Tag: Motley Fool Australia

Every Monday I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Myer Holdings Ltd (ASX: MYR) remains the most shorted share on the Australian share market with short interest of 11.9%. With more and more spending shifting online, short sellers appear to believe Myer’s prospects of a successful turnaround are dwindling.
• Speedcast International Ltd (ASX: SDA) has short interest of 11.7% again. This communications satellite technology provider’s shares have been suspended since February after its debt load became too much and led to it declaring itself bankrupt.
• Inghams Group Ltd (ASX: ING) has 9.7% of its shares held short, which is up slightly week on week. The poultry company’s shares have come under pressure amid concerns that its performance in FY 2020 could be impacted by an unfavourable sales mix because of the pandemic. Increased feed costs could also weigh on margins.
• Webjet Limited (ASX: WEB) has seen its short interest fall slightly week on week to 9.6%. Short sellers appear to believe that the online travel agent’s shares are overvalued based on its medium term outlook because of difficult travel markets.
• Orocobre Limited (ASX: ORE) has seen its short interest surge higher week on week to 8.25%. Last week the lithium miner revealed that it has cut its operating costs to their lowest on record. However, this is still higher than the price it is commanding for its lithium.
• CLINUVEL Pharmaceuticals Limited (ASX: CUV) has seen its short interest remain flat at 8%. Last week this biopharmaceutical company released its fourth quarter update and revealed a 20% decline in cash receipts compared to the prior corresponding period. Lockdowns led to softening sales of its SCENESSE product.
• Nearmap Ltd (ASX: NEA) has seen its short interest fall to 7.8%. Short sellers appear to be closing positions after the aerial imagery technology and location data company’s performance remained solid during the pandemic.
• Bank of Queensland Limited (ASX: BOQ) has seen its short interest fall to 7.8%. Last month the regional bank lifted its coronavirus provisions and warned that there could be more to come. Short sellers appear confident that the worst is not over for the bank.
• Zip Co Ltd (ASX: Z1P) has short interest of 7.7%, down slightly week on week. Short sellers may be targeting the buy now pay later provider due to a recent rise in bad debts. Though, it is worth noting that forward indicators are pointing to these easing.
• Galaxy Resources Limited (ASX: GXY) has re-entered the top ten with short interest of 7%. Rock bottom lithium prices are weighing heavily on Galaxy’s profits and look unlikely to improve any time soon due to oversupply issues.

More reading

• These were the best performing ASX 200 shares in July
• Top ASX Stock Picks for August 2020
• Top brokers name 3 ASX shares to sell next week
• These were the best performing shares on the ASX 200 in July
• Will the coronavirus kill cash?

James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Nearmap 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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In July, the S&P/ASX 200 (ASX: XJO) saw a halt to previous gains. Rising coronavirus infections in Victoria tempered investor appetite with the index ending the month 29.9 points down. On that note, let’s take a look at the worst performing ASX 200 shares in July. 

Avita Therapeutics Inc (ASX: AVH) 

The Avita Therapeutics share price fell 32.56% in July to close the month at $6.07. Avita Therapeutics is a regenerative medicine company. It produces the ‘Recell System’ which is essentially a spray-on skin therapy. Currently used to treat burns, it is also being assessed for the treatment of vitiligo, scar reconstruction, and aesthetic applications. Growth in sales of the Recell System slowed significantly in the face of coronavirus, with sales revenue of US$3.79 million in the fourth quarter compared to US$3.78 million in the third quarter. 

Lockdown measures drove a reduction in accidents leading to burn injuries, which the Recell System is used to treat. Patient and facility access was also limited due to the onset of the pandemic. Sales had been growing strongly prior to COVID-19; over the full year, Recell System sales grew 213% to US$13.79 million. The reprioritisation of hospital resources meant April results were the lowest seen this calendar year. Fortunately, the benefits of the Recell System, including reduced hospital stays and fewer surgeries, enabled a recovery in procedural volume growth in May and June. 

IDP Education Ltd (ASX: IEL) 

The IDP Education share price fell 14.14% in July to finish the month at $13.30. IDP Education operates in international education services, helping international students study in English speaking countries. The company is also a co-owner of IELTS, the world’s most popular English language test, and operates English language teaching courses across South East Asia. There was no news out of the education provider to prompt the price fall. The growing realisation that coronavirus restrictions may be in place long term, however, probably turned investors off the company which relies on international mobility. 

