Tag: Motley Fool Australia

The Magellan Financial Group Ltd (ASX: MFG) share price went up more than 2.5% today after the company released its annual report for the year to 30 June 2020.

What was in the annual report?

Magellan had a revenue of $693.95 million in the year to 30 June 2020 – a 12.4% increase on the 2019 financial year.

The company posted a net profit after tax of $396.21 million, up 5% on 2019.

Adjusted net profit after tax was $438.3 million, which excluded the amortisation of intangible assets and after tax transaction costs related to strategic initiatives. This was a 20% increase on adjusted net profit after tax in the 2019 financial year.

Earnings per share were 218.3 cents for the 2020 financial year. Magellan’s average funds under management were up 26% to $95.5 billion in the year to 30 June 2020.

The company declared a dividend for the 6 months to 30 June of 122.0 cents, taking total dividends for the year to 214.9 cents per share.

What does Magellan do?

Magellan Financial Group is a funds management company that operates listed and unlisted managed funds. It was founded in 2006 and has offices in Australia, New Zealand and the USA.

In June 2020, Magellan launched the Airlie Australian Share Fund (ASX: AASF), an ETF that typically invests in between 15 and 35 Australian equities. This is one of several listed funds managed by Magellan.

In a letter to shareholders, Magellan CEO Brett Cairns commented on the group’s results, stating;

“During the year, the group saw a 26% growth in average FUM (funds under management) over the previous corresponding period, to $95.5 billion (average FUM of $75.8 billion for the year ended 30 June 2019).

“We are pleased with this outcome, particularly given the severe market volatility seen around the world driven by the COVID-19 pandemic. This could not have been achieved without the performance of our investment strategies which exhibited the strong downside protection traits that are a key component of our investment objectives.”

About the Magellan share price

The Magellan share price was up 2.7% to $63.35 at the time of writing, more than double its 52-week low of $30.10 in April. The share price is up 5.47% since this time last year.

More reading

• Why the Magellan share price might be a post-earnings buy today
• Why Aurizon, Cochlear, Magellan, & Westpac shares are pushing higher
• It’s ASX reporting season! Here’s what to watch out for this week
• Magellan share price falls despite strong July inflows
• Top brokers name 3 ASX shares to sell next week

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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It has been a tough year for the airline industry with the grounding of flights and uncertainties in the travel market. Revenue has been hammered and companies are burning through their cash pile.

The Qantas Airways Limited (ASX: QAN) share price has been heavily traded since March, falling 52% from its all-time high of $7.46 reached in December last year. At the time of writing, the Qantas share price is up 0.28% for the day at $3.57.

So, when will Australia’s largest carrier (and its share price) be flying high again?

What happened?

Since early this year, the world has been swept up with the coronavirus pandemic. Entire industries have been shut down and foot traffic has come to a standstill.

Qantas has seen its revenue stripped away, with its aircraft parked at tarmacs around Australia or in the Mojave Desert in California – where its A380 super jumbo jets have been sent for deep storage.

The company has taken a number of measures to reduce its cash burn rate of approximatively $40 million a week. Initiatives such as standing down 6,000 employees, deferring capital spending and revoking its dividend payout to shareholders have been implemented to try and staunch the bleeding.

And whilst management have been diligently working to get the company though this crisis, liquidity may be an issue for the long-run. As of 5 May, Qantas had $2.5 billion in cash, undrawn facilities of $1 billion and an unencumbered fleet value worth $2.7 billion. The recent share purchase plan – which failed to reach its $500 million target – may be a sign of a slow recovery.

What’s next for Qantas?

All eyes will be on the company as it releases its full year results. Analysts at Goldman Sachs expect Qantas to report earnings before interest, taxes, depreciation, amortisation and restructure (EBITDAR) of $2.2 billion. This will be a 37% decline on FY19’s result. Underlying net profit is expected to be around $25 million, a sharp drop from $912 million the year before.

Goldman doesn’t expect Qantas to pay shareholders a final dividend, which could potentially weigh on investor sentiment and send the Qantas share price lower.

