Tag: Motley Fool Australia

The Afterpay Ltd (ASX: APT) share price was on form again on Monday and charged notably higher.

At one stage the payments company’s shares were up over 9% to a record high of $43.68.

This means that Afterpay’s shares have gone from a 52-week low of $8.01 on March 23 to a new record high in just seven weeks.

To put that into context, if you had been brave enough to invest $10,000 into Afterpay’s shares at its low, your investment would have been worth $54,500 on Monday.

Why is the Afterpay share price at a record high?

There have been a couple of catalysts for Afterpay’s strong gains over the last seven weeks.

The first catalyst was a third quarter update which quashed concerns that the company’s buy now pay later platform would struggle during the current crisis.

During the third quarter the company delivered underlying sales of $2.6 billion, up 97% on the prior corresponding period. This was driven by a 40% lift in ANZ sales, a 263% increase in US sales, and a $0.1 billion contribution by the UK business.

But arguably best of all was its gross losses metric. This remained in line with the first half at 1%, which was particularly positive given the crisis and the increased contribution from newer markets that traditionally have initially higher losses early in the lifecycle.

This was achieved partly by its pre-emptive adjustments to risk settings, such as paying your first instalment up front, and increasing repeat customers.

The second catalyst for its strong share price gain was news that Tencent Holdings has become a substantial shareholder.

Investors appear optimistic the US$500 billion WeChat owner will be the key to opening up the Asian market in the future.

Management certainly sees a lot of positives in having Tencent on the share registry. It said: “Tencent’s investment provides us with the opportunity to learn from one of the world’s most successful digital platform businesses. To be able to tap into Tencent’s vast experience and network is valuable, as is the potential to collaborate in areas such as technology, geographic expansion and future payment options on the Afterpay platform.”

Is it too late to invest?

While I would say that Afterpay’s shares are probably fully valued now, I would still be a buyer if you plan to hold onto them for the long term.

Along with Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX), I think Afterpay is one of the best tech shares on the Australian share market and believe it could generate strong returns for investors over the next decade.

More reading

• Start your week off with these 3 top Warren Buffett quotes
• Fund manager thinks investors should look beyond the worst economic data since the Great Depression
• Buy these 4 ASX shares to survive the pandemic
• These ASX shares booked the biggest gains last week
• These ASX 200 shares are up over 1,000% in just 3 years

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and Appen 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.

The post The Afterpay share price just hit a record high: Is it still a buy? appeared first on Motley Fool Australia.

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Luckily for income investors in this low interest rate environment, the Australian share market is home to a large number of dividend-paying shares.

While not all of these will be paying dividends during the pandemic, three that look set to do so are listed below.

Here’s why I think they could be good options for income investors right now:

Coles Group Ltd (ASX: COL)

I think that Coles is one of the safest dividend shares to buy. This is because, as we have seen in recent months, we still need the staples during a crisis. In addition to this, thanks to its positive growth outlook, I believe Coles is well-positioned to increase its dividend consistently over the coming years regardless of economic conditions. In FY 2021 I estimate that its shares will provide investors with a fully franked dividend yield of ~4%.

Rural Funds Group (ASX: RFF)

Another safe option to consider is Rural Funds. It is an agriculture-focused property group with a diverse portfolio of assets across a number of industries such as cattle, vineyards, and orchards. I like the company due to the quality of its assets and their long term tenancies. In respect to the latter, at the end of the first half its weighted average lease expiry stood at 11.5 years. This gives investors a lot of visibility with its earnings and distributions. In FY 2021 the company intends to lift its distribution to 11.28 cents per share. This works out to be a forward 5.9% distribution yield.

Wesfarmers Ltd (ASX: WES)

A final dividend share to consider buying is Wesfarmers. I think the conglomerate is a good option due to the quality and positive outlook of its portfolio of businesses. In addition to this, the company has a sizeable cash balance that could be used for acquisitions that bolster its growth in the coming years. At present I estimate that its shares offer a fully franked forward 3.9% dividend yield.

More reading

• Want to become wealthy? Do this one thing
• These 3 ASX 200 retail shares are absolutely thriving right now
• 3 high quality ASX shares for a retirement portfolio
• Buy these 4 ASX shares to survive the pandemic
• ASX 200 Weekly Wrap: New ASX bull run continues

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

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Is the REA Group Limited (ASX: REA) share price a buy? Investors certainly thought so last week.

