Tag: Fool

As most investors would know, Guzman Y Gomez Ltd (ASX: GYG) shares are now trading on the ASX. However, some investors are questioning whether the Mexican fast-food company is expensive. Let’s see how it compares to the competition.

There aren’t too many fast-food companies trading on the ASX, but Domino’s Pizza Enterprises Ltd (ASX: DMP) is a good business to compare GYG to.

Both companies have comparable valuations. Guzman Y Gomez currently has a market capitalisation of $2.93 billion, and Domino’s has a market capitalisation of $3.31 billion.

Domino’s also has a long-term target of significantly growing its global store count, just like GYG.

However, there are other more helpful measures for comparing businesses. Let’s dig in.

How to compare these ASX shares

Domino’s has been a listed ASX business for close to two decades, while GYG is newly-listed.

It may not be helpful to compare them based on how much net profit after tax (NPAT) they’re making because Guzman Y Gomez is investing heavily for growth, while Domino’s has been profitable for some time.

Revenue may not be the most useful comparison either because their business models are somewhat different.

Earnings before interest, tax, depreciation and amortisation (EBITDA) and earnings before interest and tax (EBIT) are not perfect profit measures, but they could help us compare these two businesses for the next two or three years until GYG starts generating sizeable NPAT.

For now, all we can go on is the GYG prospectus information. Then, in a few months, we’ll examine GYG’s FY24 statutory result.

Forecast Guzman Y Gomez profitability

Guzman Y Gomez has forecast that it can generate pro forma (underlying) EBITDA of $43 million and pro forma (underlying) EBIT of $12 million in FY24. GYG predicts that statutory EBITDA will be $25.4 million in FY24.

GYG’s FY25 statutory EBITDA and EBIT are projected to be $59.9 million and $19.7 million, respectively. Those numbers suggest that GYG could deliver good double-digit growth in FY25.

I think FY25 is a more useful year to look at because it reflects where the company could be in 12 months from now. Even then, a year is not long in investing terms.

At the current GYG share price and market capitalisation, it’s valued at 149x its FY25 estimated EBIT.

The broker UBS believes Domino’s profitability can materially recover in FY25 after its inflation and post-COVID difficulties.

UBS has forecast Domino’s can generate $244 million of EBIT in FY25 (a rise of $30 million compared to the estimate for FY24). At the current Domino’s share price, it’s valued at 13.5x FY25’s estimated EBIT.

Clearly, Domino’s is a lot cheaper than Guzman Y Gomez based on FY25’s predicted profitability. The Domino’s share price is down close to 40% this year, so it could be a contrarian opportunity at the current value.  

Of course, GYG’s EBIT is still at a low base. Adding $10 million, for example, of EBIT in FY26 wouldn’t be much in dollar terms, but it would represent a 50% increase in percentage terms and help normalise the Guzman Y Gomez EBIT multiple.  

Why GYG shares could still be worth it

GYG is still fairly early on in its growth journey. It plans to add dozens of locations every year in Australia, with expected growth in Asia and North America.

The Mexican fast-food business can benefit from global expansion, even through global franchisee sales, because it owns the brand. However, Domino’s can only expand in certain countries.

GYG may be able to deliver much better profit margins in the future because of its focus on drive-through locations, which can deliver good unit economics.

While GYG is starting at an expensive short-term valuation, it may be able to significantly grow its profitability over the next five or 10 years to justify the price today.

The post How does the Guzman Y Gomez ASX valuation compare to Domino’s? appeared first on The Motley Fool Australia.

More reading

• Why Guzman y Gomez, KMD, Mineral Resources, and Pilbara Minerals shares are sinking
• Nuclear power, debt and burritos
• Guzman y Gomez share price implodes 10% on ASX trading day 2
• Would I be crazy to buy Guzman y Gomez (GYG) shares at $30?
• Why Bigtincan, DroneShield, Guzman Y Gomez, and Helia shares are racing higher

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Domino’s Pizza Enterprises. The Motley Fool Australia has recommended Domino’s Pizza Enterprises. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Cettire Ltd (ASX: CTT) share price is under tremendous selling pressure today.

