The Mesoblast limited (ASX: MSB) share price is up 1.6% at $3.15 in close of trade today. The company released its report this morning for the quarter ending 30 September, alongside an update on its lead product candidate remestemcel-L.

Mesoblast’s gains today come as the S&P/ASX 200 Index (ASX: XJO) followed US and European markets lower, down 1.6% at close.

Mesoblast shareholders have endured some major ups and downs this year, with the share price cratering 64% from late January through to 23 March. Since that low, the share price is up 184%, for a year-to-date gain of 54%.

What does Mesoblast do?

Mesoblast develops allogeneic cellular medicines. The company has established a portfolio of commercial products and late-stage product candidates via its proprietary mesenchymal lineage cell therapy technology platform.

Mesoblast’s global intellectual property (IP) portfolio protection extends through to at least 2040 in all major markets. Its cell therapies are planned to be readily available to patients worldwide.

Why is the Mesoblast share price up today?

Investors appear to have taken note of the positive outlook Mesoblast reported for its lead product candidate remestemcel-L. This is intended to treat inflammatory diseases in children and adults, including severe acute respiratory distress syndrome.

The company noted that in September, the US Food and Drug Administration recommended it conduct another randomised study to prove the effectiveness of remestemcel-L.

Mesoblast said it now believes the product could receive accelerated approval as there are no other approved treatments for the life-threatening SR-aGVHD in children under 12. The company expects to meet with FDA officials in November to discuss the potential for accelerated approval, particularly as remestemcel-L could be used to treat respiratory distress associated with COVID-19.

Mesoblast chief executive Dr Silviu Itescu said:

We believe the immunomodulatory properties of remestemcel-L position this potential therapy at the forefront of treatment for severe and life-threatening inflammatory conditions, including COVID-19 acute respiratory distress syndrome (ARDS) and steroid-refractory acute graft versus host disease (SR-aGVHD).

We are pursuing an accelerated approval pathway for remestemcel-L in the treatment of children with SR-aGVHD, and a parallel approval pathway for COVID-19 ARDS if the randomised controlled Phase 3 trial is positive.

The company also reported cash on hand of US$108 million (AU$153 million). It stated it may have access to another US$67.5 million over the next 12 months through its existing financing facilities and strategic partnerships.

With the pandemic likely to see many more people suffering from respiratory issues, positive results from the Phase 3 trial could see Mesoblast’s share price run far higher.

More reading

• Buy these 3 ASX stocks that hit a 52-week low during this market meltdown
• Down 4% in 10 days: Is it time to buy ASX 200 shares?
• ASX 200 sinks 1.6%, ANZ (ASX:ANZ) reports FY20 result
• The Clinuvel (ASX:CUV) share price edges down on Q1 update
• Xplore Wealth share price surged to a 2-year high today on M&A fever

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

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The S&P/ASX 200 Index (ASX: XJO) is having a nasty day today, and indeed a nasty week. At the time of writing, the ASX 200 is down 1.43% to 5,971 points. Over the week so far, it’s down 3.4%, and over the past 10 days, down 4.1%.

So, is this a ‘buy the dip’ opportunity for ASX 200 shares? Or should investors keep their powder dry?

Are ASX 200 shares really cheap today?

Well, despite the dramatic fall we have seen over the past 10 days, ASX 200 shares aren’t actually that low today, judging by the levels we’ve seen in 2020 so far. Remember, it was only on 5 October that we last saw the ASX 200 around today’s levels. And we’re still a ways away from the ASX 200 going under 5,800 points, which it did back at the start of the month.

Even so, today’s levels are still pushing some ASX 200 shares to relatively low levels. Telstra Corporation Ltd (ASX: TLS) is one, trading at $2.70 at the time of writing, very close to the company’s all-time low.

Newcrest Mining Limited (ASX: NCM) is another. Newcrest shares (again at the time of writing) are trading at $29.34 (the lowest levels since June) after falling 4.1% on the back of a mixed quarterly update.