IDP Education conducted an emergency capital raise at the start of the coronavirus crisis and took measures to reduce operational expenditure. Travel restrictions and school closures in destination markets caused uncertainty regarding the timing of future intakes. With restrictions still in place, IDP Education is hoping to capture expected deferred demand once lockdowns are lifted. In June, major shareholder, the Board of Education Australia Limited, sold shares equivalent to 5.1% of IDP Education’s issued capital. The Board said that its motivation to reduce its holding in IDP Education did not relate to its view of the potential of the company or its business.  

AMP Limited (ASX: AMP)

The AMP share price dropped 21.51% in July to close the month at $1.46. The embattled wealth manager saw shares dip sharply last week following an update on its 1H FY20 results. Underlying profit for retained businesses is expected to be in the order of $140 – $150 million. Results have been impacted by factors including market volatility and a credit loss provision for AMP Bank. AMP did complete the sale of AMP Life during the half, which serves to simplify the portfolio and free up capital. The post-Royal Commission remediation program remains on track and is expected to be 80% complete by the end of 2020.

The wealth unit saw net cash outflows of $4.4 billion, impacted by the early release of superannuation scheme and the loss of corporate super mandates. AMP reported expected assets under management of $126 billion, 6% lower than 2H FY19. The capital unit is expected to see performance and transaction fees fall by around 40% due to market impacts. The banking unit has reported a credit loss provision of $25 million for COVID-19 related macro-economic conditions. First half results have been impacted by market volatility, but according to CEO Francesco De Ferrari, significant progress was made in delivering on strategy with the simplified portfolio setting the business up well for the future. 

Monadelphous Group Limited (ASX MND) 

The Monadelphous Group share price declined 17.65% in July to finish the month at $8.91. Monadelphous is an engineering group providing construction, maintenance, and industrial services to the resources, energy and infrastructure sectors. The Monadelphous share price is now just 7 cents above its March low of $8.84. The company has seen delays, suspensions, and reductions in services across its projects and worksites as a result of COVID-19. Monadelphous advised in May that if COVID-19 disruptions continued, revenue would be similar to that of the prior corresponding period. 

In June, the company announced it had secured a number of contracts in the resources and energy sectors with a combined value of $150 million. Monadelphous was awarded construction and maintenance contracts in the Pilbara with BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Limited (ASX: FMG). The company has also been awarded a contract by Newcrest Mining Limited (ASX: NCM) to provide capital project services at gold mining operations in Papua New Guinea. 

oOh!Media Ltd (ASX: OML) 

The oOh!Media share price fell 17.58% in July to close the month at 75 cents. Shares in the outdoor media company have fallen from above $3 pre-pandemic as continued lockdowns take their toll. oOh!Media manages advertising in public spaces, however demand for its services has taken a dive as the public spends more time at home. Prior to the pandemic, out of home advertising had seen a growing audience and market share. The sudden impact of the COVID-19 pandemic on revenue meant the company’s cost base had to be rapidly adjusted. 

oOh!Media has reduced discretionary spend, negotiated rent savings, and reduced capital expenditure to manage cash flow. The out of home market has been disproportionately impacted compared to other forms of media. This impact has been particularly pronounced in specific areas such as airports. Around 85% of advertisers due to run campaigns in April and May deferred them to the second half of the year. Nonetheless, the advertiser did see a significant uplift in activity in June and July as restrictions were eased outside Victoria. 

More reading

• 5 things to watch on the ASX 200 on Monday
• These were the worst performing shares on the ASX 200 in July
• 7 ASX shares to watch this reporting season
• Top brokers name 3 ASX shares to sell next week
• These were the best performing shares on the ASX 200 in July

Kate O’Brien owns shares of Avita Medical Limited, BHP Billiton Limited, and Rio Tinto Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited and Idp Education Pty Ltd. The Motley Fool Australia has recommended Avita Medical Limited and oOh!Media 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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On Friday the S&P/ASX 200 Index (ASX: XJO) finished the week on a very disappointing note. The benchmark index fell 2% to 5,927.8 points.

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

ASX 200 expected to open flat.

