mining Limited and its administrators to acquire all shares of Altura Lithium Operations Pty Ltd (ALO).

Pilbara’s deed of company arrangement (DOCA) received ALO creditors approval with all parties signing off. That has cleared the way for Pilbara Minerals to acquire the neighbouring site for US$175 million.

The acquisition is contingent on Pilbara raising A$240 million in equity to support the transaction. That has put the Pilbara Minerals share price in a trading halt ahead of the planned equity raising.

The $240 million comprises a $119 million placement to Australian Super and Resource Capital Fund VII L.P. alongside a $121 million accelerated non-renounceable entitlement offer.

Pilbara’s 1-for-7.6 fully underwritten offer will see the miner issue 337 million new shares. The group has proposed price of A$0.36 per new share as part of the equity raise.

What is the Altura Project?

The Altura Project produces hard rock spodumene concentrate next to Pilbara Minerals’ existing Lithium-Tantalum Project. The operation produced 181,263 wet metric tonnes of spodumene concentrate in the year ended 30 June 2020.

Pilbara believes the acquisition will enhance its scale and provide tangible synergies of A$18 million to A$27 million per year. On top of that, management is hoping for greater flexibility, speed to market and increased market relevance.

The Pilbara Minerals share price has rocketed 183.9% in 2020 and boasts a market capitalisation of $1.95 billion.

More reading

• Are ASX lithium shares a hot commodity right now?
• Why the PIlbara Minerals (ASX:PLS) share price is charging higher
• The 13 ASX shares that could have doubled your money in 2020
• Are ASX lithium shares making a comeback?

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

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The Access Innovation Holdings Ltd (ASX: AIM) aka Ai-Media share price is surging higher today after the company announced two new acquisitions in the United States. The company also released a full investor briefing on the news. 

At the time of writing, the Ai-Media share price is trading up 3.59% at $1.01.

Ai-Media provides live and recorded captioning, transcription and translation services. Its technology combines artificial intelligence (AI) and human expertise to deliver speech-to-text as accurately as possible.

Right now, Ai-Media is the biggest captioning provider in the Australian market and has a growing international presence, capturing more than 1 million minutes of live and recorded media every month.

Details of the acquisitions

The company’s new acquisitions – Caption IT and CaptionAccess – are strategic within the US market.

Caption IT is based in Wisconsin and offers real-time, offline and post-production captioning, transcription and translation services. The company generates most of it’s revenue from corporate customers. White label product sold via resellers in the technology space are a large part of this revenue. 

CaptionAccess is based in Illinois and is owned and managed by people who are deaf and hard of hearing. It provides communication services to the government, corporate and education sectors. Revenue comes mainly from enterprise customers in these sectors and particularly in the university space, where it has 23 clients.

Key terms

The key terms of the acquisition agreements include the following points:

• Total purchase consideration for the acquisitions, on a cash and debt free basis, is US$1.9 million comprising approximately US$1.6 million in cash and US$0.3 million in AIM shares with the number of AIM shares issued to be determined based on the 30-day VWAP to 11 December 2020 (consideration shares).
• The consideration shares will be subject to the three-year escrow agreement applying to board and senior management, as set out in the Ai-Media prospectus.
• 10% of the total purchase consideration will be retained in escrow for a 12-month period to cover any breaches of representations and warranties. There are no earnout amounts associated with the acquisitions.
• The acquisitions are expected to be completed on 4 January 2021 and will be funded by existing cash reserves.

Rationale behind the acquisitions

The rational behind this move was to grow revenue and expand the company’s presence in North America.  Together, the acquisitions represent complementary additions to Ai-Media and help to achieve a number of goals for the company. Caption IT has a “top tier” corporate customer base and CaptionAccess is well positioned to service the education space. 

These two companies will directly help Ai-Media to expand its high-quality live captioning services in the US market. According to Ai-Media, the US is a fast growing market for these services and one that is directly in their target zone. The acquisitions are consistent with strategic goals to pursue consolidation opportunities that can complement the existing technology platform.

Ai-Media technology will help to leverage the already strong growth recorded by these new companies.

Earlier this year, Ai-Media completed another acquisition of Alternative Communication Services (ASC) to further enhance the US footprint. These latest acquisitions continue the expansion efforts.