ASX resources shares like BHP Group Ltd (ASX: BHP) are also at relatively low levels. You’d have to go back to May to find the ‘Big Australian’ at the levels we’re seeing today. Ditto with BHP’s compatriot Rio Tinto Limited (ASX: RIO).

Go time or no time?

But aside from these more obvious potential value plays, I don’t think the ASX’s current level should induce an all-out, ‘buy the dip’ mentality. This isn’t a crash, bear market or even a correction yet. And most ASX shares aren’t looking too cheap anyway from where I’m standing.

Growth shares like Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO) are still pretty close to record highs. The ASX banks like Commonwealth Bank of Australia (ASX: CBA) aren’t looking too much cheaper than they have been for most of the year. And the ‘big dog’ of the ASX, CSL Limited (ASX: CSL), is still near $300 a share.

Remember, we’re about to head into a period of potentially massive market volatility with the US election just around the corner. If the ASX 200 is going to have a major pullback in the next month or 2, I would be willing to bet it’s going to be because of the election. So, I would personally keep the investing powder dry on this one, unless you have been dying to add one of the companies discussed above to your portfolio.

More reading

• ASX 200 sinks 1.6%, ANZ (ASX:ANZ) reports FY20 result
• $14 trillion investor alliance warns Aussie mining companies
• Here’s what this broker thought of the Afterpay (ASX:APT) Q1 update
• The Clinuvel (ASX:CUV) share price edges down on Q1 update
• Newcrest (ASX:NCM) share price tumbles lower following Q1 update

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

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The S&P/ASX 200 Index (ASX: XJO) dropped 1.6% to 5,960 points. The ASX selloff followed on from overseas market declines seemingly because of COVID-19 declines.

Here are some of the highlights from the ASX today:

Australia and New Zealand Banking Group Ltd (ASX: ANZ)

The big four ASX bank announced its FY20 result today. There were some pretty big profit declines.

ANZ’s statutory net profit after tax (NPAT) fell by 40% to $3.56 billion and continuing operations cash profit dropped by 42% to $3.76 billion.

The bank said that the profit decline was primarily driven by full year credit impairment charges of $2.74 billion, which increased because of the impact of COVID-19 and the first impairment of its Asian associates to the tune of $815 million, also due to the pandemic.

ANZ declared a final dividend of $0.35 per share, bringing the full year dividend to $0.60 per share. That amounts to a cut of 62.5% compared to FY19.

The ASX 200 bank’s CET1 capital ratio was almost the same as last year, ending at 11.3% – still unquestionably strong using APRA’s standards.

ANZ CEO Shayne Elliot said: “We could never have forecast 2020, a year that started with devastating bushfires in Australia and unwound with the waves of a pandemic that continues today. While we still cannot predict its course, we remain confident that we can deal with its impacts.

“While our immediate focus has been on assisting customers, we have also taken steps to protect the steps of our shareholders by maintaining our strong capital position, tightly managing costs and bolstering credit reserves, while still managing to pay a prudent dividend without diluting their holdings.”

The ANZ share price fell by 2.4% today.

Hub24 Ltd (ASX: HUB)

Hub was in the spotlight today after coming back to trade from its capital raising and acquisition news.

It is raising around $60 million to fund three acquisitions. It’s going to acquire investment platform provider Xplore Wealth Ltd (ASX: XPL) for $60 million through a combination of cash and new shares.

Hub24 is going to acquire Ord Minnett’s non-custody portfolio administration and reporting service for a $10.5 million upfront consideration.

It’s also going to invest in some Easton Investments Ltd (ASX: EAS) shares which will result in Hub24 owning 40% of Easton.

The total investment is $93 million and it’s expected to add 13% to Hub24’s earnings per share (EPS) in FY22.

The Hub24 share price went up more than 8% today. 

REA Group Limited (ASX: REA)

REA Group has also announced an acquisition today. The real estate tech share is going to take a controlling stake in India’s Elara Technologies. Its shareholding will be between 47.2% to 61.1%.

The total consideration will cost between US$50 million to US$70 million for the ASX 200 share.

Elara is India’s fastest growing digital real estate businesses in terms of audience with brands like housing.com, PropTiger.com and Makaan.com. Whilst Indian listings have been impacted due to COVID-19, Elara has continued to grow its market share.

