Fintech is a broad term that refers to any company that applies technology to the world of finance.

Some of the products and services offered by these types of companies include payment processing, online and mobile banking and online financial services, to name a few.

As you may already be aware, there is one particular sub-category of the fintech sector that’s taken the ASX by storm in 2020 – and that’s buy now, pay later (BNPL).

In fact, the top 6 best performing ASX fintech shares in 2020 are dominated by these BNPL players.

Let’s take a look at each one of these top performing fintech shares, and find out why they fared so well in 2020.

ASX fintech share	1-year share price performance	Share price (at the time of writing)	Market capitalisation
1. Afterpay Ltd (ASX: APT)	295%	$118.77	$33.8 billion
2. Sezzle Inc (ASX: SZL)	200%	$6.23	$0.6 billion
3. Splitit Ltd (ASX: SPT)	79%	$1.22	$0.5 billion
4. Pushpay Holdings Ltd (ASX: PPH)	72%	$1.72	$1.9 billion
5. Zip Co Ltd (ASX: Z1P)	46%	$5.30	$2.9 billion
6. Douugh Ltd (ASX: DOU)	467%	$0.17	$0.1 billion

1. Afterpay

No need for introductions here. The Afterpay share price has returned almost 300% for investors over the year.

But if you haven’t followed this market darling closely, you might not be aware it achieved this feat the hard way, with Afterpay shares plummeting as low as around $8 back in March. If you had purchased Afterpay shares in March and held on to them until today, your return would have been a staggering 1,400%!

So how did the company do it? 

Afterpay transacted a whopping $11.1 billion for the FY20 full year, an increase of 112% year on year. The company followed this up with a strong first quarter of FY21 with underlying sales growth of 115% to $4.1 billion. Its active customers also grew globally, rising 98% to 11.2 million within the year.

According to Afterpay , its customer base – which consists mainly of Gen Z and Millennials – provides it with a strong tailwind going forward. Afterpay revealed that Gen Z and Millennials represent 36% of the total retail spend in Australia. By 2030, that is expected to grow to 48% as more of Gen Z enter the workforce. In the US, that share of retail spend will also increase from 32% to 48%.

The company has also been actively expanding globally. In 2020, Afterpay launched its services in Canada, followed by the acquisition of Pagantis – a European BNPL player which will open the company’s path to Spain, France, and Italy. Furthermore, Afterpay recently established an office in Singapore, paving the way for its entrance into Asia.

2. Sezzle

Sezzle is another BNPL player that has seen a meteoric rise in its share price in 2020. The Sezzle share price has risen by around 200% over the year.

How does Sezzle work? A shopper who chooses Sezzle instead of a credit card at checkout pays one quarter of the purchase price immediately. The shopper then pays the remainder across three interest-free installments. Sezzle makes money not from the shopper, but from the retailer, which pays the company a fee for each transaction. 

November represented the highest monthly underlying merchant sales (UMS) performance since the company’s inception. Sezzle reported UMS of US$113 million for the month, which represents an increase of 188.5% compared to the prior corresponding period. 

The company also said it has added 1 million new customers since February, with its total active customers now surpassing the 2 million mark.

Sezzle believes payment instalments will be a megatrend going forward. The company expects that in the United States, at some point in 10 years, “we’re going to go shopping and see instalment prices on the shelf”.

3. Splitit

The Splitit share price has gained almost 80% over the year.

The company’s business model deviates slightly from the traditional BNPL model. It enables customers to pay for purchases with an existing credit card by splitting the cost into interest and fee-free monthly payments, without additional registrations or applications.

Unlike Afterpay, which has a reasonably modest average order size, Splitit is being used for higher value items. Management notes that its average order value remains above $1,000.

Splitit achieved record merchant sales volume (MSV) during the Black Friday and Cyber Monday promotional period in late November. Over that holiday shopping event, the company reported MSV of US$15.3 million. This was an increase of 216% on the same period a year earlier.

This led to gross revenue for the quarter of US$2.4 million, which was up 318% on the prior corresponding period.

Splitit has recently announced a partnership with Quickfee, an Australian company that provides payments services to accountants and legal firms. The company said this partnership could grow its addressable market by 650,000 accounting and law firms in the US alone.

4. Pushpay

At the time of writing, the Pushpay share price is up by around 72% over the year.