Shares in the All Ordinaries Index (ASX: XAO) retail stock closed on Friday trading at $2.24. In early morning trade on Monday, shares were swapping hands for just $1.29 apiece, down 42.4%.

The Cettire share price has since recovered a small part of those losses, trading for $1.34 at the time of writing, down 40.1%.

For some context, the All Ords is down 0.2% at this same time.

Here’s what’s happening.

Cettire share price plunges on profit warning

Investors are bidding down the Cettire share price after the online luxury goods retailer updated the market on its FY 2024 expectations.

On the plus side, Cettire noted that it had experienced “strong, broad-based revenue growth” in Q4 FY 2024.

And management said it expected to deliver “significant” year-on-year growth in active customers, sales revenue, adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) and cash.

Indeed, sales revenue is forecast to grow 77% to 99% from FY 2023 to $735 million–$745 million. And adjusted EBITDA is expected to fall in the range of $32 million to $35 million, up 24% to 36% year on year.

But the Cettire share price has nonetheless come under heavy pressure after the company reported that “the operating environment within global online luxury has become more challenging”.

The All Ords retail share said softening demand trends and increased promotional activity had crimped margins and impacted its Q4 financial performance.

Commenting on the FY 2024 growth figures, Cettire CEO Dean Mintz said:

With FY24 nearing completion, we are expecting to report considerable growth in revenue and Adjusted EBITDA for the year. Not only does this highlight the strong traction that our platform is gaining both on the supply and demand side, but it also illustrates our efficient cost structure.

Turning to the more challenging market conditions sending the Cettire share price tumbling today, Mintz added:

A softening demand environment and an increase in promotional activity has been visible across our footprint, particularly in the last several weeks as the market has entered the Spring Summer 24 sale period.

Additionally, we believe the market is currently being impacted by clearance activity as certain players exit parts of the market.

To continue to expand our market share, Cettire has selectively participated in the promotional activity, leading to an increase in marketing costs relative to sales and a decline in delivered margin percentage.

Offering some potential future tailwinds, Cettire launched its direct platform in China on Sunday. The company is already processing orders.

“The company continues to grow rapidly, is profitable and cash generative,” Mintz said.

Management will release Cettire’s full-year FY 2024 results in the second half of August.

With today’s big intraday losses factored in, the Cettire share price is down more than 50% over 12 months.

The post Why did the Cettire share price just crash 42%? appeared first on The Motley Fool Australia.

More reading

• 6 ASX retail shares to buy this month
• 3 beaten-up ASX shares fundies love right now
• Why Cettire, Neuren, Peter Warren, and Qantas shares are falling today
• Why Cettire, Lendlease, Neuren, and Sayona Mining shares are racing higher today
• Shorted ASX All Ords share rallies 8% despite ’empty box’ allegations

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Cettire. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

One of my best ASX stock investments within the last year has been Lovisa Holdings Ltd (ASX: LOV). The Lovisa share price has gone up almost 90% since I bought it in the last quarter of the year. I think it’s a very exciting ASX growth share with a lot of potential to keep expanding.

Investors generally consider an ASX stock by its present profit and its prospects for future profit. I am optimistic about the jewellery company’s potential for significant growth in the future.

I think there are few non-technology S&P/ASX 200 Index (ASX: XJO) shares that have the potential to grow revenue as much as Lovisa in the next several years.

Two things make me believe the company could deliver strong capital growth in the next five years.

Global store rollout plans to boost ASX stock’s sales

Over the last three years, five years or longer, Lovisa’s sales growth has largely tracked its store rollout and a bit of same-store sales growth in normal economic conditions.

For example, in the FY24 half-year result, Lovisa’s store count rose 19.4% to 854, and total sales went up by 18.2% to $373 million (despite the current challenging economic conditions harming same-store sales growth).

