A few weeks ago I wrote an article about why the Afterpay Ltd (ASX: APT) share price could hit $100 in 2020.

It might have seemed crazy at the time, but now leading broker Morgan Stanley is tipping the group’s shares to hit $101.

Why was I bullish on the Afterpay share price?

When I wrote that article on 17 June, the group’s shares were trading at $56.52 with a market capitalisation of $15.1 billion.

It was my view that the ability to maintain a low bad debt expense and continue growing retail merchant networks were key to Afterpay’s future growth. Successful international expansions including the United States and the United Kingdom were another big part of my bullish cash.

At the time, many might have thought the Afterpay share price had topped out. However, the buy now, pay later group’s shares have continued to climb and closed at $66.00 per share yesterday.

What did Morgan Stanley say in its research?

Perhaps unsurprisingly, the leading broker highlighted many of the same themes carrying the Afterpay share price in 2020.

According to an article in the Australian Financial Review, Morgan Stanley is tipping Afterpay to hit $101. That’s a significant increase from its previous price target of just $36 for the buy now, pay later share.

Morgan Stanley said in a note to clients that Afterpay was ‘demonstrating better-than-expected credit quality control, while accelerating sales growth and diversifying away from the fashion category’.

The broker’s most optimistic scenario even had the Afterpay share price tipped to hit $242.80.

Why is everyone so bullish on Afterpay?

Consistently strong trading updates have been the key to Afterpay’s strong share price gains.

That includes Tuesday’s ASX announcement highlighting that underlying Q4 FY20 sales were up 127% year-on-year to $3.8 billion.

The group’s Net Transaction Margin for FY20 is expected to be approximately 2%, which Afterpay sees as the key to longer-term profitability.

Yesterday, Afterpay advised it has successfully raised $650 million through an institutional placement. This will be followed by a $150 million share purchase plan and comes as the company looks to strengthen its balance sheet and fund further expansion in 2020.

That expansion looks set to continue overseas with Afterpay targeting growth in Canada in Q1 FY21.

Would I buy Afterpay shares?

I think there are a lot of tailwinds for the Afterpay share price right now. The group’s trading update on Tuesday showed strong current sales, strategic expansion plans and, overall, painted a pretty good picture.

However, at $66 per share, I’m not sure I’d be buying in right now. While I wouldn’t be surprised to see the Afterpay share price hit $100 in 2020, it looks to be speculative given its astronomic price-to-revenue ratio.

More reading

• 5 things to watch on the ASX 200 on Thursday
• ASX 200 drops 1.5% today, Afterpay falls 3%
• ASX buy now, pay later shares leading the recovery
• QuickFee share price plummets 10% despite record results
• ASX 200 down 0.5%: Afterpay completes placement, big four banks tumble

Motley Fool contributor Ken Hall 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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Is the Westpac Banking Corp (ASX: WBC) share price a buy?

Westpac shares have actually fallen by more than 10% over the past month. The last five months have been a rollercoaster for ASX banks. The Westpac share price fell by 46% between 21 February 2020 and 23 March 2020. It has since rallied 26% higher from the low.

There are a couple of important points about why Westpac’s share price is justifiably higher than it was a few months ago

As one of the big four ASX banks, Westpac’s performance is linked to how the broader economy. Things were looking grim in March 2020 when it was estimated that the jobkeeper package would cost $130 billion. But then it turned out that that estimate was probably $60 billion too high. Less damage to the economy should mean less damage to the Westpac balance sheet.

CoreLogic releases a monthly update about house price movements. Whilst May and June have shown a bit of a decline, there hasn’t been a widespread crash that some economists were fearing.

The second reason to be positive about the Westpac share price is that Australia has mostly gotten COVID-19 under control. Every state except Victoria is reporting there isn’t any community transmission going on. Victoria was also reporting very limited community spread a few weeks ago.

A negative turn

The introduction of lockdowns in Melbourne is definitely not what anyone wanted. A return to limited economic activity will save lives, which is the most important thing. It will mean a slower recovery for the overall economy and the second outbreak could cause a lot more financial pain in Australia’s second biggest city.