Pushpay is a donor management platform provider that has been growing its share of the US church market at a rapid rate over the last few years. It also sells the Church Community Builder software, a subscription-based church management platform that enables management of various church activities.

Pushpay is therefore doing business in a very niche market. You may initially think of this as a small niche, but the market size in donation giving reached US$124 billion for 2018 in the US alone.

This has led to the company delivering stellar revenue and operating earnings growth.

At the end of the first half of FY21, Pushpay increased its earnings guidance for the year ending 31 March 2021 to between US$54 million and US$58 million. This will be more than 115% higher than FY 2020’s earnings before interest, tax, depreciation, and ammortisation (EBITDA) of US$25.1 million.

Broker Goldman Sachs is also positive on the ASX fintech share and believes it is well-positioned for growth. The broker has a conviction buy rating and $10.35 price target (now $2.59 after Pushpay’s 4 for 1 share split) on its shares.

5. Zip

The Zip share price has not seen the triple digit rise achieved by its competitor Afterpay, but it has risen by a very respectable 46% over the year.

In FY20, the BNPL player delivered an impressive 175% jump in revenue to $253 million.

The company has continued that strong form, announcing recently that it continues to deliver record results across all regions. Zip said its transaction value of $577.1 million in November was a record, which is up more than 100% year on year. Based on this, Zip’s transaction value is now annualising at almost $7 billion.

Its US brand, Quadpay, also saw significant transactions growth in November, and total customers have now reached 5.3 million.

In December, Zip successfully completed a $120 million capital raising to fuel its growth in existing countries, explore new markets and further product expansion. 

6. Douugh

With the smallest market capitalisation of the 6 companies, I’ve put Douugh last on the list. This is despite this ASX share producing a superior share price return of over 467% since its initial public offering (IPO) in early October.

Douugh listed at an oversubscribed IPO share price of 3 cents. 

The company believes the current business model operated by banks and neo-banks is outdated, and aims to disrupt the status quo with a radically new banking model.

Douugh’s core product is its AI-powered smart phone app and bank account that allows its customers to take control of their financial wellness. Significantly, the company entered into a global partnership with Mastercard Inc in 2019.

In November, Douugh announced its official launch in the US after a successful 18-month beta trial. Its go-to-market growth strategy will be its utilisation of Google’s AI-powered ad bidding platform to target customers. 

More reading

• Why Afterpay, DEXUS, Integrated Research, & Regis Healthcare are dropping lower
• ASX 200 down 0.8%: Big four banks and tech shares drag the market lower
• What’s in store for the Afterpay (ASX:APT) share price in 2021? 
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises 0.5%

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Eddy Sunarto 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 Alphabet (A shares), Alphabet (C shares), and Mastercard. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Mastercard, PUSHPAY FPO NZX, and Sezzle Inc. 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 Euro Manganese Inc. (ASX: EMN) share price looks like it will ring in 2021 over 180% higher than 12 months ago. At the time of writing, the yearly gains are posted at 182%.

The small Canadian mining endeavour has set out to mine manganese in the Czech Republic via its Chvaletice Manganese Project. According to management’s latest discussion and analysis, “The company’s goal is to produce high-purity manganese products in an economically, socially and environmentally-sound manner.”

So how come the Euro Manganese share price shot up over 180% this year?

First of all, what’s a high-purity manganese product?

Our journey begins with the growing popularity of electric vehicles. Electric cars need batteries. There are two big battery players in the market. Lithium manganese cobalt oxide batteries (abbreviated NMC) that run off of mainly nickel, manganese and cobalt. Then there are lithium iron phosphate (LFP) batteries, which tend to run cheaper. That’s why Tesla likes them.

As mentioned in management’s commentary, Euro Manganese is particularly focused on high-performance NMC Li-ion batteries claiming that high purity sources of manganese and other battery raw materials ensure that the batteries meet increasingly demanding performance, safety and durability standards.

What are analysts saying about the Euro Manganese share price?

In a research report released earlier this week, Morningstar calculated the Euro Manganese share price to be fairly valued, rating the company three out of five possible stars. However, the report also includes a ‘very high uncertainty’ rating which isn’t going to please some potential investors.

With a market cap of around $72.5 million, Euro Manganese is a microcap company. A lot of analysts don’t care about companies so small, which limits the coverage. However, if the share price continues marching upward like it has been, analysts are more likely to take notice.

