After a strong start to the day, the S&P/ASX 200 Index (ASX: XJO) is tumbling lower in late morning trade. At the time of writing the benchmark index is down 0.7% to 5,903.1 points.

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

The AMP Limited (ASX: AMP) share price has jumped 7.5% higher to $1.90. Investors have been buying the financial services company’s shares after the release of a positive announcement this morning. According to the release, AMP has received all the required regulatory approvals for the sale of AMP Life to Resolution life. It expects the transaction to complete after the market close on 30 June.

The FlexiGroup Limited (ASX: FXL) share price has stormed 8% higher to $1.32. The catalyst for this gain was an update by the financial services company this morning. That update reveals that its buy now pay later business has been growing strongly in the second half of FY 2020. In fact, it now has 2.1 million customers using its interest free services and has generated $2 billion in transaction value over the last 12 months.

The Harvey Norman Holdings Limited (ASX: HVN) share price is up 2.5% to $3.53. This morning the retailer released an update on its performance during the 11 months to 31 May 2020. The company’s unaudited profit before tax for the period was up approximately 20% on the prior corresponding period.

The Qube Holdings Ltd (ASX: QUB) share price has charged almost 4% higher to $2.80. This follows the announcement of an agreement with Woolworths Group Ltd (ASX: WOW) for the development of two new major warehouses across 26 hectares at Moorebank Logistics Park, which is the largest intermodal logistics precinct in Australia. Woolies has signed 20 year leases for the warehouses.

More reading

• ASX 200 flat: Westpac tumbles, Woolworths reveals strong sales growth, Challenger sinks
• Woolworths share price higher on major supply chain update and FY 2020 guidance
• FlexiGroup share price on watch after reporting strong BNPL growth
• ASX supermarket shares on the radar
• Here are 3 Australian share market trends to watch this week

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

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The ASX tourism sector was hammered hard in the early stages of the coronavirus pandemic. As countries closed their borders and went into lockdowns, airlines grounded entire fleets. Australia’s second-largest airline, Virgin Australia Holdings Ltd (ASX: VAH), found the conditions especially difficult to navigate and suspended its shares after going into voluntary administration.   

Australian rival, Qantas Airways Limited (ASX: QAN), hasn’t fared much better, although has kept its head above water. Qantas has cancelled a planned off-market share buyback, slashed costs, and increased borrowings by more than $1.05 billion to sure up liquidity.

A suspension of trading may have been what Qantas shareholders preferred. Considering Qantas shares have plunged close to 40% so far this year.

Travel carnage 

The carnage wasn’t limited to just the airlines. Travel booking agents Webjet Limited (ASX: WEB), Flight Centre Travel Group Ltd (ASX: FLT) and Corporate Travel Management Limited (ASX: CTD) also saw massive selloffs. Flight Centre was hit hard by having a large brick and mortar presence; its shares almost 70% down year-to-date.

But with social restrictions in the early stages of relaxing, interstate borders potentially reopening for tourism in the coming weeks. And with talk of a trans-Tasman travel bubble, could the ASX tourism sector rebound in the near future?

Qantas seems to be taking a balanced perspective. In a May update, the company announced it had sufficient liquidity to support operations if market conditions continued to December 2021. It could also ramp up capacity within roughly a week if demand increased from easing social restrictions.

Even if domestic tourism rates increase, international travel (outside of the potential for New Zealand travel) could stay suppressed for years. It’s very uncertain how countries will manage international travel in the era of coronavirus. Plus, many of us may be unable to afford travel in the short-term with unemployment set to surge. 

I will admit that an investment in any of these companies is a pretty enticing option for contrarian investors. Their shares are trading at historic lows just when some tentative green shoots are beginning to emerge. However, we are still comparing their current valuations against their pre-coronavirus highs and that isn’t a like-for-like comparison. The COVID-19 pandemic has fundamentally changed the ASX tourism sector for possibly years to come.

Foolish takeaway

So, while it’s tempting to have a punt on Qantas or Webjet, a better option might be to strengthen your portfolio with companies in the technology and healthcare space that can continue to generate dependable sources of revenue throughout the crisis.

