• Nokia shares jump after cull of low-margin business sees earnings beat

    Nokia shares jump after cull of low-margin business sees earnings beatFinnish telecom network equipment maker Nokia reported an unexpected rise in second-quarter underlying profit on Friday as it took on less low-margin business particularly in China, sending its shares up 13% in early trade. Cutting less-profitable service business and not winning 5G radio deals in the cut-throat Chinese market helped Nokia, where new Chief Executive Pekka Lundmark takes over this weekend, upgrade its earnings outlook for 2020. “We do not mind trading poor revenue which doesn’t have high quality margin for better revenue,” outgoing chief executive Rajeev Suri told Reuters.

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  • Is Southwest Airlines Co.’s (NYSE:LUV) Stock Price Struggling As A Result Of Its Mixed Financials?

    Is Southwest Airlines Co.'s (NYSE:LUV) Stock Price Struggling As A Result Of Its Mixed Financials?Southwest Airlines (NYSE:LUV) has had a rough month with its share price down 9.3%. It is possible that the markets…

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  • Stock market crash: why I’d grab this rare chance to buy cheap shares

    road sign saying opportunity ahead against sunny sky background

    Despite the recent market rebound, there are still a relatively large number of cheap shares that could deliver high returns in the long run.

    Certainly, their prices could fall further in the short run due to risks such as a continued rise in global coronavirus cases. However, the recovery potential of the stock market suggests that buying undervalued companies today can lead to high returns compared to other assets.

    Moreover, some share prices are rarely as cheap as they are at the moment. Grabbing wide margins of safety that may be temporary in nature could, therefore, be a logical move.

    A rare opportunity to buy cheap shares

    The last time there were so many cheap shares available to buy was probably during the global financial crisis in 2008/09. Although the recent market rebound means that some sectors now appear to be fully valued, other industries continue to have extremely undervalued shares on offer. In some cases, they trade well below their historic average valuations. This could indicate that they offer good value for money, and that investors have priced in many of the risks they face.

    Such opportunities are generally rare. Over a decade has elapsed since the last global bear market and recession, and many investors are likely to be able to count on one hand how many times they have experienced such periods in their own lives. Therefore, taking advantage of the opportunities available today could be a sound move that allows you to buy stocks when they are unusually low, and sell them at a later date when they are relatively likely to trade at higher prices.

    Recovery potential

    Buying cheap shares today could allow investors to capitalise on a sustained recovery over the long term. As per the global financial crisis, and other past bear markets, a recovery in the stock market’s price level seems likely. Even though there are risks facing the world economy, the impact of stimulus packages such as quantitative easing and tax changes in many major economies could lead to a strong recovery over the coming years.

    As such, focusing your capital on undervalued shares could be a more profitable strategy than buying other assets such as cash and bonds. Although less risky assets may offer a higher chance of a return of capital, their profit potential may be very limited in an era when interest rates look set to persist at low levels. In fact, fixed-income securities and cash savings accounts may erode your spending power if monetary policy measures such as quantitative easing prompt a period of higher inflation.

    While buying cheap shares today may not necessarily feel like a natural move for any investor to make, history suggests that it is a logical step for those individuals with long-term horizons. Some stocks are rarely this cheap, and could offer high total returns in the coming years.

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    Motley Fool contributor Peter Stephens 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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  • 3 ASX dividend shares for dependable income

    street sign saying yield, asx dividend shares

    Some dividend yields are looking sky high right now – hello, Flight Centre Travel Group Ltd (ASX: FLT). But uncertainty is also at highly elevated levels. Dividends are inherently uncertain. They can be cut or not paid at all if funds are not available. Investors tend to prefer some degree of certainty around whether they will receive investment income. Companies that operate in industries with reliable demand are more likely to be able to pay consistent dividends. Here we take a look at three ASX shares for dependable dividends. 

    3 dependable ASX dividend shares

    AGL Energy Limited (ASX: AGL)

    Electricity is a non-negotiable necessity, so the revenues of power generator AGL are fairly certain. AGL targets a payout ratio of 75% of underlying profit after tax and is currently offering a dividend yield of 6.68%. In the first half of FY20, AGL declared an interim dividend of 47 cents per share. This was down 8 cents per share, consistent with AGL’s payout ratio as underlying profit was down 20% for the half year. This was due to a power station outage, lower wholesale gas prices, and reduced gas volumes. AGL has predicted full year profits in the upper half of its guidance range of between $780 million and $860 million. 