What’s the final word? 

Mining can be quite a risky game, especially for the little guys. This is often associated with amount of work that has to go into mapping, feasibility studies, government negotiations and other road blocks. Land acquisitions and environmental impact assessments can also slow things up. The list goes on, really. 

Investors seem to be happy with the progress Euro Manganese is making, otherwise the share price wouldn’t have seen such a sweet 12 months. Going into 2021, the company will be tested to see if this momentum can continue. 

The current Euro Manganese share price is trading at 39.5 cents, down 2.47%.

More reading

• The top 6 ASX fintech shares of 2020
• Why Afterpay, DEXUS, Integrated Research, & Regis Healthcare are dropping lower
• Why AVZ Minerals, Immutep, Kogan, & Strategic Elements shares are pushing higher
• Can the ugliest ASX 200 dogs of 2020 turnaround in the New Year?
• Why the Universal (ASX:UBI) share price is on the run today

Motley Fool contributor Gretchen Kennedy 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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In afternoon trade the S&P/ASX 200 Index (ASX: XJO) is on course to give back yesterday’s gains. At the time of writing, the benchmark index is down 0.8% to 6,645 points.

Four shares that have fallen more than most today are listed below. Here’s why they are dropping lower:

Afterpay Ltd (ASX: APT)

The Afterpay share price is down 3% to $118.58. This decline appears to be a combination of weakness in the tech sector and profit taking after some strong gains. Despite today’s decline, the Afterpay share price is still up a whopping 286% since the start of the year.

DEXUS Property Group (ASX: DXS)

The DEXUS share price has fallen 3% to $9.46. The majority of this decline is attributable to the property company’s shares trading ex-dividend this morning for its interim dividend. Eligible shareholders can now look forward to receiving this 28.8 cents per share unfranked dividend in their accounts on 26 February. A number of other property companies are trading lower for the same reason on Wednesday.

Integrated Research Limited (ASX: IRI)

The Integrated Research share price has crashed 13% lower to $2.62. Investors have been selling the performance management solutions company’s shares after it downgraded its guidance just 12 days after giving it. Integrated Research now expects first half revenue to be in the range of $34 million to $37 million and first half profit to be in the range of breakeven to $2 million. On the top line, this will mean a decline of 30.5% to 36% compared to the first half of FY 2020. Whereas on the bottom line, this will be an 83% to 100% decline on the prior corresponding period.

Regis Healthcare Ltd (ASX: REG)

The Regis Healthcare share price has dropped 4.5% to $1.89. This is despite there being no news out of the aged care operator on Wednesday. However, this decline has merely reversed all of Tuesday’s gains, which also occurred on the back of no news.

More reading

• ASX 200 down 0.8%: Big four banks and tech shares drag the market lower
• Why the Integrated Research (ASX:IRI) share price crashed 9% lower
• What’s in store for the Afterpay (ASX:APT) share price in 2021? 
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises 0.5%

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 Integrated Research Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why Afterpay, DEXUS, Integrated Research, & Regis Healthcare are dropping lower appeared first on The Motley Fool Australia.

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It has been a disappointing day for the S&P/ASX 200 Index (ASX: XJO) on Wednesday. In afternoon trade, the benchmark index is down 0.8% to 6,648.5 points.

Four shares that have not let that hold them back today are listed below. Here’s why they are pushing higher:

AVZ Minerals Ltd (ASX: AVZ)

The AVZ Minerals share price has jumped 18% to 16.5 cents. Investors have been buying the lithium-focused mineral exploration company’s shares since the release of an announcement last week. That announcement revealed that AVZ Minerals has signed a strategic, long-term offtake partnership with China’s largest lithium compounds producer, Ganfeng Lithium. The deal is for 30% of the company’s Manono Project’s initial saleable yearly tonnage.

Immutep Ltd (ASX: IMM)

The Immutep share price has risen almost 8% to 42 cents. This morning the biotech company revealed that it has been granted a patent in the United States relating to combined preparations comprising its lead active immunotherapy candidate eftilagimod alpha (efti) and a PD-1 pathway inhibitor. This US patent follows the grant of the corresponding European patent in November 2018.