More reading

• ASX 200 finishes flat, ASX travel shares drop
• The ASX stocks worst hit by second wave COVID-19 fears
• Why Altium, Australian Ethical, Flight Centre, & Transurban are dropping lower
• These are the 10 most shorted ASX shares
• Short-sellers are stepping up their attack against these popular ASX shares

Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Zip Co Ltd (ASX: Z1P) share price is pushing higher on Tuesday despite revealing a large number of insider sales.

At the time of writing the buy now pay later provider’s shares are up 0.5% to $6.03.

Who has been selling Zip Co shares?

This morning Zip Co advised that a number of directors have sold shares this month.

This includes Managing Director Larry Diamond, Chairman Philip Crutchfield, and Company Secretary David Franks.

According to one change of director’s interest notice, Mr Diamond offloaded a total of ~5.5 million through a series of on-market trades between 18 June and 19 June. The managing director received an average of $6.125 per share, which equates to a total consideration of ~$33.7 million.

Another notice reveals that Mr Crutchfield sold 1 million shares through a series of on-market trades between 18 June and 22 June. The chairman received an average of ~$6.11 or a total consideration of $6.11 million.

Finally, the third notice shows that Mr Franks has offloaded 1.3 million shares through on-market trades on 18 June and 19 June. The company secretary received an average of $6.12 per share, which equates to a total consideration of just under $8 million.

Why have they been selling shares?

In response to the sales, Zip Co released an announcement which explains why the sales were made.

According to the release, the directors sold these shares to pay personal and/or related party tax obligations, reduce personal and/or related party debt commitments, and to allow them to diversify a minor part of their total investment in Zip Co.

It is worth noting that these directors are still heavily invested in the company, which I believe means their interests remain firmly aligned with shareholders.

In fact, although these were sizeable sales, in aggregate, the directors sold less than 10% of their holdings in the company. Furthermore, all three directors have confirmed that they have no present intention to sell any further shares in the medium term.

More reading

• Is the Afterpay share price a boom or a bubble?
• ASX share price winners and losers of last week
• Which shares to buy if the ASX tumbles
• Grow your wealth with these 3 ASX fintech shares
• Millennials be warned! Signs of dangerous ASX share trading grow

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

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One leading broker believes that the majority of the big four banks could be in the buy zone right now.

What did Morgans say?

According to a note out of Morgans, with the exception of Commonwealth Bank of Australia (ASX: CBA), its analysts feel the bad debt damage being factored into current major bank share prices is overdone.

Morgans explained: “Across the sector, at this stage we continue to be of the view that the bad debt experience during the current crisis will not be as severe as that experienced during the GFC, largely as this time we are seeing the Australian government and central bank provide cushioning to bank and private sector balance sheets to an extent never seen before.”

Westpac Banking Corp (ASX: WBC) remains the broker’s top pick in the sector. This is largely on the belief that it feels Westpac is the only major bank where “the bad debt damage being priced in is greater than that experienced during the GFC.” It appears to believe this is excessive.

What about their net interest margins?

In addition to this, the broker isn’t overly concerned about the big banks’ net interest margin (NIM) outlook.

Although Morgans expects the low interest rate environment to continue to be a NIM headwind, there are a number of tailwinds which it expects to largely offset this.

These include a reduction in basis risk with swap-OIS spreads now in negative territory, the RBA’s Term Funding Facility (TFF), improvement in institutional lending margins, home loan standard variable rates not being reduced after the last cash rate cut, and strong growth in transaction deposits.

Will they pay dividends?

Morgans doesn’t expect Australia and New Zealand Banking GrpLtd (ASX: ANZ) and Westpac to pay interim dividends, even on a deferred basis.

It does, however, expect dividends from them all, including National Australia Bank Ltd (ASX: NAB), in November.

“With the staged easing of lockdown restrictions currently being experienced in Australia and signs of a plateauing in loan repayment deferrals, we expect ANZ, NAB and WBC to declare final dividends in November and we see the possibility of CBA declaring a deferred final dividend in November,” the broker added.

Morgans has add (buy) ratings on ANZ, NAB, and Westpac, but a hold rating on Commonwealth Bank.

More reading

• Is the Afterpay share price a boom or a bubble?
• ASIC hits Commonwealth Bank with civil proceedings
• 5 things to watch on the ASX 200 on Tuesday
• 3 quality ASX dividend shares you can buy today
• Why Morgans is urging investors to buy ASX big bank stocks today

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

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In morning trade the Woolworths Group Ltd (ASX: WOW) share price is edging higher.