    Fortescue Metals Group Limited (ASX: FMG) 

    Fortescue produces iron ore which is the main ingredient in steel. Iron ore is the world’s most used metal accounting for about 95% of metal tonnage produced worldwide. This ASX dividend share targets a payout ratio of 50% to 80% of net profits and is currently offering a dividend yield of 5.74%. In the June quarter, Fortescue reported record iron ore shipments of 47.3 million tonnes. Full year shipments were 178.2 million tonnes, exceeding the top end of guidance. FY21 guidance is for iron ore shipments of 175 – 180 million tonnes. Fortescue paid a fully franked FY20 interim dividend of 76 cents per share, up from 30 cents per share in 1H19. 

    Orora Ltd (ASX: ORA) 

    Packaging provider Orora supplies customers with glass bottles, aluminium cans, caps and closures, boxes, cartons, and more. Packaging is ubiquitous – a necessity in making products available for consumption. This ASX dividend share is currently offering a yield of 7.07% but some have questioned how sustainable this is given Orora’s high payout ratio. Orora returned $600 million to shareholders earlier this year via a special dividend of $450 million and a capital return of $150 million. While COVID-19 will have a negative financial impact, however, Orora’s estimate limits this to $25 million in the second half. 

    5 stocks under $5

    We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.

    And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

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    Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. 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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  • ASX 200 drops 2%, ASX banks fall, Super Retail jumps

    ASX 200

    The S&P/ASX 200 Index (ASX: XJO) fell by just over 2% today to 5,928 points.

    The number of COVID-19 case numbers continue to mount in Victoria and the NSW cases continue to edge higher.

    Super Retail Group Ltd (ASX: SUL) was a bright spot

    The Super Retail share price rose by 9.5% today, it was a shining light on a pretty negative day for the ASX 200.

    The retailer announced updated expectations for the FY20 year with the full year result expected on 24 August 2020.

    In the 52 weeks to 27 June 2020, three of the company’s four core businesses achieved solid sales growth. Supercheap Auto sales increased 7.6%. Rebel sales grew 3.3% and BCF sales increased by 4%. However, Macpac sales declined by 5%. Overall, total sales grew by 4.2% with like for like sales growth of 3.6%.

    Super Retail revealed that sales rebounded strongly during the fourth quarter as the easing of COVID-19 restrictions led to a significant uplift in domestic tourism and travel, personal fitness and outdoor leisure activities. In April there was a 26.2% decline in like for like monthly sales during the peak of the COVID-19 lockdown. But then sales increased by 26.5% in May. In June the momentum continued with like for like sales growth of 27.7%.

    The company also announced some preliminary unaudited financial results for FY20.

    Total revenue was approximately $2.82 billion, up from $2.71 billion.

    Pro forma segment earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to come between $327 million to $328 million – up from $315 million in FY19. Pro forma segment earnings before interest and tax (EBIT) is expected to be between $235 million to $236 million – up from $228 million.

    Pro forma normalised net profit expected to come between $153 million and $154 million. The FY19 profit was $153 million. These pro forma numbers exclude $54 million of ‘abnormal items’.

    ASX banks take a tumble

    The big four ASX banks were among the largest hits on the ASX 200 today.

    Australia and New Zealand Banking Group (ASX: ANZ) suffered a share price fall of around 2.2%.

    The Commonwealth Bank of Australia (ASX: CBA) share price dropped by around 2.75%.

    The National Australia Bank Ltd (ASX: NAB) share price fell by approximately 2.5%.

    Finally, the Westpac Banking Corp (ASX: WBC) share price dropped 3.3%.

    Most of the ASX 200 was actually in the red today. Whilst Super Retail was one of the best performers, it was another painful day for a business which has suffered a lot recently:

    AMP Limited (ASX: AMP)

    The AMP share price dropped close to 13% today after giving an update that showed its underlying profit is expected to halve in the upcoming FY20 half year result.

    AMP said that the Australian wealth management division is expecting operating earnings of approximately $60 million.

    AMP Capital is expecting operating earnings of approximately $70 million.