Caption IT and CaptionAccess are expected to produce revenue of around US$2.2 million this calendar year. This is to be added to AI-Media’s revenue for six months of FY21.

This revenue increase is incremental to the current revenue produced by Ai-Media, which will account for more than 95% of the total, even after this acquisition. It’s complementary, but not majorly altering of the bottom line. AI-Media is expected to report around A$43.8 million in FY21. As this is incremental revenue, it’s not yet known what kind of long term affect it might have on the AI-Media share price. 

Management commentary

Ai-Media CEO and co-founder Tony Abrahams said North America now made up around 50% of the company’s total revenue.

Both CaptionAccess and Caption IT have been built on foundations of high-quality service delivery to loyal enterprise customers with values and cultures that are strongly aligned with Ai-Media.

Following our successful integration of ACS in North America in recent months, I am excited that Ai-Media can provide the infrastructure and scalable technology platform to enable these great businesses to continue to accelerate their growth in the years ahead.

We continue to see strong demand for Ai-Media’s services across all regions, in particular in live enterprise where COVID-19 restrictions have accelerated the adoption of video as a key communication tool for business and the education sector.

Caption IT Founder and CEO Maureen DeRuyter added:

Following years of strong growth with top tier enterprise customers, we knew we needed to partner with a great technology business to provide the scale to continue to grow. Ai-Media’s demonstrated success with the recent ACS acquisition has given us enormous confidence to further enhance the excellence in service and quality that Caption IT is known for.

CaptionAccess founder and CEO Bill Graham said:

As a proud deaf business owner with Disability Owned Business Enterprise (DOBE) Certification, it was important for me to partner with a business that shares our community roots and our values, as well as focusing on delivering the highest quality services to our customers who rely on us to participate equally in education and at work.

Ai-Media share price

The Ai-Media share price has been on a downward slope since listing on the ASX in September this year. Shares listed at $1.23 and have slipped as low as $0.95 before rallying today. 

More reading

• Up 109% in 2020: Is it too late to buy Mineral Resources (ASX:MIN) shares?
• ASX retail shares in the spotlight: Cashed up consumers unfazed by “uneven and bumpy” rebound
• Crown Resorts’ (ASX:CWN) woes continue on latest lawsuit
• Why Emerge Gaming, Flight Centre, Medical Dev International, & Tyro shares are dropping lower
• Why the Botanix (ASX:BOT) share price is soaring up today

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

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The Mineral Resources Limited (ASX: MIN) share price has been among the best performers on the S&P/ASX 200 Index (ASX: XJO) this year.

Since the start of the year, the mining and mining services company’s shares have more than doubled in value and are up 109%.

Is it too late to invest?

According to a note out of Goldman Sachs, its analysts believe that all the good news is factored into the Mineral Resources share price and it is now fully valued.

This morning the broker retained its neutral rating but lifted its price target by a massive 30% to $34.50.

This compares to the current Mineral Resources share price of $34.56.

What did Goldman Sachs say?

The Goldman Sachs commodities team has just upgraded their forecasts for a number of metals.

It has lifted its iron ore price forecasts by ~30% to US$120 and US$95 per tonne for 2021 and 2022, its long-run forecasts for lithium spodumene by 7% to US$570 per tonne, and lithium hydroxide by 18% to US$13,000 per tonne.

The latter two upgrades are due to an improving supply/demand outlook and higher implied industry utilisation rates. This is being driven by an upward revision to the broker’s global auto team’s electric vehicle adoption and sales assumptions.

Given Mineral Resources’ exposure to both iron ore and lithium, these upgrades have had a major impact on Goldman Sachs’ earnings estimates.

It commented: “The iron ore and lithium forecast changes have driven a significant uplift to earnings and valuation for MIN. Our 12-mth TP is up +30% to A$34.5/sh, with FY21/22/23 EBITDA up +35%/+53%/+32%.”

However, given its strong share price rise, the broker is holding firm with its neutral rating for the time being. Though, it has acknowledged that a strong iron ore price could make it change its mind.