The REA Group share price rose 7.7% on the day that the third quarter trading update was released to the market. A strong reaction for the realstate.com.au owner.

What was in the REA Group March 2020 quarter update?

The company said that in the three months to 31 March 2020, revenue rose by 1% to $199.8 million, earnings before interest, tax, depreciation and amortisation (EBITDA) went up 8% to $119.6 million, but free cash flow fell 20% to $66.7 million.

The property portal business also revealed how it has performed over the nine months to 31 March 2020. Revenue was down 4% to $640.2 million, EBITDA dropped 3% to $390.8 million and free cash flow was down 14% to $195.2 million.

It was a mixed quarter because the number of listings were actually showing improvement until halfway through March. In the first half of March national listings were up 3% with listing increases of 15% in Melbourne and 24% in Sydney, but finished down 2% after the impact of the coronavirus.

Overall national residential listings declined 7% for the quarter, while Melbourne and Sydney were up 6% and 5% respectively.

So what does this mean for the REA Group share price? Well, share prices are predominately forward looking. The above numbers and April’s listing numbers didn’t seem to put off investors.

In April, national residential listings were down 33%, Sydney listings were down 18% and Melbourne listings were down 27%. Perhaps investors were expecting worse. 

Is the REA Group share price a buy?

The company is working to offset some of the lost revenue by implementing cost cutting measures. Reduced marketing expenditure and a review of all supplier arrangements. Fourth quarter core operating expenses are expected to be 20% lower than last year. It continues to achieve stronger viewing numbers than Domain Holdings Australia Ltd (ASX: DHG). 

REA Group said it has a strong balance sheet, low debt levels and a cash balance of $135 million at 30 April 2020. It also added a $149 million loan facility as well as an additional $20 million overdraft facility.

The company is well placed to survive through this crisis. People will keep transacting property, particularly once the worst of the crisis is over. 

At the current REA Group share price I think it could be a long-term buy. But there could be another painful drop in the next few weeks, so I’d only buy a small-ish REA Group position today.

More reading

• The latest ASX shares to be downgraded by top brokers
• Morgans warns investors to sell these ASX 200 shares in the rally
• Leading brokers name 3 ASX shares to buy today
• REA Group shares are up 53% since late March. Is it too late to invest?
• The ASX 200 blue chip shares I would buy with $5,000 after the market crash

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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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On Monday the S&P/ASX 200 Index (ASX: XJO) started the week in sensational form. The benchmark index stormed 1.3% higher to 5,461.2 points.

Will the market be able to build on this on Tuesday? Here are five things to watch:

ASX 200 expected to fall.

It looks set to be a weaker day of trade for the Australian share market on Tuesday. According to the latest SPI futures, the ASX 200 is expected to fall 20 points or 0.4% at the open. This follows a mixed night of trade on Wall Street which saw the Dow Jones fall 0.45%, the S&P 500 trade flat, and the Nasdaq index jump 0.8%.

Oil prices drop lower.

Energy producers such as Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) could be under pressure today after oil prices dropped lower. According to Bloomberg, the WTI crude oil price fell 0.8% to US$24.54 a barrel and the Brent crude oil price dropped 3.1% to US$30.97 a barrel. Oil prices dropped lower despite Saudi Arabia announcing plans to cut its production further.

Gold price tumbles.

Gold miners including Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Limited (ASX: NCM) will be on watch after the gold price tumbled lower. According to CNBC, the spot gold price fell 0.75% to US$1,701.01 an ounce. Investors were buying the U.S. dollar ahead of gold on second wave fears.

Incitec Pivot to return from its trading halt.

The Incitec Pivot Ltd (ASX: IPL) share price will be on watch today when it returns from its trading halt. The chemicals company placed its shares in a trading halt on Monday after the release of its half year results and the launch of a $600 million capital raising. Incitec Pivot reported earnings before interest and tax (EBIT) of $159 million, up 34% on the prior corresponding period. In respect to its capital raising, it is aiming to raise its $600 million at $2.00 per new share. This represents an 8.7% discount to its last closing price.

Cochlear rated as a sell.