The ASX 200 looks set to open the week flat despite a positive end on Wall Street. According to the latest SPI futures, the benchmark index is expected to open the day 1 point lower. On Wall Street on Friday the Dow Jones rose 0.45%, the S&P 500 climbed 0.8% higher, and the Nasdaq index jumped 1.5%. The latter was given a boost by the Apple share price, which surged 10% higher after its quarterly update. The tech giant is now the world’s most valuable company.

Victoria “State of Disaster”.

With Victoria declaring a “State of Disaster” and locking down the state, a number of shares are likely to be impacted both positively and negatively. Reports of panic buying in supermarkets could give Coles Group Ltd (ASX: COL) shares a lift today. Whereas Crown Resorts Ltd (ASX: CWN) shares could struggle given how its Melbourne casinos and hotels are likely to be empty until mid-September.

Oil prices jump.

Energy producers such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could start the week on a positive note. According to Bloomberg, on Friday night the WTI crude oil price climbed 0.9% to US$40.27 a barrel and the Brent crude oil price rose 0.6% to US$43.52 a barrel. This means that oil prices recorded their third straight month of gains.

Gold price surges higher.

Gold miners including Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could be on the rise on Monday after the gold price surged higher again. According to CNBC, the spot gold price rose 1% to US$1,985.90 an ounce. At one point on Friday night the gold price broke above US$2,000 an ounce for the first time on record.  

Goodman Group given sell rating.

Analysts at Goldman Sachs believe the Goodman Group (ASX: GMG) share price is overvalued. This morning the broker put a sell rating and $11.25 price target on the property company’s shares. It believes the market is pricing in an unrealistic earnings per share growth rate of ~9% per annum between FY 2020 and FY 2024. It feels a growth rate of 6% per annum is more realistic.

More reading

• Top ASX Stock Picks for August 2020
• These were the worst performing shares on the ASX 200 in July
• These were the best performing shares on the ASX 200 in July
• 5 things to watch on the ASX 200 next week
• Here’s how to start investing with $5k

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended Crown Resorts 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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We asked our Foolish writers to pick their favourite ASX stocks to buy in August. 

Here is what the team have come up with…

Brendon Lau: Audinate Group Ltd (ASX: AD8)

Audinate shares have been under pressure since the tech company’s earnings update and capital raising last month, but I think it’ll find a floor and start to recover over the next few months. I’ve seen a similar trend for other cap raise candidates where the stock trades comfortably above the offer price following the transaction. Audinate sold new shares at $5.15 to institutions and its SPP is priced at the same level (or a 2% discount to VWAP).

I believe the Audinate share price will stay above the offer price given the positive longer term outlook and adoption rate for its technology.

Motley Fool contributor Brendon Lau owns shares of Audinate Group.

Michael Tonon: Nearmap (ASX: NEA)

Since Nearmap showed its business model was also successful in the huge American market, its share price has experienced some large swings, both up and down. No doubt it is now watched closely by more analysts while its growing market cap pushed it into the ASX200 in 2019.

While COVID-19 would have provided many challenges, I believe some businesses may have turned to Nearmap’s services as site visits became more difficult with restrictions. This leads me to believe that these structural changes may outweigh any of the short term impacts of the pandemic on the stock.

That’s why looking through Nearmap’s share price movements, I believe it to be a fantastic opportunity and eagerly await its FY20 results, due to be released 19 August. 

Motley Fool contributor Michael Tonon owns shares of Nearmap.

Lloyd Prout: BetaShares Asia Technology Tigers ETF (ASX: ASIA)

The Technology Tigers ETF share price is up 52% over the last year, including distributions. Despite this, I think it makes a great long term option for investors looking for both international and industry-specific diversification.

The ASX has a relatively immature technology sector, with the few well known tech stocks (Eg. the WAAAX stocks) sporting lofty valuations as a result. The Technology Tigers ETF allows you to buy international behemoths, that are continuing to grow rapidly, at relatively lower valuations.

Not only that, China and Asia more broadly is a massive and growing market – especially as the middle class expands.

Motley Fool contributor Lloyd Prout owns shares in BetaShares Asia Technology Tigers ETF and expresses his own opinion.

Tristan Harrison: Pushpay Holdings Ltd (ASX: PPH) 

I think Pushpay is one of the most promising ASX shares. It’s an electronic donation business that is focused on facilitating digital giving to large and medium churches.  

Its growth has accelerated due to the COVID-19 social distancing measures. Its FY20 was a strong year and earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) is expected to at least double in FY21. 