Kogan.com Ltd (ASX: KGN)

The Kogan share price is up over 2% to $19.37. This is despite there being no news out of the online retailer today. However, with the COVID-19 outbreak in New South Wales continuing to spread, investors may believe more and more people in the state will be forced to shop online during the peak retail season.

Strategic Elements Ltd (ASX: SOR)

The Strategic Elements share price has rocketed 45% higher to 24 cents. Investors have been buying the company’s shares following the release of an announcement relating to its printable Nanocube Memory technology. According to the release, testing has confirmed that the technology has potential as printable brain-inspired (neuromorphic) computing hardware. The University of New South Wales confirmed that the Nanocube Memory structure and operation allows it to combine computing and memory in one place in a way similar to how biological neurons operate.

More reading

• Why the Strategic Elements (ASX:SOR) share price rocketed 39% higher today
• Why the Immutep (ASX:IMM) share price jumped 9% higher today
• 2 explosive ASX growth shares to buy for 2021
• Why these ASX shares have smashed the market in 2020
• 3 ASX growth shares to buy this week

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. 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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This is the season many investors will be looking at punting on the worst performing ASX stocks of the year in the belief that most will stage a turnaround in 2021.

It’s a tradition made popular by the “Dogs of Dow” theory, although adopting this strategy for the ASX is fraught with danger.

But there is a way to minimise the risk and get this seasonal phenomenon working in your favour.

What drives the Dogs of Dow

Before I get into that, it’s important to know why this strategy can work in the US but not necessarily here.

For those who are unfamiliar with the Dogs of Dow, it’s driven by the belief that businesses work in cycles. So if a stock on the Dow Jones Industrial Average (INDEXDJX: .DJI) slumps in one year, there’s every chance it will turnaround in the new year.

History has shown that this investment method can work most of the time on average, but the theory doesn’t translate so well on the ASX.

Why Dogs of Dow doesn’t work as well for the ASX 200

The most obvious reason is size. The Dow Jones consist of some of the largest companies in the world and have been selected as they shape the US economy. The total market cap of the Dow Jones is US$8.33 trillion ($10.9 trillion).

In contrast, the total market cap of the S&P/ASX 200 Index (Index:^AXJO) is a mere $1.7 trillion.

The other point to note is that the Dow Jones has only 30 stocks. It’s easy to buy all the underperformers. If you tried that with the ASX 200, you will need deep pockets as you will need to buy many more.

You could use the ASX 20, but that’s dominated by banks and mining stocks. There just isn’t quite the same diversification as stocks on the Dow.

Should you still buy 2020 ASX dogs?

But this doesn’t mean you shouldn’t be looking at the dogs of 2020 on the ASX 200. One way this strategy could work for ASX investors is to be far more discerning when picking these laggards.

I’ve screened the biggest stragglers from this year against consensus broker recommendations provided by Thomson Reuters.

Here are a few 2020 dogs on in the top 200 index that brokers are urging you to buy today.

ASX underperformers that brokers are urging you to buy

One stock that stands out is the Downer EDI Limited (ASX: DOW) share price. Shares in the construction services group shed nearly a third of its value this year.

But consensus favours the stock as its leveraged to the booming pipeline of infrastructure construction projects.

Another worth watching is the Nufarm Ltd (ASX: NUF) share price, which lost a quarter of its value in 2020.

Profit misses and droughts have dragged on the seed and fertiliser group over the past year, but the weather outlook is looking bright for 2021.

Further, there are signs that its new omega oil enriched canola seed product is catching on. This innovation is promising to be a medium-term profit driver for Nufarm.

Finally, there’s the Telstra Corporation Ltd (ASX: TLS) share price. The value of our largest telco shrunk by more than 17% in 2020 but most brokers are backing it for 2021.

Its dividend appears to be sustainable, and that’s worth a lot in this zero-rate environment.

While this dividend may be under threat if Telstra tries buying for the NBN, this really isn’t such a bad thing. It’s short-term dividend pain for a longer-term growth lever – if Telstra can get it.

More reading

• Is the surging Bitcoin an existential threat to ASX gold miners?
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises 0.5%
• Key risks and rewards for ASX share investors heading into 2021
• 2020 was good for investors, will 2021 be even better?