At the end of the FY24 first-half result, the ASX stock had 175 stores in Australia, a country of less than 30 million people.

I think there is excellent scope for the business to expand significantly in numerous markets. For example, in the USA, it has 207 stores (up from 155 stores in HY23), 47 stores in the UK, one store in China, one store in Vietnam, four stores in Mexico, and so on. These countries have much bigger populations than Australia, particularly the US and China.

In my opinion, the Lovisa store network could easily double in the next five years, and if its growth trend continues, Lovisa’s sales could double in that time too.

Scale benefits

When a business grows, profit margins often increase. This can enable the bottom line to grow faster than revenue. The profit can help push the Lovisa share price higher and fund larger dividends.

While Lovisa’s costs have accelerated during this inflationary period, I think inflation can slow down relatively soon, and the ASX stock’s growing scale will enable bigger profit margins.

Expansion into a new country comes with initial costs, but it doesn’t need to enter Mexico or Canada again; those one-off start-up costs won’t be repeated. It just needs to open more stores in those markets.

Becoming bigger will give Lovisa more buying power and give it other economies of scale.

The broker UBS has estimated that Lovisa can generate $709 million in revenue in FY24 and $81 million in net profit after tax (NPAT). By FY28, in four years, its revenue is expected to increase by 76% to $1.25 billion, and the net profit is projected to grow by 112% to $172 million.

According to those UBS estimates, the Lovisa share price is valued at 21x FY28’s estimated earnings.

The post This ASX stock has gained 89% since I bought it – but it could still be a bargain appeared first on The Motley Fool Australia.

More reading

• 7 excellent ASX growth shares to buy next week
• 1 ASX dividend stock to buy for growth and stay for a 5% yield
• These 3 top ASX 200 shares just earned substantial broker upgrades. Here’s why
• Up 78% in a year, is it too late to buy Lovisa shares?
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Tristan Harrison has positions in Lovisa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa. The Motley Fool Australia has recommended Lovisa. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The ResMed Inc. (ASX: RMD) share price is having a very disappointing start to the week.

In morning trade, the sleep disorder treatment company’s shares are down 13% to $27.88.

Why is the ResMed share price sinking?

Investors have been rushing to the exits this morning in response to the release of sleep apnoea trial results in the United States.

On Friday, global pharmaceutical giant Eli Lilly And Co (NYSE: LLY) released detailed results from the SURMOUNT-OSA phase 3 clinical trials. These are evaluating tirzepatide injection (10 mg or 15 mg) for the treatment of moderate-to-severe obstructive sleep apnoea (OSA) in adults with obesity, with and without positive airway pressure (PAP) therapy.

Tirzepatide, sold under the brand names Mounjaro and Zepbound, is an antidiabetic medication used for the treatment of type 2 diabetes and for weight loss.

According to the release, in both studies, tirzepatide achieved all primary and key secondary endpoints for both the efficacy and treatment-regimen estimands and demonstrated a mean reduction of up to 62.8% on the apnoea-hypopnea index (AHI), or about 30 fewer events restricting or blocking a person’s airflow per hour of sleep, compared to placebo.

It also notes that in a key secondary endpoint, the efficacy estimand showed that 43% (Study 1) and 51.5% (Study 2) of participants treated with tirzepatide at the highest dose met the criteria for disease resolution.

Management highlights that this means achieving an AHI of fewer than 5 events per hour, or an AHI of 5-14 events per hour and an Epworth Sleepiness Scale (ESS) score of ≤10. It notes that ESS is a standard questionnaire designed to assess excessive daytime sleepiness.

‘A complex disease’

Commenting on the results, Dr Atul Malhotra said:

In the trials, patients with moderate-to-severe obstructive sleep apnea and obesity treated with tirzepatide experienced about 30 fewer disruptive events every hour of sleep and nearly half achieved disease resolution.