“MIN appears fully valued, trading at 1.19xNAV (US$62/t long-run Fe) and pricing in US$75/t long-run Fe, and we retain our Neutral rating. However with ongoing iron ore price strength, we see likely consensus earnings upgrades over the next few quarters based on the significant operating leverage in MIN’s iron ore business.”

“If spot iron ore and FX (US$150/t, 75c AUDUSD) held for the remainder of FY21, our EBITDA and EPS forecasts would be +16%/+21% respectively to A$1,942mn/A602cps, and MIN would generate an additional c. A$200mn in free cash flow above our base case,” it concluded.

This might be one for investors to keep a close eye on.

More reading

• Quarterly rebalance: Afterpay (ASX:APT) added to ASX 20, Kogan (ASX:KGN) joins the ASX 200
• Strong growth potential for Mineral Resources (ASX:MIN) share price: fundie
• Top ASX shares making record all-time highs
• The sector that’ll explode in February: fundie
• Why the Afterpay (ASX:APT) share price and these ASX stocks could get a boost next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Australia’s great economic rebound is coming.

In fact, it’s already underway.

But don’t expect smooth sailing.

Not for the economy. And not for the S&P/ASX 200 Index (ASX: XJO).

But that doesn’t mean there won’t be great ASX investment opportunities in 2021.

Keep your eyes on the horizon

If you’ve spent any time out at sea, you’ll know one of the best ways to avoid seasickness is to keep your eyes on the horizon. That’s because the swells will move the boat you’re on, but the horizon stays constant. And our brains are wired to appreciate that sense of consistency.

If you’re a long-term investor, the horizon is your goal. And you’re better off ignoring the daily and weekly ups and downs the share markets will throw your way.

Ronald Temple is the head of US Equity at Lazard Asset Management.

Envisioning a choppy transition period over the next 6 months as developed nations begin to shift out of the pandemic investment environment that’s dominated so much of 2020, Temple recommends investors take that long-term view.

He adds that investors should focus “on bottom-up fundamentals for each individual security, while also avoiding the instinct to move too far out on the risk curve.”

Temple points to two major forces in a sort of tug of war with share prices, one pushing them higher the other lower:

On the positive side, the US election has passed with a market-friendly outcome and three COVID-19 vaccines appear to be within weeks of initial distribution, with more likely to follow. Typically, these events would be the signal investors need to shift out of defensive work-from-home beneficiaries into cyclical recovery plays.

However, major developed countries across the Northern Hemisphere are facing new record levels of COVID-19 infections, spurring new economic lockdowns and increasing the risk that many companies, particularly small businesses, might not make it to the other side of this pandemic.

Investors face a timing conundrum, indicating yet again that it is likely to be darkest before the dawn.

In Australia, that dawn looks closer than it does for most of Europe and the Americas.

Consumers ready to do the heavy lifting

Australia, alongside a handful of other nations like New Zealand, has been exceptionally successful at squashing the coronavirus spread.

While those efforts saved thousands of lives and many more illnesses, the months of severe lockdowns, particularly in Victoria, delivered plenty of economic pain.

But, provided Australia manages to keep the virus in check until vaccines are widely distributed, that pain could fade faster than hoped heading into 2021.

Shane Oliver is the head of investment strategy and chief economist at AMP Capital. He expects Australia’s economy will see another quarter of solid recovery to end the year. However, with Europe and the US struggling with record infection rates, their economies are likely to slow or contract with renewed lockdown measures.

Addressing the Federal Government’s Mid-Year Economic and Fiscal Outlook, due out later this week, Oliver says (quoted by the Australian Financial Review):

[Australia is] likely to see an upgrade to the growth outlook and a downgrade to the budget deficit projections reflecting stronger revenue flows and slightly less emergency spending than expected in the Budget… All things being equal this is relatively positive for the Australian share market and the Australian dollar.

Australia’s economic recovery into 2021 may be “uneven and bumpy”, as RBA governor Philip Lowe cautioned earlier this month, but consumers don’t seem bothered.

Consumer confidence in December is at 10-year highs, having climbed 4-months in a row.

Household savings levels are also at multi-year highs. And there’s plenty of pent-up demand from consumers who haven’t been able to spend on travel, dining out, or indeed shop in many brick-and-mortar locations.