At the time of writing the conglomerate’s shares are up slightly to $36.75.

Why is the Woolworths share price edging higher?

Investors have been buying Woolworths’ shares this morning after the release of an announcement.

According to the release, Woolworths is planning to develop an automated regional distribution centre and a semi-automated national distribution centre at Moorebank Logistics Park in Sydney.

It expects the construction to be completed by the end of calendar 2023, with initial benefits expected to be realised in FY 2025.

These new facilities will eventually replace the current ambient grocery operations at Woolworths’ Sydney Regional Distribution Centre in Minchinbury, Sydney National Distribution Centre in Yennora, and Melbourne National Distribution Centre in Mulgrave. The current temperature controlled fresh food distribution will continue to be serviced out of the Minchinbury centre.

What will this cost?

This is certainly going to be a big investment for the company. It expects to invest $700 million to $780 million in technology and fitout of the two distribution centres over the next four years and has signed an initial lease term of 20 years with Qube Holdings Limited (ASX: QUB).

Pleasingly, it intends to fund this investment through its existing capital expenditure framework and does not expect it to materially increase its levels of operating capex spend over the period of construction and installation.

All the hard work should be worth it, though. Management expects the centres to deliver a significant reduction in its supply chain costs over time and deliver strong returns above its cost of capital.

Woolworths CEO, Brad Banducci, commented: “Moorebank will transform the way we serve our NSW grocery customers. The new facilities will advance our localised ranging efforts, with the ability to hold over 30% more products than existing facilities. Automation will allow the creation of aisle-specific pallets by store, and in doing so, reduce the time to restock shelves and result in better on-shelf availability for customers.”

“We have learnt a lot from our MSRDC development, which is delivering against its business case and this gives us the confidence that now is the right time to invest in our NSW network,” he added.

The company intends to support team members at sites that will close. And given that it will be a number of years until these closures, it notes that it has the opportunity to explore meaningful redeployment opportunities for impacted employees.

Significant items.

Management has advised that the decision to proceed with the supply chain transformation will result in a one-off pre-tax cost of $176 million. This will be recorded as a significant item in FY 2020.

Which, combined with Endeavour Group transformation costs and employee remediation, brings its pre-tax significant items to $591 million for FY 2020.

Trading update.

In addition to the above, Woolworths has provided a trading update for the 10 weeks ending 14 June 2020.

That update reveals that the company is having a particularly strong finish to the year.

Compared to the prior corresponding period, Australian Food sales are up 8.6%, NZ Food sales are up 15.1%, BIG W sales have jumped 27.8%, and Endeavour Drinks sales are 21.4% higher.

Mr Banducci commented: “Trading has remained strong in Q4 to date, with the exception of Hotels where venues were closed until the end of May and have just begun to enter different stages of reopening. In Australian Food and Endeavour Drinks, sales growth improved in May and June following a more subdued April impacted by unusual trading patterns around Easter and Anzac Day.”

Full year guidance.

In light of this strong finish to the year, Woolworths currently expects to report earnings before interest and tax (EBIT) (post-AASB 16 and before significant items) of $3,200 million to $3,250 million. This compares to $3,290 million in FY 2019 on a 53-week basis.

The main drag on its performance this year has of course been the closure of its Hotels. Hotels EBIT is expected to be $160 million to $170 million, less than half of the $355 million it recorded last year.

More reading

• ASX supermarket shares on the radar
• ASX 200 Weekly Wrap: ASX back in the green
• These 3 ASX ETFs are yet to recover from the market crash
• Australian retail sales up 16.3% in May
• How the ASX 200 can help first home buyers save for a deposit

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

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The Challenger Ltd (ASX: CGF) share price has returned from its trading halt and sunk lower.

In morning trade the annuities company’s shares are down 7% to $4.93.

Why was the Challenger share price in a trading halt?

Challenger requested a trading halt on Monday while it undertook a $300 million equity raising to further strengthen its capital position and provide flexibility to enhance earnings.

This morning the company revealed that it has successfully completed the institutional component of its equity raising. Challenger raised $270 million through the issue of approximately 55 million new shares at $4.89 per share. This was an 8.1% discount to the company’s last close price.

Management notes that it received significant interest from both domestic and offshore institutional investors, with the placement significantly oversubscribed.

