Tag: Motley Fool Australia

At lunch on Wednesday the S&P/ASX 200 Index (ASX: XJO) is on course to give back a lot of yesterday’s gains. The benchmark index is currently down 1.15% to 5,968.5 points.

Here’s what is happening on the market today:

Big four banks tumble.

The big four banks’ rebound was only short-lived. After recording some very strong gains on Tuesday, they are giving them back today and weighing down the index. The worst performer in the sector has been the National Australia Bank Ltd (ASX: NAB) share price with a 2.8% decline. Its shares were downgraded by analysts at Macquarie today. The broker downgraded NAB all the way from outperform to underperform with a $17.50 price target.

Telstra asset sale.

The Telstra Corporation Ltd (ASX: TLS) share price has dropped lower with the market today despite announcing a major asset sale. According to the release, Telstra has entered into an agreement to sell its data centre complex in Clayton, Victoria, to Centuria Industrial REIT (ASX: CIP) for a total of $416.7 million. Telstra’s CEO, Andrew Penn, notes that the sale is part of the company’s T22 strategy which is cutting costs and simplifying its business.

Gold miners rocket higher.

One area of the market which is booming on Wednesday is the gold sector. The likes of Evolution Mining Ltd (ASX: EVN), Newcrest Mining Limited (ASX: NCM), and Northern Star Resources Ltd (ASX: NST) are all storming higher after the gold price smashed through US$2,000 an ounce and hit a record high overnight. At the time of writing, the S&P/ASX All Ordinaries Gold index is up a sizeable 3%.

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Wednesday has been the Mesoblast limited (ASX: MSB) share price with a gain of almost 7%. This may be due to news that a competing COVID-19 treatment delivered promising but not overly convincing trial results. The worst performer has been the Pro Medicus Limited (ASX: PME) share price with a 4% decline. This is despite there being no news out of the leading health imaging company.

More reading

• Why this ASX miner that’s missing the rally is one of my key picks for FY21
• Why Mesoblast, Northern Star, PointsBet, & Splitit shares are racing higher
• 3 ASX shares I’d buy if the ASX crashes again
• ASX shares that could get a boost from Victoria’s shutdown
• Telstra share price on watch after major asset sale announcement

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. and Telstra 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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There are some ASX shares that I’d buy if the ASX crashes again.

Some shares have performed really strongly since the worst of the crash in March 2020. I think they may be too expensive to buy now, but could be great buys if the share market dropped again.

Here are my three picks that I’d buy if the ASX drops again:

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is a high-flying ecommerce business. It’s an online seller of furniture and homewares. Customers are flocking to the online retailer for the large range, fast shipping and good prices.

The FY20 result of the ASX share was impressive in my opinion. Full year revenue was up 74% to $176.3 million. FY20 second half revenue was up 96% and the fourth quarter revenue grew by 130%. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 466% to $8.5 million.

The Temple & Webster share price has risen by 410% since 23 March 2020. Its growth has certainly accelerated since the COVID-19 lockdowns started. But I’d prefer to buy it at a cheaper price.

How much cheaper? Well that depends how much the ASX share is going to fall in this theoretical crash. I’d love to buy shares for under $2 but who knows if it will ever go under that price again. At this stage I think I’d be happy to buy shares under $6.

Kogan.com Ltd (ASX: KGN)

Kogan.com is another online retailer that has seen enormous growth since March 2020. Both Kogan.com’s share price and earnings are soaring.

Kogan.com sells a large range of different products like devices, appliances and furniture. It also offers other services like insurance, mobile, telecommunications, energy and superannuation.

A couple of weeks ago the ASX share announced some of its growth numbers for the fourth quarter of FY20. Gross sales grew by more than 95%, gross profit rose by over 115% and adjusted EBITDA increased by around 150%.

The Kogan.com share price is up almost 400% since 16 March 2020. It has been a very strong performer – but can things continue?