It’s a good thing that banks have announced they will extend loan repayment holidays for another four months if borrowers are still experiencing financial hardship. That includes other big ASX banks like Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ). The extension will give borrowers more time to recover from the COVID-19 impacts and hopefully avoid a wave of fire sales of property across the country.

When Westpac released its FY20 half-year result (HY20) it increased its provisions for expected credit losses to $5.8 billion, which included approximately $1.6 billion of additional impairment charges predominately related to COVID-19 impacts. Only time will tell whether this estimate was too low or about right.

The overall HY20 result was pretty tough for shareholders. Cash profit was down 70% to $993 million. Even after excluding ‘notable items’, cash profit was still down 44% to $2.3 billion. Investors were expecting this type of result, it’s why the Westpac share price was down so heavily. 

Another problem on the horizon is the upcoming AUSTRAC penalty for failing to properly report some international transfers. Westpac provisioned $900 million for the fine but it could end up being $1 billion or more.

Is Westpac a good ASX share to buy at this price?

A few months ago I was saying that ASX banks could be decent buys if the recovery was faster than expected. That seems to have happened – Australia is largely heading in the right direction. That’s why the Westpac share price is higher than it was in March and April 2020.

But I don’t think Westpac is out of the woods yet. The RBA interest rate is now very low at just 0.25%. It’s hard for banks to maintain their net interest margin (NIM) if the central bank rate is very lower. A lower NIM will probably result in a lower net profit for Westpac. Interest rates could be very low for some time. 

I don’t think we can buy Westpac shares for the dividend. The interim dividend was deferred and I think the final dividend will probably be reduced by at least 50%.

Westpac is trading at 13x FY21’s estimated earnings. I don’t think it’s cheap enough to warrant buying at this price considering all of the economic uncertainty over the next 12 months.

More reading

• Forget term deposits and buy these strong ASX dividend shares
• ASX 200 down 0.5%: Afterpay completes placement, big four banks tumble
• AFG share price flat despite revealing 30% increase in lodgements
• These ASX shares are swept up by the new Victorian COVID-19 lockdown
• Here’s what ASX investors need to know about the RBA’s rate decision today

Motley Fool contributor Tristan Harrison 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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On Wednesday the S&P/ASX 200 Index (ASX: XJO) was out of form and tumbled notably lower amid coronavirus concerns. The benchmark index fell 1.5% to 5,920.3 points.

Will the market be able to bounce back from this on Thursday? Here are five things to watch

ASX 200 expected to rebound.

It looks set to be a better day of trade for the ASX 200 on Thursday. According to the latest SPI futures, the benchmark index is expected to open the day 46 points or 0.8% higher. This follows a positive night of trade on Wall Street which saw the Dow Jones rise 0.7%, the S&P 500 climb 0.8%, and the Nasdaq jump 1.45%. The latter index saw Apple shares hit a record high overnight.

Afterpay share price tipped to hit $101.

The Afterpay Ltd (ASX: APT) share price has been an incredible performer this year but could still go a lot higher from here. This is the view of analysts at Morgan Stanley. According to the AFR, a note to clients on Wednesday evening reveals that the broker has lifted its price target from $36.00 to $101.00. It notes that it is “demonstrating better-than-expected credit quality control, while accelerating sales growth and diversifying away from the fashion category.”

Oil prices rise.

Energy producers such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could push higher after oil prices recovered overnight. According to Bloomberg, the WTI crude oil price is up 0.65% to US$40.88 a barrel and the Brent crude oil price is up 0.5% to US$43.31 a barrel. Improving gasoline demand in the United States supported oil prices.

Gold price jumps again.

Gold miners including Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Limited (ASX: NCM) could be positive performers today after the gold price jumped again. According to CNBC, the spot gold price pushed 0.45% higher to US$1,818.40 an ounce. Demand for safe haven assets supported the price of the precious metal.

Vicinity share purchase plan flops.

The Vicinity Centres (ASX: VCX) share price will be on watch after revealing that its share purchase plan flopped. The shopping centre operator’s non-underwritten share purchase plan was aiming to raise $200 million but fell well short of this. Vicinity Centres was only able to raise $32.6 million after receiving just 2,400 applications from eligible shareholders. This follows the successful completion of a $1.2 billion institutional placement at $1.48 per share at the start of June.