Challenger’s Managing Director and Chief Executive Officer, Richard Howes, was very pleased with the response to the equity raising.

He said: “We are very pleased with the strong support shown by institutional shareholders for Challenger’s commitment to maintaining a strong capital position while at the same time providing flexibility to enhance earnings.”

“This raise supports the business to remain strongly capitalised through this period of ongoing market uncertainty,” he added.

What is Challenger going to do with the money?

Challenger intends to prudently and progressively deploy the capital raised. This will primarily be investment grade fixed income opportunities that provide compelling risk adjusted returns.

Mr Howes explained: “Following the pandemic market sell-off, fixed income asset risk premiums have widened significantly and we are now seeing opportunities, primarily in investment grade, to selectively invest this cash and liquids balance and generate pre-tax ROEs in excess of 20% on the capital backing these investments.”

“This is well above our pre-tax ROE target of the RBA cash rate plus a margin of 14%. Importantly, we can capture these opportunities, while maintaining our current defensive portfolio settings, with a high weighting to investment grade fixed income,” he added.

What now?

Challenger will now push ahead with its share purchase plan which aims to raise up to $30 million.

Existing eligible shareholders have the opportunity to apply for up to $30,000 in new, fully paid Challenger ordinary shares without incurring brokerage or transaction costs.

The issue price will be the lower of the placement price and a 2% discount to the 5-day volume weighted average price of its shares up to, and including, the closing date of the share purchase plan.

No final dividend. 

Finally, also weighing on its shares today has been an update on its final dividend for FY 2020.

Given the uncertain economic conditions, investment market volatility, and its intention to maintain a strong capital position while optimising earnings, the Challenger board revealed that it does not intend to pay a final dividend in September.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Is the Challenger share price a buy?
• Why Challenger is launching a $300 million equity raising
• 3 long-term ASX 200 shares I’d buy right now
• What are the best ASX shares for dividends?

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

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The Afterpay Ltd (ASX: APT) share price currently has a market valuation equal to Santos Ltd (ASX: STO). Whether you think Afterpay is overbought or not depends on whether you think it will grow its earnings to match its valuation. However, from this point, 2 things are pretty clear.

First, it is unlikely to double in price again, let alone another 2 or 3 times. Second, it is clearly the market leader in Australia and possibly the second globally behind the Commonwealth Bank of Australia (ASX: CBA)-backed Klarna app.

Does the Afterpay share price indicate a bubble?

Last week saw most buy now pay later (BNPL) companies valuations rise. The Splitit Ltd (ASX: SPT) share price rocketed up by 110% last week. Meanwhile, the Sezzle Inc (ASX: SZL) share price continued winding its way upward, rising by a massive 30.13% last week. The Afterpay share price rose by only 12.87% by comparison, and Zip Co Ltd (ASX: Z1P) actually fell by 4.5%.

These wild swings are exactly what we saw in the dot-com bubble. There was always a share of the moment that defied gravity to rocket upwards out of nowhere and for no real reason. Followed by others crashing.

But this time it’s different

The dot-com bubble created no real value for the most part. Just wild speculation about what was possible on the internet. Even though the Afterpay share price has inflated so much, BNPL is vastly different. It speaks to 2 separate dynamics in the marketplace today. First, the rise of Gen Z in particular, but also millenials.

These generations eschew credit cards. It pays to remember that the millenials spawned the Financially Independent Retire Early (FIRE) movement. For whatever reason, these 2 generations are extremely financially savvy and appear to have learned a lot from the errors of Gen X, in particular. 

 The second dynamic is the shrinking of discretionary income. For years Australians have seen very low wage growth. At the same time taxes and charges continue to balloon. Moreover, prices for food staples continue to increase, as do house prices. 

Foolish takeaway

The BNPL sector is definitely not a bubble. It is one of the last ways left for most people to acquire discretionary items. The market in Australia, the US and Europe is very large and underserved. 

While the Afterpay share price has risen to a point where it is unlikely to see large scale growth, there are still very good growth opportunities. Personally, I have invested in Sezzle. However, I also like Zip Co as a prospective share purchase. 