Senior vice president, product development, Jeff Emmick, MD, Ph.D, added:

There are currently no pharmaceutical treatment options to address the underlying cause of OSA, a complex disease that disrupts the daily lives of 80 million people in the U.S. alone and is linked to serious health complications. The SURMOUNT-OSA results showed a significant proportion of patients with moderate-to-severe OSA and obesity treated with tirzepatide achieved disease resolution based on predetermined AHI and ESS measures, at which point PAP therapy may not be recommended.

Based on the ResMed share price weakness today, it appears that some investors are concerned that tirzepatide could weigh on the company’s growth in the coming years by reducing its addressable market.

Time will tell if that is the case and whether today’s selling has been yet another overreaction.

The post ResMed share price plunges 13% as weight-loss results reawaken worries appeared first on The Motley Fool Australia.

More reading

• ResMed shares are in a two-month lull. Is this a chance to buy?
• Analysts say these strong ASX 200 blue chip shares are top buys today
• Buy the ASX 200 healthcare stock with ‘decades of growth ahead’
• 3 of the best ASX 200 blue chip shares to buy now
• 3 high-quality ASX 200 shares to buy forever

Motley Fool contributor James Mickleboro has positions in ResMed. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

S&P/ASX 200 Index (ASX: XJO) travel share Webjet Ltd (ASX: WEB) is in the red today.

The Webjet share price closed on Friday at $8.88. In morning trade on Monday, shares are changing hands for $8.83 apiece, down 0.6%.

For some context, the ASX 200 is down 0.2% at this same time.

This comes after the company updated the market on its demerger plans.

ASX 200 travel share aims to split in two

The Webjet share price is edging lower after the ASX 200 travel share reported that it continues to progress with the potential separation of its two leading travel divisions, WebBeds and Webjet B2C, via a demerger.

The company originally informed investors of its demerger plan on 22 May. At the time, managing director John Guscic said:

Having carefully weighed up the arguments for and against a demerger, the board sees significant value enhancement through a potential separation of our two industry leading businesses and brands.

Our B2C businesses will continue to deliver organic growth through the shift to online, while separation will support our WebBeds business in its relentless focus on achieving scale in all markets, in a post pandemic landscape characterised by a reduced number of smaller competitors.

In pursuing the demerger, the board noted today it expected the process would “strengthen both businesses’ ability to respond to the continuously evolving travel industry, streamline capital allocation decisions and build long-term value for shareholders”.

How will all this work?

If the demerger goes through, Webjet Limited shareholders will receive one Webjet B2C share for every Webjet Limited share they own, and they’ll retain their shareholding in Webjet.

After the demerger, the board expects Webjet Limited (Webjet B2B), will be renamed to match its global bedbanks business, WebBeds.

Should things progress to plan, Webjet B2C will be listed on the ASX alongside Webjet B2B. The two standalone ASX-listed companies will have their own leadership positions within their respective industries.

In line with that, the ASX 200 travel share announced the appointment of Katrina Barry as CEO of Webjet B2C. An experienced technology executive, Barry has served as non-executive director of the company since 2022. She starts in her new role today.

Webjet B2B, comprising the WebBeds business post-demerger, will continue to be led by Roger Sharp as chair and John Guscic as managing director.

Management expects that both Webjet B2B and Webjet B2C will maintain net cash positions, “reflecting capital structures that provide each business with adequate funding flexibility to pursue their respective growth initiatives”.

If it gains the necessary shareholder and regulatory approvals, the company expects to complete the demerger in calendar year 2024.

With today’s intraday moves factored in, the Webjet share price remains up 31%% in 12 months.

The post ASX 200 travel share slips on latest demerger news appeared first on The Motley Fool Australia.

More reading

• 7 excellent ASX growth shares to buy next week
• What’s ahead for ASX 200 travel shares in FY 2025?
• 5 top ASX growth shares to buy in June
• 3 ASX shares that can rise 25%+ in 12 months
• Top ASX shares to buy in June 2024

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Owning Telstra Group Ltd (ASX: TLS) shares gives investors exposure to the leading telco in Australia. That could be the sort of investment that might appeal to Warren Buffett. But, I’d suggest he would want to analyse the business before deciding to buy.