Investors will be looking to see how Qantas plans to minimise costs from the coronavirus outbreak and what proactive measures the airline is taking to create a stronger platform for future profitability and growth.

Is the Qantas share price a buy?

In my opinion, I think that while the Qantas share price may be turbulent for now, restrictions will eventually ease and the company will again return to strong profitability. Domestic services are predicted to resume at the end of 2020, and Qantas does have the lion’s share in this market. Given the airline’s strong financial track record and disciplined management team, I would class Qantas shares as a buy for the long term.

More reading

• 3 ASX shares I would buy right now at these prices
• Bank savings rates fall as Buffett racks up record cash pile and analysts tip Qantas share price rebound
• ASX 200 jumps 1.2%: Big four banks rise, Qantas update, Mesoblast surges
• Qantas share price higher despite share purchase plan flop
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor Aaron Teboneras 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 NEXTDC Ltd (ASX: NXT) share price has been among the best performers on the S&P/ASX 200 Index (ASX: XJO) in 2020.

Since the start of the year the data centre operator’s shares have risen an impressive 77%.

In light of this, expectations are very high ahead of its full year results release at the end of the month.

In order to keep readers informed, I thought I would take a look to see what the market is expecting from NEXTDC in FY 2020.

What is the market expecting from NEXTDC in FY 2020?

According to a note out of Goldman Sachs, its analysts expect NEXTDC to deliver a 14% increase in revenue to $203 million. This sits in the middle of the company’s guidance of $200 million to $206 million given in May.

In respect to its earnings, the broker is forecasting earnings before interest, tax, depreciation, and amortisation (EBITDA) of $103 million. This will be a 21% increase on the prior corresponding period and, once again, sits in the middle of its EBITDA guidance range of $100 million to $105 million.

What else should investors look out for?

In addition to the above, Goldman Sachs has suggested investors look out for enterprise contracts.

It commented: “With +12MW of M2 Hyperscale contracts announced, we will be focused on new Enterprise MW and any Covid-19 related acceleration, noting that NXT also signed a major bank contract during the half.”

The broker also has its eyes on pricing and returns. Goldman explained: “We will focus on the impact of S2 [Sydney 2] contracts on NXT’s blended MW/pricing, along with growth in cross connects, noting Equinix delivered one of its strongest interconnect quarters on record in the Jun qtr.”

Finally, its analysts will be looking for commentary on recent expansions and future plans.

It said: “We look for details on P2’s [Perth 2] opening performance, M3 [Melbourne 3] land acquisition, international expansions, and any updates on potential joint ventures / funding structures for these projects.”

More reading

• Top brokers name 3 ASX 200 shares to buy today
• Where I’d invest $10,000 in ASX shares for the future
• If you invested $10,000 in Afterpay shares last year, you’d have this much today…
• Nextdc share price hits record high – does it have room to grow?
• Why it’s a good time to buy and hold ASX shares

Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. 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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Leisure and entertainment company Ardent Leisure Group Ltd‘s (ASX: ALG) share price topped the leader’s board on the ASX last week. The Ardent Leisure share price gained a whopping 22.7% in the first trading week of August.

Things got off to a rockier start for the company this week, with Ardent’s share price falling 3.6% by this morning’s opening bell. And shareholders looked to be in for more pain in early morning trade today as Ardent Leisure’s share price fell 5% in less than an hour.

Like one of the company’s amusement park rides, though, the share price came shooting back up to recoup all those losses by mid-afternoon trade.

Ardent Leisure’s share price gain of 21.2% for August still puts it at the top of the big gainer’s board.

Of course, it’s got a lot further to climb before regaining all of 2020’s massive losses.

Like most shares on the ASX — particularly companies tied to travel and entertainment — the COVID-19 market rout hit the Ardent share price hard. From 21 February to 25 March, Ardent’s share price cratered by 92%.

Since the 25 March low, the company’s shares have shot up an impressive 264%. Yet it’s still far shy of where it began the year, down nearly 70% since 2 January.