Will sales continue to be as strong as jobkeeper starts to tail off and lockdown effects lift in some of the country? Time will tell, but I don’t think I’d want to buy shares above $12.50 with how much uncertainty there is about retail conditions.

Pro Medicus Ltd (ASX: PME)

I think that Pro Medicus is one of the highest-quality ASX shares around. It’s a medical technology business that provides radiology information systems.

It has clients from across the world with recent major wins in both Europe and the US.

The company was one of the ASX 200 shares to fall the hardest during the first COVID-19 crash. It dropped to under $15 on 19 March 2020. It then just about doubled to around $30 at the end of May, but it has slid back to $22.60 at the time of writing.

Aside from providing remote training to clients using screen-share technology etc, the ASX share said its operations haven’t really changed because most of the work was done remotely anyway.

Pro Medicus is in a very strong position. It had cash on the balance sheet of $38.8 million at 31 December 2019 with no debt, so its balance sheet isn’t in any danger. In the FY20 half-year result it reported an earnings before interest and tax (EBIT) margin of 50.2%, which is one of the highest on the ASX.

It’s worth holding the best ASX shares in your portfolio, it just needs to be at the right price. I’d actually be happy to buy a small parcel of Pro Medicus today, but if it dropped below $20 I’d be willing to load up for the long-term with how low interest rates are right now.

Foolish takeaway

I think all three of these ASX shares look like they could continue to be winners over the next decade, but we need to ensure we pay the right price for them. Today, I’d buy Pro Medicus shares, but I think all three would fit into a growth portfolio if the ASX crashed again.

More reading

• 2 of the best online shopping ASX shares to buy in August
• ASX 200 down 1.15%: NAB downgraded, Telstra asset sale, gold miners rocket
• ASX shares that could get a boost from Victoria’s shutdown
• Reporting season metrics to watch for JB Hi-Fi
• This is the only ASX sector tipped to report earnings growth this reporting season

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group Ltd. 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 Maggie Beer Holdings Ltd (ASX: MBH) share price has this morning surged 22.7%. This came following the company’s announcement it will be launching a range of plant-based meals in Coles. The launch will increase the company’s presence in the $1 billion Australian prepared meals market.

Formerly known as Longtable Group, the company recently changed its name to Maggie Beer Holdings at a general meeting held on 16 July 2020.

Coles agreement

In mid-October this year, Maggie Beer Holdings will launch new incremental ranging of 3 ‘Maggie’s Food for Life’ ready to eat meals in approximately 400 Coles supermarkets nationally.  The plant-based meals target the fast growing, prepared and plant-based meals category.

Additionally, the announced launch of the range in a major supermarket is an important step in the company’s growth strategy.

Prior to the announcement, Maggie Beer prepared meals had been launched in independent supermarkets in the H1 FY20.

FY20 preliminary trading update

On 9 July 2020, Maggie Beer provided an unaudited trading update. In the update, the company announced strong sales in May and June this year and advised it is on track to achieve positive earnings before interest, tax, depreciation and amortisation (EBITDA) in FY20. This represents an increase of approximately $5.3 million compared to FY19.

The group’s cash position has increased from $5.1 million at the end of December to $7.2 million at the end of FY20. Additionally, it is well funded by $10.2 million in cash reserves and undrawn debt facilities.

Net sales in FY20 have increased approximately 3.5% compared to the prior corresponding period despite challenging conditions due to summer bushfires and the COVID-19 pandemic.

Maggie Beer is continuing to work on its eCommerce presence with an an improved digital marketing plan and continued growth generated by the ‘Cooking with Maggie’ series which, at the time of the update, had over 4.4 million views on social media websites, Facebook and Instagram. Additionally, it will include a new website launch in FY21.

About the Maggie Beer share price

The company’s mission is to be a leader in meeting the expectations of discerning consumers with new, high-quality food and beverage experiences. According to Maggie Beer, “This means being at the forefront of mainstream trends, but not side-tracked by fads, recognising that opportunities arise locally & internationally”. The Maggie Beer share price is currently trading at 26.5 cents which represents a gain of more than 20% in today’s trade. The Maggie Beer share price is up 56% in year to date trading and the company has a market capitalisation of around $52 million.