REA Group CEO Owen Wilson said: “India is an incredibly attractive market and one that provides excellent long-term growth opportunities, while complementing REA’s footprint in Asia and North America. The country is forecast to deliver strong growth over the next decade and continues to experience rapid digital transformation.”

Elara provides a wide range of services including digital advertising and transactions including personalised search, virtual viewing, site visits, home loans and post-sales services.

The REA Group share price fell by 1.2% today.

JB Hi-Fi Limited (ASX: JBH)

The electronics ASX 200 retailer announced its FY21 first quarter trading update today.

JB Hi-Fi said that its total sales growth was 27.3% with comparable sales growth of 27.6%. JB Hi-Fi New Zealand delivered a total sales decline of 2.5%, with a total comparable sales decline of 2.5% as well. The Good Guys managed to grow total sales by 30.9%, with comparable sales growing by the same amount.

The company said that all of its stores located in metropolitan Melbourne opened yesterday.

The JB Hi-Fi share price dropped backwards by 6.2% today.

More reading

• Down 4% in 10 days: Is it time to buy ASX 200 shares?
• The Clinuvel (ASX:CUV) share price edges down on Q1 update
• Xplore Wealth share price surged to a 2-year high today on M&A fever
• Why market crashes are useful for buying ASX dividend shares
• The JB Hi-Fi Limited (ASX: JBH) share price has fallen 5% today

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd and REA 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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More reading

• Byron Energy (ASX:BYE) rigs evacuated as hurricane Zeta approaches
• $14 trillion investor alliance warns Aussie mining companies
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• The shares to buy for 3 different US election outcomes

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

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The Byron Energy Ltd (ASX: BYE) share price plummeted 8.82% to 15.5 cents today before recovering to 16 cents at the time of writing. This came after the company announced that it had evacuated 2 assets in the gulf of Mexico.

What was in the announcement?

Byron Energy said it had evacuated production operators from its assets at South Marsh Island 58 and South Marsh Island 71 due to adverse weather conditions caused by hurricane Zeta. 

At the company’s South Marsh Island 58 asset, tying of the G2 well into production equipment is almost complete. Production from the well can begin after the tie-in is completed, the company said. However, production has been delayed due to hurricane Zeta and is now expected to resume next week after 2 November 2020. Byron has a 100% working interest in the well and an 83.33% revenue interest.

Production from the Byron Energy operated South Marshal Island 71 F platform was shut down on 25 October 2020 due to pipeline shut ins associated with hurricane Zeta. Byron Energy holds a 50% working interest in the platform and 40.625% net revenue interest in the block. Otto Energy Ltd (ASX: OEL) holds a working interest and net revenue interest in the asset equivalent to Byron Energy.

According to the Byron Energy, production at South Marshall Island 58 and South Marshal Island 71 will continue as soon as conditions are safe.

About the Byron Energy share price

Byron Energy is an oil and gas explorer with assets in the gulf of Mexico. The company has been listed on the ASX since 2005.

In the year to 30 June 2020, Byron Energy had revenue from the sale of oil and gas of US$24.37 million, down from US$38.57 million in the year to 30 June 2019. Byron Energy posted a loss of US$70,396 in FY2020, this followed a profit of US$5.74 million in the 2019 financial year.

At 30 June 2020, Byron Energy had proven reserves (1P) of 8.1 million barrels of oil and 58.5 billion cubic feet of gas. The company had proven and probable reserves (2P) of 17.5 million barrels of oil and 105.3 billion cubic feet of gas at 30 June 2020.

The Byron Energy share price is up 60% since its 52-week low of 10 cents, however, it is down 46.67% since the beginning of the year. The Byron Energy share price is down 46.67% since this time last year.

More reading

• $14 trillion investor alliance warns Aussie mining companies
• Here’s how BrainChip (ASX:BRN) performed in the third quarter
• Why the Fluence (ASX:FLC) share price is up 10% today
• The shares to buy for 3 different US election outcomes
• Here’s what this broker thought of the Afterpay (ASX:APT) Q1 update

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

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A group that manages $14 trillion worth of investments has put Rio Tinto Limited (ASX: RIO) and other mining companies on notice.