That’s seen its market capitalisation reduced to $189 million.

What does Ardent Leisure do?

Ardent Leisure is an Australian leisure and entertainment group. The company owns and operates premium leisure assets which include Dreamworld, WhiteWater World and SkyPoint theme parks.

Its Main Event portfolio also includes a growing number of family entertainment assets in the United States.

Why is the Ardent Leisure share under pressure after last week’s 23% gain?

Last week, Ardent Leisure’s share price got a boost when the company announced it was reopening Dreamworld and WhiteWater World in mid-September. Continued social distancing measures, however, mean the theme parks will be limited to 50% capacity.

The share price was also buoyed after Ardent announced it was receiving a $66.9 million loan plus a grant of $3 million from the Queensland Government’s COVID-19 industry support package.

Two factors are likely seeing Ardent’s share price falling this week.

First, after a 23% increase, it’s natural to expect that several short-term investors will be selling shares to pocket some gains.

Second, the news out of New Zealand regarding renewed COVID-19 cases, and the subsequent lockdowns in Auckland, is likely scaring investors away from a company that’s so reliant on international and interstate tourism.

More reading

• These were last week’s best performing ASX shares
• Ardent Leisure share price on watch following government assistance
• Village Roadshow locked in a capital raise as it secures new $70m facility
• Ardent Leisure share price surges 10% despite facing $4.5 million fine

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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More than six months into the coronavirus pandemic, the end is still out of sight. Authorities have predicted a COVID-19 vaccine will not be widely available until well into next year.

Which means if we have to spend more than 12 months living with coronavirus restrictions, some of the changes we have made to our lives are likely to turn into lasting habits. Things like working from home and shopping online. 

Shifts in consumer behaviours resulting from the pandemic have real financial impacts for ASX shares. When spending patterns change, revenues can ebb and flow, or redirect to a different product or service.

With the social change brought by COVID-19 in mind, let’s take a look at 4 ASX shares for a post-coronavirus world. 

Livetiles Ltd (ASX: LVT)

Livetiles is a technology company supplying software used to create corporate intranets and employee portals. With operations across the US, Europe, and Australia, the ASX share has benefitted from the shift to remote working caused by the pandemic, which has increased interest in its products. COVID-19 has accelerated global digital workplace software adoption. 

Livetiles operates a software-as-a-service (SaaS) business. Its products create enhancements to underlying Microsoft platforms such as Office 365 and Azure. These enhancements address common business needs and priorities.

Having secured its first customer in 2015, Livetiles now has more than 1,200 enterprise customers and more than 1,000 recurring subscription customers. 

The COVID-19 pandemic has shifted solutions like those offered by Livetiles from “nice to have” to “must have” status. While the sales environment for enterprise software remains challenging, strong medium and long term tailwinds are pushing the adoption of digital workplace software. This should support long-term growth in Livetiles revenue.

The ASX share reported strong revenue growth in the fourth quarter – annualised recurring revenue increased to $58.2 million from $5.2 million at the end of March. 

Kogan.com Ltd (ASX: KGN) 

Online retailer Kogan has seen sales boom since the onset of the pandemic. As physical stores shut, consumers moved to transacting online, boosting Kogan’s bottom line. The ASX share reported a 103% increase in gross sales in April and May, which led to 130% increase in gross profit. Sales continued at an accelerated pace even after the first lockdown ended, with June sales of more than $94 million. 

In 4Q FY20 Kogan grew gross sales by more than 95% and gross profit by 115%. Adjusted EBITDA grew by more than 149%. The company reported it had more than 2 million active customers at the end of June, with 109,00 active customers added during the month.

This means Kogan, which listed on the ASX in 2016, has delivered four consecutive years of significant growth in sales and earnings. Founder Ruslan Kogan said: “Our business is booming as more customers than ever choose Kogan.com.”