More reading

• Why this ASX miner that’s missing the rally is one of my key picks for FY21
• Why Mesoblast, Northern Star, PointsBet, & Splitit shares are racing higher
• 2 of the best online shopping ASX shares to buy in August
• ASX 200 down 1.15%: NAB downgraded, Telstra asset sale, gold miners rocket
• 3 ASX shares I’d buy if the ASX crashes again

Motley Fool contributor Matthew Donald 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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Blue chip shares are perennially popular. Now more than ever, investors are seeking quality as a shield to the economic impacts of COVID-19.

Blue chip companies are strong names in their industries and have a good financial track record. The ASX is home to a diverse range of blue chip shares across a variety of industries. But some sectors are more resistant to the COVID-19 pandemic than others. Let’s take a look at 4 coronavirus-resistant blue chip ASX shares. 

Coles Group Ltd (ASX: COL)

Coles lays claim to some 26.6% of Australia’s grocery market, just behind rival Woolworths Group Limited (ASX: WOW), which has 32.9% market share. Operating in the grocery market means Coles is running a defensive business – demand will be fairly consistent regardless of the economic climate. After all, everyone needs to eat.

Panic buying in March lifted supermarket sales for the third quarter, with similar consumer behaviours emerging recently in Melbourne ahead of heightened lockdowns. 

AGL Energy Limited (ASX: AGL)

AGl operates Australia’s largest energy generation portfolio. It generates and sells energy from power stations using thermal and wind power, natural and coal seam gas, hydroelectricity, wind, and solar energy.

Society’s need for electricity is non-negotiable. While demand may ebb and flow with industry activity, a certain level of underlying demand is virtually guaranteed. AGL has predicted full year profits in the upper half of its guidance range of $780–$860 million. 

Woolworths Group Ltd (ASX: WOW)

With nearly 33% of the Australian grocery market, Woolworths has seen consistant demand throughout the pandemic. Like Coles, Woolworths sells things people need – food, household, and hygiene products. Demand for these products has been strong with Woolworths reporting a 10.7% increase in third quarter sales thanks to the same panic buying that impacted Coles. The company has been forced to close 22 Big W stores in Melbourne due to stage 4 lockdowns in Melbourne, however supermarkets will remain open. 

Origin Energy Ltd (ASX: ORG) 

Origin Energy is one of Australia’s largest energy retailers with approximately 4.2 million customers. It services both industry and business users and the residential market.

Like AGL, Origin Energy benefits from the modern economy’s reliance on electricity. During the first round of lockdowns Origin saw business demand decrease while residential demand increased.

Origin also has a 47.5% interest in the Australia Pacific LNG Joint Venture, Australia’s largest producer of coal seam gas. The company received record distributions of $1,275 million from the joint venture in FY20. 

More reading

• ASX shares that could get a boost from Victoria’s shutdown
• Coronavirus: What does lockdown mean for ASX retail shares like JB Hi-Fi?
• 3 ASX shares with generous dividend yields to buy today
• ASX 200 jumps 2% higher, Afterpay soars
• Woolworths provides update on the impact of COVID-19 restrictions

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The A2 Milk Company Ltd (ASX: A2M) share price has been a very strong performer in 2020.

Since the start of the year, the infant formula and fresh milk company’s shares are up 39%.

Is it too late to buy a2 Milk shares?

Although its shares are admittedly not cheap, I don’t believe it is too late to invest. This is due to the quality of its business and its very positive long term outlook. I believe these justify the premium its shares are trading at.

One leading fund manager that appears to agree is Ophir Asset Management.

Its Director and Portfolio Manager, Andrew Mitchell, recently told Livewire Markets that he believes a2 Milk Company has a “huge runway” and could double or even triple its Chinese market share in the future.