More reading

• Altium and these ASX 200 shares could be quality buy and hold options
• ASX 200 drops 1.5% today, Afterpay falls 3%
• Why it’s time to rotate out of JB Hi-Fi share price and these popular ASX stocks: Macquarie
• 2 reasons early super withdrawal might be a bad idea
• Top brokers are urging investors to buy these ASX stocks today

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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Over the weekend I demonstrated how buy and hold investing can generate significant wealth for investors.

With that in mind, here are three shares which I think have the potential to be market beaters over the next decade, making them great buy and hold options today:

Altium Limited (ASX: ALU)

I think Altium is one of the best buy and hold options on the ASX. This is because of the strong growth potential of its printed circuit board (PCB) design software platform, Altium Designer. This platform has exposure to the fast-growing Internet of Things (IoT) market. As almost all IoT devices have PCBs inside them, I feel this bodes well for subscriber numbers in the future. Management certainly believes this will be the case. It is aiming to grow its revenue to US$500 million by FY 2025. This compares to Altium FY 2019’s revenue of US$171.8 million.

CSL Limited (ASX: CSL)

I think that this global biotherapeutics company could arguably be the best buy and hold option on the Australian share market. Over the last 10 years the CSL share price has provided investors with an average total return of approximately 24.45% per annum. I believe that its shares could continue to provide outsized returns for shareholders over the next decade thanks to the quality of its products, management team, and lucrative research and development pipeline.

ResMed Inc (ASX: RMD)

A final buy and hold option to consider is ResMed. It is a leading developer of products that treat sleep apnoea, chronic obstructive pulmonary disease, and other chronic respiratory diseases. According to management, approximately 1 billion people are estimated to be impacted by sleep apnoea worldwide. The vast majority of these people are undiagnosed and at risk of life-threatening conditions such as chronic daytime fatigue, heart disease, stroke, type 2 diabetes, and depression. With education around the condition increasing, I expect more and more people to be diagnosed over the next decade. This is likely to lead to increasing demand for its industry-leading products and services.

More reading

• 3 high quality ASX 100 shares to buy right now
• How to beat the market with 2 kids and no time
• Why CSL and these ASX 200 shares could be fantastic buy and hold options
• 3 of the best ASX tech shares to buy in July
• 2 ASX shares I would buy for growth and income

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 Altium and CSL Ltd. The Motley Fool Australia has recommended ResMed 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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If you’re looking to boost your income by adding a few dividend shares to your portfolio, then the ones listed below could be great options.

Both ASX dividend shares listed below have strong businesses and offer generous yields at current prices. Here’s why I think they are in the buy zone right now:

BHP Group Ltd (ASX: BHP)

I think this mining giant is a top ASX dividend share to buy right now. This is because I believe BHP is well-positioned to pay generous dividends over the next couple of years at least. This is thanks to its world class and low cost operations, its growth opportunities, and its strong balance sheet.

I feel the latter should allow the company to return the majority of its free cash flow to shareholders in the form of dividends. And thanks to the sky high prices that iron ore is currently commanding, this looks likely to be billions of dollars. Based on the current BHP share price, I estimate that the mining giant provides investors with a forward fully franked ~5% dividend yield.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Another ASX dividend share for investors to consider buying is Sydney Airport. Although its terminals have been a ghost town because of the pandemic, I’m optimistic that this will change in the coming months. And if the current situation in Melbourne doesn’t get out of control, I’m confident the domestic travel market will recover enough in 2021 for it to pay a decent dividend.

At this point, I estimate that the airport operator will pay a dividend in the region of 29 cents per unit next year. Based on the latest Sydney Airport share price, this represents a 5.35% FY 2021 dividend yield.

More reading

• These ASX shares are the winners and losers in the “new normal”
• Top brokers name 3 ASX shares to buy right now
• Rio Tinto share price on watch following broker downgrade
• Why I see good value in the BHP share price today
• Why brokers have just downgraded BHP and these ASX stocks today

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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