The company is aiming for even higher profit margins in FY21. It wants to achieve US$1 billion of annual revenue from the US church sector over the long-term. 

Motley Fool contributor Tristan Harrison does not own shares of Pushpay. 

Chris Chitty: Coles Group Ltd (ASX: COL)

Coles recently hit a record high as it proves to be an ongoing success story. The company continues to grow its share of the lucrative grocery market. Its record high comes after former parent Wesfarmers Ltd (ASX: WES) sold out of the business in April and shows that Coles is more than capable of thriving as an independent company.

With 50 quarters of consecutive sales growth in its supermarket business, Coles is on a winning streak that could last for some time as more consumers continue to shift to the retailer.

Motley Fool contributor Chris Chitty does not own shares in Coles Group.

Matthew Donald: Dicker Data Limited (ASX: DDR)

A big reason for Dicker Data being my top ASX stock pick for August is that I was really impressed with the company’s recent AGM presentation and market update. Dicker Data is a hardware, software, and cloud distributor with over 41 years’ experience.

It reported double-digit percentage increases in revenue from ordinary activities, recurring software revenue, net profit after tax (NPAT), and net profit before tax.

In addition, the company could benefit from the surge in remote work in response to the COVID-19 pandemic. As a result of the surge in demand, Dicker Data’s hardware and software portfolios play an essential role in helping businesses continue to operate.

Motley Fool Contributor Matthew Donald does not own any stocks in Dicker Data Limited.

Sebastian Bowen: VanEck Vectors Wide Moat ETF (ASX: MOAT)

My pick for this month is this US-focused exchange-traded fund (ETF). In these uncertain times, I think finding businesses with defensive characteristics is more important than ever. And these are the kinds of businesses that MOAT invests in.

Companies are only selected for MOAT if they show signs of possessing a strong competitive advantage, or ‘moat’. Right now, these include famous names like Charles Schwab, Intel, Amazon.com, Tiffany & Co, Berkshire Hathaway and Bank of America.

For an easy way of investing in top quality US shares, I think this ETF is a great choice for August and beyond

Motley Fool contributor Sebastian Bowen owns units of VanEck Vectors Wide Moat ETF.

Toby Thomas: Super Retail Group (ASX: SUL)

I’m on a roll after last month picking Kogan.com (ASX: KGN), which improved 13% over July. For August though you can’t go past Super Retail, which owns recreation companies like Supercheap Auto, Rebel Sport and BCF Camping.

The Super Retail share price jumped nearly 10% on Friday after it reported a 27% spike in revenues for June and a better than expected overall performance for FY20.

As people ditch their usual mid-year holiday routine on a beach in Greece and replace it with spending cash on a road-trip, fitness equipment or camping gear, look for Super Retail to outperform in August and over the coming 12 months.

Motley Fool contributor Toby Thomas does not own shares in Super Retail Group.

Ken Hall: A2 Milk Company Ltd (ASX: A2M)

The A2 Milk Company is at the top of my watchlist in August.

I’m quietly bullish on the A2 Milk share price ahead of its August earnings result.

A planned international push into Canada combined with strong demand across Australia and Asia means we could see some strong growth figures.

Despite trading just shy of its all-time high of $20.05, I think A2 Milk shares could surge towards $25 on the back of a strong earnings result.

I like the geographic diversification and historical success of the Kiwi dairy group, as well as potentially robust earnings.

Motley Fool contributor Ken Hall does not own shares in A2 Milk Company Ltd.

James Mickleboro: CSL Limited (ASX: CSL)

With the CSL share price down over 21% from its 52-week high, I think now would be an opportune time to buy this biotherapeutics giant’s shares. This has been caused by concerns about plasma collections because of the coronavirus pandemic. However, I believe any weakness this causes in the CSL Behring business in FY 2021, will be offset by increasing demand for flu vaccines produced by its Seqirus business.

Looking further ahead, I’m confident its portfolio of leading therapies and high level of investment in research and development have positioned CSL to deliver solid earnings growth over the 2020s.

Motley Fool contributor James Mickleboro does not own shares in CSL Limited.   

Glenn Leese: Xero Limited (ASX: XRO)

With the trend of working from home increasing, businesses becoming more digital and the need to allow remote access, Xero is in prime position to thrive.