According to the Livewire podcast, the fund manager notes that the premium end of the Chinese infant formula market continues to grow even during the pandemic. This is because Chinese families are not cutting back on infant formula in difficult times.

This is a big positive for a2 Milk Company and offers “downside protection” during periods of time like those we are experiencing at present.

Potential market share gains.

At the end of the first half of FY 2020, a2 Milk Company had an infant formula consumption value share of 6.6% in China. This was up from 5.4% a year earlier.

Mr Mitchell appears confident that the company’s growth in the market is only just getting started and has suggested it is “headed towards 15% to 20% in market share.”

In addition to this, the fund manager sees opportunities for the company to expand its “innovative product” globally and notes that it has a significant amount of cash on its balance sheet. The latter gives the company a lot of options to bolster its future growth.

And while some investors have concerns that competing a2-only products could stifle its growth, Mr Mitchell doesn’t believe this will be the case. In fact, Ophir’s contacts in the China market believe the launch of a2-only products by big multinationals only reinforces the a2 Milk Company’s premium brand with Chinese consumers.

Overall, the fund manager believes a2 Milk Company is a “fantastic” company and on a “trajectory to be a much larger business.” I agree completely with this view and feel a2 Milk Company would be a great buy and hold option.

More reading

• Want to invest $3,000 into ASX blue chips?
• Why I would invest $50,000 into these excellent ASX shares
• Top ASX Stock Picks for August 2020
• Is the Fortescue share price too expensive?
• Xero and 1 other ASX growth share to watch in August

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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 tough new restrictions implemented by the Victorian Government will have a prolonged impact on the national economy and many businesses. As the state attempts to control a second wave of the COVID-19 pandemic over the next 6 weeks, many industries and sectors will suffer under the lockdown.

Despite the pessimistic outlook for general commerce, there are certain sectors and companies on the ASX that could get a boost from Victoria’s second lockdown.

Victoria is leading the shift online

A recent article in The Australian has highlighted how online retail shares on the ASX could receive a surprise boost from Victoria’s second lockdown. The article cites a report from National Australia Bank Ltd (ASX: NAB) which showed that Victoria was ahead of the curve in adapting to internet shopping.

According to the insight from NAB, Metropolitan Melbourne is the leading online commerce zone in the country while even regional Victoria is ahead of Metropolitan Sydney.

In addition, year-on-year online retail sales in Victoria are nearly 60% higher, compared to the national figure of 50% year-on-year. As a result, the extended lockdown period should see the same shift to online shopping that was experienced earlier this year.

Which ASX shares could benefit?

In my opinion, the 2 standout performers during the pandemic have been Kogan.com Ltd (ASX: KGN) and Temple & Webster Group Ltd (ASX: TPW). Kogan.com has become a household name during the lockdown period, with the company’s active user base growing to more than 2 million.

The Kogan share price has reflected the surge in demand, rallying more than 430% since mid-March. Temple & Webster has also reaped the benefits of shoppers switching to online retail avenues. In its most recent trading update, the company highlighted a 130% surge in gross sales to 28 June on a year-on-year basis.

In addition to the popular online retailers, supermarkets and other essential service providers should also receive a boost.

With the new restrictions leading to panic buying and purchase restrictions, supermarkets have been forced to adapt. Woolworths Group Ltd (ASX: WOW) is set to remodel 3 of its existing Melbourne supermarkets to become online delivery hubs in the coming weeks. With many customers opting to bypass supermarkets and move online, meal kit provider Marley Spoon AG (ASX: MMM) is also seeing a boost in demand.

Foolish Takeaway

In my opinion, the coronavirus pandemic has accelerated the inevitable shift to online commerce. As consumers, not only in Victoria, opt for the convenience of online shopping over traditional brick and mortar shops, companies with a solid online presence are poised to boom in 2020 and beyond.