    The AMP Bank division is expecting operating earnings of around $50 million. AMP Bank is expecting a credit loss provision of $25 million due to COVID-19 related economic conditions.

    The CEO of the ASX 200 share, Francesco De Ferrari, said: “AMP has taken decisive action to support clients and employees and maintain a strong and resilient business, as COVID-19 continues to impact investment markets and the broader economy.

    “Our strong capital position and liquidity have positioned us well to respond, though our first half results have been impacted by the market volatility.

    “The pandemic has presented many challenges but has not distracted us from our mission to transform AMP into a simpler, client-led, growth orientated business.

    “In the first half, we have made significance progress in delivering our strategy including completing the highly complex sale of AMP Life which simplifies our portfolio and sets us up well for the future.”

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    Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail 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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  • Is the REA Group share price a buy?

    Is the REA Group Limited (ASX: REA) share price a buy?

    It’s an interesting one. The REA Group share price is still a little below where it was in February 2020. Indeed, since 23 March 2020 the REA Group share price has risen by 67%.

    Lower interest rates certainly should increase the valuation of businesses. Australia’s interest rate is now just 0.25%. I think that justifies some of the rise. But COVID-19’s resurgence could knock over some of the recovery in my opinion. 

    FY20 third quarter

    I think the third quarter update gave us an insight into why a second wave could be so damaging to the property market and REA Group.

    In the three months ended 31 March 2020 the property business reported that free cash flow was down 20%.

    It was the number of residential listings in April that makes the REA Group share price a hard one to judge. REA Group said that the number of residential listings in April 2020 was down 33%, with Sydney down 18% and Melbourne down 27%. It’s hard to grow earnings with that type of decline. 

    REA Group needs a certain amount of volume to maintain, let alone grow, its earnings. REA Group’s stats will probably show that listing numbers rebounded in May and June nationally as COVID-19 was eradicated from states and territories one by one.

    The Victorian property market’s size is not enough to knock REA Group’s entire growth off track, but it’s obviously a sizeable part of the overall picture with Melbourne being the second largest city. It could be argued that REA Group is trading too highly with a potential slowdown of listing numbers looking more likely. 

    So does this mean that REA Group should be avoided?

    Investing is meant to be for the long-term. What happens over the next six months or twelve months shouldn’t necessarily make or break the overall thesis for a business.

    I think it’s highly unlikely that COVID-19 will be around forever. The Spanish Flu eventually went away by itself. There are a number of healthcare teams around the world that are trying to find a solution for COVID-19 – either a vaccine or a treatment (hopefully both). The Oxford University vaccine is particularly promising at this stage.  

    When you look further into the future, the REA Group share price doesn’t seem to be that bad if it can get back to good growth over the rest of the decade – it’s trading at 35x FY22’s estimated earnings.  

    What excites me about the longer-term with REA Group is the international investments in property sites in the US and Asia – two regions with much larger populations and economies than Australia. If you’re quite optimistic about those stakes then perhaps today’s valuation easily be justifiable.

    For me, I think REA Group is priced too highly with the potential for damage to property sentiment (and listings) over the next six months. Particularly in Victoria and NSW. However, I think REA Group will easily ride through this difficult period. At 30 April 2020 it had “low debt levels” and a cash balance of $135 million. It also has debt facilities it can tap into.

    But I’m still positive about some property ASX shares

    I don’t think every property share is too expensive. I’m particularly attracted to Brickworks Limited (ASX: BKW) with its defensive assets of the industrial property trust and the shares of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). I like Soul Patts as a separate investment as well.

    In terms of real estate investment trusts (REITs), I also like the farmland landlords Rural Funds Group (ASX: RFF) and Vitalharvest Freehold Trust (ASX: VTH). They both have distribution yields of more than 5%. They bpth offer defensive rental income which should operate fairly differently from most other REITs and indeed most of the ASX. We all need food, after all.

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    Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended 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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  • Why Amazon’s share price is set to leap on the opening bell

    Amazon cardboard box

    Amazon.com, Inc. (NASDAQ: AMZN) has come a long way since 1995 when the company started out as an online bookstore.

    Today Amazon has a market cap of US$1.5 trillion (AU$2.1 trillion). And founder and CEO Jeff Bezos counts among the richest people on Earth.