The Cochlear Limited (ASX: COH) share price is overvalued according to analysts at Goldman Sachs. In response to its update on Monday which revealed that sales were down 60% in April because of the pandemic, Goldman Sachs has reiterated its sell rating and $156.00 price target. It commented: “Whilst elective surgeries appear to be resuming ahead of our expectations, the trajectory of recovery also appears to be shallower.”

Returns as of 7/4/2020

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia has recommended Cochlear 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.

More reading

• 3 cheap ASX 200 shares for value investors
• The latest ASX shares to be downgraded by top brokers
• Is the Altium share price a buy?
• ASX 200 starts the week strongly, up 1.3%
• Start your week off with these 3 top Warren Buffett quotes

The post 5 things to watch on the ASX 200 on Tuesday appeared first on Motley Fool Australia.

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Along with our Top ASX Stock Picks for May, we also asked our Foolish writers to pick their favourite ASX dividend stocks to buy this month.

Here is what the team have come up with…

Sebastian Bowen: Macquarie Group Ltd (ASX: MQG)

My inaugural dividend pick is Macquarie Group. Even though this financial giant announced a dividend cut last week, it’s faring a whole lot better than its ‘big 4’ compatriots in 2020 so far. Even after last week’s trim, Macquarie is offering a decent yield of around 4% on recent prices, which also comes partially franked. 

I think Macquarie’s reduced exposure to retail banking (mortgages and loans) and increased exposure to investment banking, infrastructure and asset management has set it up for future prosperity at a time when other financial shares are struggling. Thus, I think it’s a top pick for dividends in 2020.

Motley Fool contributor Sebastian Bowen does not own shares of Macquarie Group Ltd.

Phil Harpur: Telstra Corporation Ltd (ASX: TLS)

Our leading telecommunications provider has been less impacted than many ASX shares throughout the coronavirus crisis due to the essential role that its broadband and mobile services are providing to both businesses and consumers.

Telstra’s internet and mobile services have enabled people to remain in touch with family and friends, and the demand for high bandwidth internet services such as online streaming has increased sharply. Due to this strong demand, the telco provider also appears to be well placed to pay out its scheduled dividend this year. Telstra also looks to be well on track in its strategy to evolve into a leaner, more efficient telco provider by 2022. 

Motley Fool contributor Phil Harpur owns shares of Telstra Corporation Ltd.

Nikhil Gangaram: Amcor PLC (ASX: AMC)

In my opinion, Amcor is an excellent dividend stock with the company boasting a 5.11% yield (at the time of writing) and having exposure to defensive revenue streams. Amcor currently makes the majority of its revenue from the sale of packaging for defensive consumer products such as food, beverages, pharmaceutical products and medical equipment.

Amcor has also maintained a strong balance sheet during the COVID-19 pandemic and is in the process of realising cost synergies from its $9 billion buyout of US group Bemis.

Motley Fool contributor Nikhil Gangaram does not own shares of Amcor PLC.  

Brendon Lau: Fortescue Metals Group Limited (ASX: FMG)

The iron ore miner’s latest quarterly production update reinforces my view that the stock is a sustainable high yielder. The upgrade to full-year shipments and a positive demand outlook for its ore means it is well placed to keep paying a fat dividend, and may even undertake a capital return later this year.

Motley Fool contributor Brendon Lau owns shares of Fortescue Metals Group Limited.

Michael Tonon: Tassal Group Limited (ASX: TGR)

Tassal Group is Australia’s leading seafood producer and its largest producer of Atlantic salmon. It has a focus on quality and sustainability while producing a healthy, sustainable protein which is experiencing increasing demand both domestically and internationally.

I was pleased with Tassal’s recent announcement indicating that early trend changes due to COVID-19 look to be impacting its domestic market favourably. For this reason, and its expected stronger second half, I have confidence that it can continue to pay, or maybe even increase, its current dividend. This is something which should not be taken for granted at these times.

At the time of writing, Tassal currently provides investors with a net dividend yield of 4.8% which is 5.3% grossed up.

Motley Fool contributor Michael Tonon owns shares of Tassal Group Limited.

Daryl Mather: Yancoal Australia Ltd (ASX: YAL)

Yancoal is not only a great dividend stock, but it is also one of the great value opportunities on the ASX today. With a very stable dividend yield of 14.4% at the time of writing, companies like this form the backbone of any income replacement strategy.