Motley Fool contributor Brendon Lau owns shares of Nufarm Limited and Telstra Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Telstra 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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Universal Biosensors Inc. (ASX: UBI) shares are on the run today. This comes as the company’s Canadian subsidiary signed a new deal. The news has sent the Universal share price 4.5% higher to 46 cents.

What’s driving the Universal share price higher?

The Universal share price is surging higher today after the medical diagnostics company announced its Canadian subsidiary, Hemostasis Reference Laboratory Inc (HRL), has signed a new deal with Bayer AG.

HRL provides laboratory testing services in the areas of coagulation. The company performs clinical trials, research studies, and compound analysis, as well as validation testing on equipment. HRL assists global diagnostic manufacturers, pharmaceutical and clinical researchers, and contract research organisations.

According to its release, Universal advised that the agreement will see its laboratory business provide specific services to Bayer, “relating to the performances of laboratory analysis of biological samples.”

Management did not state the length of the contract, but did say it will be for an agreed period of time. HRL estimates the new partnership will generate CAD$1.3 million in additional revenue.

What did the CEO say?

Universal CEO Mr John Sharman commented on the strategic partnership, saying:

HRL is our laboratory service business in Canada and is an important asset in our blood testing business. We are looking to grow HRL and expand the client base over time. The contract with Bayer is a significant first step and we expect to be in a position to announce additional contracts with other customers over the course of the next six months.

How has the Universal share price performed in 2020?

This Universal share price has had a stellar year, gaining close to 150% over the past 12 months. The company’s shares fell to an all-time low of 13 cents in March, before quickly rebounding.

Earlier this month, the Universal share price reached a multi-year high of 50 cents after the company announced its distribution agreement with Grapeworks.

Based on current share price levels, the company commands a market capitalisation of around $78 million.

More reading

• Why the Universal Biosensors (ASX:UBI) share price is up 5% today
• Why the Universal (ASX:UBI) share price reached a multi-year high 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. 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 PlaySide Studios Limited (ASX: PLY) share price has been a strong performer since completing its initial public offering (IPO) earlier this month.

Since landing on the ASX boards with a listing price of 20 cents, the video game developer’s shares have doubled to 40 cents today.

The PlaySide Studios IPO.

Earlier this month, PlaySide Studios raised $15 million from investors at 20 cents per share. Management revealed that that the IPO received strong support from a broad range of institutional and retail investors.

Upon listing, the company had approximately 366.5 million shares on issue, giving it a market capitalisation of $73 million based on the IPO price.

Given the doubling of its share price since then, its market capitalisation is now ~$150 million.

What is PlaySide Studios?

PlaySide Studios is one of Australia’s largest independent video game developers.

At the last count, the company had 52 titles developed across four platforms: Mobile, Virtual Reality (VR), Augmented Reality (AR), and PC.

This includes games that have been developed internally with original intellectual property (IP) and games developed in partnership with Hollywood studios such as Disney, Warner Bros, and Nickelodeon.

Among its titles are games related to Jumanji, The Walking Dead, Batman, Superman, Teenage Mutant Ninja Turtles, and Disney Pixar’s Cars.

The company operates in a growing mobile games market which it estimates to be worth $77.2 billion per annum at present.

What’s next?

With the company’s operations well-funded following its IPO, management is now aiming to secure the rights to develop mobile games from select media brands within its Brands & Licensing Division. It is also aiming to expand its development team to support new original titles.

In addition, the Port Melbourne-based company plans to open a business development office in Los Angeles when the risk from the COVID-19 can be appropriately managed. This is expected to support its activities with Hollywood studios.

The company’s Managing Director, CEO, and Co-Founder, Gerry Sakkas, appears very positive on the future.

Upon listing, Mr Sakkas commented: “PlaySide has in the past few years proven its ability to make games that millions of people love to play while sustainably building a profitable business on a global stage and, having now listed on the ASX, we believe we’ll be able to scale our skills, science and art to unlock significant value for PlaySide shareholders.”

More reading

• 3 recents ASX IPOs to watch
• Experts pick the best ASX IPO of 2020
• PlaySide Studios (ASX:PLY) share price doubles on ASX debut

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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At lunch on Wednesday the S&P/ASX 200 Index (ASX: XJO) has followed the lead of U.S. markets and is dropping lower. The benchmark index is currently down 0.8% to 6,644.4 points.

Here’s what has been happening on the market today:

Bank shares drop lower.