In a letter sent on Thursday, the group warned that it required confidence in how the companies liaised with Indigenous land owners to manage risk for its long-term investments.

The correspondence came after Rio Tinto in May blew up Juukan Gorge in Western Australia, which displayed historical and cultural evidence of human habitation going back 46,000 years.

“The recent tragic and irreversible destruction of First Nations sites of cultural and archaeological significance in the Juukan Gorge, in Australia, highlights the consequences for communities, companies and investors when relations with communities are not adequately managed,” the letter reads. 

“This in turn calls into question the social license of a company to operate.”

Who sent the letter?

The investors’ group included international giants like the Church of England Pensions Board, AXA IM and Council of Ethics for the Swedish National Pension Funds. Local signatories included large superannuation funds like HESTA, Australian Super and Cbus.

ASX-listed recipients included Rio Tinto, BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG) and Newcrest Mining Limited (ASX: NCM).

Church of England Pensions Board ethics & engagement director Adam Matthews said each time an adverse event happens, it casts a shadow over the entire industry.

“As with the issue of tailings dam safety a single event has exposed a systemic issue across the mining sector.”

HESTA chief Debby Blakey said the Juukan Gorge tragedy was “a wake-up call” for investors small and large.

“It’s critical companies and investors who are making long-term decisions manage risks associated with indigenous heritage protection appropriately,” she said. 

“Not only so we can mitigate financial risk for our members’ investments, but also so we can ensure there are fair and sustainable outcomes for indigenous communities and companies.”

Failure to protect culturally significant sites is a “material investment risk”, said Australian Council of Superannuation Investors chief Louise Davidson.

“The events of Juukan Gorge have identified a significant failing in the way Rio Tinto managed its relationship with traditional owners,” she said.

“We want to understand how companies across the industry are managing these risks and working to ensure that a disaster like the Juukan Gorge never happens again.”

Rio Tinto initially stripped $7 million of bonuses from 3 executives. But after investor pressure all 3 departed the company, albeit with golden handshakes worth millions of dollars.

More reading

• Newcrest (ASX:NCM) share price tumbles lower following Q1 update
• How did ASX iron ore shares perform in the last quarter?
• Fortescue (ASX:FMG) share price lower despite record Q1 shipments
• 5 things to watch on the ASX 200 on Thursday
• How did ASX gold shares perform in the last quarter? 

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

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The BrainChip Holdings Ltd (ASX: BRN) share price has managed to avoid the selloff and is trading flat at 37 cents in late trade following the release of its third quarter update.

What happened in the third quarter?

During the three months ended 30 September, BrainChip reported cash receipts from customers of just US$10,000. This brings its financial year to date cash receipts to US$22,000.

The company posted a cash outflow from operating activities of US$2.2 million. However, thanks to US$8.45 million from the exercise of options, it ended the period with a cash balance of US$12.2 million.

And as of 26 October, its cash balance had increased to US$20.3 million thanks to proceeds from its put option agreement with LDA Capital, as well as the exercise of employee and investor stock options.

What developments have happened during the quarter?

BrainChip had a busy quarter and entered into several agreements for its Early Access Program (EAP).

This includes with The Ford Motor Company, Valeo, Vorago Technologies, and the National Aeronautics and Space Administration (NASA).

Management notes that the EAP provides engineering samples, evaluation boards, and dedicated support to manufacturers that will evaluate its Akida neuromorphic processor. Fees to participate in the EAP are intended to cover the company’s expenses related to participants individual requirements.

What is the Akida neuromorphic processor?

BrainChip is working on a neuromorphic processor that brings artificial intelligence to the edge.

Management believes its chip is high performance, small, ultra-low power, and enables a wide array of edge capabilities. These include on-chip training, learning and inference.

It explained that the event-based neural network processor is inspired by the spiking nature of the human brain and is implemented in an industry standard digital process.