    But judging by the company’s second quarter results — released yesterday (overnight Aussie time) — both Bezos and the Amazon share price could have much more growth ahead.

    The company reported a 42% increase in operating cash flow, to US$51.2 billion. That’s compared to the previous 12 months ending 30 June.

    Net sales grew to US$88.9 billion, up 40% from its second quarter in 2019. And according to the company’s third quarter guidance, net sales are forecast to grow from 24% to 33% compared to the third quarter in 2019.

    Net income also rose to US$5.2 billion. That works out to earnings per share (EPS) of US$10.30, compared to US$5.22 EPS in the same quarter of 2019.

    Additionally, the COVID-19 lockdowns saw online grocery sales triple, while Amazon increased its grocery delivery capacity by 160%.

    A word from Amazon’s founder and CEO, Jeff Bezos

    This was another highly unusual quarter… As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand — purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners. We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, full-time positions. And third-party sales again grew faster this quarter than Amazon’s first-party sales. Lastly, even in this unpredictable time, we injected significant money into the economy this quarter, investing over $9 billion in capital projects, including fulfillment, transportation, and AWS.

    How did investors in Amazon stock react?

    Amazon trades on the Nasdaq Composite (INDEXNASDAQ: .IXIC) at US$3,051.88 per share. The Amazon share price closed up 0.60% on Thursday. The share price is up 65.0% in after-hours trading.

    While the company trades at a nosebleed price to earnings (P/E) ratio of 145 times, Amazon’s share price has been trending higher since 1997, when you could have picked up the stock for US$1.73 per share! And with the company forecasting net sales to grow from 24% to 33% in the next quarter, compared to the same quarter in 2019, I believe Amazon is well-placed to see its shares run higher from here.

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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. Bernd Struben 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 Amazon 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 Amazon. 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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  • Thorn Group share price surges 30% on quarterly report

    wooden blocks with percentage signs being built into towers of increasing height

    The Thorn Group Ltd (ASX: TGA) share price surged 30% on Friday to close the day at 13 cents. The rise in the Thorn Group share price came following the release of the company’s quarterly report.

    What was in the announcement?

    The company announced that the closure of its Radio Rentals stores was completed. According to Thorn group, the company had initially closed its stores temporarily due to the coronavirus pandemic, later deciding to close them permanently. The store closures were completed at the end of May 2020 with significant redundancies occurring as a result. The company’s Radio Rentals business now utilises a purely online model which onboards customers digitally. Progress was made towards the development of this new structure during the second quarter of 2020.

    Thorn reported that its business finance division faced difficulties during the second quarter of 2020 due to reduced cash repayments from customers. The company is in discussion with the lenders of its warehouse funding trust about relief options.  

    In the June quarter of 2020, Thorn Group had positive cash flow of $45.5 million. This came as receipts from previously written lease contracts exceeded operating expenses and outgoings for new leases.

    Thorn Group paid off $21.3 million of debt funding in the June quarter along with $2 million of its corporate debt facility. 

    The company is currently undergoing cost reductions and collecting receivables from its Radio Rentals business after remodelling this division into an online business. It expects both these initiatives to be cash positive for the group. 

    At the end of the June quarter, Thorn Group had $71.8 million in cash. This compared to $49.6 million cash at the end of the March quarter.

    About the Thorn Group share price

    Thorn is a financial services company that provides leasing and financing to consumers and businesses.

    In December 2019, Thorn Group settled a class action brought against the company for $25 million. The class action was related to the previous lending practices of its Radio Rentals business.

    The Thorn Group share price is up 333% from its 52 week low of 3 cents, however, it is down 40.9% since the beginning of the year. The company’s share price is also down 53.6% since this time last year.

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    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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  • Apple smashes revenue forecasts

    Apple CEO Tim Cook in front of Apple logo

    Stock holders in Apple Inc. (NASDAQ: AAPL) will have much to cheer from its third quarter results, released on Thursday (overnight Aussie time).

    The company’s quarterly revenue leapt 11% from the same quarter in 2019, hitting US$59.7 billion (AU$82.9 billion). Fully 60% of the quarter’s revenues came from international sales.

    Quarterly earnings per share (EPS) were up 18%, to US$2.58. And operating cash flow was $16.3 billion. Both figures represent a new record for the June quarter.