Yancoal is home to the ex-Rio Tinto Limited (ASX: RIO) coal assets as well as the world-class Moolarben coal mine. At present, the company has a market capitalisation at least a third lower than its book value. It is well managed and well-positioned for any growth opportunity regardless of current low coal prices. 

Motley Fool contributor Daryl Mather does not own shares of Yancoal Australia Ltd.

Matthew Donald: AGL Energy Limited (ASX: AGL)

AGL recently presented at the Macquarie Australia Conference 2020 and stated it has approximately $1 billion in cash and undrawn facilities.

On 31 March 2020, AGL had a gearing ratio of 26.5% and no bond debt to refinance until FY22. In addition, customer accounts grew and its churn numbers are decreasing.

Given its defensive characteristics and strong financial position, I believe AGL can reward investors with a dividend in the current climate. Based on trailing dividends and the current share price, AGL’s yield is 6.74%. Considerably more than term deposits!

Motley Fool contributor Matthew Donald does not own shares of AGL Energy Limited.

Ken Hall: Fortescue Metals Group Limited (ASX: FMG)

The Fortescue Metals share price could be a great dividend buy right now. Fortescue shares are yielding 8.73% at the time of writing which makes it a top ASX dividend share in my books. Dividend yields can be a bit misleading at the moment, but I still think the fundamentals are solid for the Aussie iron ore miner.

Times are tough but there are signs that China’s economy is picking up and the Aussie government could invest in infrastructure. That could mean more demand for iron ore which is good news for Fortescue’s earnings (and dividends!) in 2020.

Motley Fool contributor Ken Hall does not own shares of Fortescue Metals Group Limited.

Tristan Harrison: Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

If you’re after reliable and growing dividends, Soul Patts may be the best pick on the ASX. It has grown its dividend every year since 2000 and it has paid a dividend every year since 1903.

The investment house has a diversified portfolio from different industries including telecommunications, building products, resources, financial services and soon data centres (according to the AFR).

Its dividend is funded by the annual investment income it receives, less expenses. In FY19, around 20% was retained for further growth. The grossed-up dividend yield is around 5% after the coronavirus share market decline of over 20%.

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Co. Ltd.

James Mickleboro: Sydney Airport Holdings Pty Ltd (ASX: SYD)

If you’re not in need of an immediate source of income, then it could pay to be patient with Sydney Airport. Australia’s busiest airport is currently experiencing a significant decline in passenger numbers because of the pandemic. But it is worth remembering that it will recover in time when the crisis clears, as will its distributions.

I expect the airport operator to pay a 27 cents per share distribution in FY 2021, before being able to lift it back up to 37 cents per share distribution in FY 2022.

Motley Fool contributor James Mickleboro does not own shares of Sydney Airport.

Lloyd Prout: Jumbo Interactive Ltd (ASX: JIN)

Jumbo is personally one of my most recent stock purchases. I believe that the business will receive a tailwind from COVID-19. For health reasons, I see a behavioural shift away from physical tickets towards online sales.

Although we may have economic struggles in the short term, punters who are trying to get rich quick will continue to buy tickets over the long term.

Jumbo isn’t cheap with shares trading at around 30 times earnings. With that said, because of its capital-light business model, it should provide a great total return with capital growth combined with a solid 3% fully franked dividend. 

Motley Fool contributor Lloyd Prout owns shares of Jumbo Interactive Ltd and expresses his own opinion.

Cathryn Goh: Dicker Data Ltd (ASX: DDR)

Dicker Data is an ASX dividend star with a policy to distribute 100% of after-tax profits to shareholders, paid in quarterly instalments. As a wholesale distributor of hardware and software, Dicker Data has been experiencing an uptick in demand as organisations turn to remote working solutions to ensure business continuity.

Coupled with its recent capital raising, the company appears to be in a strong position to deliver on its proposed FY20 dividend payments. Just yesterday, Dicker Data announced a 7.5 cent interim dividend which will trade ex-dividend on Thursday, 14 May for payment in early June.

Motley Fool contributor Cathryn Goh does not own shares of Dicker Data Ltd.

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See the top dividend stock for 2020

*Returns as of 7/4/20

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Amcor Limited, Dicker Data Limited, Macquarie Group Limited, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Jumbo Interactive 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.