Kogan is due to release its full year results next Monday. Investors are expecting big things with the Kogan share price increasing 300% over the past year. But the ASX share stands to benefit greatly from the long term shift to digital which has been accelerated by current events. This is demonstrated in the company’s most recent results – July sales were up more than 110% year on year with active customers growing to over 2.3 million. 

Afterpay Ltd (ASX: APT) 

Australia’s largest buy-now-pay-later (BNPL) provider, Afterpay, was already reporting phenomenal growth prior to the onset of COVID-19. The pandemic has accelerated this growth with underlying sales in the fourth quarter growing 127% to $3.8 billion, the highest quarterly sales performance ever. The BNPL provider now boasts 9.9 million customers, a 116% increase compared to 30 June 2019 and above the target of 9.5 million by the end of FY20. 

Afterpay has benefitted from the flight to online spending and an increased focus on budgeting in the current economic environment. The ASX share is focused on growing underlying sales and prioritising global expansion in the short term in order to maximise shareholder value in the long-term. To this end, Afterpay raised $800 million in capital last month to invest in growth. 

Afterpay is now well-capitalised to grow its position in each market and expedite its expansion into new markets. The additional capital also provides the capacity to execute on potential M&A opportunities that may arise. There are plans to launch in Canada and roll out in-store services in the US in 1Q FY21. FY21 is expected to be a year of increased investment for Afterpay as it maintains its strong momentum and capitalises on the opportunity to scale globally. 

Megaport Ltd (ASX: MP1) 

Megaport operates in the network-as-a-service space, providing bandwidth to allow customers to connect to cloud services and data centres. The company has been focused on expanding its network footprint to new markets and deepening its reach in existing ones. Following expansion into Denmark and Spain in 4Q FY20, the Megaport platform is now available in 23 countries and 128 cities. The ASX share now serves 1,842 customers including Amazon, Facebook, Tesla, and Salesforce. 

Megaport reported strong growth in revenue and customer numbers in FY20 as ecosystem richness drove greater service connection opportunities. Customer numbers grew from 1,490 at the end of FY19 to 1,842 at the end of FY20. Over the same period, monthly recurring revenue increased 52% to $5.7 million and annualised revenue grew 57% to $67.8 million. Profit margins are also increasing as growth in recurring revenue has outstripped growth in direct network costs. 

Megaport has now delivered 17 consecutive quarters of growth in annualised revenue. The technology operator is due to report full year results on Wednesday 19 August which will give investors insight into its growth over the past year.

CEO Vincent English said: “Megaport has continued its strong growth momentum, with solid revenue results throughout FY20. The Megaport platform has enabled customers the flexibility to respond to their rapidly changing business environment.”

More reading

• Whatever happened to WAAAX shares?
• 3 stellar ASX tech shares to buy for the long term
• Where to invest $500 into ASX shares immediately
• Is the Afterpay share price a buy?
• Can the Kogan share price keep going?

Kate O’Brien 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 MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and LIVETILES FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Kogan.com ltd, LIVETILES FPO, and MEGAPORT 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.

The post 4 ASX shares to buy now for a post-coronavirus world appeared first on Motley Fool Australia.

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Although the BHP Group Ltd (ASX: BHP) share price is dropping 1% lower on Wednesday, it has still been among the best performing blue chips over the last 30 days.

Since this time last month, the mining giant’s shares have gained 10%. This compares to a 3.2% gain by the S&P/ASX 200 Index (ASX: XJO).

Why is the BHP share price up 10% in a month?

There have been a couple of catalysts for BHP’s strong performance over the last 30 days.

The first is the positive performance of the iron ore price. The price of the steel making ingredient has been edging higher over the last few weeks and currently stands at a lofty US$118.34 a tonne according to CommSec.

It is for the same reason that the Fortescue Metals Group Limited (ASX: FMG) share price has been a very strong performer over the same period.

Another catalyst for the BHP share price rise has been its fourth quarter and full year update.

During the 12 months, BHP achieved its production guidance for iron ore, metallurgical coal, and operated copper and energy coal assets.