The big four banks are giving back Tuesday’s gains and are weighing on the ASX 200 today. While all the banks are trading lower, the worst performer in the group is the Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price. The bank’s shares are currently down 1%.

Tech shares under pressure.

The shares of Afterpay Ltd (ASX: APT) and Altium Limited (ASX: ALU) are out of form on Wednesday and are trading notably lower. This has led to the  S&P ASX All Technology Index (ASX: XTX) losing 1.3% of its value today. Investors have been selling tech shares after a pullback on the technology-focused Nasdaq index overnight. The famous index recorded a 0.4% decline on Tuesday night.

Property shares tumble.

The property sector is under pressure today and is a sea of red. However, this is largely down to a large group of property shares trading ex-dividend this morning for their next payouts. Among the companies trading ex-dividend are the likes of BWP Trust (ASX: BWP), Charter Hall Group (ASX: CHC), and DEXUS Property Group (ASX: DXS).

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Wednesday has been the Sims Ltd (ASX: SGM) share price with a 2% gain on no news. The worst performer has been the Growthpoint Properties Australia Ltd (ASX: GOZ) share price with a 4% decline. This morning the property company’s shares traded ex-dividend for its upcoming 10 cents per share interim dividend. This will be paid to eligible shareholders on 26 February.

More reading

• What’s in store for the Afterpay (ASX:APT) share price in 2021? 
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises 0.5%
• Leading brokers name 3 ASX shares to buy today
• ASX 200 up 0.65%: Big four banks rise, tech shares charge higher, Flight Centre jumps

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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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.

Tesla (NASDAQ: TSLA) shares hit a record $695 per share last week, briefly vaulting its market cap to over $650 billion. Since then, it has given back some of those gains.

Earlier this year, another very well-known tech company blasted past a $650 billion market cap — and never looked back. I’m talking about Facebook (NASDAQ: FB), the world’s biggest social media company.

Both Facebook and Tesla are part of the NYSE FANG+ index, which tracks 10 highly traded tech giants, including Alphabet and NVIDIA. And with Tesla joining Facebook in the S&P 500, millions of index fund investors now own a slice of both companies — whether they like it or not.

The parallels pretty much end there, though. And from an investment perspective, Facebook is easily the better bet now. 

Facebook has a sticky business model

Tesla operates in a competitive industry with many players — whether we’re talking about electric vehicles or the auto industry as a whole. Most car buyers aren’t as brand loyal as your typical Tesla owner. The typical car buyer is also a bit more price-sensitive when choosing a vehicle — which partially explains why Tesla’s had to cut prices to stay competitive.

Unlike Tesla and the auto industry, Facebook dominates the social media sphere, with 3.2 billion monthly active users across its Facebook, Instagram, Messenger, and WhatsApp apps. In 2019, seven out of every 10 global internet users — estimated at 4 billion — were on a Facebook app.

With so many people already use Facebook, potential new users are drawn to be where everyone else is already congregating and are less inclined to choose a competing service. For existing users, deleting Facebook means potentially instantly losing networks of connections they have built up over years. What’s more, users have filled up their Facebook and Instagram pages with photos, posts, and videos. It would be hard to move all this content away from Facebook.

Facebook has become, for many, more than just a social app — it’s a huge part of everyday life. It gives users access to the latest news, thousands of games and videos, and marketplaces for buyers and sellers. For those who aren’t happy with Facebook, there’s pretty much nowhere to go. 

As practically everyone’s on Facebook, companies are spending a big part of their ad and marketing budgets to reach the social network’s users. In the U.S., for example, eMarketer estimates that Facebook gets 23 cents of every dollar spent on digital advertising. As a result, Facebook’s revenue has almost quadrupled from 2015 to 2019.

This dominance has created issues for Facebook. For one, regulators are trying to make sure Facebook doesn’t abuse its dominant position. There are increasing calls from critics to break up the company by forcing it to divest its Instagram and WhatsApp apps. Even if Facebook isn’t broken up, its cost of doing business will inevitably rise in the long term. As the company grows, public pressure will force Facebook to take on more responsibility as a corporate citizen.

But these risks are just part and parcel of doing business. For now, the attractiveness of Facebook’s business model continues to far outweigh its challenges.

It is trading at a better price tag

Not only is Facebook the better business here, but its stock is also trading at a more palatable price.