By mimicking brain processing, BrainChip believes it has pioneered a processing architecture, called Akida, which is both scalable and flexible to address the requirements in edge devices.

Akida has been designed to provide a complete ultra-low power and fast AI Edge Network for vision, audio, olfactory and smart transducer applications. It notes that the reduction in system latency provides faster response and a more power efficient system that it believes can reduce the large carbon footprint of data centres.

More reading

• Douugh and Ioupay were among the most traded shares on the ASX last week
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• 3 unique ASX shares I’d buy and hold forever
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Fluence Corporation Ltd (ASX: FLC) share price is up 10% in late afternoon trading. That puts the company in the enviable position of being among the biggest gains posted on the All Ordinaries Index (ASX: XAO) today, with the All Ords down 1.8%.

The share price surge comes following today’s update on the company’s Ivory Coast water treatment project. And it will come as welcome news to shareholders who’ve watched the share price slide for much of the year.

With today’s gains, the Fluence share price is down 50% year-to-date. That compares to a 10% loss for the All Ords.

What does Fluence do?

Fluence is involved in the decentralised water, wastewater and reuse treatment markets. Its smart products solutions include Aspira, NIROBO and SUBRE. The company’s range of services range from early stage evaluation to design and delivery through to ongoing support and optimisation of water related assets. Fluence operates in 70 countries, with established operations in North America, South America, the Middle East, Europe and China. It aims to help businesses and communities make the most of their water resources.

Why did the Fluence share price leap higher?

Fluence announced that the Israel Discount Bank had confirmed the final conditions precedent for the 165 million euro (AU$275 million) Ivory Coast water treatment plant. The Ivory Coast finance facility will now begin funding contractual payments to Fluence for the plant.

Fluence plans to start construction immediately. The surface water treatment plant will be capable of treating 150,000 cubic metres of water daily. It will treat contaminated water from Lagune Aghein, the biggest freshwater reserve in Ivory Coast, helping to supply fresh water to Abidjan, the nation’s most populous city.

Commenting on the news, Fluence CEO Henry Charrabe said:

Despite challenging logistics and COVID-19 related delays, we are very pleased to have been able to meet this key milestone to progress the Ivory Coast Project and to officially commence construction. This is an immensely important project for the people of Ivory Coast, and we look forward to now fully mobilising.

More reading

• Why the CV Check (ASX:CV1) share price is edging lower today
• Why the Champion Iron (ASX:CIA) share price is up 6% today
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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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With the United States election just a few days away, equities experts are dusting off their crystal balls to work out how Australian investors might take advantage.

A couple of weeks ago, T. Rowe Price Group Inc (NASDAQ: TROW) Australian equities head, Randal Jenneke, presented 3 potential outcomes — and his thoughts on the best shares to hold for each scenario.

Now Betashares Director, Adam O’Connor, has done a similar exercise, coming up with his own 3 possible scenarios and what Aussie investors might do in each.

Scenario 1: blue wave

This is the outcome the polls are suggesting at the moment — Democrat wins in both the White House and Congress.

This would give the centre-left party a clear mandate to reform.

“It’s expected this would include large-scale fiscal spending – with a major focus on clean energy and infrastructure, health care reform, and the possibility of a return to higher corporate taxes and increased corporate regulation,” said O’Connor.

“Though it has been suggested that, with a focus on stimulating the economy and getting Americans back to work post-COVID, any corporate tax reform could be delayed.”

This naturally would make shares related to the clean energy industry or those that are environmentally focused very attractive.

“Biden’s policy agenda… could also accelerate the structural shift towards sustainability and have flow-on effects for Wall Street, with an increased focus on ESG factors,” O’Connor said.

“There could also be tighter regulation on oil and gas exploration and production, particularly for US shale.”

Conversely, the technology industry could suffer from some headwinds.

“There are well-documented concerns from the Democrats around the monopoly power of the tech giants such as Apple, Facebook, Amazon, and Alphabet,” said O’Connor.

“A Biden administration could potentially subject the large digital platforms to greater regulation and take a harder line on antitrust enforcement.”