More reading

• 5 top ASX shares to buy and hold for a decade
• Want to become wealthy? Do this one thing
• Morgans warns investors to sell these ASX 200 shares in the rally
• 3 high quality ASX shares for a retirement portfolio
• Is the ANZ share price a buy?

The post Top ASX Dividend Stock Picks for May 2020 appeared first on Motley Fool Australia.

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You might have heard the phrase ‘share buyback’s thrown around quite a lot in recent years (although probably not since February). It’s a concept that has gotten a lot of media attention in recent years – and a lot of praise from investors.

Even the great Warren Buffett has waxed lyrical about buybacks over the years, saying he prefers them to straight dividend payments from his (meaning Berkshire Hathaway’s) holdings:

“Disciplined repurchases are the surest way to use funds intelligently: It’s hard to go wrong when you’re buying dollar bills for 80¢ or less” Buffett said in his 2012 letter to Berkshire Hathaway shareholders.

But why? Surely receiving dividends in cash is a better option to a share buyback for the average investor? Well, let’s have a look and see.

What is a share buyback?

A ‘share buyback’ program refers to a decision by a company’s management to use its cash to purchase its own company’s shares off of the open market. Once the shares are bought, they are ‘retired’ – it’s the opposite of a company issuing new shares to raise capital.

So how does this help investors? Well, say if Company A has 100 shares outstanding and you as an investor own 10. That would equate to a 10% ownership stake of that company and an entitlement to 10% of the company’s earnings.

But say Company A’s management decide to buy back 20 shares using the company’s profits. Now, there are only 80 shares of Company A on issue, meaning us, the investor, still owns 10 shares. But these 10 shares now represent 12.5% of the company’s ownership – meaning our stake in the company has increased. It’s a similar outcome to if the company paid out a dividend and you reinvested it instead (except without taxes getting in the way).

Are share buybacks always a good idea?

Not always. It can be deleterious to a shareholder’s long-term wealth if a company pays too much for its own shares – much like for an investor.

But conversely, it can be extremely beneficial if the company manages to buy back shares at a discount.

One of my own holdings – Magellan High Conviction Trust (ASX: MHH) – permits share buybacks if the trust’s unit price is trading under the net tangible assets (or real value) of each unit. Just last week, the trust informed the ASX that over $3.5 million worth of MHH shares were purchased on market for a price below what each unit is worth.

As a shareholder, I am very pleased with these actions for the reasons outlined above.

More reading

• How to make a $1 million share portfolio by investing $1,000 a month
• 2 ASX shares I would use for a starter ASX portfolio
• 3 shares to buy if the ASX shares crash again
• Are Magellan shares a high-conviction buy today?
• Where I’d invest $5,000 into ASX shares right now

Motley Fool contributor Sebastian Bowen owns shares of Magellan High Conviction Trust. 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 irrational bear market has thrown investors many false dawns over the past 2 months. We have had many false starts and bear rallies, all traps for new players. Nonetheless it has created some of the most extraordinary value investing opportunities in my lifetime. Many companies that are almost totally unaffected by the pandemic have seen share prices slashed in blind panic. 

For example, the Evolution Mining Ltd (ASX: EVN) share price has rocketed up ~60% since its low point on 16 March. IDP Education Ltd (ASX: IEL) is a company that is marginally impacted. Yet after being over sold dramatically, the IDP share price has risen by 41.4% since 23 March. Lastly, the mighty Afterpay Ltd (ASX: APT) share price has risen by 350.6% from its low point on 23 March.

These are not normal returns, just as these are not normal times. However, there are still opportunities in the S&P/ASX 200 Index (INDEXASX: XJO). The 3 ASX 200 shares below are set to see a significant rebound as restrictions start to relax. 

Value investing opportunities

Santos Ltd (ASX: STO) has shown itself to be a well managed company with a strong chance of emerging from the oil crisis as a productivity leader. The Santos share price has already risen by ~79% from its low point on 19 March. Yet its price-to-earnings (P/E) ratio is still 6 points lower than its 10-year average P/E at 9.9.

The Santos share price still has a way to rise. By my calculations it needs to rise another 61% to meet average 10 year P/E levels. That doesn’t factor in the huge productivity gains the company has made over the past 2 months. This is a prime candidate for value investing.