The Big Australian’s iron ore business was arguably the highlight of the year. Production increased 4% on the prior corresponding period to 248 Mt.

Pleasingly, this is expected to have been achieved with Western Australia Iron Ore costs in line with its guidance of US$13 a tonne to US$14 a tonne. Which is significantly lower than the average price realised of US$77.36 a tonne during the 12 months.

This could mean another year of bumper free cash flow for BHP in FY 2020, which may result in further generous dividends when it hands its report card later this month. And if iron ore prices remain stronger for longer, FY 2021 could be a similarly positive year.

Should you invest?

BHP remains my favourite pick in the resources sector even after its strong gain over the last 30 days. I think it is a top option due to its world class and low cost operations, growth opportunities, and favourable commodity prices.

Overall, I continue to class BHP shares as a buy, especially for income investors in search of dividends in this low interest rate environment.

More reading

• Broker sees top returns for iron ore miners BHP and Rio
• Has the ASX 200 finally taken off?
• ASX iron ore miners jump on broker upgrades
• Are ASX lithium shares the next big thing?
• 3 tips for beginners investing in ASX shares

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 Commonwealth Bank of Australia (ASX: CBA) share price is edging lower on Wednesday afternoon following the release of its full year results.

At the time of writing the banking giant’s shares are down almost 0.5% to $74.37.

How did Commonwealth Bank perform?

In case you missed it earlier, here’s a summary of how Commonwealth Bank performed in FY 2020:

• Operating income of $23,758 million, up 0.8% on the prior corresponding period.
• Net interest margin declined 2 basis points to 2.07%.
• Home lending growth at 1.3x system and household deposit balance growth of 9.8%.
• Statutory net profit after tax including discontinued operations of $9,634 million, up 12.4% on FY 2019. This statutory result includes significant gains on the sale of businesses.
• Cash net profit after tax from continuing operations down 11.3% to $7,296 million. This was driven largely by higher COVID-19 loan impairment expense.
• Final fully franked dividend of 98 cents per share, representing a dividend payout ratio of 49.95%. This is in line with APRA’s guidance that banks should retain at least 50% of earnings.
• CET1 ratio of 11.6%, comfortably ahead of APRA’s ‘unquestionably strong’ benchmark of 10.5%.

How does this compare to expectations?

According to a note out of Goldman Sachs, Commonwealth Bank’s cash earnings from continuing operations were 2.2% below its expectations. It notes that this was partly due to a 3 basis point miss on its net interest margin and weaker trading/other income.

Positively, its dividend was better than the broker expected. Goldman had been expecting a final dividend of 90 cents per share. It was also expecting a lower CET1 ratio of 11%.

The banking giant’s asset quality surprised the broker. Commonwealth Bank’s bad and doubtful debts charge to loans ratio was 49 basis points in the second half, well short of Goldman’s forecast for 57 basis points.

Looking ahead, Goldman appears happy with the bank’s prospects in respect to its asset quality.

It commented: “The economic assumptions used by CBA to come up with its provisioning appear to have remained relatively unchanged versus its 3Q20 trading update, with 2020 GDP growth remaining at -6.0% (compares to current GSe of -4.0%), unemployment at 9.0% (GSe 8%) and a 12% fall in house prices (GSe -5%).”

“Forward indicators of asset quality were mixed: new impaireds were down 2% hoh (hardly surprising given loan deferrals), the balance of impaireds was up 5% hoh, with gross impaired assets + corporate troublesome loans up hoh to A$8.7 bn (A$7.8 bn in pcp and hoh). Mortgage arrears increased by 2bp hoh but down 5bp on pcp,” it added.

Nevertheless, despite the bank ticking quite a few boxes in FY 2020, it isn’t enough for Goldman to change its rating on Commonwealth Bank shares. It has held firm with its sell rating and $65.25 price target.