Scenario 2: shared power

If Biden takes the presidency and the Republicans hold onto the Senate, the Democrats reform agenda would be severely hampered.

“Any change in climate policy would also likely need to be via regulation rather than legislation, while major healthcare reform and tax changes would be difficult to achieve,” O’Connor said.

“On the other hand, policies with bipartisan support such as infrastructure spending would likely be easily implemented.”

In this case, US healthcare stocks could do well.

“The healthcare sector in the U.S. has been trading close to its largest discount to the broader S&P 500 in nearly 30 years as markets have been pricing in an increasing likelihood of a Democratic sweep,” said O’Connor.

“However, under a divided congress any proposed drug price controls are inevitably going to be more difficult to negotiate and are more likely to remain on hold while the government relies on drug manufacturers for a COVID vaccine.”

According to Betashares, in the past 70 years share markets have averaged better returns when the White House and Congress were held by different parties.

“Overall, a divided congress would lead to less policy uncertainty, and combined with a more stable foreign policy and an easing of trade tensions, would potentially be supportive of broad equity valuations.”

Scenario 3: Trump is re-elected

If the status quo remains and the Republicans hold onto both the White House and the Senate, the tech-led bull market has a chance of continuing.

“Trump has always seen the strength of the stock market as a barometer for the success of his administration,” O’Connor said.

“So he appears unlikely to do much to undermine the strength of America’s dominant technology sector.”

The corporate tax cuts he enacted during this first term would survive and the market will not need to price in any climate change-related reforms.

“More than likely Trump will continue to provide support for America’s energy industry.”

Long-term impacts no matter who wins

O’Connor also noted that there are market forces that will prevail regardless of who wins the White House and the Senate.

Recovery out of the COVID-19 recession is a major factor, as is the arrival of a coronavirus vaccine and Federal Reserve policy shifts.

“Structural trends like digitisation and automation could also continue to dictate market leadership, irrespective of who is in the White House,” he said.

More reading

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• The Clinuvel (ASX:CUV) share price edges down on Q1 update
• Is inflation back in black? Here’s what it means for ASX shares
• Newcrest (ASX:NCM) share price tumbles lower following Q1 update
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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. Tony Yoo owns shares of Alphabet (A shares) and Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Facebook and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Facebook. 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 has been caught up in the market selloff and is tumbling lower today.

In afternoon trade the payments company’s shares are down 3.5% to $99.33.

Is this a buying opportunity?

While I think this pullback could be a buying opportunity when the dust settles on this latest market volatility, one leading broker believes investors should wait for an even better entry point.

According to a note out of Goldman Sachs, this morning the broker held firm with its neutral rating and lifted its price target to $94.40 following its first quarter update.

Goldman was pleased that Afterpay’s operating momentum appears robust. However, it notes that its customer additions in the United States fell short of its expectations. The broker had forecast US customer numbers of 6.7 million, compared to the 6.5 million that it reported.

It commented: “APT operating momentum appears robust although customer additions in the US of 6.5mn were below GSe 6.7mn. We note, however, the December quarter in the US is seasonally a very strong one and customer addition run-rates were indicated to be accelerating into October.”

Two things the broker was particularly pleased with were the growing frequency of use in the ANZ market and its net transaction profit margin. These were both ahead of its expectations.

What else did Goldman Sachs say?

Goldman Sachs expects Afterpay to continue to execute strongly, however it does have concerns over the impact of increasing competition.

The broker commented: “While APT continues to execute strongly and we anticipate it will have a strong December 2020 quarter, at this stage we remain Neutral rated reflecting the fact we expect competition to intensify particularly in the US market.”

Goldman notes that plenty of institutional funds have been flooding into the industry. 

“A number of APT’s US competitors have recently completed equity raisings. Klarna announced a US$650mn equity funding round in September 2020 and Affirm raised US$500mn in September 2020 in a series G funding round ahead of its launch of a fortnightly instalment product with Shopify. We also note that Paypal has launched its ‘pay in 4’ product for the upcoming holiday season,” it explained.

In light of this, the broker will be holding firm with its neutral rating for the time being.

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

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