Being a Software as a Service (SaaS) company, Xero specialises in cloud-based software for businesses. Its products include tax, cashflow, bookkeeping and other tools. Multiple industries are serviced, including retail, technology and healthcare.

Xero shares have grown almost 40% in the last year, including the recent market crash.

Motley Fool Contributor Glenn Leese does not own any shares in Xero Limited.

Phil Harpur: Kogan.com Ltd (ASX: KGN)

Kogan has been one of the star performers on the ASX in recent months. The online retailer’s share price has surged from below $4 in mid-March to now be trading above $16. This strong rally is linked to a series of positive market updates, as online sales have been in strong demand during the coronavirus crisis.

Gross sales climbed by more than 95% during the fourth quarter of 2020. Despite the strong recent share price increase, I believe that there is strong potential for further growth for the Kogan share price in the years to come, as the structural shift towards the online shopping environment continues.

Motley Fool contributor Phil Harpur owns shares of Kogan.com Ltd.

More reading

• Buy these ASX dividend shares before the RBA meeting
• 7 ASX shares to watch this reporting season
• Here’s how to start investing with $5k
• Top brokers name 3 ASX shares to buy next week
• These were the best performing shares on the ASX 200 last week

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO, CSL Ltd., Kogan.com ltd, Nearmap Ltd., PUSHPAY FPO NZX, and Xero. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF, Dicker Data Limited, and Super Retail Group Limited. The Motley Fool Australia owns shares of A2 Milk and COLESGROUP DEF SET. The Motley Fool Australia has recommended AUDINATEGL FPO, Kogan.com ltd, Nearmap Ltd., PUSHPAY FPO NZX, and VanEck Vectors Morningstar Wide Moat ETF. 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 Top ASX Stock Picks for August 2020 appeared first on Motley Fool Australia.

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Next week the Reserve Bank will meet again to discuss the cash rate.

Although I feel a cut to zero is a possibility given recent economic data and projections, I feel it is unlikely at this meeting.

This is a small win for income investors who look likely to have to battle with low interest rates for possibly a few more years.

But don’t worry if you’re an income investor, because the ASX dividend shares listed below can help you beat low rates:

Dicker Data Ltd (ASX: DDR)

Dicker Data is a bit of an unsung hero of the Australian share market. The wholesale distributor of computer hardware and software has quietly been growing its earnings and dividends at a consistently solid rate for many years. This has been driven by its increasing number of vendor relationships, strong market position, and robust demand for information technology products.

As a result, its shares have rewarded shareholders with some very strong returns over the last five years. Since this time in 2015, Dicker Data shares have generated an average total return of 32.2% per annum. While I suspect the returns may moderate over the next five years, I’m confident that it will still be a market beater. Especially given its generous dividend yield. In FY 2020 Dicker Data intends to lift its fully franked dividend by 31% to 35.5 cents per share. Based on the current Dicker Data share price, this represents an attractive 4.7% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

The last five years have been very different for Telstra and its shareholders. The disruption to its fixed line business by the NBN has led to its shares losing shareholders an average of 6.7% per annum since this time in 2015. The good news is that I believe the worst is now over for the telco giant and expect the next five years to be materially better.

This is thanks to its T22 strategy, rational competition, and the easing of the NBN headwind. In respect to the latter, peak pain from the rollout is on the horizon and should make a return to growth possible in the not so distant future. For now, I believe its 16 cents per share dividend is sustainable from its current cash flows. Based on the latest Telstra share price, this means it offers investors a fully franked 4.7% dividend yield.

More reading

• 3 of the best ASX dividend shares to buy right now
• I would buy ResMed and these ASX blue chip shares in August
• Buy these ASX ETFs for dividends in August
• 3 quality ASX shares to add to your portfolio
• Telstra and 2 more ASX shares I’d like to buy with $5,000

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited 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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Is the Afterpay Ltd (ASX: APT) share price a buy?

The buy now, pay later business has performed incredibly well since the March 2020 crash when the Afterpay share price dropped to $8.90. It has gone up 670% since then. What an amazing run.

Is the strength of the Afterpay share price justified?

The most recent update that Afterpay has released was its FY20 fourth quarter update when it announced a capital raising and a selldown by the founders of the company.

Afterpay said that it delivered underlying sales of $3.8 billion in the fourth quarter of FY20, 127% higher than the prior corresponding period. Afterpay said this was a record quarterly performance and reflected an accelerated shift to ecommerce since the impacts of COVID-19 emerged globally.