More reading

• Fund managers have been buying these ASX shares
• As CBA slashes its dividend, the brutal reality is bank shares have been dogs for 5 years, with more pain ahead
• ASX 200 down 0.3%: CBA delivers $7.3bn cash profit, gold miners sink, SEEK’s outlook disappoints
• ASX investors have been buying these international shares
• CBA share price dips on FY20 results and slashed dividend

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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I like to keep an eye on substantial shareholder notices. This is because these notices give you an idea of which shares large investors, asset managers, and investment funds are buying or selling.

Two notices that have caught my eye today are summarised below. Here’s what these fund managers have been buying:

Baby Bunting Group Ltd (ASX: BBN)

A notice of initial substantial holder reveals that United Super has been adding to its position over the last few months. Between 6 April and 4 August, the fund manager picked up 1,557,545 Baby Bunting shares. This brought its total holding to 6,446,678 shares, which equates to a 5.05% interest in the baby products retailer’s shares.

While its purchases in April were at a significant discount to today’s share price, it did pick up 200,000 shares for an average of $3.60 per share last week. This is the same level Baby Bunting’s shares are trading at today, which appears to be an indication that this fund manager still sees a lot of value in them. One broker that might agree is Citi. Last month it put an overweight rating and $3.90 price target on its shares.

EML Payments Ltd (ASX: EML)

Another notice of initial substantial holder reveals that Commonwealth Bank of Australia (ASX: CBA) has been buying this payments company’s shares. According to the notice, the banking giant and its subsidiaries have been buying EML shares consistently since the beginning of April. As a result, the bank now owns 18,008,708 shares, which is the equivalent of a 5% stake in the company.

It appears as though Commonwealth Bank has taken advantage of a collapse in the EML Payments share price during the pandemic. Its shares are down by 46% from their 52-week high after the coronavirus hit its business hard. However, management remains confident that its growth will resume post-pandemic. Judging by its purchases, Commonwealth Bank appears to agree with this view.

More reading

• How did the CBA FY 2020 result compare with expectations?
• As CBA slashes its dividend, the brutal reality is bank shares have been dogs for 5 years, with more pain ahead
• ASX 200 down 0.3%: CBA delivers $7.3bn cash profit, gold miners sink, SEEK’s outlook disappoints
• ASX investors have been buying these international shares
• CBA share price dips on FY20 results and slashed dividend

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Emerchants 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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WAAAX is an acronym we don’t seem to hear as much as we used to on the ASX share market.

Inspired by the FAANG (Facebook, Apple, Amazon.com, Netflix and Alphabet (owner of Google) stocks of American fame, WAAAX was the term coined to describe a group of high-flying ASX tech shares.

These shares were – sorry, are – WiseTech Global Ltd (ASX: WTC), Appen Ltd (ASX: APX), Altium Limited (ASX: ALU), Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO).

And back in early 2019, they were all the rage.

All had delivered strong capital growth over the previous few years. All were exciting, innovative tech stars that ASX investors dreamed might one day rival the famous FAANGs.

So what happened? Why do we not hear this WAAAX term as much anymore? Has the WAAAX turned to wane?

WAAAX off?

Well, it comes down to divergence. See, it was easy to pile these 5 companies together when their fortunes were intertwined. But today, it’s a different story, with the 5 WAAAX shares going in 3 separate directions.

Afterpay and Xero have continued to shoot the lights out. These 2 companies are today trading near record highs.

Appen and Altium haven’t really enjoyed the same level of love from investors though. Appen shares have recently had a leg up, but between March 2019 and May 2020 pretty much went nowhere. It’s a similar story with Altium.

WiseTech Global though… ouch. This global logistics company is something of a fallen WAAAX angel. After rising by around 360% in the 2 years to September 2019, WiseTech has been in freefall ever since. Over the past 11 months, WiseTech shareholders are down around 50%.

And that’s why I think we don’t hear much of the ‘WAAAX shares’ anymore. Perhaps because AAAX (or XAAA) doesn’t quite have the same ring to it. Or perhaps ASX investors now accept that we can’t really rival the seemingly-indestructible FAANGs over in the US, at least right now.

Which AAAX share is the pick of the bunch?