More reading

• 4 coronavirus-resistant blue chip ASX shares
• Reporting season metrics to watch for JB Hi-Fi
• This is the only ASX sector tipped to report earnings growth this reporting season
• ASX 200 jumps 2% higher, Afterpay soars
• Woolworths provides update on the impact of COVID-19 restrictions

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group Ltd. 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 PointsBet Holdings Ltd (ASX: PBH) share price jumped 4% higher in early trade today to as high as $6.24 before being partially sold down. The increase in the Pointsbet share price came following the company’s announcement of an important new agreement in its United States market.

New Sporting Agreement in the US

PointsBet has announced today that its US subsidiary has entered into a new agreement with Pacers Sports & Entertainment. The multi-year agreement will see the company’s PointsBet USA subsidiary become an Official Sports Gaming Partner in respect to the National Basketball Association (NBA) for the Indiana Pacers team.

PointsBet branding will be positioned along the out-of-bounds space that is located between the base line and the team bench. This is the first time in the US that a betting operator has been able to advertise in this position.

Also, as part of the agreement, PointsBet signage will be permitted to be displayed in the Pacers’ home arena, The Fieldhouse. The Fieldhouse is located in downtown Indianapolis. In addition, PointsBet will be able to utilise online advertising on the Pacers’ range of digital platforms. This will include offering unique promotions to fans.

PointsBet was appointed earlier this year to become an Authorised Sports Betting Operator of the NBA. This was PointsBet’s first partnership with a professional sports league in the US.

Johnny Aitken, PointsBet USA CEO commented: “Indiana represents a massive opportunity for PointsBet, and we will take a heavily localized approach to ensure we are delivering the best overall customer experience Indiana sports fans and bettors are seeking….”

Recent financial performance

PointsBet recently provided the market with a fourth quarter update. The company delivered turnover of $349.4 million, which was a very strong increase of 57.9% on the prior corresponding period. Growth was very much driven by its Australian operations, with growth of 80.5% during this period. In comparison, its US operations saw a decline in turnover. In respect to the full financial year for 2020, PointsBet recorded turnover more than double that of a year prior.

PointBet share price performance

The PointsBet share price has risen strongly over the past 12 months from $3.19 to now be trading at $6.12. That’s a very strong 92% increase. The company’s share price was hit very hard during the early phase of the pandemic, falling to as low as $1.19 in late March. However since then the PointsBet share price has recovered all of those losses plus substantially more.

More reading

• Short-sellers are targeting these ASX stocks ahead of the reporting season
• Why Bubs, PointsBet, Perpetual, & Waypoint shares are dropping lower
• PointsBet share price tumbles lower on Q4 update
• Why the Pointsbet share price is outperforming today
• Why PointsBet, Recce Pharmaceuticals, Vocus, & Webjet shares are storming higher

Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. 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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Looking for 2 ASX shares to provide you with above average shareholder returns over the long term?

There are never any guarantees with share investing. However, here’s why I believe why the following two ASX shares have a better chance than most of achieving this goal.

TPG Telecom Ltd (ASX: TPG)

TPG now has a significantly stronger market position in the Australian telecommunications landscape since its merger with mobile operator, Vodafone.

TPG has been previously financially challenged over the past few years as a fixed broadband operator. This was mainly due to the lower retail margins it received from wholesaling broadband services on the National Broadband Network. However, following the merger with the local subsidiary of global mobile operator Vodafone, this now places TPG in a much stronger competitive position.

The TPG share price has lost a bit of ground since it was re-listed post the merger at the beginning of July. However, I think it is way too early to read anything into this trend just yet. I believe that TPG is well-placed for above-average shareholder returns over the next five years. Growth is likely to be driven from a combination of a competitive fixed broadband and 5G offering.

REA Group Limited (ASX: REA)

The REA Group share price fell heavily during the early phase of the coronavirus pandemic up to late March. However, the company’s share price has rebounded strongly since then, recovering nearly all of those losses. It has risen from a low of $65.02 on 23 March to now be trading at $110.47.

Although the Australian housing market has been impacted by the pandemic, national house price falls have only been moderate since early this year.