Warren Buffett is one of the world’s leading investors who has led Berkshire Hathaway to become one of the world’s largest businesses by buying quality companies with long-term growth potential. His investment returns have been an average of around 20% per annum over the decades.

There are a few different things Buffett likes to look for, so I’ll look at a couple of those factors.

Economic moat

Telstra is seen as having the strongest telecommunications network in Australia, with wider coverage, more spectrum and a greater number of subscribers. That could be the kind of economic moat Buffett likes to see.

The company has invested heavily in 5G to ensure that it continues to have the best network. According to Telstra’s FY24 first-half result, the company’s 5G population coverage reached around 87%, with 48% of mobile traffic on 5G.

Telstra’s ownership of spectrum and its vast network reach give it a strong economic moat that Warren Buffett would like, in my opinion.

In the last couple of years, we’ve seen Telstra feel confident enough in the appeal of its network and loyalty of subscribers to increase prices in line with inflation.

I think Buffett would also like the fact that almost every household and business is paying for telecommunication services, making telecommunications a very defensive industry.

Growth

Warren Buffett usually likes to look at businesses that have good long-term potential.

Telstra has a significant market share already, so I wouldn’t say it’s likely to grow its market share a lot.

However, the company is winning a lot of new subscribers. In the HY24 result, it reported its mobile services in operation (SIO) rose 4.6% year over year, which represented an increase of 625,000. If Telstra keeps winning significant numbers of new subscribers, it can deliver good profit growth for shareholders.

Telstra is investing in several areas, including fixed wireless broadband for households, intercity cable infrastructure, cybersecurity, and more.

The HY24 net profit after tax (NPAT) rose by 11.5% to $1 billion, and the areas I mentioned above could help deliver profit growth in the coming years.

Has Warren Buffett invested in US telcos?

While we’ve never heard of Buffett investing in Telstra shares before, he has previously invested in some US telco shares.

However, he chose to dump the AT&T shares quickly after acquiring them, and Verizon didn’t last much longer in the portfolio. But, in the last few years, Buffett has bought T-Mobile shares.

Those previous investments do not guarantee that Buffett would choose to invest in Telstra shares today, but they do show that he could be interested in the sector.

Are Telstra shares trading at a reasonable price?

Warren Buffett hasn’t outlined exactly what valuation metric he likes to focus on when investing within Berkshire Hathaway’s portfolio. It’s also not clear what margin of safety he’d want either when it comes to price.

According to the broker UBS, Telstra shares are valued at 20x FY24’s estimated earnings. Looking ahead to the 2028 financial year, Telstra shares are valued at 13.5x FY28’s estimated earnings.

I think Warren Buffett would be intrigued by Telstra shares after their 15% fall in the past year. However, there’s a fair chance the Omaha investor would prefer an even cheaper price before considering investing.

The post Would Warren Buffett buy Telstra shares? appeared first on The Motley Fool Australia.

More reading

• Top 10 most traded ASX shares and US stocks in May
• Telstra shares: Buy or sell?
• How to invest for retirement in an inflationary environment
• Buy Telstra and these ASX dividend stocks now
• Tax-busters: 5 fully-franked ASX dividend shares I’d buy for FY25

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Verizon Communications. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Myer Holdings Ltd (ASX: MYR) shares are rocketing higher today.

In morning trade, the department store operator’s shares are up 20% to 77.5 cents.

This follows news that the company has tabled a proposal to fellow retailer and major shareholder Premier Investments Limited (ASX: PMV).

Its shares were up as much as 7% to $32.10 in early trade on the news.

What’s going on with Myer and Premier Investments shares?

This morning, Premier Investments announced that it has received a non-binding, indicative, and conditional proposal from Myer to explore a potential combination of the department store with Premier’s Apparel Brands business. The latter comprises the Just Jeans, Jay Jays, Portmans, Jacqui E and Dotti brand.