    The Board of Directors declared a cash dividend of $0.82 per share of the Company’s common stock. That will be paid out on 13 August. If you want part of that dividend payment, you’ll need to own shares before 10 August.

    Additionally, the Board of Directors approved a four-for-one stock split. That’s intended to make the stock, currently trading for US$384.76 (AU$534.31) per share more accessible to mum and dad investors.

    A word from Apple’s CEO Tim Cook

    Apple’s record June quarter was driven by double-digit growth in both Products and Services and growth in each of our geographic segments. In uncertain times, this performance is a testament to the important role our products play in our customers’ lives and to Apple’s relentless innovation. This is a challenging moment for our communities, and, from Apple’s new $100 million Racial Equity and Justice Initiative to a new commitment to be carbon neutral by 2030, we’re living the principle that what we make and do should create opportunity and leave the world better than we found it.

    While the COVID-19 pandemic lockdowns have hampered many businesses, Apple has clearly come out on top. With hundreds of millions around the world unable to leave their homes over the past months, even to visit your family, iPhones and iPads have offered a way to remain connected.

    Is it too late to buy Apple stock?

    Apple trades on the Nasdaq Composite (INDEXNASDAQ: .IXIC). The stock closed up 1.2% on Thursday. The Apple share price is up 6.4% in after-hours trading.

    Year-to-date the Apple share price is up 28%, having gained an astonishing 80% over the past 12 months. That puts Apple’s market cap at US$1.67 trillion (AU$2.32 trillion).

    I can’t see Apple’s share price gaining another 80% over the coming 12 months, though it’s certainly possible. But if you’re looking for a venerable blue chip tech stock, I believe Apple has a lot more growth ahead in the years to come.

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    Bernd Struben 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 Apple. The Motley Fool Australia has recommended Apple. 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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  • Is the Woolworths share price in the buy zone?

    shopping trolley filled with coins, woolworths share price, coles share price

    Despite being resilient to the market sell-off in March, the Woolworths Group Ltd (ASX: WOW) share price has failed to kick on. Whilst the share price of supermarket giant Coles Group Ltd (ASX: COL) surges to record highs, the Woolworths share price is only 6.6% higher for the year.  

    However, with various tailwinds emerging, the Woolworths share price could be in the buy zone for the medium term.

    Why has the Woolworths share price been so subdued?

    Firstly, as seen in other large cap shares such as CSL Limited (ASX: CSL), the Woolworths share price could reflect many investors rotating their portfolio. As higher growth opportunities emerge from the market sell-off, many investors would be selling their positions in high yielding companies for shares that are heavily sold-off.

    In addition, the Woolworths share price could reflect the higher costs that could potentially eat into the positive earnings from higher sales during the pandemic. In the company’s most recent trading update, Woolworths cited $275 million in extra costs due to precautionary procedures imposed by the pandemic. These included such things as more cleaning and labour as well as extra warehouse space.

    Second wave fears fueling demand

    The COVID-19 pandemic is resulting in a relatively uncertain outlook over the medium term. With fears of a second nationwide lockdown growing, the essential services offered by Woolworths could become in greater demand. Woolworths is well positioned as a defensive company and could also see a growing yield as demand for essential goods accelerates.

    Marley Spoon partnership and growth outlook

    Earlier today, Woolworths announced that its venture capital arm, W23, converted its $2.95 million convertible bond into 5.9 million CHESS depository interests in meal box delivery company, Marley Spoon AG (ASX: MMM). Woolworths entered a 5-year partnership alliance with Marley Spoon in June 2019 and could benefit from the surge in demand for delivered meal kits.

    In addition, with many consumers shifting to online shopping habits during the pandemic, Woolworths is investing heavily into adapting and growing its online presence. The supermarket giant plans to spend approximately $780 million on two automated distribution centres in Sydney.

    Is the Woolworths share price a buy?

    In my opinion, defensive shares with growth potential like Woolworths are worth keeping an eye on in the medium term. Given the uncertainty of the pandemic and the potential for more lockdowns, investors could pile back into defensive consumer staples businesses like Woolworths.

    Instead of pre-empting an entry, I think a more conservative approach would be to wait until Woolworths has reported its full-year earnings to see how the company has handled the increase in costs and how it plans to grow in the future.

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    Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET and 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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