The strong final quarter led to underlying sales of $11.1 billion in FY20 – up 112% compared to last year.

That growth was strong, there’s no denying that. It goes some of the way to justify the Afterpay share price growth. 

The number of active customers also increased strongly. Active customers rose by 116% during FY20 to 9.9 million. The more customers that Afterpay has the more potential transactions that can go through its platform. In the US it reached 5.6 million active customers and in the UK it hit the 1 million milestone.

Active merchants rose by 72% over FY20 to 55,400 with 202% growth in the US. The UK passed 1,000 merchants after its first year. The more merchants there are on the Afterpay system the more attractive it is to customers. There are good network effects.

Expansion into Canada and an in-store offering in the US is expected sometime in the first quarter of FY21.

Underlying sales growth is an important part of Afterpay delivering on its long-term potential. But it needs to be doing it profitably.

Profit metrics

Afterpay said that its merchant revenue margins for FY20 are expected to be in line with or better than the margin in the first half of FY20 and FY19.

The net transaction loss for FY20 is expected to be up to 0.55%. The Australia and New Zealand net transaction loss has remained at “historically low” levels. The net transaction loss within the US and UK regions has improved in the second half of FY20.

The net transaction margin for FY20 is expected to be approximately 2%. Afterpay indicated this underpins a pathway to longer term profitability for the overall business.

Afterpay is expecting FY20 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be between $20 million to $25 million. This measure excludes ‘one-off items’, share-based payments and foreign currency.

The key profitability question

The biggest question is how much profit will Afterpay be able to generate in the future? Is the current Afterpay share price a reasonable reflection of its long-term future?

Will Afterpay be able to maintain its merchant margin? On the face of it, the merchant is handing over a hefty sum for each transaction. But Afterpay can argue that it is generating leads for businesses, it increases the transaction size and may improve loyalty.

There are lots of other competitors out there for Afterpay. Zip Co Ltd (ASX: Z1P), Sezzle Inc (ASX: SZL), Splitit Ltd (ASX: SPT), Klarna and so on. When there’s a lot of supply for a product it normally leads to a reduction in price. Does Afterpay have a strong brand that customers will stick to? Or would merchants switch to another provider?

It’s a hard one to call because the idea of getting an instalment service for free is new.

I don’t know what a fair price for Afterpay is. You can’t invest for the short-term, you can’t know for certain which way share prices will go. Does today’s Afterpay share price reflect its long-term outlook? I don’t know, so I’m happy to leave it to other people to invest in. I think there are easier opportunities like Pushpay Holdings Ltd (ASX: PPH).

More reading

• Here’s how to start investing with $5k
• US tech shares deliver massive results – what does it mean for ASX tech shares?
• Will the coronavirus kill cash?
• Why Afterpay, Bapcor, NRW, & Super Retail shares are climbing higher today
• Want to start investing? Here’s how

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 PUSHPAY FPO NZX and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PUSHPAY FPO NZX and Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Despite a disappointing finish to the month, the S&P/ASX 200 Index (ASX: XJO) recorded a 0.5% gain to end it at 5927.8 points.

Unfortunately, not all shares on the index were climbing higher with the market in July. Here’s why these were the worst performing ASX 200 shares during the month:

The AVITA Therapeutics Inc (ASX: AVH) share price was the worst performer on the ASX 200 last month with a 32.5% decline. Investors were selling the regenerative medicine company’s shares following the release of its fourth quarter and full year sales update. For FY 2020, AVITA’s total revenue came in at approximately US$14.32 million. Although this was a 160% increase over FY 2019’s sales, it appears as though investors were expecting an even stronger sales result.

The Adbri Ltd (ASX: ABC) share price wasn’t far behind with a 30.5% decline. The catalyst for this decline was news that Alcoa of Australia will not be renewing its lime supply contract when it expires at the end of June 2021. This agreement has been ongoing for decades and appears to have sparked fears that other customers may switch to lower cost imports as well. The news didn’t go down well with brokers. This was particularly the case with UBS, which downgraded its shares all the way from a buy rating to a sell with a reduced price target of $2.00. The Adbri share price ended the month at $2.21.