According to the release, the combination would see the department store acquire Premier’s Apparel Brands business in exchange for the issue of new Myer shares.

The businesses would be contributed in proportion to their maintainable EBIT and on the same EV/EBIT multiple.

In addition, the Apparel Brands business would be contributed together with sufficient cash to ensure a consistent capital structure for each of the two businesses and to provide Myer with capital to invest in growth initiatives.

The deal would also bring an end to Premier Investments’ shareholding in Myer. It notes that Premier would distribute all of its shares in Myer to shareholders. As a result, Premier would cease to own Myer shares and Premier shareholders would become Myer shareholders directly, whilst also retaining their existing Premier shareholding.

What’s next?

The proposed transaction would require approval by Myer’s board and shareholders, Premier’s board and shareholders, and be subject to ASX, ACCC and ATO engagement.

The good news for Myer is that Premier Investments’ chair, Solomon Lew, appears to be in favour of the transaction. He has indicated that he would be prepared to take an active role as a non-executive director of Myer if the transaction proceeds.

Premier Investments has stated the following in regards to the proposed transaction. It said:

Myer has indicated that it sees significant opportunity from a combination of the businesses and that it wishes to explore whether that opportunity can be realised as part of a current review of Myer’s operations.

Premier also believes that there may be meaningful opportunity for both businesses from the proposal. The proposed combination has the potential to deliver a step change in Myer’s scale and market position, deliver synergies and drive sustainable earnings growth. Premier shareholders would benefit given Premier’s existing shareholding in Myer and because Premier shareholders would become shareholders in Myer.

Premier Investments has stated that it will be considering the proposal. However, it has warned that there is no certainty that the proposal will result in a binding offer or transaction.

In the meantime, it continues to work towards the proposed demerger of Smiggle, and to explore the demerger of Peter Alexander.

The post ASX 200 retailer and Myer shares rocket on ‘significant opportunity’ to combine powers appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy today
• 5 things to watch on the ASX 200 on Tuesday
• 2 ASX 200 shares with ex-dividend dates next week
• 6 ASX retail shares to buy this month
• Why these 4 ASX 200 shares were just rerated by top brokers

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX tech stock Brainchip Holdings Ltd (ASX: BRN) has had a rocky 12 months.

After falling to a 52-week low of $0.14 a share back in October 2023, it traded mostly sideways until February, when it quickly shot up to a 52-week high of $0.54. Since then, it’s pulled back again and is currently trading at just $0.22.

Overall, the Brainchip share price has dropped almost 40% over the past year – but it’s been a wild ride getting here. So, what can Brainchip shareholders now expect from this topsy-turvy stock?

What does Brainchip do?

Brainchip is an Australian artificial intelligence (AI) company that specialises in neuromorphic computing.

The phrase ‘neuromorphic computing’ might sound like something out of a sci-fi novel, but it basically refers to computer systems and processors that are designed to mimic the way the human brain works.

For example, conventional computer processors ingest large amounts of data from many different inputs simultaneously. But, if you think about how the human brain works, it filters out unneeded inputs and focuses just on the most essential. This makes your brain a much more efficient processor of information than a standard computer chip.

Even as you sit rivetted reading this article (as I’m sure you currently are and didn’t drift off at the first mention of ‘neuromorphic computing’), there are any number of different background noises, visual distractions and other sensory inputs that your brain is ignoring – and it’s only once you actively focus on them that your conscious mind becomes aware of them again.

In other words, your brain recognises that the constant background hum of your air conditioner or the sensation of your legs touching the chair you’re sitting on aren’t important inputs for the task you’re currently focussed on.

So it doesn’t need to constantly process them. Instead, your brain alerts you to changes in your surroundings and prioritises these inputs – as these could be events you need to respond to.

This is how Brainchip has designed its flagship product, the Akida ‘neuromorphic’ computer chip. The chip is ‘event-based’, meaning it responds to changes in the environment in much the same way as the human brain does. This makes it significantly more efficient than standard computer chips, because it processes key information faster and reduces unnecessary power consumption.