As you might have picked up, I’m not a huge fan of WiseTech. But the other 4 ‘AAAXers’ I am more partial to. All have long growth runways ahead of them and could be massive companies in 10 years’ time if their cards are played right.

If pricing wasn’t an issue, Afterpay and Xero would definitely my picks of the bunch. I love Xero’s capital-light, software as a service (SaaS) model, which could turn Xero into a free cash flow machine down the road.

Ditto with Afterpay. If Afterpay can continue carving the US and UK markets up and enter the Asian market, I think its growth potential is almost limitless. Especially if you consider its recent partnership with Chinese e-commerce giant Tencent Holdings.

All of this (and perhaps more) is reflected in the current Xero and Afterpay share prices in my view, so I’m still biding my time with these two. But they are both companies I would love to see in my portfolio and sooner, rather than later.

More reading

• 4 ASX shares to buy now for a post-coronavirus world
• 3 stellar ASX tech shares to buy for the long term
• Why Mesoblast, Northern Star, SEEK, & WiseTech Global shares are sinking lower
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ASX stocks that have delivered pleasant surprises during the reporting season have been outperforming the S&P/ASX 200 Index (Index:^AXJO).

Some recent examples include the GPT Group (ASX: GPT) share price, Aurizon Holdings Ltd (ASX: AZJ) share price and James Hardie Industries plc (ASX: JHX) share price.

Here are two other ASX 200 stocks that may beat expectations when they hand in their earnings report card next week.

Earnings surprise on strong tailwinds

One possible reporting season hero is the AMCOR PLC/IDR UNRESTR (ASX: AMC) share price. Macquarie Group Ltd (ASX: MQG) noted that other packaging companies like Berry, Sealed Air and Huhtamaki have all reported results that exceeded consensus forecasts.

It’s also worth noting that the COVID-19 crisis triggered a surge in demand for a range of consumer goods that Amcor is exposed to. More than 95% of the group’s sales are linked to food, beverages, healthcare and personal care.

Double-digit growth

Macquarie is forecasting Amcor to deliver earnings per share (EPS) growth of between 10% and 11% for FY20, and a further 9% in the current financial year.

Not many companies can boast of having double digit growth in the past year and if the positive tailwinds continue into 2021, the broker’s 9% forecast for FY21 may look conservative.

Amcor will report its results on 18 August. Macquarie is recommending Amcor as “outperform” (or a “buy”) with a price target of $16.81.

Cream rises to the top

Another stock that looks poised to beat the street is the A2 Milk Company Ltd (ASX: A2M) share price.

UBS believes the infant formula (IF) company will post a FY20 earnings before interest, tax, depreciation and amortisation (EBITDA) that is around 4% above consensus.

The broker came to this conclusion by compiling the sales data of A2’s products across different channels and analysed its operating expenses. The market is underestimating A2’s profit margins.

Positive FY21 outlook expected

“Our revenue growth indicator is in line with market consensus with strong IF growth via CBEC [cross border e-commerce] countering headwinds in small daigou and MBS [Mother and Baby Stores],” said UBS.

“Our analysis suggests A2M enters FY21 with a record CBEC market share in July and MBS sales ahead of pre-COVID-19 helped by a larger store footprint.

“Plus channel checks point to wholesale price increase of ~5% phased in over 1HFY21.”

However, Australian distributors may be holding excess stock and weak gift store demand could offset some of these positives.

Nonetheless, UBS is recommending investors buy the ASX and New Zealand listed stocks. It’s price target on A2M is NZ$22 a share.

A2 Milk is expected to report its results next Wednesday.

More reading

• How the Santos share price could gain from COVID-19 stimulus
• 2 easy ASX shares to buy for small cap exposure
• Top brokers name 3 ASX 200 shares to buy today
• ASX 200 down 0.3%: CBA delivers $7.3bn cash profit, gold miners sink, SEEK’s outlook disappoints
• Should you buy these 2 ASX dairy shares instead of A2 Milk?

Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Amcor Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Aurizon Holdings 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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