The AMP Limited (ASX: AMP) share price was out of form and sank 21.5% lower in July. The majority of this decline came on the final day of the month when the financial services company revealed that the coronavirus had impacted its performance in FY 2020. According to AMP’s first half update, it expects to report underlying profit from retained businesses in the range of $140 million to $150 million. This was below the market’s expectations and driven by market volatility and a credit loss provision in AMP Bank.

The IDP Education Ltd (ASX: IEL) share price was a poor performer and crashed 19.8% lower last month. Investors were selling the shares of the provider of international student placement services and English language testing services due to a spike in coronavirus cases. They appear concerned that this recent spike both at home and globally could impact the company’s performance greatly in FY 2021.

More reading

• These were the best performing shares on the ASX 200 in July
• 5 things to watch on the ASX 200 next week
• These were the best performing shares on the ASX 200 last week
• These were the worst performing shares on the ASX 200 last week
• ASX 200 drops 2%, ASX banks fall, Super Retail jumps

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 Avita Medical Limited and Idp Education Pty Ltd. The Motley Fool Australia has recommended Avita Medical 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 COVID-19 pandemic is poised to make the upcoming reporting season one to remember for some time. Since late-March, many companies on the ASX have been pulling their full-year earnings guidance and have been unable to provide assurances to investors. On that note, let’s take a look at 7 ASX shares that I’ll be keeping a close eye on during reporting season.

Afterpay Ltd (ASX: APT)

The Afterpay share price has been a bellwether of overall market enthusiasm during the pandemic. With online shopping and eCommerce platforms thriving during the lockdown period, it will be interesting to see how Afterpay has harnessed the momentum and how the company plans to grow as the overall economy struggles.

BHP Group Ltd (ASX: BHP)

BHP boasts a strong balance sheet and low-cost operations with earnings coming from iron ore, copper and coal. The company recently reported a record-breaking quarterly output of iron ore on the back of robust demand from Chinese steel mills. With iron ore being its biggest money maker, BHP will be one to watch this reporting season, especially for how the company treats its dividend.

Mirvac Group (ASX: MGR)

Mirvac owns and operates a commercial property portfolio that is exposed to office, retail and industrial properties, which, together, account for 59% of group earnings. The coronavirus pandemic has wreaked havoc on retail and other commercial rental incomes so I’ll be keen to find out exactly how Mirvac is going at protecting its income streams.

Flight Centre Travel Group Ltd (ASX: FLT)

The pandemic has created an unprecedented challenge for travel and leisure companies like Flight Centre. The company has completed a $700 million equity raising and reduced its annualised operating expenses by $1.9 billion. With domestic travel looking to have a protracted recovery, reporting season will help reveal the full impact the pandemic has had on Flight Centre and how the company plans to recover.

ResMed Inc (ASX: RMD)

This company has emerged as a leader during the pandemic, which has seen the ResMed share price make stellar gains for the year. The company tripled its ventilator production to more than 52,000 units in order to fulfil an urgent contract from the Australian Government. It will be interesting to see how the company has performed during this period and how it is looking to sustain growth beyond the pandemic.

Kogan.com Ltd (ASX: KGN)

Kogan.com is fast becoming a household name, thanks in part to the coronavirus pandemic. During the lockdown period, Kogan’s active customer base grew to over 2 million, with an additional 126,000 customers being added in May alone. The online retailer also completed a $115 million capital raising in order to accelerate future acquisition opportunities. With the Kogan share price already looking like investors have priced in the company’s recent success, it will be fascinating to see whether Kogan has any upside surprises left to reveal.

Wesfarmers Ltd (ASX: WES)

During the initial lockdown period, many people flocked to complete home improvements and also set up home offices. Wesfarmers owns both Bunnings and Officeworks, which are 2 companies that obviously benefitted from these trends. On the other hand, the company’s Target and K-Mart stores have suffered from reduced foot traffic resulting from lockdowns. 

Should you buy?

With the S&P/ASX200 (ASX: XJO) rallying since the peak of the pandemic, many people have thrown out fundamentals and harnessed the momentum through speculation. As a result, the share prices of many companies on the ASX (in my opinion) have been overinflated, whilst others have also been oversold.

I think this reporting season will no doubt reveal the reality and provide investors with some great opportunities. I think a good exercise for investors would be to compile a watchlist of shares they wish to pay close attention to during reporting season in order to take full advantage of these opportunities when they arise.