What has happened to the Brainchip share price over the past year?

Brainchip shares went on a tear back in February, skyrocketing over 200% in a matter of weeks. The massive jump in its share price even prompted a ‘please explain’ notice from the ASX, but Brainchip couldn’t offer a business reason for the sudden interest in its stock.

In truth, the surge in Brainchip shares could have had more to do with events happening overseas than anything Brainchip had actually done. The sudden rise of American AI company NVIDIA Corp (NASDAQ: NVDA) inspired short-term traders to greedily gobble up shares in other AI companies, hoping to latch onto the next ‘big thing’ – even if company valuations didn’t justify the investment.

Unfortunately for Brainchip, by the end of February, its shares were already in freefall again after it reported a net loss of US$28.9 million for 2023 – an even worse result than its 2022 net loss of US$22.1 million.

So, what’s next for Brainchip?

Brainchip is the first company in the world to try to commercialise neuromorphic technology, which comes with both benefits and disadvantages.

On the one hand, Brainchip has a huge addressable market and few viable competitors – which is the ideal scenario for a strong economic moat. If Brainchip can show that neuromorphic technology can be successful, it has the first-mover advantage and can develop a loyal brand following.

On the other hand, it’s trying to convince its customers to buy a piece of highly complex technology that they have probably never heard of before. This is a hard thing to do – regardless of how groundbreaking that technology might be.

So far, its financial performance has been less than convincing. For its part, Brainchip blamed its 2023 net loss on a ‘transitional year’, in which it invested in further developing its technology and expanding its marketing and sales functions. However, it was still hard for investors to look past the whopping 95% year-on-year drop in revenues.

In its 2023 annual report, Brainchip mentioned the ‘strong levels of interest’ it had received from potential customers and the ‘encouraging pipeline’ it had built throughout the year. Investors will need to see that translated into real sales (and quickly!) before they can confidently invest in Brainchip shares.

The post Brainchip share price tumbles 40% in the past year. What’s next? appeared first on The Motley Fool Australia.

More reading

• It’s up 3,500%, but here’s why I’m still not buying Nvidia stock
• Want to buy Nvidia but don’t have a US share account? Buy these ETFs instead
• Thinking about buying Nvidia stock? Here’s why you might already own it
• Nvidia investors just got some bullish news
• Is Nvidia stock going to $200 in the wake of its 10-for-1 stock split?

Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Metcash Ltd (ASX: MTS) shares are on the move on Monday morning.

In early trade, the ASX 200 stock is down 2% to $3.68.

This follows the release of the wholesale distributor’s FY 2024 results.

ASX 200 drops on FY 2024 results

• Group revenue up 0.7% to $15.9 billion
• Revenue including charge throughs up 0.7% to $18.2 billion
• Underlying EBIT down 0.9% to $496.3 million
• Underlying profit after tax down 8.2% to $282.3 million
• Total dividends down 13.3% to 19.5 cents per share

What happened during the year?

For the 12 months ended 30 April, Metcash reported a modest 0.7% increase in group revenue to $15.9 billion. This reflects growth in the Hardware and Liquor pillars, which offset a small decline in the Food pillar. The latter was driven by lower sales in tobacco.

The company’s group underlying EBIT decreased by 0.9% to $496.3 million in FY 2024. This was due to earnings growth in Food and Liquor being offset by lower earnings in Hardware and increased corporate costs.

Management notes that the Food pillar continued to perform well in an environment of increased value-conscious shopping. It believes this provides further evidence of its shift to a sustainable and resilient business model. Food earnings increased 3% to $210.1 million for the 12 months.

Metcash’s Liquor pillar increased its earnings by 4.9% to $109.2 million. This reflects its diversified customer strategy, the ongoing preference for localised liquor offers, strategic buying, and good cost management.