The Bank of Queensland Limited (ASX: BOQ) share price has dropped by 33% year to date, giving it a P/E ratio of 7.7. This is 3 points lower than the 10-year average. To get back to this level, the bank’s share price will need to rise by 51%.

The bank also has good dividend stability of ~95% despite the present deferral. At the current price, the trailing 12-month dividend yield is 13.4%, placing the company as one of the better paying dividend shares. I believe this bank is a good candidate for value investing. Its share price is likely to see a jump over the next 3 – 6 months as the pandemic eases.

The BHP Group Ltd (ASX: BHP) share price has risen 25% from its low point on 16 March. It has another ~17% before equalling its 10-year P/E ratio. However, I don’t think the market has fairly valued the company’s future earnings.

BHP has 4 things in its favour. First, the low Australian dollar increases the value of every tonne of product sold in USD. Second, the iron ore market has withstood the impacts of COVID-19. Third, BHP is the third largest producer of copper, a commodity soon to see a price increase.

Lastly, the company has no exposure to aluminium, unlike mining stablemate Rio Tinto Limited (ASX: RIO). Aluminium is likely to see further price falls without high car manufacturing volumes. 

More reading

• The latest ASX shares to be downgraded by top brokers
• Is the Altium share price a buy?
• ASX 200 starts the week strongly, up 1.3%
• Start your week off with these 3 top Warren Buffett quotes
• Morgans warns investors to sell these ASX 200 shares in the rally

Motley Fool contributor Daryl Mather 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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The Australian economy is emerging from the dreaded COVID-19 lockdown and the optimism is firing up the share market!

The S&P/ASX 200 Index (Index:^AXJO) jumped 1.3% on Monday with all sectors finishing in the black, although the runup in share prices is forcing some brokers to downgrade some ASX shares.

Bad news around the corner

One of the latest stocks to be hit with a recommendation downgrade is building supplies group CSR Limited (ASX: CSR).

Citigroup cut its rating on the stock to “neutral” from “buy” ahead of the group’s full year results tomorrow.

This probably explains the 4% plunge in CSR’s share price to $3.38 even as the broader market rallied. This makes CSR the second worst performer on the ASX 200 today after Graincorp Ltd (ASX: GNC), which fell 4.2% to $3.45.

Earnings hit from construction

Citigroup is expecting CSR to post a 40% drop in underlying net profit to $111.1 million, which is 7% below consensus forecasts.

You can blame the downturn in building construction for much of the damage, although the challenging medium-term outlook for its aluminium business isn’t helping either.

“The outlook for CSR remains challenging, with top line headwinds in housing and aluminium businesses emerging,” said the broker.

“This creates a high level of earnings pressure medium term and drives our underlying NPAT downgrades of ~50% in FY21e and FY22e.”

Citi’s 12-month price target on the stock was lowered to $3.45 from $5.60 a share.

Running out of puff

Another to come under pressure today was the REA Group Limited (ASX: REA) share price.

Shares in the online property classifieds group fell 1.8% to $93.46 after Credit Suisse downgraded the stock to “neutral” from “outperform”.

The broker’s decision comes in the wake of the group’s quarterly earnings update that showed a 1% increase in revenue and 7% improvement in earnings before interest, tax, depreciation and amortisation (EBITDA).

The top-line missed Credit Suisse’s forecast of around 5% while EBITDA was roughly in line.

Fully priced

“Given ~7% price increases, this implies the benefit from depth penetration for the quarter was minimal,” said the broker.

“We lower our target price to A$94.50/share (prev A$94.80/share) to reflect the minor reductions to our forecasts.

“We continue to expect a recovery in volumes from the low point expected over the next few months, but given the recent rally in the stock, we view the recovery as appropriately priced in.”

On the flipside, if you are looking for undervalued stocks to buy for the post COVID-19 recovery, you should download the latest free report from the experts at the Motley Fool.

Follow the free link below to find out more.

More reading

• Is the Altium share price a buy?
• ASX 200 starts the week strongly, up 1.3%
• Start your week off with these 3 top Warren Buffett quotes
• Morgans warns investors to sell these ASX 200 shares in the rally
• Will high unemployment be the last straw for this ASX bull run?

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. 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.