More reading

• Here’s how to start investing with $5k
• I would buy ResMed and these ASX blue chip shares in August
• Buy these ASX ETFs for dividends in August
• US tech shares deliver massive results – what does it mean for ASX tech shares?
• 3 top ASX shares to buy and hold for at least a decade

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. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Flight Centre Travel Group Limited, Kogan.com ltd, and ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

Fortescue Metals Group Limited (ASX: FMG)

According to a note out of Citi, its analysts have retained their sell rating and $11.70 price target on this iron ore producer’s shares following its fourth quarter update. Although the broker has upgraded its estimates to reflect Fortescue’s FY 2021 shipments guidance, it isn’t enough for a change of rating. The broker continues to believe that the market is pricing in a long term iron ore price that is unrealistic. The Fortescue share price ended the week at $17.41.

Orocobre Limited (ASX: ORE)

Analysts at Ord Minnett have downgraded this iron ore producer’s shares to a sell rating with a reduced price target of $2.00. The broker notes that Orocobre has worked very hard with its cost cutting, but this has still not been enough to offset the sharp decline in lithium prices. Ord Minnett also has concerns that costs could rise because of the pandemic. Which, given the oversupply of lithium, could mean another tough 12 months for the company in FY 2021. The Orocobre share price last traded at $2.97.

Reece Ltd (ASX: REH)

Another note out of Citi reveals that its analysts have downgraded this plumbing parts company’s shares to a sell rating with a reduced price target of $8.55. According to the note, Citi is expecting the pandemic to result in tough trading conditions that stifle Reece’s earnings growth over the next couple of years. Particularly given the weakening housing market activity and softening house prices. The Reece share price ended the week at $9.99.

More reading

• These were the best performing shares on the ASX 200 in July
• Here’s how to start investing with $5k
• 3 of the best ASX dividend shares to buy right now
• 3 ASX dividend shares for dependable income
• Reliable ASX dividend shares still exist

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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Although the S&P/ASX 200 Index (ASX: XJO) dropped a disappointing 2% lower on the final day of the month, it still managed to record a gain in July. The benchmark index rose 0.5% to end at 5927.8 points.

While a good number of shares climbed higher last month, some recorded stronger than average gains. Here’s why these were among the best performers on the ASX 200 in July:

The Netwealth Group Ltd (ASX: NWL) share price was the best performer with an impressive 33.9% gain. Investors were buying the investment platform provider’s shares following the release of its quarterly update. At the end of the fourth quarter, Netwealth’s funds under administration (FUA) had climbed to a sizeable $31.5 billion. This means the company grew its FUA by $8.2 billion or 35% during the financial year. Which is all the more impressive when you consider that it recorded a negative market movement of $0.9 billion for the year.

The ALS Ltd (ASX: ALQ) share price was on form and stormed 29.4% higher last month. The catalyst for this appears to be the testing services company’s annual general meeting. That update revealed that it is performing reasonably positively considering the tough trading conditions. One broker that was pleased with its update was Macquarie. Its analysts put an outperform rating and $9.00 price target on ALS’ shares.

The Orocobre Limited (ASX: ORE) share price wasn’t far behind with a surprising 28.6% gain in July. Investors were buying the lithium miner despite the price of the battery making ingredient continuing to weaken. One positive, though, was that the company has cut its costs materially. During the fourth quarter Orocobre achieved its lowest cash cost of sales for 3 years at US$3,920 a tonne. However, with a realised average price of US$3,913 a tonne, it is still making a loss.

The Fortescue Metals Group Limited (ASX: FMG) share price was a very positive performer in July and recorded a 25.7% gain. The iron ore producer’s shares were in demand with investors last month due to a strong iron ore price and the prospect of another bumper profit result in FY 2020. Fortescue doesn’t look likely to disappoint. Late on in the month it released its fourth quarter update and revealed total shipments of 178.2mt. This was ahead of guidance and achieved with a C1 cost of US$12.94 per wet metric tonne. This compares very favourably to its average realised selling price of US$81 a dry metric tonne.

More reading

• These were the worst performing shares on the ASX 200 in July
• Top brokers name 3 ASX shares to sell next week
• 5 things to watch on the ASX 200 next week
• Here’s how to start investing with $5k
• These were the best performing shares on the ASX 200 last week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Netwealth. 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 These were the best performing shares on the ASX 200 in July appeared first on Motley Fool Australia.

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