Things weren’t quite so positive for the Hardware pillar, which reported a 3.8% decline in earnings to $210.9 million. This reflects rapidly slowing builder confidence and reduced market activity, as well as significantly increased competition for the Total Tools business in the second half.

This ultimately led to group underlying profit after tax falling 8.2% to $282.3 million and the Metcash board cutting its fully franked final dividend by approximately 23% to 8.5 cents per share. This brought its total dividends to 21.5 cents per share in FY 2024, which is down 13.3% year on year.

Management commentary

The ASX 200 stock’s CEO, Doug Jones, was pleased with the results. He said:

I am pleased to report that the Company has delivered strong results for FY24, a year in which there was a further decline in the external environment. The results have been underpinned by our strategy, which is clearly working, and the disciplined execution of key initiatives. Operationally, all pillars performed well, in line with their strategic positioning, demonstrating resilience in the current softer market conditions.

Outlook

Total group sales for the first seven weeks of FY 2025 have increased 2.2%. However, this includes the acquisition of Superior Foods. Excluding this business, sales were flat.

Management commented that it believes “Metcash is well positioned with the plans, platform, capabilities and diverse business portfolio for future growth and strong returns through the cycle.”

Following today’s decline, this ASX 200 stock has now dropped into the red on a 12-month basis.

The post Guess which ASX 200 stock just slashed its final dividend by 23% appeared first on The Motley Fool Australia.

More reading

• This ASX dividend share could pay an 8% yield in 2026!
• 2 ASX dividend shares offering over 5% yield
• Where Aussies are spending their money, and the ASX shares that could benefit
• 3 lower-risk ASX dividend shares for retirees
• Here’s how I’d target a $2,000 second income by investing $35 a week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Metcash. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Star Entertainment Group Ltd (ASX: SGR) shares are under pressure on Monday.

In morning trade, the struggling casino and resorts operator’s shares are down 3% to 47.5 cents.

Why are Star Entertainment shares tumbling today?

Investors have been selling the company’s shares again this morning after it released an update on its profit expectations for FY 2024.

According to the release, trading conditions have remained difficult since its last update in April.

The company notes that this reflects the challenging economic environment and cost of living pressures.

Group revenue for the fourth quarter of FY 2024 is expected to be 4.3% below the previous quarter and 3.3% below the prior corresponding period. This is being driven by revenue from Premium Gaming Rooms (PGRs) continuing to trend downwards, which is offsetting growth from Main Gaming Floor (MGF) revenue.

As a result, management expects group revenue for FY 2024 to be between $1,675 million and $1,685 million. This will be down from $1,868 million in the last financial years.

Unfortunately, it gets worse. Management notes that these conditions, together with elevated operating expenses from ongoing remediation and transformation activities, have had a big impact on its earnings.

Star Entertainment is forecasting FY 2024 normalised group EBITDA to be in the range of $165 million to $180 million. This represents a significant decline on FY 2023’s normalised EBITDA of $317 million.

In response to this new operating environment, Star Entertainment will seek to expedite a range of initiatives to further reduce its operating cost base.

Leadership update

In a separate announcement, Star Entertainment has revealed that David Foster has ceased his executive responsibilities and resigned as a director with effect on 21 June 2024.

The company has progressed its recruitment process for a new permanent group CEO and managing director. It expects to make an announcement in the near term.

As an interim measure, Star Entertainment has appointed current interim group chief financial officer, Neale O’Connell, as acting CEO. This is subject to all requisite regulatory approvals.

This appointment is in addition to Mr O’Connell’s existing duties as group CFO and will remain in place until the appointment of a permanent CEO takes effect.

The company’s chair, Anne Ward, has also assumed additional responsibilities on an interim basis. She will continue performing these additional responsibilities until the appointment of a permanent CEO takes effect.

Star Entertainment shares are now down approximately 49% over the last 12 months.

The post Star Entertainment shares tumble on disappointing earnings guidance appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• 3 ASX 200 stocks leading the charge higher in June
• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.