Facebook’s already profitable. The company generates significant free cash flow every quarter, racking up a strong balance sheet, with $56 billion in cash and no debt. In contrast, Tesla has been losing money for just about its entire existence as it builds its business. It’s still dependent on external capital infusion to maintain operations. Tesla has been on the verge of bankruptcy before, prompting founder Elon Musk to shop the company on different occasions to buyers.

An evaluation of the financials suggests that Facebook should be trading at a higher valuation, especially given the strength of its business model and its ability to generate copious amounts of cash. But the reality is far from rational. Facebook trades at a price-to-sales ratio of 10 times trailing revenue while Tesla trades at over 20 times trailing revenue. 

Granted, a double-digit price-to-sales multiple doesn’t suggest Facebook is a screaming buy. But compared to Tesla, Facebook’s price is definitely more attractive, especially considering the company’s profitability and rock-solid financial position.

What this means for long-term investors

Even in a challenging 2020, Facebook generated revenue growth of 22% in the third quarter. That’s more impressive when you consider that many companies scaled back their advertising spend this year.

There are signs Facebook’s brightest years lie ahead. Facebook’s global average revenue per user has room to grow as it sits at $7.90, compared to $36.30 for U.S. and Canadian users. In particular, monetizing Instagram and WhatsApp could be a key driver of growth.

Facebook stock has rallied over 100% after hitting a 52-week low point in March, while Tesla is up over 690% year to date. In the short term, both stocks face the risk of a correction. 

But Facebook’s investors are probably sleeping better at night. After all, the company’s track record and long-term prospects make it a safer and better bet than Tesla — which, for all the hype, still has much to prove.

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

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Lawrence Nga has no position in any of the stocks mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook and Tesla. The Motley Fool Australia has recommended Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Forget Tesla. Facebook is a better buy now 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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Cooper Energy Ltd. (ASX: COE) shares have fallen lower in morning trade. At the time of writing, the Cooper Energy share price is trading 1.35% lower at 36.5 cents after the company released an update on its Sole Gas Sales Agreements (GSAs) this morning.

What did the company report?

The Cooper Energy share price is edging lower despite the company confirming its remaining Sole GSAs will commence on 1 January. Cooper Energy reported its long-term GSAs with industrial and utility clients in 2021 total 19.75 petajoules (PJ) in annual contract quantity. Its take-or-pay obligations represent a minimum quantity of roughly 90% of the total annual contracted volume.

The company said most Sole gas will now sell for the agreed term contract prices. Before the commencement of these remaining GSAs, Sole gas was selling for lower spot prices, less transportation costs. Cooper Energy and APA Group (ASX: APA) were sharing the revenue and costs, in accordance with their transition agreement.

APA Group operates the Orbost Gas Processing Plant, where Sole gas is processed. Performance at the plant has been hindered due to foaming of the sulphur recovery unit’s absorbers. Earlier this month, the company reported reconfiguration of the plant’s two absorbers, enabling them to operate independently, was complete. It is still analysing the root cause of the foaming issues.

Cooper Energy said it has backup gas supply arrangements in place to ensure supply to the GSAs.

Commenting on the progress, Cooper Energy managing director David Maxwell said:

The commencement of the Sole GSAs is a significant milestone which will deliver a material step-change in production, revenue, cash flow and earnings. We are pleased to be increasing gas supply to our utility and industrial customers and providing a competitive new source of natural gas to the domestic market. We are grateful for the strong support shown by our customers during what has been a longer than expected commissioning phase for the Orbost Gas Processing Plant.

Cooper Energy share price and company snapshot

Cooper Energy is an energy exploration and production company. It generates revenue from gas supply to south-east Australia as well as the production of low-cost Cooper Basin oil.

It’s been a difficult year for the company’s shareholders, who watched the Cooper Energy share price drop 41% in the wider COVID-19 market selloff earlier this year. And with the company reporting a 150% decline in underlying net profit after tax (NPAT) for the full 2020 financial year, the rest of the year wasn’t much better.

Year to date, the Cooper Energy share price is down 39%.

By comparison the All Ordinaries Index (ASX: XAO) is up 1.4% in 2020.

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

The post Cooper Energy (ASX:COE) share price falls despite progress report appeared first on The Motley Fool Australia.

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