The post The latest ASX shares to be downgraded by top brokers appeared first on Motley Fool Australia.

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The Altium Limited (ASX: ALU) share price has been up and down in 2020, but is it set to surge in the second half of the year?

What’s been happening to the Altium share price?

Altium is a software company that provides PC-based electronics design software for engineers who design printed circuit boards. It’s been something of a rollercoaster for the ASX tech company in 2020, with less international trade, reduced business expenditure and potential supply chain disruptions weighing heavily on the Altium share price in March.

Altium is part of the WAAAX group of tech shares that have rocketed higher in recent years. While Altium does have a 1.03% dividend yield, much of its value is tied up in future expected growth. In fact, Altium trades at a price-to-earnings ratio of 59.82, which is why investors were spooked by the COVID-19 shutdown. 

At the height of the February earnings season, Altium hit a new 52-week high of $42.76 per share. It was downhill from there as the S&P/ASX 200 Index (ASX: XJO) slumped amid a broader bear market. The Altium share price fell to a 52-week low of $23.11 per share before recovering to its current $36.79 valuation.

Is Altium in the ‘buy zone’?

It’s been an impressive share price recovery for Altium in April and May. Altium is still trading below its pre-COVID-19 value but the economic outlook has certainly shifted. I personally don’t think Altium’s valuation is compelling enough to buy right now.

If we see another bear market drop then I’d look at buying Altium for the right price, however, I think there are other strong ASX tech shares that could be in the buy zone, like Xero Limited (ASX: XRO).

Foolish takeaway

The Altium share price has been on a rollercoaster ride this year. Altium is a dividend-paying share that does provide some security, but I still think I’ll wait for another market dip before buying in.

More reading

• The latest ASX shares to be downgraded by top brokers
• ASX 200 starts the week strongly, up 1.3%
• Start your week off with these 3 top Warren Buffett quotes
• Morgans warns investors to sell these ASX 200 shares in the rally
• 3 ASX growth shares to buy immediately with $3,000

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium. 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 Is the Altium share price a buy? appeared first on Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) went up 1.3%, it started the week strongly. Investors are feeling more confident about the situation now that restrictions are starting to lift.

Whilst Australia’s leaders are telling people not to get complacent, various rules around the country are starting to become a bit more relaxed.

Here are some of the highlights from the ASX 200 today:

Large ASX 200 share price gains

Some ASX 200 businesses saw share prices rise considerably today.

The share price of Webjet Limited (ASX: WEB) rose by 19.5%.

Southern Cross Media Group Ltd (ASX: SXL) saw its share price go up 18.5%.

The share price of NRW Holdings Limited (ASX: NWH) grew by 12.2%.

AP Eagers Ltd (ASX: APE) saw its share price rise by 10.8%.

Cochlear Limited (ASX: COH)

The ASX 200 hearing device business saw a 5% rise in its share price today despite outlining a significant fall in revenue.

Compared to April 2019, sales revenue across the company declined 60% in April 2020. Cochlear implant unit sales fell by 80% across developed markets, with most elective surgeries postponed across the US and Western Europe.

The bright spot was China where surgeries recommenced in late February and continued to recover throughout April. Surgeries are now running close to pre-virus run rates despite Beijing, the largest surgery centre, remaining largely closed to elective surgery.

Suncorp Group Ltd (ASX: SUN)

The ASX 200 financial business saw its share price rise 4.2% today after also giving an update.

It was announced CEO of Banking and Wealth Lee Hatton will be leaving the organisation at the end of the month.

At 31 March 2020 it had excess group common equity tier 1 (CET1) capital of $682 million at 31 March 2020.

On the insurance side of things Suncorp is expecting gross written premiums to be impacted by lower economic activity, however it’s expecting lower consumer motor claims volumes. It said it’s expecting increased landlord loss of rent claims.

The final dividend will be considered though the year end process.

Returns as of 6/5/2020

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 Cochlear Ltd. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Cochlear 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.

More reading

• The latest ASX shares to be downgraded by top brokers
• Is the Altium share price a buy?
• Start your week off with these 3 top Warren Buffett quotes
• Morgans warns investors to sell these ASX 200 shares in the rally
• Analysts think this ASX auto share could be turning the corner

The post ASX 200 starts the week strongly, up 1.3% appeared first on Motley Fool Australia.

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