Further house price falls as well as further restrictions on sales activities, such as property open for inspections, may occur in the months ahead.

However, I believe that REA Group is well-placed for strong, long-term growth. In my opinion, REA Group has a much stronger market position than its main rival Domain Holdings Australia Ltd (ASX: DHG). REA Group is well-placed to tap into a rising demand for online property services over the next decade as our national housing market continues to grow.

Foolish Takeaway

TPG and REA Group are 2 ASX shares that I am confident are well-positioned for strong, long-term growth over the next five years. This is likely to lead to above average shareholder returns.

More reading

• Where to invest $20,000 into ASX shares right now
• 5 things to watch on the ASX 200 next week
• Is the REA Group share price a buy?
• I would buy ResMed and these ASX blue chip shares in August
• A dirt-cheap ASX dividend share to add to your portfolio today

Motley Fool contributor Phil Harpur owns shares of REA Group Limited. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Splitit Ltd (ASX: SPT) share price has returned from its trading halt and zoomed higher this morning.

In early trade the buy now pay later provider’s shares were up as much as 20% to $1.64.

Why was the Splitit share price in a trading halt?

The Afterpay Ltd (ASX: APT) rival requested a trading halt on Monday while it launched an equity raising.

This morning Splitit announced that it has received firm commitments to raise $90 million (before costs) in new equity. These funds will be raised via a fully committed two-tranche share placement to institutional, sophisticated, and professional investors.

This will be through the issue of approximately 69.2 million new shares at a price of $1.30 per share. This represents a discount of 4.8% to Splitit’s last close price.

Management advised that the placement was well supported by existing shareholders and will see a number of new, high quality institutions join the company’s register.

This includes cornerstone investor, Woodson Capital Management, as a substantial shareholder. Woodson Capital manages a global consumer and technology investment fund headquartered in New York and launched in 2010 with seed backing from Tiger Management.

What about retail shareholders?

The company also intends to launch a non-underwritten share purchase plan following the issue of the first tranche of the placement shares.

This is expected to raise approximately $10 million, which brings the total of the equity raising to $100 million.

What will the funds be used for?

Management advised that the proceeds from the equity raising will be used to accelerate Splitit’s high-growth strategy. This will be through funding additional sales and marketing, and further investing in product and technology development.

Its strengthened balance sheet is also expected to further support growth across the business, including growth of its funded merchant model.

Splitit CEO and Managing Director, Brad Paterson, commented: “We are excited to welcome North American and Global institutional investors to our register. With the business foundations in place and our strategy working well, this equity raising allows us to take things to the next level.”

“We are the only BNPL provider servicing the huge and growing credit card industry and our investors recognise the enormous opportunity to accelerate merchant and customer adoption across our key markets. Our business outlook remains extremely positive, with a healthy pipeline of new merchants and as we work towards activating our strategic partnerships with Visa and Mastercard. We are just getting started and I look forward to building on this positive momentum,” he concluded.

More reading

• ASX 200 jumps 2% higher, Afterpay soars
• Afterpay and Qantas were among the most traded shares on the ASX last week
• Zip Co share price surges 8.5% higher: Is it too late to buy shares?
• 3 quality ASX tech shares to buy in August
• ASX 200 jumps 2%: Big four banks rebound, Wesfarmers update, Afterpay rockets

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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Zoom Video Communications Inc (NASDAQ: ZM) was one of the hottest growth stocks of the year, rallying over 270% as the COVID-19 crisis brought millions of new users to its video collaboration platform. That growth attracted the attention of larger tech companies like Microsoft Corporation (NASDAQ: MSFT), which aggressively promoted Teams as an alternative to Zoom.

Zoom easily outpaced Microsoft’s 30% gain this year, and it likely remains a more appealing stock for growth-oriented investors. But is Zoom actually a better long-term investment than Microsoft?