With that in mind, the final weeks of December are expected to see a surge in retail spending.

According to Bloomberg:

The average Australian is expected to spend A$893 ($675) on Christmas this year for a cumulative total of A$17.3 billion, according to a late November survey by Finder.com – a comparison website — with greater spending on gifts than the 2019 survey signaled…

Analysis from economists at National Australia Bank Ltd, using their Cashless Retail Sales Index, suggests that national retail sales rose 3% in November from the previous month.

ASX 200 retailers cheer on the reopening

The reopening in Australia and New Zealand is welcome news to everyone. But few will be cheering louder than the owners and operators of some these nations’ largest shopping centres.

Like Scentre Group‘s (ASX: SCG) shareholders.

The retail property group owns and operates Westfield shopping malls across Australia and New Zealand. So, when the viral lockdowns saw shoppers forced to stay at home, Scentre’s share price collapsed.

From 12 February through to 24 March, Scentre Group’s share price dropped 63%. Since that low it’s rebounded 94%, leaving shares down 28% year-to-date.

In intraday trading today, Scentre’s share price is edging higher, up 0.2% at the time of writing.

More reading

• Top brokers name 3 ASX shares to sell today
• Which ASX 200 sectors performed the best in November? 
• Aussie companies blast ‘knee-jerk’ COVID-19 border closures

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. 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 problems for casino operator Crown Resorts Ltd (ASX: CWN) continue to mount. This comes after it was reported that a class action lawsuit has been launched by a group of Crown shareholders who are alleging “misleading and deceptive” conduct by the company.

At the time of writing, the Crown share price has edged just over 1% higher to $9.82 despite the news report.

More about the lawsuit

The class action lawsuit has been launched by law firm Maurice Blackburn on behalf of a group of Crown investors.

The law firm is pushing for compensation for shareholders who lost money as the Crown share price fell in the wake of a series of revelations.

The Crown share price has fallen by over 18% this year with $500 million of market value being lost on 19 October alone. This occurred when it was revealed the casino was being investigated for potentially breaching money laundering laws.

The latest lawsuit claims that Crown engaged in misleading or deceptive conduct from December 2014 through to October 2020, telling investors it had effective controls in place to comply with anti-money laundering (AML) laws. This is despite the company conducting its affairs “contrary to the interest of members” in the period, according to the claim.

In a novel legal approach, the claim has asked the court to order Crown to buy back shares from affected investors at “fair value.”

Other problems facing Crown

This is not the first class action lawsuit made against Crown by legal firm Maurice Blackburn. Earlier this year, the law firm also launched a $1.3 billion lawsuit on behalf of Crown shareholders.

That lawsuit claimed the Crown share price dove by 14% in October 2016 after it was revealed 19 Crown employees were arrested and charged with gambling-related crimes in China.

The casino operator is also currently facing an inquiry by the New South Wales Government following an investigation by Austrac, which revealed the casino had paid illegal junket operators to attract high rollers from mainland China. Austrac is the Australian government intelligence agency set up to monitor money laundering, organised crime, and fraud.

That inquiry is ongoing, and will decide whether the company is fit to hold a license in NSW. The opening of Crown’s Sydney casino has also been delayed until February 2021, pending the outcome of the inquiry.

Last Friday, Austrac released its risk assessment of junkets operating in Australia’s gaming sector. The assessment reported that junkets posed a high level of criminal risk and harm to the community.

How has the Crown share price performed in 2020?

The Crown share price has fallen by 18.3% in 2020. Crown shares began the year at $12.02 before dropping to around $6 in March, as COVID-19 lockdown restrictions forced the closure of the company’s venues. The Crown share price has since recovered to today’s levels, but is still a long way off its 52-week high of $12.71.

The company currently commands a market capitalisation of around $6.6 billion.

More reading

• Crown Resorts (ASX:CWN) share price falls as Austrac calls junkets high risk
• Here’s why the Crown (ASX:CWN) share price is pushing higher today
• Crown Resorts (ASX:CWN) share price is up 6% despite Fitch downgrade
• ASX 200 rises again on Monday
• Why the Crown (ASX:CWN) share price is dropping lower again today

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Crown Resorts 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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