More reading

• Should you buy ANZ, CBA, NAB, or Westpac? Here’s what this broker thinks
• How to try and beat the market with ASX shares
• ASIC hits Commonwealth Bank with civil proceedings
• 5 things to watch on the ASX 200 on Tuesday
• Afterpay and 2 more ASX 200 shares to watch this week

Daryl Mather owns shares of Sezzle Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The A2 Milk Company Ltd (ASX: A2M) share price has rocketed 26.9% higher in 2020 but can it really continue to surge higher?

Why the A2 Milk share price is climbing

It’s been a wild start to the year for most ASX shares but A2 Milk has proven to be a real outperformer.

The Kiwi dairy group’s shares have been surging in value thanks to strong consumer demand. In fact, A2 Milk’s April trading update contained some good news for investors.

The company couldn’t provide any revenue or earnings guidance for FY20 due to the pandemic. However, A2 Milk does anticipate ongoing revenue growth in key regions such as China and the USA.

The Board expects A2 Milk to target an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 30% in FY20.

There’s also been media speculation that the company is looking at strategic options relating to its manufacturing capacity and capability. That led the company to address those rumours yesterday saying it would provide an update “if and when any such discussions were to reach a conclusion.”

Both of these things say to me that there could be more growth on the way for A2 Milk. That could lead to increased earnings and a boost for the A2 Milk share price in 2020.

Of course, a lot of this is speculation. I think it’s worth waiting until there’s some confirmation about expansion plans from the company itself before buying in.

The A2 Milk share price is now up 2,734.4% in the last 5 years. That means a $10,000 investment in A2 Milk back then would be worth a tidy $279,230.77 in today’s money.

Foolish takeaway

I don’t know if the A2 Milk share price will close the year higher than its current $18.14 valuation.

However, I think the technical environment is looking good and I’m quietly bullish on the Kiwi dairy group.

If you’re looking for a long-term growth prospect, A2 Milk could be one of those ASX shares that’s worth a look in 2020.

More reading

• These ASX stocks might be a better option than Carsales.Com
• How to try and beat the market with ASX shares
• Is it time to buy BHP shares right now?
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 finishes flat, ASX travel shares drop

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post The A2 Milk share price is up 27% in 2020, but is it time to buy? appeared first on Motley Fool Australia.

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The automotive market appears to be turning a corner! This good news is reflected in the latest update from Carsales.Com Ltd (ASX: CAR) although many brokers are reluctant to recommend the stock as a buy.

Not that there’s anything wrong with the online car classifieds business. It’s just that the Carsales.Com share price has surged 67% since the S&P/ASX 200 Index (Index:^AXJO) struck the bear market low three months ago.

But there might be a better way to gain leverage to this thematic – and that’s through the ASX-listed novated leasing and fleet management companies.

Better option than Carsales.Com?

Morgan Stanley recently upgraded two in the sector as it believes these stocks will be re-rated.

The broker pointed out that new car sales and the macro economic environment are “important drivers” for the sector (I’m sure the pun’s intended).

But it also pointed out that some recent macro and regulatory headwinds can cause a divergence in performance among the individual stock names.

How to pick the best of the bunch

There are three areas the broker is looking at to pick the best winners in the sector. The first is differentiated growth. While all companies will benefit from any improvement in car sales and economic activity following the COVID-19 shutdown, some will benefit from additional growth levers.

Next is business model resiliency. This describes how a company can weather changes in lending appetite and funding, as well as regulatory and consumer scrutiny.

The third is valuation. The key is to look for underappreciated stocks with share price catalysts.

ASX stocks that stand out

The standout after applying these three filters is Eclipx Group Ltd (ASX: ECX) with Morgan Stanley describing the stock as its highest conviction pick.

The broker believes it’s the one with the highest growth potential and with a unique funding model that its competitors are trying to replicate.

Morgan Stanley upgraded the stock to “overweight” from “equal-weight” with a price target of $1.70 a share.

Another stock that got upgraded to “overweight” is McMillan Shakespeare Limited (ASX: MMS). The broker likes McMillan as it has an additional income stream from its Plan Partners business, which helps offset any weakness from novated leases.

The group is also building a strong balance sheet to management options in unlocking value. A strategic review of its business may also trigger a re-rating in the stock.

Morgan Stanley’s price target on McMillan is $11.50 a share.

More reading

• How to try and beat the market with ASX shares
• Is it time to buy BHP shares right now?
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 finishes flat, ASX travel shares drop
• Afterpay and 2 more ASX 200 shares to watch this week

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

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