David vs. Goliath

Zoom has a market cap of more than $70 billion, but it’s dwarfed by Microsoft’s valuation of over $1.5 trillion. Microsoft also generated 230 times as much revenue and over 2,000 times as much generally accepted accounting principles (GAAP) profit as Zoom last year.

Zoom is also trading at much higher valuations than Microsoft. Zoom trades at 200 times forward earnings, while Microsoft has a more grounded forward price-to-earnings (P/E) ratio of 31. Zoom trades at 40 times this year’s sales, compared to Microsoft’s cooler forward price-to-sales (P/S) ratio of 10.

The bears will argue that Zoom is overvalued, while the bulls will claim its valuations are justified by its growth rates.

How fast is Zoom growing?

Zoom’s revenue surged 88% to $622.7 million in fiscal 2020, which ended this January, as its adjusted net income surged 514% to $101.3 million.

In the first quarter, which bore the full impact of the COVID-19 shutdowns, Zoom’s revenue rose 169% annually to $328.2 million, and its adjusted net income soared 555% to $58.3 million. Its number of customers contributing over $100,000 in revenues over the past 12 months also grew 90% annually.

For the full year, Zoom expects its revenue to rise 185% to 189%, and for its adjusted earnings-per-share (EPS) to grow 246% to 269%. But after that growth spurt, analysts expect Zoom’s revenue and earnings to rise 25% and 19%, respectively, in fiscal 2022.

Investors should take those forecasts with a grain of salt, but they suggest Zoom’s COVID-19 boost could fade as it faces stiff competition from rivals like Cisco‘s Webex, Facebook‘s Messenger Rooms, Alphabet‘s Google Meet, and Microsoft Teams.

Zoom surpassed 300 million daily active-meeting participants in April but admitted that was a “peak” during last quarter’s conference call. Microsoft claimed Teams hit 75 million daily active users in April but hasn’t updated that figure since.

How fast is Microsoft growing?

Microsoft’s revenue rose 13% to $143 billion in fiscal 2020, which ended in June, as its adjusted EPS grew 14%. The COVID-19 crisis mainly curbed the growth of Microsoft’s Productivity and Business Processes unit, which sells productivity software like Office and Dynamics to enterprise customers.

However, Microsoft’s Intelligent Cloud unit, which houses its cloud platform Azure and server products, benefited from the higher usage of cloud services throughout the crisis. Its More Personal Computing unit — which sells its Windows licenses, Xbox games and hardware, and Surface devices — also benefited from stay-at-home measures.

In short, Microsoft’s strengths offset its weaknesses, and maintaining that balancing act allowed it to expand its ecosystem with loss-leading strategies — like bundling Teams as a free service for Office 365 users.

Microsoft estimated its revenue would rise 8% to 9% annually in the first quarter of 2021 but didn’t offer clear guidance for the rest of the year. Analysts expect its revenue and earnings to rise 10% and 12%, respectively, as the growth of its cloud services and the upcoming launch of the Xbox Series X offset the softness of its macro-sensitive businesses.

The long-term winner: Microsoft

Zoom’s stock still has a lot of momentum, but its valuations are too high, and the competitive threats are too great to ignore. It might be a good short-term play, but its long-term growth is too difficult to predict.

Microsoft is a more balanced investment. The “mobile first, cloud first” strategies, which CEO Satya Nadella spearheaded six years ago, are still generating strong returns; it’s well diversified across multiple markets; and it rewards patient investors with a 1% yield and consistent buybacks.

For now, Microsoft is the better overall investment for long-term investors. I admire Zoom’s robust growth, but I’m not convinced it can maintain its momentum and meaningfully widen its moat against its larger rivals.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Leo Sun owns shares of Cisco Systems and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, Microsoft, and Zoom Video Communications and recommends the following options: short August 2020 $130 calls on Zoom Video Communications, long January 2021 $85 calls on Microsoft, and short January 2021 $115 calls on Microsoft. 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.

The post Better Buy: Zoom Video Communications vs. Microsoft appeared first on Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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